ALJDEC - Licensing

2025A-07731-NPC-ROC · Registrar of Contractors · 2026-05-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Smith Ludwig LLC,

COMPLAINANT,

v.

Haven Builders LLC,

License No. ROC 329643,

RESPONDENT.

No. 2025A-07731-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: January 22, 2026, and March 24, 2026.

APPEARANCES:

Complainant: William Brier, Esq.

Marcus Smith

Aaron Edberg

Respondent: Jordan Shill

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.

Respondent Exhibit 2

_____________________________________________________________________

FINDINGS OF FACT

Procedural History

Haven Builders LLC (Respondent) was the holder of License No. 329643 issued by the Arizona Registrar of Contractors (Registrar).

On or about September 8, 2023, and March 15, 2024, Smith Ludwig LLC (Complainant) entered into two separate contracts with Respondent to provide electrical work to complete a restaurant remodel and a kitchen and house remodel, respectively.

On or about August 1, 2025, Complainant filed a Non-Payment Complaint Form with the Registrar, claiming Respondent had failed to pay eight invoices, amounting to $25,076.54.

On September 30, 2025, the Registrar issued a Citation, alleging that Respondent violated A.R.S. § 32-1154 (A)(10). Respondent timely submitted an Answer on October 15, 2025, asserting Respondent had paid all money owed to Complainant. Specifically, Invoice Nos. 1964, 1815, and 1943 were paid. Regarding Invoice No. 1810, four payments were issued totaling $17,380.00. Invoice Nos. 1812, 1837, 1838, and 1842 were for a commercial job in which the project owner directly asked Complainant to do work and subsequently refused to pay Respondent when change orders were submitted. Respondent had not been paid by the project owner.

The matter was referred to the Office of Administrative Hearings for an administrative hearing. The Notice of Hearing was issued on November 3, 2025, setting the hearing for December 8, 2025.

A hearing was held on January 22, 2026, with further hearing held on March 24, 2026.

Hearing Evidence

Respondent submitted its 2023 Construction Subcontractor Agreement (Agreement), signed by Complainant. The Agreement provided, in pertinent part, as follows:

[The Welcome Letter]. . .For any change orders, or requests to modify the scope of work, you need to contact [Respondent] immediately.

. . . .

Scope Discrepancies

. . . .

If changes have been made or discrepancies are noticed, these differences are to be noted and brought to [Respondent] in a Change Order by email or submitted to BuilderTrend within one business day.

. . . .

Change Orders

If there has been a change to the Scope of Work, or if initial pricing will be affected in any way, this change in price must be noted and agreed upon through a Change Order.

All Change Orders are to be dated, with the reason for the price change clearly noted.

Change Orders must be submitted by email or BuilderTrend immediately and will be responded to within one business day.

The work outlined in the Change Order may only proceed once the new pricing and Scope of Work have been approved by [Respondent] in writing.

Additional costs on invoices will be paid out only if the Change Order and pricing have been approved in writing.

. . . .

Invoicing

. . . .

If invoice amounts are different than the original Estimate provided, they will only be paid if a Change Order coincides with the discrepancy amount.

. . . .

Payments

. . . .

Checks will only be issued once your associated Scope of Work is completed to the satisfaction of [Respondent].

Willeta Project

On March 15, 2024, Complainant submitted a Bid Proposal that subsequently served as the parties’ contract for the Willetta project. The Bid Proposal (contract) provided the following terms, in pertinent part:

Total Price for the Above Job: $17,380.00

$4,500.00 Supply and install new 200 amp panel.

. . . .

Exclusions: Plans, permits, and engineering. Anything not listed above. Smoke detectors.

Terms: $12,166.00 (70%) due . . . after completion of rough phase.

$5,214.00 (30%) due . . . after completion of final phase.

$4,500.00 Total due upon completion of panel change.

Complainant issued Invoice No. 1732, dated November 21, 2023, after completion of the rough phase, for a total amount of $13,704.00. The invoice included the following line items, in pertinent part:

(1) Project Address. Amount: $0.00.

