ALJDEC - Licensing

2025A-02875-NPC-ROC · Registrar of Contractors · 2025-08-14

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Cornerstone Plumbing LLC,

COMPLAINANT,

v.

Temac Development Inc.,

ROC License No. 236246,

RESPONDENT.

No. 2025A-02875-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: June 16, 2025 & July 29, 2025.

APPEARANCES: Marvin Rodriguez and Tanya Rodriguez appeared on behalf of Cornerstone Plumbing LLC (“Complainant”). James Sparks, Esq. appeared on behalf of Temac Development Inc. (“Respondent”) with Jesus Garcia, Timothy McCormac, Marija Nikolic, and Terry Lee Lamb as witnesses.

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 administrative file, May 07, 2025, Hearing Order, June 17, 2025, Further Hearing Order, Complainant Exhibits 1-16 & 19-26, and Respondent Exhibits 1-14 were admitted into the evidentiary 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 July 29, 2007, the Registrar issued ROC License No. 236246 for General Commercial B-2 Small contracting to Respondent. The license is current active and in good standing with the Registrar, and has been renewed through July 31, 2026. Timothy John McCormac is listed as the Qualifying Party and Officer for the license. The address of record for the license is 2200 S. Rural Rd. Tempe, Arizona 85282-6642. Respondent has an active $100,000.00 surety bond for the license issued by RLI Insurance Company. The license has no prior disciplinary history. Currently, the license has one (1) open complaint against it; which is presumed to be related to this matter.

In or around late-March 2025, 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 five (5) invoices totaling $28,254.00 regarding a commercial plumbing project (“Vanilla Shell”) located at 1014 N. 2nd St. Phoenix, AZ 85004. The Registrar designated it Complaint No. 2025-02875 and assigned the case to an investigator in their legal department for review.

On an unknown date, 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.

On March 31, 2025, Respondent replied, in pertinent parts, that it had submitted a complaint to the Registrar against Complainant under Complaint No. 2025-02678 for alleged defective work. On March 10, 2025, it had issued a Notice to Cure to Complainant that was rejected, the underlying work of which was addressed by Red Eagle Plumbing LLC, another licensed subcontractor. Respondent admitted that it “could not proceed with payments for work that did not meet the approved plans and specifications” because Complaint’s deviation from approved plans and poor workmanship had “caused significant delays and requires immediate remediation.”

On April 14, 2025, the Registrar issued a Citation to Respondent for an alleged violation of Arizona Revised Statute (“Ariz. Rev. Stat.”) § 32-1154(A)(10). Respondent was notified that a failure to provide an Answer by April 29, 2025, 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 April 23, 2025, the Registrar received Respondent’s timely Answer whereby Respondent argued, overall, that (a) Complainant’s refusal to adhere to plans and specifications resulted in multiple failed city inspections of the project, (b) Complainant’s deviation from approved plans forced Respondent to reroute plumbing; causing delay and the incurrence of additional expenses, (c) Complainant installed a system that did not match those specified in approved plans, without permission or consent, which forced Respondent to hire another licensed contractor to repair Complainant’s work after Complainant refused to address it without being further compensated, and (d) Complainant failed to complete the bid-on scope of work by not connecting water lines, per design. Per Respondent, the invoices at issued were not paid because Complainant did not perform work in line with approved plans, and because Respondent refused to pay Complainant additional monies for correcting its deficient work.

On April 28, 2025, this matter was referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on June 16, 2025. Per the May 06, 2025, 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

Marvin Rodriguez and Tanya Rodriguez testified on behalf of Complainant. Jesus Garcia, Timothy McCormac, Marija Nikolic, and Terry Lee Lamb testified on behalf of Respondent. The substantive facts of record are as follows:

On September 30, 2024, Complainant submitted a $60,094.00 bid to Respondent for the Vanilla Shell project wherein the following was noted, in pertinent part:

In accordance with the International Plumbing Code and all applicable local rules and regulations, we agree to furnish and install the following materials listed below. All materials shall be warranted to the satisfaction of the customer by the manufacturer, and all workmanship by us. By accepting this proposal, all parties involved agree that this proposal has been completed from data, plans and project specifications, supplied by the builder and are assumed to be both current and accurate.

The project was scheduled to be completed by December 20, 2024. Payments were scheduled to be made in thirds; the first for 40% (i.e. underground), second for 40% (i.e. rough end), and third and last at 20% (i.e. finish).

On October 04, 2024, the parties entered into a $60,100.00 plumbing subcontract agreement pursuant to Complainant’s bid. Respondent tendered $22,356.00 to Complainant as the initial 40% payment.

On October 24, 2024, Complainant issued Invoice No. 1413 to Respondent for underground plumbing. Respondent paid $21,636.00 to Complainant as the 1st draw on the $24,040.00 invoice.

On November 21, 2024, Complainant issued Invoice No. 1422, totaling $740.00, to Respondent for four (4) hours worth of schematic drawings.

On December 16, 2024, Complainant issued Invoice No. 1431, totaling $350.00, to Respondent as a trip charge for allegedly failing to have the project site prepared for Complainant to perform work.

On February 17, 2025, Complainant issued Invoice No. 1462, totaling $24,040.00, to Respondent for the 2nd draw (i.e. rough end completion).

On February 24, 2025, Complainant issued Invoice No. 1464, totaling $720.00, to Respondent for the running of a 30’ PEX water line.

