Contractors Beware: Unlicensed Contractors Can Collect Via the ROC

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.)

CONCLUSION

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.