ALJDEC

99F-R0009-ROC · Registrar of Contractors · 1998-10-28

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 28, 1998 APPEARANCES: Mary DeLaat Williams, Assistant Attorney General, on behalf of the State Thomas Chandler, Attorney at Law, appeared telephonically on behalf of the Respondent ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________

FINDINGS OF FACT The parties stipulated to the relevant facts for this hearing. There was no testimonial evidence. In 1988, Innovative Formulations Corporation (Respondent), was issued a Class L-05, license no. 081120 (the instant license), and a Class C-05 license no. 081119, by the Registrar of Contractors (Registrar ). Ian Neal Ornstein is the president and Terry Ann Ornstein is the secretary- treasurer, of the Respondent. By Order of the Registrar dated May 18, 1994, license no. 081119 was suspended until certain corrective work was accomplished by the Respondent (Case No. T93-0395). No specific evidence was presented on exactly what transpired after the above Order. However, it is apparent based on the Order for Judgment in Civil Case No. 320245, Superior Court for Pima County, dated April 30, 1998, that the Registrar had ordered a pay out from the Residential Contractors Recovery Fund (Fund), in the amount of $3,245.00 to the Complainant and revoked license no. 081119, in the above referenced Registrar’s Case, No. T93-0395, and that the instant Respondent had appealed part or all of the final Registrar’s Decision entered in that case. The Registrar’s Order of revocation and Fund pay out was affirmed by the Superior Court. It is noted that A.R.S. §32-1154 (E) provides in pertinent part that the Registrar may order payment from the Fund; “…if a contractor’s license has been revoked or has been suspended as a result of an order to remedy a violation of this chapter, and the contractor refuses or is unable to comply with the order of the registrar to remedy the violation…”.

According to the records of the Registrar, license no. 081119 was revoked effective May 13, 1998. CONCLUSIONS OF LAW A.R.S. §32-1154A(A)(21) provides in pertinent part that one of the grounds for suspension or revocation of a license, is having a person named on the license which person was also named on another license which is under suspension or revocation. As a preliminary matter, upon challenging the constitutionality of the relevant statute, counsel for the Respondent was informed that an administrative agency (the Administrative Law Judge), “…has no power to determine whether a statute complies with a constitution.”, Bohn v Waddell , 164 Ariz. 74 (Tax 1990). An Administrative Law Judge does have authority to make determinations on whether a statute is constitutional as applied, Estate of Bohn v. Waddell , 174 Ariz. 239 (App. 1993) citing Davis, Administrative Law Treatise (1958). The facts of this case are not in dispute. Ian and Terry Ornstein were persons named on the revoked license and are named on license no. 081120, the instant license. Based on this, there is a violation of A.R.S. §32- 1154(A)(21). Counsel for the Respondent argued that the application of the statute by the Registrar is a denial of due process because the decision to revoke is an “automatic” decision made in 100% of the cases alleging this particular violation. A review of the Citation and Complaint does not support the Respondent’s assertion. There is nothing in the Citation and Complaint which establishes a prior determination by the Registrar to revoke the license. The Citation and Complaint references disciplinary sanctions and alludes to both suspension and revocation. Since there is no competent evidence to support the fact asserted by the Respondent’s counsel, there can be no justiciable issue of the applicability of due process or equal protection to the asserted facts. Absent competent facts, there is no actual issue in controversy. The issue therefore becomes what is the appropriate sanction to be imposed in the instant case? The State submitted no specific guidelines, standards or substantive policy statements which would indicate what if any standards are relevant in determining whether a sanction should be suspension or revocation of a license for the type of violation as is presented by this case. However, this is not essential in making legal conclusions as long as the conclusion bears a reasonable relationship to effectuating the purpose of the statute which is at issue. The Respondent cited Arizona Public Service Company v. Arizona Corporation Commission, 155 Ariz. 263, (App. 1987), to set forth the due process principles applicable to this case. Under the case, there must be inquiry into whether the State’s action implicates a protected interest, whether the degree of infringement by the State is justified by the interest, and whether appropriate process was provided to assure against arbitrary deprivation. The State argued that under the legislative scheme, the Registrar’s duties in protecting the public, include assuring that incompetent or persons otherwise not qualified to be contractors, are not licensed. It is accepted that the license to contract is a protected interest and cannot be arbitrarily taken away by the State. There should be no need to discuss why qualified and competent contracting is a legitimate and significant State interest. Under the appropriate circumstances, the degree of infringement by the State may be total (revocation). The purpose of the instant hearing is to assure that the Respondent is not arbitrarily deprived of the interest. The fact that the Respondent has had a license recently revoked and the revocation has been upheld by Superior Court, is prima facie evidence that the Respondent should not have or was otherwise not qualified to hold that particular license. The fact that the revocation also concerned payment which had to be made from the Recovery Fund because of the Respondent’s failure or inability to do corrective work is also relevant to the issue of the Respondent’s qualifications. Under the applicable statue, such a revocation reasonably leads to a presumption that the named persons involved with the entity which had a license revoked, presently lack the qualifications or competency to hold another contractor’s license. The above presumption may be rebutted by competent evidence. No such evidence was offered on behalf of the Respondent. The Respondent chose to rely solely on a legal argument that was not applicable to the facts established by the evidence. RECOMMENDED ORDER In view of the foregoing it is recommended, commencing on the effective date of the Order entered in this matter, that the Class L05 license of the Respondent be Revoked Done this day, October 30, 1998.

_________________________________ ALLEN REED Administrative Law Judge

Original transmitted by mail this ____ day of October, 1998, to:

Michael P. Goldwater, Director Registrar of Contractors ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By _______________________________

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Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826