Contractors Beware: Unlicensed Contractors Can Collect Via the ROC
While they may be safe from unlicensed subcontractors’ collection efforts in Arizona courts, licensed contractors remain vulnerable to the dictates of an ROC proceeding
In 2003, a licensed Arizona contractor, Twin Peaks
Construction Inc., contracted with the City of Bisbee to build improvements in a
city park. As part of the project, Twin Peaks contracted with Weatherguard Metal
Construction to provide a metal ramada.
The City paid Twin Peaks for its services, but Twin Peaks made only a partial
payment to Weatherguard.
Weatherguard filed a complaint with the Arizona Registrar of Contractors (ROC),
claiming that Twin Peaks’ failure to pay violated
A.R.S. § 32-1154(A)(11),
which requires a contractor to pay a subcontractor “when due for materials or
services rendered in connection with the licensee's operations as a contractor.”
At the ensuing hearing, Twin Peaks asked the administrative law judge (ALJ) to dismiss Weatherguard’s
claim, arguing that Weatherguard was not properly licensed for the Bisbee
project and, thus, per
A.R.S. § 32-1153, was not entitled to bring an action to
collect for its work. (That statute prohibits unlicensed or improperly licensed
contractors from using Arizona courts to collect for work performed.)
The ALJ refused to dismiss Weatherguard’s claim, ruling that § 32-1153 “pertains
to actions in civil court, not administrative proceedings” such as an ROC
complaint. The ALJ ordered Twin Peaks to pay Weatherguard or risk revocation of
its license, and the ROC adopted the ALJ’s order.
Twin Peaks asked for a judicial review in Superior Court,
where the order was upheld. Twin Peaks then appealed to the Arizona Court of Appeals, which affirmed
the lower court’s ruling and, by extension, the ROC order for Twin Peaks to pay
the remaining amount owed to Weatherguard.
(In its ruling, the Arizona Court of Appeals noted that Weatherguard was, in
fact, properly licensed at all required times. Nevertheless, the Court took the
opportunity to affirm that an unlicensed contractor may utilize the ROC
administrative process to enforce collection against a licensed contractor.)
The Court of Appeals’ 2007 decision in Twin Peaks Construction v. Weatherguard
is a useful reminder to licensed contractors that, while they may be safe from
unlicensed subcontractors’ collection efforts in Arizona courts, they remain
vulnerable to the dictates of an ROC proceeding.