PDF copy: ALJDEC decisions subject to certification as final

24F-024-REL · Department of Real Estate · 2023-12-20

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

In the Matter of the Real Estate License of: No. 24F-024-REL

CORRECTED ADMINISTRATIVE EDWARDS, JOSEPH, holder of license number BR648630000, LAW JUDGE DECISION Respondent.

HEARING: November 16, 2023 at 1:00 PM. APPEARANCES: Assistant Attorney General James Rolstead, Esq. appeared on behalf of the Arizona Department of Real Estate (“Department”) with Brett Beisenthal as a witness. Joseph Edwards (“Respondent”) appeared on his own behalf. ADMINISTRATIVE LAW JUDGE: Jenna Clark. _____________________________________________________________________ Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following RECOMMENDED DECISION to the Commissioner of the Department. FINDINGS OF FACT PROCEDURE AND BACKGROUND 1. On February 20, 2018, Arizona Management Services, LLC was

incorporated in Arizona.1 Since that time, Respondent has been the sole Member and

Manager of the manager-managed entity.2

2. On April 17, 2018, the Department issued Entity license No. LC678214000

to Arizona Management Services, LLC (“AMS”).3 The license is scheduled to expire on

September 30, 2024.

3. On September 14, 2018, the Department issued REAL ESTATE BROKER

LICENSE NO. BR648630000 to Respondent. The license is currently active and set to

See Department Exhibit 2. 2 Id. See Department Exhibit 3. expire on September 30, 2024.4 The license has not previously been disciplined by the Department.5 4. On September 21, 2023, the Department referred this matter to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on November 16, 2023. Per the October 12, 2023, NOTICE OF HEARING AND COMPLAINT the issues to be determined are whether grounds exist for the Department to take disciplinary action against Respondent’s REAL ESTATE BROKER LICENSE NO. BR648630000 based on alleged violations of ARIZ. REV. STAT. §§ 32-2153(A)(9) and (A)(24). HEARING EVIDENCE 5. The Department called Investigator Beisenthal as a witness and submitted Exhibits 1-25. Respondent testified on his own behalf and submitted Exhibit A. The NOTICE OF HEARING AND COMPLAINT was also admitted into the record as its own exhibit. The substantive evidence of record is as follows: a. On or about January 05, 2023, the Department received a complaint from husband and wife property owners Andy Ang and Lucillia Tan (“Owners”).6 In the complaint, Owners detailed that they had terminated a property management agreement with AMS, effective November 07, 2022, and further alleged that Respondent had breached his fiduciary duties as a property manager by failing to account for money belonging to them. Owners included a Rental Owner Statement prepared by AMS for the period January 01, 2022 through December 31, 2022 (“Statement”).7 i. Statement reflects that Respondent debited the Owners’ account $9,450.00 on May 22, 2022, and $9,450.00 on July 08, 2022, for payment to NuFlow Services of Phoenix, LLC (“NuFlow”) for

See Department Exhibit 1. 5 Id. See Department Exhibit 4. 7 See Department Exhibit 6. 2 plumbing services at the Gem Apartments, a property managed by AMS for Owners. ii. NuFlow invoices further reflect that a total of $18,900.00 was charged for plumbing services at the Gem Apartments.8 The April 28, 2022, statement reflects that a “25% deposit before start date” of $4,725.00 was applied to the $18,900.00 charged on April 28, 2022.9 The July 14, 2022, statement reflects a balance due of $14,175.00, with an August 03, 2022, due date. b. On January 06, 2023, Department investigator Bret Biesenthal (“Investigator Biesenthal”) issued Respondent a copy of Owners’ complaint via US mail and the Department’s electronic message center, and asked Respondent to reply with a narrative statement and supporting documentation in response to the complaint no later than January 16, 2023.10 i. Respondent did not submit a response by January 16, 2023. c. On January 18, 2023, Investigator Biesenthal sent a follow-up letter to Respondent via certified mail and the Department’s electronic message center with a request that Respondent respond by January 25, 2023.11 d. On January 24, 2023, Respondent requested additional time to respond.12 e. On February 06, 2023, Respondent provided a response, which noted in pertinent part, that “NuFlow had last corresponded with [AMS] by email to make an invoice correction on Nov. 15th, 2022 and currently have not yet cashed the check that was sent.”13 [sic] f. On March 08, 2023, Investigator Biesenthal inquired with NuFlow regarding the receipt of any payment(s) from Respondent and/or AMS to resolve the

