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Butch Randolph v. International Fidelity - 6/13/2006

Arizona Court of Appeals Division One Holds That The Subcontractor is Not Disqualified From Recovery of the Value of Material Against a Surety’s Construction Payment Bond Because the Subcontractor Is Not a Licensed Contractor, Where Subcontractor Supplies Materials But Performs No Installation, Rega


Butch Randolph v. International Fidelity (06/13/06) Division One Holds That The Subcontractor is Not Disqualified From Recovery of the Value of Material Against a Surety’s Construction Payment Bond Because the Subcontractor Is Not a Licensed Contractor, Where Subcontractor Supplies Materials But Performs No Installation, Regardless of the Cost of the Items to Be Installed.

A general contractor was responsible for a municipal park project in Glendale. The general contractor obtained from the surety a $2.2 million statutory payment bond pursuant to A.R.S. § 34-222 (2000). The subcontractor agreed to supply barbeque grills and armadas for the park project. The subcontractor was not a licensed contractor, but a licensed contractor actually installed the grills and armadas. The general contractor failed to pay the subcontractor for the grills and armadas. When the surety failed to pay the subcontractor’s claim for payment, the subcontractor sued for the price of the grills and armadas.

The surety argued that the subcontractor was barred from recovery for the materials because it was not a licensed contractor. The superior court determined the subcontractor was exempt from the licensing requirement and entered summary judgment in its favor.

The Court of Appeals unanimously affirmed the trial court’s entry of summary judgment based on the exemptions in A.R.S. § 32-1121(A)(4) . The Court found that this statute creates two exemptions: it exempts contractors from the licensing requirement who merely supply materials and perform no installation, and it exempts suppliers of materials who also install them if the value of the transaction does not exceed $750 in value. Although the grills and armadas at issue exceeded $750 in value, the $750 condition only applied to a supplier of materials that also actually installs the materials. To interpret the statute otherwise would render a portion of the statute meaningless, in contravention of well-established statutory interpretation principles. The Court also noted that their interpretation is consistent with the consumer protection purposes of the statute.

Judge Lankford authored the opinion; Judge Timmer and Judge Snow concurred.

Posted On: 6/19/2006