ALJDEC (decisions subject to certification as fin)

03F-0219-ROC · Registrar of Contractors · 2003-01-21

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Case Number 02-2301 came on for hearing on November 4, 2002 and for further hearing on January 13, 2003. Case Number 03-0219 came on for original hearing on January 13, 2003. On both occasions Lexington Homes, LLC (herein called “Lexington”) was represented by its attorney, Henry L. Timmerman, Esq., and Hohn Construction, Inc. (herein called “Hohn”) was represented by its attorney, Dan Campbell, Esq. Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law and Recommended Order are made.

FINDINGS OF FACT

1. By prior ruling of this tribunal, the further hearing in Case Number 02-2103 based upon a complaint filed by Lexington was consolidated for purposes of hearing

with the original hearing in Case Number 03-0219 based upon a complaint filed by Hohn, since both appeared to involve many of the same underlying issues of fact and law and also entailed the use of predominantly the same witnesses and documentary evidence.

2. At the outset of the second hearing session, which was the original hearing in Case Number 03-0219, counsel for both parties stipulated that no claim was being asserted based upon that portion of the issued Citation in that matter charging possible violations by Lexington relating to the use or inappropriate display of a license containing an improper name or license number. Such stipulation effectively warrants a dismissal of those separate charges.

3. Pursuant to a written subcontract agreement, Hohn agreed to and did perform concrete work as a selected subcontractor for a portion of the construction of a large residence (at least 5,000 square feet) on which Lexington was serving as the project’s general contractor (herein referred to as the “Lot 63 project”).

4. The initially contemplated work was to consist of the pouring of a stem wall, footings and a floor slab in accordance with submitted plans and specifications. It was further contemplated that the concrete floor slab would be subsequently covered in the various rooms by either travertine tile, carpeting or wood.

5. The stated total subcontract price of $24,760.00 was subsequently increased by $500.00 through a mutual modification agreement relating to the providing of requested extra saw cutting work, thereby increasing the total contractual price to $25,260.00. It was not disputed that all but $3,000.00 of this adjusted contract price was paid by Lexington to Hohn.

6. A day or two prior to the start of the concrete pour, and after certain preparatory work had been accomplished by Hohn, including the installation of key-way

materials for use in controlling cracking, Lexington notified Hohn that the property owners had altered their intentions with respect to floor coverings and, instead, desired to have a finished exposed concrete surface in most all areas of the home, encompassing over 4000 square feet. Such surface was to be subsequently coated with a stain material furnished and applied by another specialty contractor.

7. The floor slab poured and finished by Hohn was shown to have exhibited a widespread cracking condition by the end of the same day that the work was performed. Additionally, the finishing treatment, including various areas along many of the saw cut joints, was irregular or flaking, and there were numerous visible footprints on the surface at scattered locations through the home. The combined overall results, aesthetically and structurally, rendered the concrete floor slab surface unacceptable for receiving an application of the contemplated staining materials. Irrespective of the absence of any specific standards applicable to exposed concrete floors, the concrete work by Hohn failed to result in a surface that was fit for its intended purposes, thereby breaching an implied warranty of fitness for use.

8. Over a prolonged time period during which Hohn, together with Lexington, were endeavoring to find solutions to the above-described concrete surface problems, numerous test patches were attempted and other products were considered. Despite Hohn’s ongoing good faith efforts, little or no realistic progress was made, even after a formal complaint was filed with the Registrar. In point of fact, some of the remedial attempts and test patch areas effectively worsened the floor slab’s surface condition and also resulted in a degree of damage by allowing some repair materials to be deposited on the adjacent drywall.

9. Following a jobsite visit by the Registrar’s assigned Inspector, a written directive was issued to Hohn requiring the deficiencies observed in the concrete floor

slab to be rectified.[1] The credible evidence tended to indicate that Hohn did not achieve substantial compliance with the terms of the directive within the allotted time nor for a significant time period thereafter. However, in fairness, Hohn’s ongoing willingness and efforts to remedy the floor problems were not met with cooperative actions on the part of Lexington or its customer with respect to any potential cure short of an overlay application with an identified topping material.

10. Ultimately, after approximately five months, Lexington selected another specialty contractor to correct the problems by applying an overlay with a material known as Ardex SD-T. Such resort to another contractor is found to have been justified under all the circumstances, especially since its (Lexington’s) own license was in peril and subject to valid claims by its customers, the property owners.

11. Although a lower proposal of $24,100.00 had been obtained from a different contractor for performance of the remedial work using an overlay of the specified Ardex material, the prospect of further substantial delays with the low bidder, even in providing a test sample, prompted Lexington to select JKL Construction (herein called “JKL”) for the corrective work performance at an agreed cost of $27,094.00. The testimony at the hearing given on behalf of JKL and others tended to indicate that materials other than the top-of-the-line Ardex product that was used could have successfully rectified the jobsite problems by making the floor surface capable of accepting the intended staining work. It was also admitted that the costs of such other materials might be several thousand dollars less. Based upon all the documentary and testimonial evidence of record, it is found and determined that the reasonable cost of appropriately correcting the concrete slab on the Lot 63 project was not less than $22,000.00.

12. The continuing supervisory responsibility of Lexington, as this project’s general contractor must not be overlooked. In fact, such supervisory obligations became applicable to an even greater extent after the change by the property owners to obtain an exposed concrete floor surface. That change warranted an extra degree of precaution, monitoring and safeguarding so as to produce a result with an absence of or a very minimum amount of irregularities. Moreover, in this case, the general contractor directed the elimination of the already-installed key-way material for aesthetic reasons, also directing the size and placement of decorative saw cuts throughout the floor slab.