See Department Exhibits 7-9 9 See Department Exhibit 7. See Department Exhibit 10. 11 See Department Exhibit 11. See Department Exhibit 12. 13 See Department Exhibit 14. 3 outstanding $14,175.00 balance.14 That same date, NuFlow replied that “We have not received any funds with this account.”15 g. On May 11, 2023, Investigator Biesenthal issued a subpoena to Respondent for additional documents, including all cash receipts, invoices, and bills from vendors.16 The deadline to provide all subpoenaed information was May 25, 2023. h. Respondent was granted 2 extensions by the Department and given until June 26, 2023, to comply with the subpoena.17 i. Respondent failed to comply. j. On May 24, 2023, the Department received a second complaint from Mr. Ang that alleged additional property management violations regarding another property that AMS managed for him.18 k. On June 01, 2023, the Department issued Respondent a letter via regular mail and the Department’s electronic message center that instructed Respondent to reply to the allegations contained in the second complaint no later than June 12, 2023.19 Although message center records indicate the message was read on June 01, 2023, the Department did not receive a response from Respondent. l. On June 23, 2023, the Department sent Respondent a second letter via certified mail and the Department’s electronic message center with a June 29, 2023 deadline to respond.20 A postal notification reported that “Notice Left (No authorized recipient available)” in the certified correspondence’s tracking history.21 Although message center records also reflect that

See Department Exhibit 16. Id. See Department Exhibit 17. 17 See Department Exhibit 19. See Department Exhibit 20. 19 See Department Exhibit 21. See Department Exhibit 23. 21 See Department Exhibit 22. 4 Respondent read the Department’s message on June 24, 2023, the Department never received a response from Respondent. m. On July 13, 2023, the Department issued a subpoena via certified mail that required Respondent to appear in-person with specific documents on July 20, 2023, or submit them to the Department before that date. The subpoena was returned by the post office with a “Return to Sender, Attempted – Not Known, Unable to Forward” label.22 n. Although message center records indicate the message was read on August 03, 2023,23 Respondent never provided to the Department any documentation to establish the whereabouts of the missing $14,175.00 debited from Owners’ account, nor did Respondent ever provide a response to the second complaint. ADDITIONAL EVIDENCE o. Mr. Edwards testified that Owners were ASM’s sole client, and when AMS lost them it near-immediately resulted in the closure of Respondent’s business. As such, Mr. Edwards lost access to accounting software in July 2022 and was unable to satisfy the Department’s initial request for documentation. Respondent’s business email address for Mr. Edwards, [email redacted], was also temporarily shut down for an unspecified amount of time. p. Mr. Edwards also testified that he believed his former Office Manager issued a check to NuFlow via regular mail on behalf of Owners, but admitted that he did not follow-up to ensure receipt or processing. q. After ASM’s termination, all account information for Owners was transferred to their new accountant.24

22 See Department Exhibit 24. See Department Exhibit 25. 24 See Respondent Exhibit A. 5 CLOSING ARGUMENTS 6. In closing on behalf of Respondent, Mr. Edwards apologized profusely for admittedly failing to timely respond to the Department’s requests for information. Mr. Edwards offered that between parenting 2 teenage children and working full time in construction, he had difficulties managing his time, but argued that he was willing to submit to the Department’s regulation of his license. 7. In closing, the Department opined that the record reflected NuFlow never received a $14,175.00 payment, and no evidence tended to suggest that AMS had ever issued them a check for that amount. The Department argued that the money was absolutely taken from Owners’ account in 2022 and remained missing through the date of the hearing. The Department further argued that Mr. Edwards did not satisfactorily respond to the Department’s multiple informal and formal requests for information. As such, the Department moved the Tribunal to recommend the revocation of Respondent’s license to the Commissioner. CONCLUSIONS OF LAW 1. Because at all times relevant to this matter Respondent was subject to the provisions of Title 32, Chapter 20, Arizona Revised Statutes, the Commissioner of the Department has jurisdiction over Respondent and the subject matter in this case. 2. The case was properly brought before the Office of Administrative Hearings for adjudication pursuant to Title 2, Chapter 19, Article 1, of the Arizona Administrative Code. 3. Pursuant to ARIZ. REV. STAT. § 41-1092.07(G)(2) and ARIZ. ADMIN. CODE R2-19-119(B), the Department has the burden of proof in this matter. The standard of proof is by a preponderance of the evidence.25 4. A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.”26 It is “[e]vidence which is of greater weight or more convincing than the evidence which is offered in opposition to it;

See ARIZ. ADMIN. CODE R2-19-119(A). 26 MORRIS K. UDALL, ARIZONA LAW OF EVIDENCE § 5 (1960). 6 that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.”27 5. ARIZ. REV. STAT. § 32-2153(A) provides, in pertinent parts, as follows: The commissioner may suspend or revoke a license … if it appears that the holder or applicant, within five years immediately preceding, in performing or attempting to perform any acts authorized by the license, has: 9. Failed, within a reasonable time, to account for or to remit any monies, to surrender to the rightful owner any documents or other valuable property that comes into the licensee's possession and that belongs to others, or to issue an appraisal report on real property or cemetery property in which the licensee has an interest, unless the nature and extent of the interest are fully disclosed in the report. * * * 24. Violated any condition or term of a commissioner's order.

