ALJDEC - Licensing

2024A-12536-NPC-ROC · Registrar of Contractors · 2025-04-03

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

T L Hanks Excavating Inc.,

COMPLAINANT,

M S Dudley Development LLC

License No. ROC 270544,

RESPONDENT.

No. 2024A-12536-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: February 25, 2025 at 11:00am

APPEARANCES: Terry Lee Hanks, Qualifying Party, and Tracy Hanks on behalf of Complainant T L Hanks Excavating Inc. Mike Dudley, Qualifying Party, appeared on behalf of Respondent M S Dudley Development LLC.

ADMINISTRATIVE LAW JUDGE: Nicole Robinson

EXHIBITS ADMITTED INTO EVIDENCE: Registrar of Contractors Notice of Hearing Packet (“Packet”); Complainant Exhibits; Respondent Exhibits.

FINDINGS OF FACT

M S Dudley Development LLC (“Respondent”) is the holder of License No. ROC 270544 issued by the Registrar of Contractors (“Registrar”).

On or about November 24, 2024, T L Hanks Excavating Incorporated (“Complainant”) filed a Complaint against Respondent with the Registrar alleging that Respondent had failed to pay Complainant the sum of $6,518.00 for an excavating project which represented the final invoice.

The parties were unable to resolve their differences, and Complainant requested an administrative hearing. On December 17, 2024, the Registrar then issued a Citation for Alleged Violation of Ariz. Rev. Stat. § 32-1154(A)(10).

Hearing Evidence

Terry Lee Hanks testified on behalf of Complainant and presented testimony of Tracy Hanks, Complainant Accountant. Mike Dudley testified on behalf of Respondent. Administrative notice was taken of the Registrar’s packet which includes the Notice of Hearing. The substantive evidence of record is as follows:

Mr. Hanks had been in the construction business for over 50 years. Complainant was hired by Respondent as a subcontractor on a new residential home project which was built into a mountain hillside located in Fountain Hills, Arizona.

Mr. Dudley was a custom home builder, primarily as a general contractor, and had been in the industry for 36 years.

On February 15, 2022, Mr. Dudley signed off on Complainant’s contract, which had a contract price of $132,680.00. This contract did not include extras, soil report, taxes, footing compaction in native undisturbed soil, inaccurate existing contours, or any deviations from finish floor plan. The contract stated, “Proposal includes use of Loader, Excavator, Water, Application, Track In, Labor, Spot density test only and HDPE included per plan. All material is guaranteed to be as specified. All work to be completed in a workmanlike manner per standard practices.”

On March 20, 2022, Mr. Hanks signed off on a subcontractor agreement presented by Respondent. The contract stated in part, “Subcontractor agrees to provide all materials, labor, tools, equipment, supervision, supplies, and other items necessary or required to execute the work and perform all Excavation work in accordance with the contract drawings, specifications and any addenda contained in the general contract documents for the construction of the [Client Name] project.”

On March 24, 2022, a deposit of $35,000.00 was paid to Complainant by Respondent. Complainant began work on the project around April 2022. Complainant’s work stopped around the end of September 2023.

In the industry, “extras” consist of verbally agreed upon items such as hard digs and spoils (material that is hard to get rid of). These extras are costs beyond the initial contract and are billed separate and apart from the initial contract amount.

Invoice 2000 dated April 6, 2022, included extras in the amount of $1,527.86. The extras were “wattles” and “leach rock.” Wattles, a building material, were not a part of the initial contract. Complainant did not charge for the wattles material but did charge for the material pickup and the laborer hours to install the wattles. On June 13, 2022, Respondent paid for these extras.

Invoice 2018 dated July 11, 2022, included extras in the amount of $875.00. The extras were for labor and assistance with trenching utilities which were not a part of the initial contract. On August 1, 2022, Respondent paid for these extras.

Invoice 2020 dated July 20, 2022, included an extra in the amount of $1,200.00 which was a hard dig. On August 1, 2022, Respondent paid for this extra.

