ALJDEC decisions subject to certification as final

2014A-657-ROC · Registrar of Contractors · 2016-01-25

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: January 12, 2016, at 1:00 p.m. APPEARANCES: Shrader and Martinez Construction Incorporated (hereinafter “Shrader” or “Complainant”) was represented by its attorney, Steven R. Beeghley, Esq. Phillip Ray Lucero DBA: Lucero Fire Protection (hereinafter “Respondent” or “Lucero” or “Lucero FP”) was represented by his attorney, Troy Stratman, Esq. ADMINISTRATIVE LAW JUDGE: M. Douglas _____________________________________________________________________ The hearing was convened to determine whether Respondent violated the charged provisions A.R.S. §§ 32-1154(A)(6) and 32-1154(8) as alleged by Complainant and as cited by the Registrar of Contractors (hereinafter “Registrar”). Evidence and testimony were presented and the following Findings of Fact, Conclusions of Law, and Recommended Order are made: FINDINGS OF FACT Background and Procedure 1. Respondent is the holder of License No. C-16.197192-C issued by the Registrar. Respondent’s license is current. 2. On or about February 18, 2014, the Registrar received a Complaint from the Complainant against the Respondent alleging that the Respondent had committed fraud by fabricating a City of Phoenix water flow test and by and that Respondent had submitted a Change Order to Complainant based on the fabricated water flow test. The Complaint provided, in relevant part, as follows: In July, Lucero FP claimed that it had received data from the City of Phoenix Water Division regarding a purported water flow test conducted by the City on July 2, 2013. Together with the hydraulic water flow data that Lucero FP (purportedly) gained through this July 2nd water flow test and its purported investigation of the fire sprinkler system at the Project, Lucero FP submitted a proposed fire sprinkler plan for the Project to the City of Phoenix using the existing fire sprinkler system at the Project. Lucero FP knew the proposed plan would be rejected by the City since the water supply/pressure reported in its submittal was insufficient for the building….Lucero FP used the rejection of tis fire sprinkler plan to form the basis of a $21,813.33 change order for the Project….In other words, Lucero fabricated that the City conducted a flow test on July 2nd and, in turn, fabricated the flow test data associated with the flow test. So, the factual basis supporting Lucero FP’s proposed change order was false due to this fraudulent conduct….

3. Respondent denied all claims. Respondent’s Answer to the Complaint provides, in relevant part, as follows: …. On the contrary, Lucero's actions were in all respects directed to fulfilling his responsibilities to provide a fire sprinkler system which was adequate for the Project and which was in compliance with all applicable codes and requirements, which the existing system was not. Specifically: a. In early July 2013, Lucero undertook to perform a water pressure test at the base of the existing riser on the property, which Lucero knew to be the main testing area specified in NFPA, titled "Standard for the Inspection, Testing, and Maintenance of Water-Based Fire Protections Systems." This test, performed in the presence of SMC's representative and a representative of Phoenix FD, disclosed a Residual pressure of 58 psi, which was recognized by Lucero and the Phoenix FD to be inadequate to support the system Lucero was being requested to install. At no time did Lucero misrepresent to SMC that the City had performed a hydrant flow test; SMC's representative had been present and observed the entire procedure….

4. On June 16, 2015, the Registrar issued a Citation for an Alleged Violation of A.R.S. § 32-1154(A). That Citation contained two charges: A violation of A.R.S. § 32-1154(A)(6).[1] A violation of A.R.S. § 32-1154(A)(8).[2]

