ALJDEC decisions subject to certification as final

2018A-1516-NPC-ROC · Registrar of Contractors · 2018-10-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: October 4, 2018. APPEARANCES: Carrie Stone, Complainant; Fred Hicklel, Esq., counsel for the Complainant; Trever J. Zarling, Complainant; Robert Caylor, Respondent; William Goldinez, David Tyrrell and Jared Morgan. ADMINISTRATIVE LAW JUDGE: Randolph D. Wolfson

FINDING OF FACTS[1]

The Arizona Registrar of Contractors [RC] referred this matter to the Office of Administrative Hearings, an independent agency, to hear evidence regarding the Complaint filed by Excel Mechanical Inc., ROC license numbers 096704, 096695 and 167371 [hereinafter, “Excel”] against Robert Caylor Construction Company, ROC license number 069844 [hereinafter, “Caylor] The Complaint was filed with the ROC on April 3, 2018[2] alleging Caylor’s violation of A.R.S. § 32-1154(A)(10).[3] Caylor and Excel are parties to a March 1, 2016 Sub Contract Agreement,[4] which generally controls the business relationship of the parties, wherein Caylor is the contractor and Excel is the sub-contractor. Pursuant to the Sub Contract Agreement, on August 2, 2017, Purchase Order number 6604 [hereinafter, “PO”] was issued to Excel by Caylor[5] to supply materials and labor for 24 Split System heat pump units for apartments at 6604 Lofts at 2 E. Congress Street in Tucson, Arizona. The total payment for the PO is stated therein as $561,812.00.[6] On April 24, 2018 the ROC issued its Citation versus Caylor alleging that Caylor had violated A.R.S. § 32-1154(A)(10). The Complaint alleges non- payment of the sum of $57,914.20, and attaches two (2) specific invoices: 17-126-6 dated August 18, 2017 in the amount of $1,559.70 and 17-126-RET dated September 21, 2017 in the amount of $56,354.50.[7] Caylor denies[8] owing Excel the amount claimed of $57,914.20 and alleges that Excel has not completed its work per the contract and that, it is asserted, final payment is not due.[9] The Mechanical Design Professional for the Project, Adams and Associates Engineers, [hereinafter “Adams”], reported on March 29, 2017[10] several concerns affecting the installation and operation of units placed by Excel:

Split System Heat Pump Units (all units): Mechanical contractor shall field verify equivalent lengths of all refrigerant piping runs based on proposed location for outdoor equipment prior to ordering any equipment. Submit shop drawing for equipment locations on Mezzanine roof with condenser air discharge orientation noted on the plan.

Fan coil units FC 3-8, 4-8, 5-8 are specified as vertical units (FTQ36PBVJU). Resubmit with a vertical unit.

Air Devices (louvers, fire smoke dampers): Contractor to verify exact sizes, quantities, and frame types. In Field Report #1 dated August 21, 2017[11], Adams reiterated its earlier concerns regarding deficiencies in Excel 's installation of the Split System/Heat Pumps and with more specificity stated:

The outdoor equipment has been set in the outdoor equipment yard without any confirmations of refrigerant piping lengths or shop drawings by the Mechanical Contractor. The installation of the outdoor condensing units does not appear to meet the requirements of the manufacturer's installation manual.

The Mechanical Contractor was responsible for confirming maximum lengths of refrigerant piping prior to installation of outdoor equipment and field coordinate final locations of all equipment with Architect, General Contractor and Electrical Contractor prior to the start of construction. Section 1.06 of the Mechanical Specifications on sheet M401 also requires the Mechanical Contractor to install all equipment per the manufacturer's installation instructions.

Shop drawings confirming the lengths of refrigerant piping and locations of all outdoor requirement were requested from the Mechanical Contractor in the mechanical equipment submittal review dated March 29, 2017.