Additional Evidence

Although Complainant was awarded the Vanilla Shell subcontract agreement based on its proposal that a six (6) person crew would perform the work, Complainant only had a crew of three (3) perform work.

All approved plans were on site and readily accessible for the duration of the project.

Respondent retained 10% of Invoice No. 1413 to ensure that Complainant would address any outstanding issues prior to final payment, per the terms of the parties subcontract agreement.

Complainant admittedly deviated from approved plans in executing the underground sewer installation, directly resulting in inspection failure by the local building authority and requiring Respondent to submit a revised plumbing design for approval, which unnecessarily delayed the project. Invoice No. 1422 was issued after Respondent required Complainant to assist in the redraft of plans, which Respondent refused to pay because the parties did not execute a Change Order for the additional work.

After design changes were complete, Complainant went to the project site to execute the primary design modification, but the area was neither prepared nor ready for Complainant to complete the scope of work. Complainant issued Invoice No. 1431 to Respondent for a trip charge.

Respondent refused to pay Invoice No. 1462 because the rough end was not complete, as Complainant had not remediated its poor plumbing workmanship or coordinated for another subcontractor to remediate the work.

Although a Change Order was approved for reworking the water line, Respondent refused to pay Invoice No. 1464 because Complainant improperly connected a 3⁄4” pipe instead of the required 1 1⁄4” pipe, constituting a deviation of plans as no permission or notice had been provided beforehand.

On March 28, 2025, Respondent terminated Complainant from the project.

On or about April 03, 2025, Red Eagle Plumbing LLC (“Red Eagle”), ROC License No. 340879, was hired by Respondent as a remediation subcontractor to perform corrections and otherwise complete Complainant’s scope(s) of work on the project. Red Eagle identified 38 items that required demolition and/or reconfiguration in order to adhere to plan design and specifications. In total, Respondent paid Red Eagle $25,014.92 for repairs. Work was completed on or about May 20, 2025.

On an unknown date, Respondent conducted and inspection of Complainant’s plumbing on the project, and drafted a report of its findings afterward. In total, Respondent discovered 26 defective work items.

Closing Arguments

In closing, Respondent opined that it was not required to pay Complainant to fix its poor workmanship. Respondent argued that its refusals to pay Complainant were justified as the only parts of the Vanilla Shell project that failed inspections were those attributed to Complainant’s workmanship and deviations. Respondent also argued that it was not responsible to pay for costs related to Complainant improper bidding of the underlying project, or over any costs associated with Complainant’s misunderstanding of its own subcontractual obligations.

In closing, Complainant opined that it met its burden of proof, and argued that restitution and discipline were warranted.

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.

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. § 32-1129.02(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.”

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

Upon review of the record, the relevant evidence establishes that Complainant has not sustained its burden of proof by the requisite evidentiary standard.

Here, the record clearly illustrates that the parties had a $60,100.00 plumbing subcontract agreement whereby Complainant bid on the project beforehand, having reviewed the project’s plans and specifications, but failed to include all necessary items in its bid to ensure that the project was timely completed per design. The record also illustrates that Respondent paid Complainant $43,992.00 towards their agreement. The record also illustrates that on more than one occasion Complainant deviated from approved plans, and then refused to perform corrections without additional payment by Respondent. It was only after Respondent provided written notice of its intent to terminate the underlying contract if Complainant chose not to perform corrective work, whereby Complainant refused to do so, that the contract was terminated. Invoice Nos. 1462 and 1464 were issued after Complainant was terminated from the project. Per the record, at the time of Complainant’s termination, there was technically an outstanding balance of $16,108.00 owed to Complainant on the original contract.

Therefore, the only issue remaining is whether Respondent raised a sufficient justification or excuse for failing to tender the balance due on the underlying subcontract agreement to Complainant for the Vanilla Shell project. Based on a review of the credible and relevant evidence of record, the Tribunal finds that Respondent established an affirmative defense(s) for failing to do so. It is clear from the record that not only did Complainant deviate from approved plans on two (2) occasions without authorization, causing unnecessary delay and the incurrence of additional project costs, but that Complainant also refused to perform correct work after receiving written warning of its deficiencies and the possible termination of the parties’ contract resulting therefrom. Moreover, the record reflects that Complainant’s many workmanship deficiencies were remediated by Red Eagle. Under the circumstances, Respondent’s conduct was reasonable and lawfully permitted.

Complainant’s arguments regarding plan changes are not supported by the evidence of record.

Because Complainant has not established that Respondent violated Ariz. Rev. Stat. § 32-1154(A)(10) by a preponderance of the evidence, Complainant has not established cause or grounds for the Registrar to discipline ROC License No. 236246.

RECOMMENDED ORDER

In light of the foregoing,

IT IS RECOMMENDED that the Registrar dismiss Complaint No. 2025-02875, with prejudice.

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, August 14, 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]

Cornerstone Plumbing LLC, Complainant

c/o Marvin & Tanya Hernandez, Agents

4405 W. Alabama Ln.

San Tan Valley, AZ 85144

[email redacted]

James Sparks, Esq.

Temac Development Inc., Respondent

c/o Sparks Law Group PLLC, Counsel for Respondent

4742 N. 24th St., Ste. 340

Phoenix, AZ 85016

[email redacted]

[email redacted]

By: OAH Staff