Testimony 5. Mark Daniel Chilton (hereinafter “Mr. Chilton”) testified that he is employed by Complainant as vice-president construction. Mr. Chilton stated that Complainant contracted with Respondent for the design and construction of a fire protection system for a tenant improved project at “The Henry” a new restaurant located at 4455 East Camelback, Phoenix, Arizona (hereinafter “Henry”). Mr. Chilton said that he was the construction manager for the Henry. 6. Mr. Chilton said that Respondent falsely represented that the City of Phoenix had conducted a water flow test in the vicinity of the Henry on July 2, 2013.[3] Mr. Chilton testified that Respondent submitted a proposed fire sprinkler system based on the July 2, 2013 water test which was rejected by the City of Phoenix (hereinafter “City”). Mr. Chilton said that after the Respondent’s initial fire protection plan was rejected by the City the Respondent then prepared a $21,813.33 change order which was presented to the owner of the Henry. Mr. Chilton said that the owner of the Henry believed the Respondent’s calculations to be in error and retained an expert to perform an evaluation of Respondent’s initial evaluation and change order. 7. Mr. Chilton testified that he repeatedly asked the Respondent to provide the Complainant with a copy of the July 2, 2013 water flow test. Mr. Chilton said that Respondent failed to do so. 8. The owner’s evaluation of the Respondent’s work and change order led to a determination by the owner that Respondent’s evaluation was based on false information. The owner’s evaluation found that there was adequate water pressure for adequate for the Henry and that Respondent’s change order was a fraudulent. The owner of the Henry then back-charged the Complainant for the owner’s cost of performing the evaluation and for the cost of designing a new fire protection system in the total sum of $38,306.38. 9. Mr. Chilton testified that the owner demanded that the Respondent be terminated from the construction project and that the fire protection system be constructed by an alternative contractor. Mr. Chilton said that Complainant did not contest the owner’s action and allowed the back-charge because there was no proof the City had performed a water flow test on July 2, 2013, as represented by the Respondent. 10. Mr. Chilton acknowledged that Complainant and Respondent had worked on twelve or more previous projects without a problem. 11. Mr. Chilton acknowledged that there was no contractual obligation for the Respondent to have performed a water flow test for the Henry. 12. Scott Granger (hereinafter “Mr. Granger”) testified that his is a civil engineer and a fire protection engineer. Mr. Granger said that he prepared the Report of Findings for the Fire Sprinkler Water Supply.[4] Mr. Granger said that he performed an onsite review of the Henry and determined that with one small change there was plenty of water for the Henry’s fire protection system. Mr. Granger said the he contacted the City and was informed that there was no evidence that there had been a water flow test conducted anywhere near the Henty on July 2, 2013. Mr. Granger opined that Respondent’s hydraulic calculations based on the supposed water flow test performed by the City on July 2, 2013, was a fabrication. 13. Mr. Granger acknowledged that the City’s policy for water flow tests is that a contractor can rely on a water flow test that has been conducted in the close vicinity of the construction site within six months. Mr. Granger opined that no water flow test had been performed in the vicinity of the Henry within six months of July 2, 2013, that the Respondent’s hydraulic calculations were fabricated by the Respondent. 14. Phillip Ray Lucero (hereinafter “Mr. Lucero”) testified that he had been in the fire protection business for over forty years and had performed over 7,000 fire protection construction projects. Mr. Lucero said that he had terminated Mr. Granger from a prior construction project because his consulting fees were outrageous and he did not give proper information. 15. Mr. Lucero testified that he had work worked on previous construction projects with the Complainant. Mr. Lucero said that Respondent initially did not want to perform any fire protection work at the Henry because the job was relatively small. Mr. Lucero stated that Respondent agreed to perform fire protection project at the Henry based upon its past relationship with the Complainant. 16. Mr. Lucero testified that Respondent’s contract limited Respondent to designing the fire protection system for the Henry as “it is.” Mr. Lucero said that the fire protection system had to satisfy the City and the owner. Mr. Lucero said the proposed occupancy of the Henry was changed after Respondent entered into a contract with Complainant. Mr. Lucero said that the kitchen became a big issue. 17. Mr. Lucero testified that the parties’ contract did not require to obtain a new water flow test from the City. Mr. Lucero stated that it is not required to obtain a new water flow test for a tenant improvement construction project. Mr. Lucero said that the only time a water flow test is required is if the tenant improvement involves a major modification or the City requires it. Mr. Lucero said that neither the owner nor the Complainant requested Respondent to obtain a new water flow test for the Henry. 