ALJDEC - Licensing

2025A-09085-NPC-ROC · Registrar of Contractors · 2026-03-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Arthur Julio Hernandez,

DBA: Kage Electric,

COMPLAINANT,

v.

7B Building and Development, LLC

License No. ROC 279676,

RESPONDENT.

No. 2025A-09085-NPC-ROC

ADMINISTRATIVE LAW JUDGE DECISION

HEARING: March 12, 2026

APPEARANCES: Arthur Julio Hernandez appeared on behalf of Complainant Arthur Julio Hernandez, doing business as Kage Electric. Guy Bluff, Esq. represented Respondent 7B Building and Development, LLC. Kyle Killough, Pam Wendeborn, and Keith Shelton appeared as witnesses for Respondent 7B Building and Development, LLC.

ADMINISTRATIVE LAW JUDGE: Sondra J. Vanella

EXHIBITS ADMITTED INTO EVIDENCE: Complainant Arthur Julio Hernandez, doing business as Kage Electric’s Exhibits1, 15 through 19, and 22; Respondent 7B Building and Development, LLC’s Exhibits 1 through 5, replacement 8, 9, 11, and 12

FINDINGS OF FACT

7B Building and Development, LLC (“Respondent”) is the holder of License Number 279676 issued by the Arizona Registrar of Contractors (“Registrar”). Respondent was the general contractor for the construction of a restaurant.

On or about April 11, 2024, Respondent contracted with Arthur Julio Hernandez, doing business as Kage Electric (“Complainant”), for Complainant to perform the electrical portion of the project. The contract price was $62,000.00.

The scope of work, attached as “Exhibit B” to the parties’ contract, specifies in pertinent part the following:

Lighting Package

Lighting Contactor

Gear Package

Oxblue Camera Install. Camera will be solar powered

Electrical contractor to verify all material shown on quote has been delivered and in good condition.

All other electrical materials outside of what is shown on the lighting package and gear package attached below are to be provided by this contractor.

Electrical subcontractor will be responsible for all labor, equipment, and materials (with exception of the provision of the materials listed above) necessary to provide the entire electrical scope listed out in the plans and details.

This scope of work includes but is not limited to:

. . . .

Building Electrical

Installation of the gear package

Includes: Panel LA

Panel LB

. . . .

Installation and provision of the following:

400A Utility Meter

400A Enclosed Circuit Breaker

The parties negotiated the terms of their contract between February 2024, and March 28, 2024, when Complainant signed off on the agreed upon scope of work.

Complainant added language to the parties’ contract that had been drafted by Respondent as follows: “In the case of the project schedule not being accomplished, this subcontractor will have the opportunity to submit a remediation plan to 7B for approval, once remedies are approved by 7B, this subcontractor will proceed to implement agreed upon measures.”

In or about September 2025, Complainant filed a Complaint against Respondent with the Registrar alleging that Respondent had failed to pay Complainant the sum of $32,226.25 representing the amount Complainant believed it was due for work performed.

The parties were unable to resolve their differences. The Registrar issued a Citation against Respondent for its alleged violation of A.R.S. § 32-1154(A)(10).

Mr. Hernandez testified that the equipment for the project was to be supplied by the owner of the project and Complainant was contracted to perform the electrical work. Mr. Hernandez testified that Complainant completed 85 percent of the rough in, underground utilities, and site lighting, worked on the project for two months and has not been paid any amount by Respondent. Mr. Hernandez testified that Complainant did not install one panel or the switch gear and did not supply the power to the electrical panel because there was no panel. Complainant did not perform the trim work because the drywall had not been completed by Respondent.

On August 23, 2024, Respondent sent Complainant a letter that stated the following:

You are hereby noticed that Kage Electric “Kage” is not in compliance with its contract with 7B Building & Development “7B” regarding the Work expected of Kage on the above referenced contract. Demand is hereby made that Kage immediately comply with the terms and conditions of its contract with 7B. The award of the contract was based upon your firm’s

ability to perform the work within the specified time of your Scope of Work and Contract, and per verbal and written schedules given to you by the Superintendent and/or Project Manager.

