ALJDEC - Licensing

2025A-03682-NPC-ROC · Registrar of Contractors · 2025-12-09

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

R E I Construction LLC,

COMPLAINANT

v.

A F Sterling Home Builders Ltd,

License No. ROC 080734,

RESPONDENT

No. 2025A-03682-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: November 19, 2025

APPEARANCES:

Complainant: Jake Ray

Angie Coltrin, witness

Adam Garza, witness

Cosmo Jimenez, witness

Respondent: Jeff Brei, Esq.

Randy Agron

Robert Brack

ADMINISTRATIVE LAW JUDGE: Nedra-Su Kawasaki

EXHIBITS ADMITTED INTO EVIDENCE: Administrative notice was taken of the Notice of Hearing Packet submitted by the Registrar of Contractors.

Complainant Exhibit 3

Respondent Exhibits 1-16

_____________________________________________________________________

FINDINGS OF FACT

Procedural History

A F Sterling Home Builders, Ltd. (Respondent) was the holder of License No. 080734 issued by the Arizona Registrar of Contractors (Registrar) on November 4, 1988.

On or about April 14, 2025, Complainant filed a Non-Payment Complaint Form with the Registrar, claiming Respondent had failed to pay Invoices 24-02-0926-3 and 24-02-0926-4, amounting to $80,431.24.

On June 11, 2025, 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 12, 2025, denying all allegations and alleging all affirmative defenses supported by facts.

The matter was referred to the Office of Administrative Hearings for an administrative hearing. The Notice of Hearing was issued on July 7, 2025, setting the hearing for August 21, 2025.

A hearing was held on August 21, 2025, and November 19, 2025.

Hearing Evidence

On August 27, 2024, Robert Brack met with Cosmo Jimenez at the jobsite to show him the project to get an estimate for construction of perimeter walls and retaining walls.

On August 28, 2024, Mr. Brack sent Mr. Jimenez, via email, the site plans documenting the perimeter and retaining wall locations and distances, as well as the engineering plan for the retaining walls.

On or about September 19, 2024, R E I Construction, LLC. (Complainant) entered into a contract with Respondent for, among other things, construction of perimeter and retaining walls for a new home community.

Prior to signing the contract, Complainant provided a cost sheet of pricing per linear foot based on the number of courses. Using this cost sheet, Complainant provided an estimate to Respondent which included “5’ – 8C View Wall Tan 6” CMU (excludes Iron)” for 2,120 linear feet at $65.90/LF totaling $139,708.00, and “6’4” Tan Fence Wall (9C)” for 815 linear feet at $65.90/LF totaling $53,708.50.

On November 15, 2024, after Complainant had constructed the first perimeter wall, Mr. Brack sent Mr. Jimenez a text message advising that he realized a cap block had not been installed on the last course of the 6” perimeter wall and “that [wouldn’t] work.”

On January 24, 2025, Complainant submitted Invoice 24-02-0926-2 (Invoice 2) to Respondent for a total amount due of $79,819.37.

On April 3, 2025, Respondent paid Complainant $32,660.72.

On April 8, 2025, Complainant issued to Respondent PayApp-3 which included two invoices as attachments. PayApp-3 included the short-paid amount from PayApp-2 and all other items/services remaining on the contract. The attached invoices were: Invoice 24-02-0926-3 (Invoice 3) totaling $74,412.00 and Invoice 24-02-0926-4 (Invoice 4) totaling $6,019.26.

Complainant Hearing Testimony

At hearing, Complainant testified in support of Invoices 2, 3, and 4. Mr. Ray testified as to how Complainant determined the cost amount for each line item billed on the invoices at issue. Ms. Coltrin testified that PayApp-3 which included Invoices 3 and 4 was the final invoice and included the amount “short paid” in January and “everything that was remaining on the contract.” Mr. Garza testified that at the end of the project he noticed Complainant’s costs were “over.” Mr. Garza testified he then contacted the Superintendent of the project and was informed that Complainant had done extra work outside the scope of the contract. Mr. Garza further testified that the initial dispute between the parties was whether the extra work had been completed, which was due to a misunderstanding. Once the misunderstanding was cleared, Respondent then disputed the cost of the extra work. Mr. Garza stated Complainant’s estimate included terms and conditions which governed, among other things, changes and access. Mr. Garza testified, it was on this basis that he “stood on the contract.” Mr. Garza testified that the change order for the extra work was submitted to Respondent with Invoice 2 and the cost of the change order was included in the invoice.

Respondent Hearing Testimony

Mr. Brack testified that Respondent’s dispute was not whether Complainant was owed for work completed, rather the dispute was the amount due and owing. Specifically, Mr. Brack argued that Complainant grossly overcharged for the work completed and billed for unallowable charges per the contract. Mr. Brack testified that PayApp-2 billed for more linear feet of wall than Complainant actually constructed. Respondent measured the exact footage Complainant had constructed and adjusted the payment accordingly, which resulted in the “short pay” of Invoice 2. Mr. Brack argued that Invoices 3 and 4 were billed at inflated prices. Mr. Brack determined the costs were inflated by referring to the estimate and cost sheet provided by Complainant to Respondent when the contract was signed. Respondent determined the final amount owed including retention was $28,772.30. Respondent advised Complainant that a check in that amount was available for pick up with the release of the lien Complainant had filed. Mr. Brack testified in detail as to each line item on the invoices at issue. Further, Mr. Brack testified there were workmanship issues during the project including two courses to be added to a wall were not added and a wall that was not capped, as required per the contract. Complainant remedied the wall cap in a manner not requested by Respondent, thereby incurring additional cost for which Complainant billed Respondent. Finally, Mr. Brack argued that some charges on the invoices were not allowed per the contract, including materials and mobilization.

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. When a source is proven untrustworthy, its evidence shall be considered less probative of the truth.

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.

Under A.R.S. § 32-1183(C), contractors may withhold an application of certification for payment, if any of the following apply, in relevant part:

Defective construction work or materials not remedied.

Disputed work or materials.

Failure to comply with other material provisions of the construction contract.

In Arizona, when construing statutes, we look first to a statute’s language as the best and most reliable index of its meaning. If the statute’s language is clear and unambiguous, we give effect to that language and apply it without using other means of statutory construction, unless applying the literal language would lead to an absurd result words should be given “their natural, obvious, and ordinary meaning,” unless defined by the legislature.

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

Change orders protect both parties to a contract. They ensure that the service-providing contractor has a record of work done and a documentary basis for payment; they also ensure that the service-receiving contractor consents to work being done and amount charged for the service. Material increases in work or costs without consent from both parties may not be enforceable or a basis for discipline. Accordingly, if a service-providing contractor knowingly failed to include material costs in an estimate or contract and failed to provide change orders to reflect such costs, the service-receiving contractor may not be responsible for those charges.

In the instant matter, there was a genuine dispute between the parties as to contract terms, including work performed, workmanship, and the costs thereof. A.R.S. § 32-1183 permits contractors to withhold payment under specific conditions. Neither the conditions provided in the statute, nor the issue of workmanship was before the Tribunal in this matter. Because there existed a genuine dispute regarding whether conditions applied to allow Respondent to withhold payment, the undersigned ALJ did not find payment was due.

Upon review of the evidence submitted in this case, Complainant failed to establish that any monies were “due” for materials or services rendered to Respondent.

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 closed.

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, December 9, 2025.

/s/ Nedra-Su Kawasaki

Administrative Law Judge

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

Tom Cole, Director

Registrar of Contractors

Jeffrey T. Brei Esq

Brei Castillo

[email redacted]

R E I Construction LLC

[email redacted]

By: OAH Staff