ALJDEC - Licensing

2024A-04005-NPC-ROC · Registrar of Contractors · 2025-05-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

JP Construction & Estimating Services LLC,

COMPLAINANT,

Engineered Structures Inc., License No. ROC 132139,

RESPONDENT.

No. 2024A-04005-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: April 3, 2025. Record held open until April 24, 2025.

APPEARANCES:

For Complainant: James Pauley.

For Respondent: Jason Clark.

ADMINISTRATIVE LAW JUDGE: Samuel Fox

EXHIBITS ADMITTED INTO EVIDENCE: Administrative notice was taken of the Notice of Hearing Packet submitted by the Registrar of Contractors. Complainant’s Exhibits A through F. Respondent’s Exhibits 1 through 33.

_____________________________________________________________________

FINDINGS OF FACT

Engineered Structures Inc. (Respondent) was the holder of License No. 132139 issued by the Arizona Registrar of Contractors (Registrar) on April 29, 1998.

On or about June 23, 2023, JP Construction & Estimating Services LLC (Complainant) entered into a contract with Respondent for, among other things, plumbing services. The contract included the following provisions:

[Section 2.13:] All claims for money due or to become due from [Respondent] arising out of this or any other transaction with [Complainant] shall be subject to deduction or setoff by [Respondent] in the event of default or should [Respondent] deem itself insecure with respect to [Complainant’s] performance under this Agreement, or any other agreement with [Respondent].

[Section 4.5:] [Complainant] shall reimburse [Respondent] for any loss, damage or extra expense paid or incurred by [Respondent] which is due to [Complainant’s] failure to perform the Work, failure to deliver all materials at the times scheduled, or failure to properly prform any and all work in keeping with the progress of the general construction work, or failure to properly perform any term, covenant or condition contained in this Subcontract or in the Prime Contract in any way associated with [Complainant’s] Subcontract Work.

[Section 12.2:] [Complainant] shall be responsible for any costs incurred by [Respondent] or others to correct [Complainant’s] defective of deficient Work or to repair damage to other trades’ Work caused by [Complainant].

[Section 23.1:] The following are events of default by [Complainant]: (a) failure to carry out the Work in accordance with this Subcontract; (b) failure to perform or observe any provision of this Subcontract; (c) failure to prosecute the Work with sufficient laborers, material and equipment to ensure its completion within the time specified for completion; (d) performing and/or failing to correct defective work. . . .

[Section 23.3.5:] Upon [Complainant’s] default. . . [Respondent] may . . . [w]ithhold further payment to [Complainant] until the Work is completed, and any amounts may be applied to payments for the completion of such Work, including, but not limited to, payment of suppliers directly, and the right to retain out of any amount sufficient to completely protect [Respondent] and OWNER from any and all potential claims, loss, cost, damage or expense, including without limitation attorney fees, arising from the Work. . .

On March 21, 2024, Complainant submitted Progress Payment Application #6, which was rejected; Complainant resubmitted the payment application several times through at least April 4, 2025.

Respondent rejected Progress Payment Application #6 for overstating completed work; Respondent investigated Complainant’s work and uncovered issues, including drains placed in the wrong places. On April 5, 2025, Complainant sent Respondent a Notice of Default, informing Complainant that Respondent would be withholding payment.

On or about April 6, 2024, Complainant filed a Non-Payment Complaint Form with the Registrar, claiming Respondent had failed to pay $73,376.32 in Progress Payment Application #6.

On April 8, 2024, Complainant’s counsel sent a demand letter to Respondent. Complainant quit the job on April 12, 2024, claiming wrongful non-payment.

On June 26, 2024, Respondent filed a lawsuit against Complainant. On or about November 26, 2024, Respondent was awarded a default judgment against Complainant for $1,419,514.41 in damages on the project at issue.

On April 10, 2024, the Registrar notified Respondent that it had received a complaint and that the Respondent could raise issues and defenses by April 17, 2024.

Respondent filed its response on April 17, 2024,

On May 21, 2024, the Registrar issued a Citation, alleging that Respondent violated Arizona Revised Statutes (A.R.S.) § 32-1154(A)(10). Respondent timely submitted an Answer on June 5, 2024, stating Complainant abandoned the project and it had performed defective work.

The matter was referred to the Office of Administrative Hearings for an administrative hearing. The Notice of Hearing was issued on June 14, 2024, setting the hearing for August 1, 2024.

After several continuances, a hearing was held on April 3, 2025.

At hearing, Complainant presented the testimony of Jay James, Hector Perez, Juan Avilla, and James Pauley. Respondent presented the testimony of Matt Kirtley, Derrick Tovey, and Eric Christiansen.

Respondent’s witnesses testified that Complainant’s work was defective and it abandoned the job.

Complainant’s witnesses disagreed, stating the work was completed as directed and that Respondent damaged their work.

The witnesses for Respondent were more credible regarding the defective work and abandonment.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction.

Complainant bore the burden of proof to establish Respondent’s statutory violations by a preponderance of the evidence. Respondent bore the burden of proof to establish an affirmative defense by a preponderance of the evidence.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”

The evidence on record may be given more or less weight toward establishing a preponderance depending on the indicia of credibility associated with that evidence and its source.

A.R.S. § 32-1154(A)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license,

[f]ailure by a licensee or agent or official of a licensee to pay monies in excess of $750 when due for materials or services rendered in connection with the licensee's operations as a contractor unless the licensee proves that the licensee lacks the capacity to pay and has not received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.

Statutes should be interpreted to provide a fair and sensible result and “be liberally construed to effect their objects and to promote justice.”

The purpose of the ROC’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors.

Respondent argued that Res Judicata applied and that the Default Judgment should not be disturbed. The credible facts on the record support the material conclusions from the Default Judgment.

Complainant was in default on the contract: it billed for work that had not been completed, it performed defective work, and it abandoned the project. Accordingly, Respondent was authorized to withhold payment under the contract, and the amount Complainant alleged was owed for work performed was not “due.”

The preponderance of the evidence did not show that Respondent violated A.R.S. § 32-1154(A)(10) as alleged.

Therefore, the Administrative Law Judge did not find grounds to impose discipline against Respondent’s license.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that on the effective date of the Registrar’s Order, Complainant’s complaint be dismissed.

Pursuant to A.R.S. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the final decision by the Office of Administrative Hearings.

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 will be forty (40) days from the date of that certification.

Done this day, May 14, 2025.

/s/ Samuel Fox

Administrative Law Judge

Transmitted by either mail, e-mail, or facsimile to:

Tom Cole, Director

Registrar of Contractors

James N. Hanson

LANG & KLAIN PC

[email redacted]

JP Construction & Estimating Services LLC

[email redacted]

Engineered Structures Inc

[email redacted]

By: OAH Staff