Arizona Court of Appeals, Division One, holds that a claimant need not file a lawsuit under A.R.S. § 32-1133.01(F) in order to claim against the contractors’ recovery fund.

Advantage Pool installed a swimming pool at Miles’s home in Lake Havasu City. Miles was dissatisfied and filed a complaint with the Registrar of Contractors (“ROC”). The ROC found for Miles, issuing a decision and order against Advantage Pool for violations relating to the installation. Later, Miles filed a recovery claim against Advantage Pool, whereby the ROC found Miles to have been damaged in the amount of $26,500, which was to be paid from the contractors’ recovery fund, A.R.S. § 32-1132.

Advantage Pool requested a hearing on the award at the Office of Administrative Hearings (“OAH”). OAH affirmed. Advantage Pool then appealed to the superior court, making two arguments: (1) Miles could not show he occupied or intended to occupy his Lake Havasu Home as a primary residence, and (2) Miles must have “proceeded against” the bond prior to claiming against the fund—both requirements for a party to claim an award from the contractors’ recovery fund pursuant to A.R.S. § 32-1132(B)(1)(b) and A.R.S. § 32-1133.1(F).

The superior court affirmed the award. First, Miles was qualified for an award from the fund because he presented unrebutted testimony that he intended to retire to his Lake Havasu home. Second, though he did not file a lawsuit, he submitted a written claim to the bonding company and thus proceeded against the bond prior to claiming against the fund.

Advantage Pool appealed, raising the same arguments as before. The Court of Appeals affirmed. The Court swiftly delt with the first issue—whether Miles met the occupancy requirement under A.R.S. § 32-1132(B)(1)(b). The superior court did not abuse its discretion in ruling for Miles on that issue, because Miles and his wife offered uncontroverted testimony on his intent to occupy the home as a primary residence in the future. The Court also noted that the statute “does not contain a temporal qualifier.”

As to the second issue, whether § 32-1133.01(F) required Miles to file suit to proceed against the Bond, the Court found the statute imposed no such requirement. That statute states that “[a] claimant to the residential contractors’ recovery fund pursuant to this section must show that the claimant has proceeded against any existing bond covering the residential contractor.” The Court found that the term “proceeded against” was undefined, but that an existing Arizona case, Great American Mortgage, Inc. v. Statewide Insurance Co., 189 Ariz. 123, 124 (App. 1997), had implicitly defined that term in reference to mortgage banker bonds, and that definition included filing a claim, not just a lawsuit. Thus, the Court reasoned that “proceeding against” a bond “includes filing a claim against a bond, even where a claimant has not sued.”

The Court rejected Advantage Pool’s contention that A.R.S. § 32-1152(E) applies, which references “maintain[ing] an action at law.” The Court reasoned that § 32-1152(E) in fact showed that the legislature knew how to make filing suit a requirement, and so its absence from § 32-1133.01(F) demonstrated it did not intend to make it a requirement under that statute. In short, the court concluded that “[t]he language of the statute shows a claimant need not file a lawsuit to proceed against a bond.”

Accordingly, the Court affirmed Miles’s final award. But the Opinion also presented another area of interest.

The ROC filed an answering brief in response to Advantage Pool’s opening brief. The ROC was the adjudicative body in the first instance, and the Court explained that “[w]e have previously noted that ‘agencies serving only an adjudicatory function prior to appeal generally lack standing to later participate when their decisions are appealed.”’ (Quoting Williams v. Ariz. Dep’t of Econ. Sec., 2025 WL 1466188, at *6 ¶ 37 (Ariz. App. May 22, 2025) (mem. decision)). But here the Court concluded that an exception applied, namely that an agency may be allowed to participate in appellate proceedings to “defend the integrity” of the residential contractors’ recovery fund. The Court therefore considered the ROC’s arguments in making is decision.

Judge Becke authored the Opinion, joined by Judges Gass and Brown.

Posted by:  Stefan Oakley