13. As to the duty to rectify the concrete floor slab problems encountered on this project, a resort to comparative fault analysis appears fully appropriate. It is further found and determined, under all the circumstances as revealed by the credible evidence of record, that the respective shares of responsibility hereunder should be 75% for Hohn, as the performing subcontractor, and 25% for Lexington as the supervising general contractor. Applying these percentages to the instant case, it is found and determined that the monetary share of responsibility of Hohn for the $22,000.00 minimum amount of cost to rectify the concrete floor slab deficiencies would be a sum equal to $16,500.00.

14. It was not effectively disputed that Lexington has withheld and has not paid Hohn the sum of $3,000.00 for Hohn’s concrete work on the Lot 63 project. It was similarly undisputed that open balances exist from two invoices in the respective amounts of $183.75 and $5,018.30, totaling $5,202.05, for certain otherwise acceptable concrete work by Hohn for Lexington on another unrelated project that was identified as the Lot 115 project.

15. The above-described open and unpaid balances against invoices for the two separate projects, in the combined aggregate amount of $8,202.05, became the subject

matter of a written assurance and guarantee commitment by Hohn dated July 2, 2002 providing for the correction of the Lot 63 concrete floor problems. Both parties were shown to have been under the mistaken impression that the total amounts so withheld would be adequate to remedy the floor slab condition so as to render it appropriate for receiving the contemplated staining materials. It must be held under all the circumstances, especially in light of the interim guarantee understanding between the parties, that Lexington’s non-payment of the open invoice amounts relating to the two identified projects that were otherwise due and payable to Hohn is not violative of the spirit and intent of the charged contracting law provisions. Moreover, the amount of restitution found appropriate as a condition, as set forth in the prior Findings of Fact, may be satisfied, in part, by Hohn’s written confirmation of a formal payment credit for $8,202.05 against all open invoices.

CONCLUSIONS OF LAW

1. The totality of the evidence of record sufficiently established that Hohn has violated the provisions of A.R.S.§32-1154(A) (7), (23) and (3); namely, Rule R4-9-108, A.A.C. However, no violations by Hohn of the provisions of A.R.S.§32-1154(A) (2) were adequately proven hereunder.

2. It is not a proper function of either the Office of Administrative Hearings or the Registrar of Contractors to adjudicate and award money damages which must be recovered, if at all, through civil court action. However, the Registrar is empowered by statute to impose reasonable conditions that may serve to reduce or eliminate any otherwise appropriate disciplinary penalties for proven violations of the State’s contracting laws. Whenever the performance of corrective or remedial measures on a jobsite is no longer warranted, possible or desired, the inclusion of a condition in the

nature of restitution, total or partial, is fully appropriate and equitably justified. In this way, a Complainant in an administrative action who has sustained the burden of proving contracting law violations does not have to await the outcome of protracted civil litigation in order to recover at least a portion of a demonstrated loss and, of equal or perhaps greater significance, a licensed Contractor/Respondent is given the means to control, to some extent, the severity of any disciplinary penalty. Moreover, any amounts paid in satisfaction of a condition affecting licensure may properly be evaluated, credited or applied against any civil judgment or arbitration award ultimately obtained in favor of either party.

3. The evidence of record further supports a determination that the inclusion of a condition in the Order to be entered in this matter consisting of the payment of monies by way of partial restitution by Hohn to Lexington is appropriate and fully warranted in this case, and that the monetary extent of restitution properly to be tendered by Hohn to Lexington, by payments, credits, or a combination thereof, should be in the amount of $16,500.00.

4. The evidence of record, including the express stipulation of the parties, failed to sufficiently demonstrate that Lexington has committed violations of the provisions of A.R.S. §32-1154(A) (7), (11), (15) or (13); namely, A.R.S. §13-1124. RECOMMENDED ORDER

In view of the foregoing, it is recommended, with respect to the administrative disciplinary action against the license of Lexington Homes, LLC, that the entire Citation and Complaint in Case Number 03-0219 be dismissed.

It is further recommended, with respect to the administrative disciplinary action in Case Number 02-2103 against the license of Hohn Construction, Inc., that commencing on the effective date of the Registrar’s Order, the Class C-09 license of Hohn shall be suspended until the Registrar receives written proof that Hohn has paid or tendered to Lexington the sum of $16,500.00, which tender may consist of the issuance of a final credit up to the combined amount of $8,202.05, and the remaining balance consisting of cash or other mutually agreed payment arrangements.

It is further recommended that if Hohn files proof of compliance with the above-described payment and/or credit conditions on or before this Order’s effective date, then no license suspension shall be imposed, and the entire Citation and Complaint in Case Number 02-2103 shall be closed.

Dated: January 22, 2003. OFFICE OF ADMINISTRATIVE HEARINGS

______________________________________ Robert I. Worth Administrative Law Judge

Original transmitted on _____________________

by: _____________________________ , to:

Michael P. Goldwater, Director Registrar of Contractors 800 West Washington Street (6th Floor) Phoenix, AZ 85007

ATTN: Jennifer Brown ----------------------- [1] Another element of the Inspector’s directive consisted of corrections to the stem wall. These remedial measures were successfully accomplished by Hohn, even at a location where the problem was admittedly not caused by Hohn’s prior work.

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Office of Administrative Hearings 1400 West Washington, Suite 101 Phoenix, Arizona 85007 (602) 542-9826