Invoice 2021 dated August 5, 2022, included a backfill sewer line to the street in the amount of $1,042.50. Mrs. Hanks testified that this was not a Complainant invoice. Mr. Dudley testified that Respondent paid for this invoice and the check was cashed by Complainant.

Invoice 2026 dated October 5, 2022, included extras in the amount of $2,900.00. The extras included a French drain, rocks, excavator, trucking, loader, and labor which was above the initial contract. The materials for this extra were picked up and installed by Complainant. The French drain and the rocks totaled $870.00 within the $2,900.00. On October 5, 2022, Respondent paid for this extra. Mr. Dudley argued that the extra charges for the excavator, loader, and trucking were already onsite, hence, part of the initial contract and Respondent should be credited $1,230.00.

Invoice 2029 dated October 8, 2022, included an extra in the amount of $530.00 for additional leach rock. Mr. Dudley argued that the additional leach rock was needed because Complainant brought in two loads initially but should have brought in two to three loads. Due to this inaccuracy, Mr. Dudley believed Respondent should be credited $530.00.

Invoice 2056 dated February 20, 2023, included extras in the amount of $675.00 for two additional French drains, material and installation. Mr. Dudley argued that Mr. Hanks should have ordered enough French drains to do the entire job earlier in the project. Mr. Dudley further argued that he already paid for a French drain per Invoice 2026. Respondent paid for this invoice on February 24, 2023.

Invoice 2064 dated April 13, 2023, included extras in the amount of $3,360.00 for pool and footing spoils. Complainant noted that the pool company should have handled this task which was not a part of the initial contract. Respondent argued that this item should have cost around $2,000.00. Respondent paid the full amount of this invoice on August 28, 2023.

Invoice 2081 dated June 22, 2023, included extras in the amount of $5,730.00 for concrete debris and plumbing spoils. On August 28, 2023, Respondent paid for these extras. Mr. Dudley argued, at the hearing, that Complainant did not present him with “haul receipts” and he did not believe that 10 loads of rock removal cost $2,500.00.

At the time invoices were paid out by Respondent, there were no issues expressed with Complainant’s billing until the final bill.

On October 2, 2023, the final bill and invoice 3001 from Complainant to Respondent included the following:

Quantity

Description

Unit Price

Line Total

Contract Completion

$5,120.00

Extras – Backfill driveway for retaining walls, grade driveway to subgrade for pavers, backfill planters, haul off spoils, move boulders, 2’ ripper bucket and tiger teeth, install French drain

Hours SK85 Kobelco Excavator

$175.00

$1,400.00

Hours 544 John Deere Loader

$120.00

$360.00

Hours Laborer

$50.00

$100.00

Hours – 8 loads x 1.5 each footing and wall alignment spoils

$140.00

$1,680.00

French Drain

$1,358.00

TOTAL

$10,018.00

Mr. Dudley testified that the final bill items for excavator time ($1,400.00), loader time ($360.00), and laborer time ($100.00) were items included in the original contract and were not owed as extras.

Part of the initial contract included Complainant to perform work on a culvert drain system installation which was itemized at $3,000.00. At some point, Mr. Dudley decided that Respondent was going to subcontract this task to another company. In response, on October 4, 2024, Complainant issued invoice 6017 to Respondent which was a credit of $3,500.00 for deleting the culverts and labor. Taking the total from the final bill of $10,018.00 and subtracting the $3,500.00 credit equated to a total of $6,518.00 that Mrs. Hanks testified Complainant was owed. Respondent testified that he thought he would get a larger credit than $3,500.00.

Complainant’s last task on the project was the driveway which was not finished to Mr. Dudley’s liking. Mr. Hanks informed Mr. Dudley that the area was not staked properly or at all and his team could not fix the grade on the driveway properly without industry standard staking. Mr. Dudley told Mr. Hanks that the driveway was too high and that they would get back to him later. Mr. Hanks informed Mr. Dudley that they would like the opportunity to cure. Mr. Dudley wound up hiring a different subcontractor who completed the drainage system and graded the driveway. Mr. Dudley testified that he informed Mr. Hanks, “Unfortunately we chose another path.”