(2) Electrical rough in for house remodel - $4,500 for new panel. Amount: $10,816.00.

(3) Additional work and material to add sub-panel. Amount: $2,888.00.

Complainant issued Invoice No. 1810, dated June 27, 2024, after completion of the final phase, for a total amount of $9,618.54. The invoice included the following line items, in pertinent part:

(1) Project Address. Amount: $0.00.

(2) Remainder not billed with Inv. 1732. Cost of panel mistakenly deleted from invoice, not realizing it was a separate line item on the Bid Proposal. Amount: $1,350.00.

(3) Electrical final. Amount: $5,214.00.

(4) Add smoke detectors x 6 for city inspection. Amount: $778.00.

(5) Redevice out areas of house not affected by remodel electrical work. Basement, hall bath, office bath, and office. Amount: $627.00.

(6) Add additional smoke detector in living room per city inspector request, interconnected with other smoke detectors. Add additional smoke detector in dining room per homeowner request. Amount: $293.00.

(7) Move switched light box in laundry to interior of cabinet...Amount: $526.54.

(8) Add switch and wiring for exhaust fan in laundry area. Amount: $230.00.

(9) Redo devices in office bathroom, raise switch, move receptacle to switch box, and change two gang box to three gang box. Amount: $400.00.

(10) Redo switches and receptacle in office bathroom again. Change three gang box to four gang and move vanity switch to four gang. Amount: $200.00.

(11) Raise devices in laundry room because of bad cabinet drawings. Amount: $0.00.

Complainant issued Invoice No. 1814, on or before June 27, 2024, for a total amount of $760.00. The invoice, as submitted with a copy of the corresponding payment check, was half obscured. However, the visible portion described as follows:

. . . breakers in sub-panel. Per city

. . . [ins]pector requirement. This became a

. . . requirement after estimate for sub-

. . . and additional circuits was . . . .

Respondent submitted copies of the checks issued to Complainant for payment on the Willetta project, as follows:

#5245, Mar 22, 2024, $5,000.00 – Memo: ACSL1732-1-[Willetta] – Progress payment.

#5261, Apr 26, 2024, $5,000.00 – Memo: [Willetta] 1732-2nd progress payment.

#5263, May 17, 2024, $5,000.00 – Memo: Progress Payment 1732-3 – Willetta.

#5279, Aug 6, 2024, $2,380.00 – Memo: Invoice 1732-4th progress payment [Willetta].

#5280, Aug 6, 2024, $2,888.00 – Memo: [Willetta] Change Order [illegible].

Respondent also submitted the bill associated with check No. 5279 for payment of the final phase. The description noted that $4,500.00, to supply and install the new panel, was “PAID ON SEPARATE INVOICE.”

Restaurant Project

On September 8, 2023, Complainant submitted a Bid Proposal that subsequently served as the parties’ contract for the Restaurant project. The contract provided the following terms, in pertinent part:

Total Price for the Above Job: $14,410.00

. . . .

Exclusions Plans, permits, and engineering. Anything not listed above.

Terms: $10,087.00 (70%) due . . . after completion of rough phase.

$4,323.00 (30%) due . . . after completion of final phase.

Complainant issued Invoice No. 1812, on June 27, 2024, after completion of the final phase, for a total amount of $4,323.00. The invoice included the following line items, in pertinent part:

(1) Project Address. Amount: $0.00.

(2) Electrical final for tenant finish. Amount: $4,323.00.

On June 12, 2024, Complainant submitted a proposal for additional work requested by the building owner. The proposal provided the following terms, in pertinent part:

Total Price for the Above Job: $12,800.00

. . . .

Exclusions Plans, permits, and engineering. Anything not listed above. Replacing dead front covers for exterior panels, removed by others.

Terms: $12,800.00 Total due after completion of rough phase.