18. Mr. Lucero testified that on July 2, 2013, he contacted the City and asked for the latest water flow data in the vicinity of the Henry. Mr. Lucero stated that no water flow test was performed on July 2, 2013. Mr. Lucero denied representing that a water flow test had been performed on July 2, 2013. 19. Mr. Lucero testified that he asked for a courtesy inspection from the fire marshal on July 2, 2013. Mr. Lucero stated that the fire marshal had a meeting with everyone there. Mr. Lucero said that representatives of the Complainant were present at the meeting. Mr. Lucero said that the fire marshal opined that the existing system was not going to work because of the low water pressure and that changes would have to occur in the system before it could be approved. 20. Mr. Lucero testified that he had called the City and obtained water flow information on thousands of occasions. Mr. Lucero stated that after the water flow information is obtained from the City he performs his own calculations to see if it complies with what he actually observes at the jobsite. Mr. Lucero said that he performed his calculations and that he prepared his suggested changes based on his calculations. Mr. Lucero denied that he had fabricated the information. Mr. Lucero said that he simply put down the information that he had received from the City. 21. Mr. Lucero testified that when he was terminated from the project he was advised to leave the job and not go back. 22. Mr. Lucero testified that the existing valves at the Henry were rusted and old. Mr. Lucero opined that new valves and gauges were installed before Mr. Granger obtained a new water flow test from the City. 23. Mr. Lucero’s testimony is found to be credible. CONCLUSIONS OF LAW This matter lies within the Registrar’s jurisdiction.[5] 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 these matters is by a preponderance of the evidence.[6] A preponderance of the evidence is “such proof as convinces the trier of fact that the contention is more probably true than not.”[7] Mr. Lucero credibly testified that the parties’ contract did not require Respondent to obtain a new water flow test from the City. Mr. Lucero stated that it is not required to obtain a new water flow test for a tenant improvement construction project. Mr. Lucero said that the only time a water flow test is required is if the tenant improvement involves a major modification or the City requires it. Mr. Lucero said that neither the owner nor the Complainant requested Respondent to obtain a new water flow test for the Henry. Mr. Chilton acknowledged that there was no contractual obligation for the Respondent to have performed a water flow test for the Henry. Mr. Lucero credibly testified that on July 2, 2013, he contacted the City and asked for the latest water flow data in the vicinity of the Henry. Mr. Lucero denied representing that a water flow test had been performed on July 2, 2013. Mr. Lucero testified that he asked for a courtesy inspection from the fire marshal on July 2, 2013. Mr. Lucero stated that the fire marshal had a meeting with everyone there. Mr. Lucero testified that when he was terminated from the project he was advised to leave the job and not go back. Mr. Chilton testified that the owner demanded that the Respondent be terminated from the construction project and that the fire protection system be constructed by an alternative contractor. This Tribunal concludes that the preponderance of the evidence is insufficient and fails to support a finding that the Respondent violated the charged provisions of A.R.S. §§ 32-1154(A)(6) and 32-1154(8). Consequently, this matter should be dismissed. RECOMMENDed order In view of the foregoing, it is recommended that this matter be dismissed. In the event of certification of this Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of the certification. Done this day, January 25, 2016.

/s/ M. Douglas Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] A.R.S. § 32-1154(A)(6) provides, in relevant part, as follows: The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: The doing of a fraudulent act by the licensee as a contractor resulting in another person being substantially injured. [2] A.R.S. § 32-1154(A)(8) provides, in relevant part, as follows: The holder of a license or any person listed on a license pursuant to this chapter shall not commit any of the following acts or omissions: Failure in a material respect by the licensee to complete a construction project or operation for the price stated in the contract, or in any modification of the contract.

[3] See Complainant’s Exhibit B (Respondent’s Hydraulic Calculations for the Henry). [4] See Complainant’s Exhibit J (Report of Findings). [5] See A.R.S. § 32-1154(A). [6] See A.A.C. R2-19-119. [7] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

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