A 2002 Arizona Court of Appeals ruling in Crowe v. Hickman’s Egg Ranch, Inc.
sends a subtle yet stern warning to Arizona contractors: Be properly licensed, or lose your right to payment.
In 1997, Hickman’s Egg Ranch sought the services of a Mississippi contractor, Richard Crowe Construction Company, which specializes in building commercial hen houses.
At the time the two parties entered into the $2.1 million construction contract, and for a time after Crowe commenced work on the project, Crowe was not licensed in Arizona. Hickman’s was aware of Crowe’s lack of license and helped Crowe gather the documentation needed for licensing. (Crowe became licensed and bonded in February 1998.)
Hickman’s paid Crowe more than $2 million for Crowe’s services, but Hickman’s allegedly failed to pay about $105,000 for work performed by Crowe between February 1998 and February 1999, a time during which Crowe was a licensed and bonded Arizona contractor. Crowe sued in Superior Court to collect the unpaid $105,000.
In a dubious decision, the trial court dismissed Crowe’s suit on the grounds that Crowe was not a licensed Arizona contractor when the contract was entered into. The court cited A.R.S. § 32-1153, which states:
“No contractor … shall act as agent or commence or maintain any action in any court of the state for collection of compensation for the performance of any act for which a license is required by this chapter without alleging and proving that the contracting party whose contract gives rise to the claim was a duly licensed contractor when the contract sued upon was entered into and when the alleged cause of action arose
.” (Emphasis added.)
Crowe appealed, and the Arizona Court of Appeals upheld the dismissal of Crowe’s suit, thus dashing Crowe’s hopes of collecting the final $105,000 on the contract.
In reaching its decision, the majority of the three-judge panel raised some issues of which Arizona contractors and owners should take note.
While the statutory language quoted above seems final, the judges cited the 1995 Aesthetic decision in which the Arizona Supreme Court offered contractors some wiggle room, i.e., that “substantial compliance” with the contractor licensing statute was sufficient to satisfy the licensing prerequisite. Thus, the question that the judges sought to answer was whether Crowe “substantially complied” with A.R.S. § 32-1153 and whether the trial court’s summary judgment against Crowe’s suit was appropriate.
Unfortunately for Crowe, the majority ruled that Crowe failed the “substantial compliance test” contained in Aesthetic. Among their findings were these:
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