Complainant subsequently issued Invoice Nos. 1837, 1838, and 1842. Invoice No. 1837 was issued on September 27, 2024, in the amount of $12,800.00 for work completed per the above-referenced proposal. Invoice No. 1838 was issued on September 27, 2024, in the amount of $767.00 for providing power to one hand dryer and one new exhaust fan. Invoice No. 1842 was issued October 9, 2024, in the amount of $650.00 for making cut outs of missing dead front covers for two panels, having new covers made, and installing new dead front covers.

Hearing Testimony

Marcus Smith testified on behalf of Complainant in support of the proposals and invoices as above described. Regarding the Willetta project, Mr. Smith clarified Invoice No. 1810. Generally, Mr. Smith testified that Invoice No. 1810 was the final bill per the contract and “then some other change orders” Complainant was asked to do by “Spencer, one of [Respondent]’s employees, [Mr. Shill] directly, or Steve Davis.” Specifically, Mr. Smith testified that line item (2) corrected the error on Invoice No. 1732 that subtracted the amount owed for the panel work. He forgot it was billed as a separate line item in the contract. Line item (3), Mr. Smith testified was the 30 percent owed on completion of the final phase, as per the contract. Regarding line items 4 through 11, Mr. Smith testified that the contract specifically excluded smoke detectors; however, during the project he was asked to install them. Additionally, there were areas of the house not included in the remodel, and the homeowner requested Complainant redevice out the smoke detectors in those areas. Mr. Smith testified the change orders were verbally approved by either Spencer, Mr. Shill, or Mr. Davis. Mr. Smith further testified he was aware that Mr. Davis was not authorized by Respondent to approve change orders.

Mr. Smith testified he determined that $3,054.54 was still owed on the Willetta project by totaling the amount billed on all invoices issued to Respondent and comparing it to the total amount of payments received. On questioning, Mr. Smith testified that he could not remember to which previously issued invoice the work referenced in each line item billed on Invoice No. 1810 was initially applied. He stated that Invoice No. 1810 was one of the final invoices he issued on the Willetta project and when he determined $3,054.54 was outstanding, he applied the balance to Invoice No. 1810.

Regarding the Restaurant project, Mr. Smith testified that the final phase was considered completed when the lights were installed and all other contracted scope of work had been completed. Mr. Smith testified that Complainant had completed all the contracted work, and Invoice No. 1812, in the amount of $4,323.00, was the final payment due as agreed in the contract.

Mr. Smith testified that the building owner would often directly approach Complainant’s employees to request additional work. However, Mr. Smith testified, Complainant never agreed to do additional work directly for the building owner. In or around June 2024, Respondent advised Complainant that the building owner requested additional work and asked Complainant to provide an estimate. Complainant submitted the proposal dated June 12, 2024, for a total of $12,800.00. Mr. Smith further testified that prior to submitting the proposal, Complainant had installed approximately three of the requested additional four-foot strips. Thereafter, Mr. Smith testified, he had a phone conversation with Mr. Shill during which Mr. Shill advised that the building owner had denied the “change order” (proposal) but Mr. Shill directed Complainant to complete the additional work to finish the project. Mr. Smith testified that Complainant completed the scope of work included in the June 2024 proposal and issued Invoice No. 1837, in the amount of $12,800.00.

Regarding Invoice No. 1838, Mr. Smith testified Complainant separated the hood vent switches after Mr. Davis advised Complainant of the building owner’s request. Mr. Davis also advised Complainant that the building owner requested to have power provided to two hand dryers and two exhaust fans. Mr. Smith testified Respondent asked Complainant to provide an estimate for the requested additional work. Mr. Smith testified he informed his employees about the potential additional work and directed them to “take a look at it.” He then submitted a change order, but Respondent subsequently advised it was denied by the building owner; therefore, Respondent denied the change order. Mr. Smith further testified that before Complainant was aware that the change order was denied, Complainant’s employees had already completed work on one hand dryer and one exhaust fan.