The primary purpose of this letter is to demand a properly established work schedule from 7am to 4PM Mon-Fri with professional & consistent communication until completion of work starting 7AM Aug 26th, 2024. The secondary purpose of this letter is to demand your company provide competent, skillful, and experienced workers on the job site with a minimum of 4 workers equipped with proper PPE, as well as making sure a foreman is on site at all times overseeing the work that is being done. If the work is not completed by the due date, your contract will be terminated and 7B will have no alternative but to move forward with another company to complete your work. If your company refuses to work with 7B in a

professional manner, your contract will be terminated and 7B will move forward with another company to complete this work. All costs to finish the work to receive a C of O will be back-charged against the contract amount which might otherwise be payable to Kage from 7B. Further if the cost of replacement services is greater than the balance of Kage’s contract amount, any such overage will be due and payable from Kage’s to 7B.

On Monday, August 26, 2024, at 8:09 a.m., Respondent emailed Complainant a Termination Letter.

Mr. Hernandez asserted that Respondent did not provide Complainant an opportunity to remedy any purported deficiencies and is in breach of contract given the language that Complainant added to the parties’ contract. Mr. Hernandez testified that he did not see the email until after 5:00 p.m. on Friday, August 23, 2024, and was terminated on Monday, August 26, 2024. Mr. Hernandez acknowledged that on August 23, 2024, he was notified of the email while on site by Respondent’s superintendent. Mr. Hernandez further acknowledged that he did not call Respondent’s project manager, who sent the email, but rather emailed him. Mr. Hernandez did not submit a remediation plan and did not request additional time in which to submit a remediation plan.

Mr. Hernandez acknowledged that part of Complainant’s scope of work was to install a meter that was to be supplied by Complainant, as well as 400 amp panels that Complainant was also to obtain, pursuant to the terms of the parties’ contract. However, because the supplier used by Complainant had a one-year lead time for the panels, Complainant could not timely supply them for the project.

Complainant advised Respondent that he could not obtain these materials in a timely manner for the project. Consequently, on May 9, 2024, Respondent offered to contact its supplier to obtain the materials, however, Respondent required the specifications to do so.

Mr. Hernandez acknowledged that he was aware of the four-and-a-half-month construction schedule, as he received schedules from Respondent identifying when work was to be completed.

Kyle Killough, Respondent’s Director of Pre-construction, testified that Respondent provided the gear package for the project as required by the parties’ contract. Pursuant to the parties’ contract, Complainant was to provide a 400 amp utility meter and a 400 amp enclosed circuit breaker. However, Complainant could not obtain these items. Consequently, on May 9, 2024, Respondent requested the specifications for these items in order to try to obtain them for the project. Mr. Killough testified that Respondent did not agree to remove those items from the contract, as Respondent was simply attempting to provide an accommodation for Complainant.

Mr. Killough testified that as of August 23, 2024, Complainant was not only behind schedule in its work, but it was behind schedule in the procurement of materials it was contractually obligated to procure. As a result of Complainant’s inability to procure a 400 amp utility meter and a 400 amp enclosed circuit breaker, Respondent was compelled to source these materials elsewhere.

On August 21, 2024, Respondent was able to source the meter from Lonestar Electric Supply in an effort to keep the project moving forward. The price of the meter was $5,320.00. However, there was a 48-week lead time, which was far beyond the timeline for the project. Consequently, Respondent was compelled to pay an expedited fee in the amount of $15,000.00 in order to obtain the meter within three weeks, for a total cost of $20,320.00. Respondent back-charged Complainant in this amount.

On September 11, 2026, Respondent paid $2,679.75 to Recovery Electric, LLC, the replacement electrical subcontractor, for the provision and installation of the enclosed circuit breaker that Complainant was contractually obligated to supply and did not. Mr. Killough testified that Respondent paid Recovery Electric, LLC an additional $34,000.00 to complete the project.

