ALJDEC - Licensing

2024A-11105-NPC-ROC · Registrar of Contractors · 2025-02-04

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Black Hills Trenching and Boring LLC,

COMPLAINANT,

v.

SRD Excavation Corporation

ROC License No. 349028 & 345373

RESPONDENT.

No. 2024A-11105-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 17, 2025 at 1:00 PM.

APPEARANCES: Joseph Donarski appeared on behalf of Black Hills Trenching and Boring LLC (“Complainant”) with Ashley Donarski as a witness. No appearance(s) by or on behalf of SRD Excavation Corporation (“Respondent”).

ADMINISTRATIVE LAW JUDGE: Jenna Clark.

EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing on Contested Case (“Notice of Hearing”), including the Arizona Registrar of Contractor’s (“Registrar’s”) attached agency file, and December 16, 2024, Hearing Order were admitted into the record.

_____________________________________________________________________

After review of the hearing record in this matter, the undersigned Administrative Law Judge makes the following Findings of Fact and Conclusions of Law, and issues this Recommended Order to the Director of the Registrar.

FINDINGS OF FACT

Background and Procedure

Pursuant to Arizona Administrative Code (“Ariz. Admin. Code”) R4-9-117, Administrative Notice is taken of Respondent’s license histories as reflected by the Registrar’s public website. On June 06, 2023, the Registrar issued ROC License No. 345373 for General Commercial A-12 Sewers, Drains and Pipe Laying contracting to Respondent. Though renewed by Respondent though June 30, 2025, the license was suspended by the Registrar on November 05, 2024, as the result of a complaint. Seth R. Dixon is listed as the Qualifying Party and President for the license. The address of record for the license is 2111 E. Melrose St. Gilbert, Arizona 85297. Respondent has an active $15,000.00 surety bond for the license issued through Merchants Bonding Company, effective January 30, 2024. The license has been disciplined on two (2) prior occasions, and currently has two (2) open complaints against it; one of which is presumed to be related to this matter.

On December 08, 2023, the Registrar issued ROC License No. 349028 for Specialty Dual CR-67 Low Voltage Communication Systems contracting to Respondent. Though renewed by Respondent though December 31, 2025, the license was suspended by the Registrar on January 03, 2025, for lack of bond. Seth R. Dixon is listed as the President for the license. The address of record for the license is 2111 E. Melrose St. Gilbert, Arizona 85297. The license has not previously been disciplined by the Registrar. There are, however, two (2) open complaints against it; one of which is presumed to be related to this matter.

In or around mid-October 2024, the Registrar received a complaint from Complainant alleging nonpayment of services and/or materials against Respondent. Specifically, Complainant alleged that Respondent had failed to remit timely payment(s) on six (6) invoices totaling $115,103.90 regarding a fiber-optic installation subcontract agreement for a new residential subdivision constructed by Respondent (“Project”). The Registrar designated it Complaint No. 2024-11105 and assigned the case to Gail Mathews in their legal department for investigation.

On October 23, 2024, the Registrar issued a Notice of No Pay Complaint letter to Respondent providing notice of Complainant’s complaint, and informed Respondent that it was free to raise any affirmative defense(s) or provide additional information by October 30, 2024.

On October 28, 2024, Mr. Dixon replied to the Registrar’s correspondence with the following:

We have yet to be paid on these contracts and they are missing information required for billing as per contract. Also had incomplete work that we had to go back and fix.

On November 05, 2024, the Registrar issued a Citation to Respondent for an alleged violation of Ariz. Rev. Stat § 32-1154(A)(10). Respondent was notified that a failure to provide an Answer by November 20, 2024, would be deemed as an admission of Respondent’s commission of the act(s) charged in the underlying complaint, pursuant to Ariz. Rev. Stat § 32-1155(B), and could result in discipline against Respondent’s license including suspension or revocation.

On November 20, 2024, the Registrar received Respondent’s timely Answer whereby Mr. Dixon provided the following information:

[Complainant] will still have money due to them when it comes in. these guys were all on the same jobs that everyone left giant messes for us to clean up and multiple utilities damages as well as homeowner and HOA bills and complaints. These jobs were all just finally billed out in the past week and the Prime contractor has changed us to a net 60 so as soon as we have payment minus all deductions they will be paid that day.

(All errors in original.)

No additional records were attached to Respondent’s Answer.

On November 25, 2024, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on January 17, 2025. Per the December 03, 2024, Notice of Hearing the issue to be determined is whether the Registrar has cause to discipline Respondent’s license based on the following charge(s) alleged in the Citation:

Charge 1: A violation of A.R.S. § 32-1154(A)(10).