Regarding Invoice No. 1842, Mr. Smith testified that at some point the dead front covers for two panels “went missing.” The building owner brought the issue to Complainant’s attention and blamed Complainant for misplacing them. Mr. Smith stated he replaced the dead front covers because Respondent had advised him to finish the project to get it through an electrical inspection, and they were required to pass inspection.

Steve Davis, Superintendent for Respondent, testified that he worked on both projects, but neither of them entirely. On questioning, Mr. Davis testified, generally, that if a homeowner requested additional work, they had to discuss it with Mr. Shill because Mr. Davis had “no power to arrange anything like that.” Mr. Davis testified that he worked only from blueprints and was not provided with the subcontractor’s scope of work, explaining he usually only worked with subcontractors when something failed a city inspection. Mr. Davis testified that the building owner on the Restaurant project often interfered, attempting to get additional work completed.

Jordan Shill testified on behalf of Respondent that all approved invoices on the Willetta project were paid. He cross-referenced all approved invoices with all payments issued and determined they were paid in full. He testified he was unaware of any approved invoice that included the additional amount Complainant claimed was owed.

Mr. Shill testified that the work billed on Invoice Nos. 1837, 1838, and 1842 was never approved. Mr. Shill referenced the Subcontractor Agreement (Agreement) signed between Complainant and Respondent as above described. Mr. Shill testified, generally, that Respondent never approved change orders that were not approved by the client. Specific to the instant matter, Respondent never agreed to approve and did not approve a change order over the phone. Mr. Shill further testified that Respondent had never granted Mr. Davis authority to approve change orders.

Mr. Shill argued, in addition to work not being approved, all invoices, including Invoice No. 1812, were not due because the building owner did not pay Respondent for the work. He argued that the Agreement payment term providing that Complainant would be paid when Respondent was satisfied with Complainant’s work, constituted a “pay when paid” clause.

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.”

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.

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 Registrar’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 the 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 failed to submit or receive approval for change orders to reflect increased costs, the service-receiving contractor may not be responsible for those charges.

Mr. Smith’s testimony regarding Invoice No. 1810 for the Willetta project was inconsistent. He testified that Invoice No. 1810 billed for the final phase per the contract and change orders, verbally approved by “someone,” without specificity, employed by Respondent. Mr. Smith also testified that despite totaling all the invoices, he was unable to determine to which invoice each line item billed on Invoice No. 1810 was initially applied, only that the difference between the invoice and payment amounts left $3,054.54 outstanding. The work billed on Invoice No. 1810 was either approved additional work, or a summation of partially paid invoices for work that Complainant could not specifically identify.

Mr. Smith’s testimony, that he was unable to determine which specific work items were unpaid, and therefore simply added the outstanding balance to Invoice No. 1810, would require an interpretation that Invoice No. 1810, line items (4) through (11)—totaling $3,054.54—were the previously unidentifiable work items, now billed as specific additional work. Additionally, line item (2) billed $1,350.00 to correct Invoice No. 1732, which billed $10,816.00 for the rough-in phase. The contract specified that $12,166.00 was due on rough-in completion. The difference between the payment amount due per the contract and the amount billed by Complainant was $1,350.00. Therefore, line item (2) simply corrected the total amount due, and purportedly unpaid, for the rough-in phase of the contract. Line item (3) billed $5,214.00 for completion of the final phase as per the contract. Thus, Invoice No. 1810 billed $6,564.00 as the contract amount still due as of June 27, 2024. However, by May 17, 2024, Respondent had paid Complainant $15,000.00. Thus, the only amount due on the contract, as of June 27, 2024, was $2,380.00. Therefore, the argument that the work previously invoiced, but not paid, could not be identified so the outstanding amount was just added to Invoice No. 1810 was not supported by the evidence.

