SECTION 903 PROHIBITION AGAINST SUING FOR COMPENSATION IF ONE HAD NO LICENSE

• Jurisdiction: Arizona

Section 903. Prohibition Against Suing for Compensation if One Had No License

(a) Introduction

In Baker v. Dolphin Beach Rental Mgmt., LLC, 224 Ariz. 523, 233 P.3d 636 (2010), the court held that A.R.S. § 32-1153 does not apply to contracting work in Mexico. The contractor in this case ("Baker") entered into a contract to perform preventative maintenance on air-conditioning units at rental properties in Mexico. At some point, Baker sued Dolphin on a number of counts, including breach of contract. The court found that the statute does not bar Baker's lawsuit as an Arizona contractor's license was not required to perform contracting work in Mexico. This holding is despite the fact that both parties are based in Arizona and the negotiations for the alleged contract occurred in Arizona.

In WB, The Bldg. Co., LLC v. El Destino, LP, 227 Ariz. 302, 257 P.3d 1182 (App. 2011), the court held that an arbitration agreement in a contract with an unlicensed contractor was unenforceable. A substantial compliance exception to licensing requirements was not available to an unlicensed contractor who was aware of Arizona licensing requirements and whose sister company was a duly licensed Arizona contractor.

However, the Arizona Court of Appeals held in Twin Peaks Const. Inc. of Nevada v. Weatherguard Metal Const., Inc., 214 Ariz. 476, 154 P.3d 378 (App. 2007), that A.R.S. § 32-1153 does not bar an unlicensed contractor from filing an administrative complaint for non-payment.

The general contractor Twin Peaks contracted with owner to build improvements to a city park. The general contractor subcontracted the fabrication and installation of a metal ramada to Weatherguard. The owner paid the general contractor but the general contractor failed to pay Weatherguard. Weatherguard filed a ROC complaint alleging the general contractor had violated A.R.S. § 32-1154(A)(11) by failing to pay a subcontractor "when due for materials or services rendered in connection with its operations as a contractor."

The general contractor sought dismissal of the ROC complaint on the ground that Weatherguard's complaint was barred under A.R.S. § 32-1153 because Weatherguard was not properly licensed as a contractor. A.R.S. § 32-1153 states in part that no contractor shall commence or maintain any action "in any court of the state" for collection of amounts due on a construction contract. The Twin Peaks court held that A.R.S.
§ 32-1153 is not a defense in the ROC complaint because Weatherguard did...