Complainant’s initial contract included a Notice To Cure clause that stated, “[Complainant] shall have not less than seven (7) days to cure any deficiencies before Customer terminates this contract.”

Complainant Argument

Mr. Hanks argued that the total amount owed by Respondent was $6,518.00 for its final bill. However, Complainant was willing to waive $1,620.00 to settle the matter, which would be a total amount owed of $4,898.00.

Respondent Argument

Mr. Dudley argued that he did not owe Complainant any additional money nor was Respondent seeking any money owed. Mr. Dudley testified that Respondent overpaid $11,056.53 in invoice amounts and project delays cost $6,160.00 in construction loan interest paid by Respondent’s client.

CONCLUSIONS OF LAW

The burden of proof at an administrative hearing falls to the party asserting a claim, right, or entitlement and the standard of proof on all issues in these matters is 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.”

Ariz. Rev. Stat. § 32-1129.02(A) provides, in pertinent part, as follows:

Performance 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, as follows:

If 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. § 32-1154(A)(10) provides, in pertinent part, that among the grounds for suspension or revocation of a contractor’s license is a

Failure 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 this case, 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 established that the final invoice, Invoice 3001 was not paid by Respondent to Complainant. The total amount of this final bill was $10,018.00. Due to the amount credited to Respondent in Invoice 6017 in the amount of -$3,500.00, Complainant testified that they were owed $6,518.00. However, Invoice 2021 in the amount of $1,042.50 was issued by Complainant, appeared to have been paid by Respondent, and was not accounted for in Complainant’s accounting breakdown. As such, the evidence established that Respondent owed a total amount of $5,475.50.

Respondent failed to establish by a preponderance of the evidence that it lacked the ability to pay Complainant for the work performed.

Furthermore, in regards to Invoice 2026, Respondent’s argument regarding any charges for excavator time, loader time, and trucking time should be included as a part of the initial contract and not billed separately. However, this argument was not convincing because Complainant’s excavator, loader, and trucking time was used for extra work that was not deemed a part of the original contract and should be charged separately per Complainant contract.

Respondent argued that Complainant only brought two loads of leach rock and only one French drain initially per Invoices 2029 and 2056 and should be credited these amounts. However, because Complainant did not estimate with 100% accuracy in the initial run does not constitute a persuasive argument by Respondent to credit its account. Ultimately, the additional leach rock and French drains were needed and as such Respondent should not be credited for these tasks because they constituted extras.

In addition, in regards to Respondent’s arguments to Invoices 2064 and 2081, that the estimates were too high and that Mr. Dudley did not receive haul receipts, were not persuasive. Respondent paid for these invoices and did not question the charges to Mr. Hanks at any time prior to Complainant filing a complaint with the Registrar.

Lastly, Respondent did not allow Complainant to cure any defect with the driveway, which was a major clause per Complainant’s contract that was not honored.

Therefore, Complainant established that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10) by failing to pay Complainant $5,475.50 for services or materials rendered in connection with Respondent’s contracting business.

Based upon Respondent’s violation of the provisions of Ariz. Rev. Stat. § 32-1154(A)(10), grounds exist to impose discipline against Respondent’s license.

RECOMMENDed order

Based on the foregoing,

It is Recommended that the Registrar suspend Respondent’s License No. ROC 270544 issued by the Registrar until it has provided to the Registrar, and the Registrar has accepted, documents that establish that it has paid Complainant $5,475.50 in certified funds.

It is Further Recommended that when and if the Registrar receives and accepts Respondent’s evidence that it has paid Complainant $5,475.50 in certified funds, the Registrar may close the Complaint in Case No. 2024-12536.

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, April 3, 2025.

/s/ Nicole Robinson

Administrative Law Judge

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

Tom Cole, Director

Registrar of Contractors

c/o Legal Department

1700 W. Washington Street, Suite 105

Phoenix, AZ 85007

[email redacted]

M S Dudley Development LLC p

7411 E 6TH AVE Suite 205

SCOTTSDALE, AZ 85251

[email redacted]

T L Hanks Excavating Inc.

26719 N 156th St

Scottsdale, AZ 85262

[email redacted]

By: OAH Staff