Hearing Evidence

Complainant called Joseph Donarski and Ashley Donarski as witnesses. The substantive facts of record are as follows:

Respondent is a general contractor for the Project, which is located in Maricopa County, Arizona.

Complainant is a subcontractor and holder of ROC License No. 349038 for Specialty Dual CR-2 Excavating, Grading and Oil Surfacing contracting. On an unknown date, Complainant was hired by 10-4 Utility Construction LLC (“10-4”), holder of ROC License No. 3508821 for Specialty Residential R-2 Excavating, Grading and Oil Surfacing, as a subcontractor on the Project.

On or about April 27, 2021, the parties entered into a subcontract agreement for the Project. Complainant’s scope of work included labor and material for fiber-optic installation, to be paid by the foot weekly.

Complainant received all payments for work from 10-4 until July 2024, when Respondent agreed to pay Complainant directly per contract because 10-4 stopped paying Complainant.

In late-Spring/early-Summer 2024, Complainant completed its scope of work on the Project.

Complainant received its last payment for the Project from Respondent in August 2024.

On September 04, 2024, Complainant issued a Demand Letter to Respondent pursuant to Ariz. Rev. Stat. §§ 32-1181 to 1188 for outstanding payment owed for worked performed “April, May, June, and July 2024.” The Demand Letter did not reference a dollar amount owed, but noted that it was being issued “in follow up to previous invoice notices, contract clauses, email notices and text message communication” regarding the alleged principal amount owed. The correspondence was not returned to Complainant as undeliverable to Respondent.

On June 27, 2024, Complainant issued a net-30 invoice, Invoice No. 1205, to Respondent for $25,434.00. Respondent paid $17,458.10 towards the invoice. On or about July 27, 2024, the invoice was reissued seeking outstanding payment for $7,975.90.

On June 27, 2024, Complainant issued a net-30 invoice, Invoice No. 1206, to Respondent for $11,374.00. On or about July 27, 2024, the invoice was reissued seeking outstanding payment.

On July 08, 2024, Complainant issued a net-30 invoice, Invoice No. 1208, to Respondent for $18,097.25. On or about August 22, 2024, the invoice was reissued seeking outstanding payment.

On July 08, 2024, Complainant issued a net-30 invoice, Invoice No. 1209, to Respondent for $18,570.25. On or about August 22, 2024, the invoice was reissued seeking outstanding payment.

On July 25, 2024, Complainant issued a net-30 invoice, Invoice No. 1211, to Respondent for $48,017.00. On or about September 08, 2024, the invoice was reissued seeking outstanding payment.

On August 08, 2024, Complainant issued a net-30 invoice, Invoice No. 1216, to Respondent for $11,069.50. On or about September 21, 2024, the invoice was reissued seeking outstanding payment.

Complainant never received a complaint by or on behalf of Respondent regarding workmanship concerns or allegations of incompleteness on the Project.

Additional Evidence

Mrs. Donarski testified that Mr. Dixon was very communicative with Complainant and responded quickly when 10-4 stopped tendering payment on their invoices, and even made four (4) payment to Complainant on invoices that were owed by 10-4.

Per Mrs. Donarski, if Complainant would have received one or more workmanship complaints from Respondent, Complainant would have been willing to address them.

Mrs. Donarski testified that Respondent owed Complainant an outstanding balance of $95,754.00.

Closing Arguments

In closing, Complainant argued that it should be paid for the work it completed per Respondent’s request, which was never complained of by Respondent.

CONCLUSIONS OF LAW

This matter lies within the Registrar’s jurisdiction and has been properly brought before OAH for adjudication.

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

The Registrar may resolve contractual disputes if such resolution in ancillary to its regulatory mission and may penalize a contractor’s license by ordering payment of restitution if a proven statutory violation was not remedied by corrective action.

The Notice of Hearing the Registrar mailed to Respondent’s address of record is sufficient, and Respondent is deemed to have received notice of the hearing in this matter. Because the Registrar mailed all correspondence to Respondent in the same manner and failed to receive any mail returned as undeliverable, Respondent is deemed to have received all correspondence regarding this matter from the Registrar as well.

Complainant bears the burden of proof to establish cause for the Registrar to discipline Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.

“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”

Statutes should be interpreted to provide a fair and sensible result. Statutes shall be liberally construed to affect their objects and to promote justice.

Ariz. Rev. Stat. § 32-1129 et seq., provides numerous benefits and protections for subcontractors including their right to timely payment, 1.5% interest per month on unpaid invoices, and the right to stop work for nonpayment (after notice).