Mr. Killough testified that Respondent paid $3,116.74 to LoneStar Electric Supply for materials that were not defined in the contract for which the parties had agreed to split the costs. Mr. Hernandez had referenced that the parties had agreed to share the cost of certain materials and that Complainant’s share was to be $1,500.38.

Mr. Killough testified that the project was delayed approximately one month and not substantially completed until November 19, 2024. Mr. Killough asserted that Respondent had to pay additional costs due to the delay, including paying the project manager and superintendent, as well as other expenses that were calculated at $342.00 per day, for a total of $10,260.00, and that Respondent back-charged Complainant for this amount. However, Respondent failed to provide any documentary evidence to establish these costs or that all delays on the project were attributable to Complainant.

Pam Wendeborn, Respondent’s Accounts Payable Manager, testified that Respondent paid the above-delineated amounts in full and provided the dates of the payments, with the exception of $3,116.74 to LoneStar Electric Supply for materials that were not defined in the contract. Ms. Wendeborn testified that the actual amount paid for this invoice was $2,139.66. Ms. Wendeborn asserted that the back-charge for project delays was reasonable, however, persuasive evidence was not presented establishing such. Ms. Wendeborn also testified that Respondent has paid attorney’s fees incurred in this matter.

Keith Shelton, Respondent’s Chief Legal Officer, testified that Respondent has paid $3,209.00 in attorney’s fees and that pursuant to the terms of the parties’ contract, Respondent is entitled to back-charge Complainant for legal fees incurred.

The Administrative Law Judge finds that there was insufficient evidence provided to establish the alleged additional costs due to delays that were calculated at $342.00 per day, for a total of $10,260.00. Respondent failed to provide any documentary evidence to establish these costs or that all delays on the project were attributable to Complainant.

The Administrative Law Judge further finds that a back-charge for attorney’s fees is inappropriate in the instant matter because the fees were incurred in defending Respondent in this disciplinary action before the Registrar, and because the Registrar is not a party to this matter, fees are not recoverable in this forum.

The Administrative Law Judge finds that Respondent established as an affirmative defense, that the following back charges to Complainant, totaling

$58,069.58, are appropriate in the instant matter:

$20,320.00 paid to Lonestar Electric for the meter

$1,069.83 paid to Lonestar Electric for additional electrical materials

$34,000.00 paid to replacement subcontractor, Recovery Electric

$2,679.75 paid to Recovery Electric for the electrical disconnect

Consequently, subtracting the appropriate back-charges from the contract amount of $62,000,00, Respondent owes Complainant $3,930.42.

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 this matter 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.”

A.R.S. § 32-1154(A)(10) includes among the grounds for suspension, revocation, or other disciplinary action against a contractor’s license:

Failure 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.

The evidence established that at the time of the hearing, Respondent owed a total of $3,930.42 for the work performed by Complainant.

As an affirmative defense, Respondent failed to establish by a preponderance of the evidence that it lacked the capacity to pay and has not received sufficient monies as payment for the particular project for which the services or materials were rendered or purchased.

Therefore, Complainant established that Respondent violated A.R.S. § 32-1154(A)(10) by failing to pay Complainant $3,930.42 for services or materials rendered in connection with Respondent’s contracting business.

Based upon Respondent’s violation of the provisions of A.R.S. § 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 Number 279676 issued by the Registrar until it has provided to the Registrar, and the Registrar has accepted, documents that establish that it has paid Complainant $3,930.42 in certified funds.

It is further recommended that when and if the Registrar receives and accepts Respondent’s evidence that it has paid Complainant $3,930.42 in certified funds, the Registrar may close the Complaint in Case Number 2025-09085.

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, March 27, 2026.

/s/ Sondra J. Vanella

Administrative Law Judge

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

Tom Cole, Director

Registrar of Contractors

Arthur Julio Hernandez

[email redacted]

7B Building and Development, LLC

[email redacted]

Guy W. Bluff, Esq.

Bluff and Associates

[email redacted]

By: OAH Staff