(Emphasis added.) 6. The legislature has charged the Department with protecting the public and consumers who deal with licensed salespersons when it issues licenses.28 Therefore, Department has discretion29 to revoke a license under ARIZ. REV. STAT. § 32-2153(B)30 as a real estate salesperson’s license is a privilege, not a right. 7. The material facts in this matter are clear, and the Department’s concerns in the underlying areas are legitimate. 8. The record reflects that Respondent was the sole Member and Manager of

BLACK’S LAW DICTIONARy 1182 (6th ed. 1990). 28 See Laws 1992, Ch. 14, § 3. See ARIZ. REV. STAT. § 32-2153(B) (“The commissioner may . . . deny the issuance of a license” under certain circumstances (emphasis added)). See, e.g., Matter of Rivkind, 164 Ariz. 154, 160-61, 791 P.2d 1037, 1043-44 (1990) (“[C]ourts are uniformly impressed by an attorney’s sincere efforts at rehabilitation and contrition, especially if such efforts demonstrate that the public and the legal system are unlikely to suffer a risk of future misconduct.”); Application of Spriggs, 90 Ariz. 387, 388-90, 368 P.2d 456 (1962) (where 4 years had passed since conviction for income tax evasion and evidence showed rehabilitation, applicant readmitted to bar without being required to pass bar exam again); Ulrich v. Board of Funeral Service, 289 Mont. 407, 961 P.2d 126 (1998) (“[A]n applicant whose license has been denied or revoked due to a criminal conviction . . . is entitled to apply for reinstatement and he is entitled to a full hearing . . . .”); cf. Matter of Wines, 135 Ariz. 203, 205- 06, 660 P.2d 454, 456-57 (1983) (after considering circumstances of conviction as well as respondent’s poor prior record, Arizona Supreme Court did not disbar attorney but instead suspended him for a period of 5 years, with credit for 16 months interim suspension during pendency of proceedings). 7 AMS January 2022 through November 2022, and that Respondent contracted with NuFlow in May 2022 for $18,900.00 in plumbing services on behalf of AMS. The record also reflects that although Respondent tendered a 25% deposit to NuFlow per the terms of their contract, no further payment towards the outstanding $14,175.00 balance was ever received by the plumbing company on or after the August 03, 2022, due date. Mr. Edwards’ assertion that NuFlow failed to cash a check he mailed for full payment is not credible, as no corroborating evidence to establish transmission or receipt was provided to the tribunal. Moreover, Mr. Edwards admitted that he never followed-up with NuFlow to confirm receipt of payment for AMS, and never reissued a check to the plumbing company. Regarding the Department’s investigation of the underlying complaints, the record reflects that Respondent failed to respond to correspondence issued by the Department on January 06, 2023, June 01, 2023, and June 23, 2023, and Respondent also failed to reply to subpoena requests from the Department issued May 11, 2023; whereby Respondent was granted 2 extensions, and July 13, 2023; whereby the Department’s correspondence was returned as undeliverable because Respondent had not updated his contact information with the Department. Thus, the Department has established Respondent’s violations of ARIZ. REV. STAT. §§ 32-2153(A)(9) and (A)(24) by a preponderance of the evidence. 9. Here, Respondent’s conduct was neither reasonable nor appropriate under the circumstances. The record is devoid of a sufficient justification or excuse to mitigate Respondent’s statutory violations. Respondent’s repeated failures to communicate with the Department are factors in aggravation, and evince an unwillingness to submit to regulation. 10. Based on the relevant and credible evidence of record, the Administrative Law Judge must find that grounds exist for the Department to take disciplinary action against Respondent’s real estate broker license NO. BR648630000. RECOMMENDED ORDER Based on the foregoing, 8 IT IS RECOMMENDED that upon the effective date of the FINAL ORDER entered in this matter the Commissioner of the Department revoke Respondent Joseph Edwards’ Real Estate Broker License No. BR648630000. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the ORDER shall be five days from the date of the certification. Done this day, December 20, 2023.

Office of Administrative Hearings /s/ Jenna Clark Administrative Law Judge

Transmitted electronically to:

Susan Nicolson, Commissioner Arizona Department of Real Estate 100 N. 15th Ave., Ste. 201 Phoenix, AZ 85007 [email redacted] [email redacted] [email redacted] [email redacted] [email redacted] Joseph Edwards, Respondent 5916 E Spring Rd. Scottsdale, AZ 85254 [email redacted] [email redacted] James Rolstead, Esq., Assistant Attorney General Office of the Attorney General 2005 N. Central Ave. Phoenix, AZ 85004 [email redacted] [email redacted] By: OAH Staff 9