Ariz. Rev. Stat. § 32-1129.02(A) provides, in pertinent part, that “[p]erformance by a subcontractor in accordance with the provisions of a construction contract entitles the subcontractor to payment from the party with whom the subcontractor contracts.”

Ariz. Rev. Stat. § 32-1129.02(B) provides, in pertinent part, that “[i]f a subcontractor has performed in accordance with the provisions of a construction contract, the contractor shall pay to its subcontractors within seven days of receipt by the contractor of each progress payment, retention release or final payment, the full amount received for such subcontractor’s work and materials supplied based on work completed or materials supplied under the subcontract.”

Ariz. Rev. Stat. § 32-1129.02(E) provides, in pertinent part, that “[i]f a contractor chooses to withhold the application or certification for all or a portion of a subcontractor’s billing, the contractor must prepare and issue a written statement within fourteen days to the applicable subcontractors stating the reasons for withholding the application or certification from the owner.”

Ariz. Rev. Stat. § 32-1129.02(F) provides, in pertinent part, that “[i]f the owner issues a written statement stating that the owner declines to certify or approve all or a portion of the contractor’s billing and if the amounts to be paid from that billing by the contractor to any subcontractors are affected by the owner’s decision not to certify or approve, the contractor shall send a copy of that written statement within seven days after the receipt to any affected subcontractors or material suppliers.”

Ariz. Rev. Stat. § 32-1154(A)(10) holds, in pertinent part, that among the grounds for suspension or revocation of a contractor’s license is a “[f]ailure by [the] licensee . . . to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.”

Ariz. Rev. Stat. § 32-1156.01 states, in pertinent part, that after a hearing an Administrative Law Judge may provide restitution to any person who is injured by an action of a licensee.

In the case at bar, the Tribunal is tasked with determining how much money Complainant is owed by Respondent, if at all, but if so whether said debt(s) constitute a violation of Ariz. Rev. Stat. § 32-1154(A)(10) for which Respondent’s license may be disciplined by the Registrar.

Upon review of the record, the relevant and credible evidence establish that Respondent subcontracted 10-4, who in turn subcontracted with Complainant, for labor and materials on a residential project; which was ultimately ratified by Respondent in July 2024 when the parties entered into their own agreement. The record also reflects that Respondent took over 10-4’s payments to Complainant prior to entering into their respective agreement, and that payments were issued to Complainant under that agreement through August 2024. The record further reflects that Complainant issued Invoice Nos. 1206, 1208, 1209, 1211, and 1216 to Respondent, some of which Respondent made partial payments on, but that Respondent did not pay them all in full.

Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to tender payment in full to Complainant. The Tribunal is not at liberty to make presumptions in favor of Respondent or accept facts in mitigation on behalf of Respondent that are not supported by the evidence. Here, the record reflects that Respondent failed to comply with the payment terms of the parties’ agreement, and did not establish any affirmative defense(s). There is no evidence in the record that Respondent provided notice of incompletion or deficient workmanship to Complainant, let alone afforded Complainant a reasonable opportunity to complete or otherwise correct the complained of work.

Notably, Respondent’s absence from this administrative proceeding is a factor in aggravation, as it evinces the licensee’s unwillingness to be regulated by the Registrar.

Because Complainant established by a preponderance of the evidence that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10), Complainant also established cause for the Registrar to discipline ROC License Nos.349028 and 345373.

RECOMMENDED ORDER

Based on the foregoing,

IT IS RECOMMENDED that on the effective date of the Final Order in this matter, Respondent SRD Excavation Corporation, ROC License No. 349028 and 345373, shall be suspended until Respondent provides the Registrar with sufficient proof that $95,754.00 has been tendered to Complainant in certified funds as restitution.

IT IS FURTHER RECOMMENDED that after the Registrar has received Respondent’s proof of payment to Complainant, Complaint No. 2024-11105 may be closed.

NOTICE

Pursuant to Ariz. Rev. Stat. § 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, February 04, 2025.

Office of Administrative Hearings

/s/ Jenna Clark

Administrative Law Judge

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

Tom Cole, Director

c/o Legal Department

Registrar of Contractors

1700 W. Washington St., Ste. 105

Phoenix, AZ 85007

[email redacted]

SRD Excavation Corporation, Respondent

2111 E. Melrose St.

Gilbert, AZ 85297

[email redacted]

Black Hills Trenching and Boring LLC, Complainant

8533 E. Thoroughbred Trl.

Scottsdale, AZ 85258

[email redacted]

By: OAH Staff