Having determined that the $3,054.54 was not a short pay of all previously invoiced work, necessitates the interpretation that it was billed for the additional work identified on Invoice No. 1810 line items (4) through (11). Complainant testified that Respondent did not always follow the Agreement terms requiring change orders to be approved in writing, and the additional work billed on Invoice No. 1810 was verbally approved. This argument, however, was problematic because Mr. Smith could not testify as to who with Respondent approved the additional work billed in each line item. Therefore, any or all the work could have been approved by Mr. Davis, and Mr. Smith was aware that Mr. Davis was not authorized to approve change orders. Therefore, Complainant could not have reasonably relied on a verbal approval by Mr. Davis. Additionally, the evidence supported that a change order approval process was followed. Specifically, Invoice Nos. 1732 and 1814 billed for additional work on a sub-panel. Both of the invoices were paid, a nd the payments referenced the related change order. Therefore, the undersigned Administrative Law Judge (ALJ) finds the evidence insufficient to establish that $3,054.54 remained due and owing on Invoice No. 1810 for the Willetta project.

Invoice Nos. 1837, 1838, and 1842, related to additional work completed for the Restaurant project. Complainant argued that the additional work billed on those invoices was verbally authorized by Respondent. In particular, Mr. Smith testified that Complainant completed the additional work billed on Invoice Nos. 1837 and 1842, because despite the denied change order for the work included on Invoice 1837, Mr. Shill verbally directed Complainant to complete all additional work to finish the project such that it would pass an electrical inspection. After which, Complainant completed the work included on Invoice No. 1842 on the building owner’s request alone, because it believed that replacing the dead front covers was required to pass inspection. Regarding Invoice No. 1838, Complainant argued that Mr. Davis directed Complainant to complete the additional work on request of the building owner. However, Complainant was aware that Mr. Davis was not authorized to approve change orders.

Respondent asked Complainant for proposals for the requested additional work billed in Invoice Nos. 1837 and 1838, supporting Respondent’s argument that a change order process was in place which required approval in writing. Complainant did not submit a change order for the work billed on Invoice No. 1842. Additionally, the evidence supported that Complainant had a pattern of beginning work on additional work requests prior to approval of a change order. Therefore, the undersigned ALJ finds the evidence was insufficient to establish that Invoice Nos. 1837, 1838, and 1842 were due and owing.

Finally, Complainant billed $4,323.00 on Invoice No. 1812 for the final phase of the Restaurant project as per the contract. Respondent argued that Invoice No. 1812 was not due because Respondent had not been paid by the building owner and the Agreement payment terms constituted a “pay when paid” clause. When a contract is ambiguous, the ambiguity is interpreted as against the drafter. Respondent drafted the Agreement. It is not intuitive to interpret the Agreement payment term, as Respondent argued, to mean Respondent’s satisfaction with the quality of a subcontractor’s work was dependent on Respondent’s receipt of payment from the project owner. Mr. Shill did not dispute that Complainant completed the final phase, only that Respondent was not paid for the work by the building owner. Mr. Shill did not proffer any testimony or evidence that Respondent lacked the capacity to pay. Therefore, the undersigned ALJ finds the preponderance of the evidence established that Invoice No. 1812 was due and owing in the amount of $4,323.00.

Therefore, the preponderance of the evidence supported that Respondent violated A.R.S. § 32-1154(A)(10) as alleged.

RECOMMENDED ORDER

Based on the foregoing, it is recommended that the Registrar suspend Respondent’s License No. 329643 issued by the Registrar until it has provided to the Registrar, and the Registrar has accepted, documents that establish it has paid Complainant $4,323.00 in certified funds.

It is further recommended that when and if the Respondent receives and accepts Respondent’s evidence that it has paid Complainant $4,323.00 in certified funds, the Registrar may close the Complaint in Case No. 2025-07731.

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 5, 2026.

/s/ Nedra-Su Kawasaki

Administrative Law Judge

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

Tom Cole, Director

Registrar of Contractors

William H Breier Esq

APRIO LEGAL

[email redacted]

Haven Builders LLC

[email redacted]

Smith Ludwig LLC

[email redacted]

By: OAH Staff