Split System Heat Pwup Units (all units): Mechanical Contractor rcfriger.mt piping nms based on proposed location for outdoor equipment prior to ordering any equipment. Submit shop drawing for equipment locations on Mezzanine roof with condenser air discharge orientation noted on the plan. The refrigerant piping at the outdoor condensing units has not been installed in a neat, workman like manner. Any future service company would find tracking the refrigerant piping from the wall penetration to the outdoor unit almost impossible. The refrigerant piping from indoor units to outdoor units has been installed without proper supports in several locations and most refrigerant lines are strapped to the unistrut supports. Several refrigerant lines have missed the top vertical support from the 3rd level.

Mechanical contractor shall provide an additional equipment submittal for equipment stands and confirm the equipment stands have been installed per the manufacturer's installation requirements. The Mechanical Contractor shall confirm the installed equipment stand will adequately support the 3-ton condensing unit (HP 3-8, 4-8 and 5-8) with weight of 283 lbs. Once the outdoor unit locations have been confirmed and a shop drawing has been approved, the Mechanical Contractor shall secure all equipment stands to the equipment platform. Once the outdoor unit locations have been confirmed and a shop drawing has been approved, the Mechanical None of the mechanical equipment has been provided with permanent equipment labels per section 3.11 of the Mechanical Specifications on sheet M40, sheet M401.

The refrigerant piping from indoor units to outdoor units has been installed without proper supports in several locations and most refrigerant lines are strapped to the unistrut supports. Several refrigerant lines have missed the top vertical support from the 3rd level. The refrigerant piping insulation does not have any tape between sections and the sealant is not consistent.

Once the outdoor unit locations have been confirmed and a shop drawing has been approved, the Mechanical Contractor shall re- route the refrigerant piping to provide a neat, organized routing from the third level penetration to each outdoor condensing unit. All refrigerant piping shall be provided with proper supports and all piping shall be strapped to the \support. All joints in piping insulation shall be sealed per manufacturer's installation manual. The final installation of the piping insulation shall be complete with the two, consistent coats of insulation coating. .

The refrigerant piping wall penetration has been foamed, but the termination has not been cleaned-up appropriately. The existing heating water piping has been disconnected, but the piping has not been removed back to the isolation valve and capped on each level.

The Mechanical Contractor shall clean-up the refrigerant piping wall penetrations and complete demolition and cap of existing heating water piping.

The water heaters have not been installed per the construction documents. The construction documents called for the main water heater to be installed on the 4th floor and the back-up water heater on the 3rd floor. The plumbing contractor installed the main water heater on the 5th floor and back-up water heater on the 4th floor. The Plumbing Contractor shall provide as-built drawings documenting the changes in the installation per note #21 in Part Ill of the Plumbing Specifications on sheet P302.

Sections of the domestic hot water supply and return piping has been insulated with elastomeric foam insulation with duct tape at end of insulation sections. None of the cold water piping supply to the water heater has been insulated.

All domestic cold and hot water supply and return piping shall be insulated with fiberglass insulation per note #7 in Part II of the Plumbing Specifications on Sheet P302. The piping installation of the cold water supply between the hot water piping return and the water heater cold water supply requires an isolation valve and check valve. The check valve could not be verified on the 5th floor water heater at the time of walkthrough or in photos from walkthrough. The plumbing contractor shall confirm piping installation matches detail #3 on sheet P202.

The recirculation pump aqua-stats were removed at water heater start-up and have not been re-installed. The water heater storage temperature is set at 119"F and both thermostatic mixing valves appear to be wide-open on the hot water side to make the 110"F supply water temperature. The plumbing contractor shall re- install the aqua-stats and balance the recirculation system with the manual balancing valves installed at each apartment. The water heater storage temperature shall be set at 140"F and the thermostatic mixing valve shall be set at 110"F.

In its letter dated April 2, 2018[12] the architect for the project, Engberg Anderson Architects [“EAA”], and the Mechanical Design Professional [Adams] refused to accept Excel’s work.[13] EEA’s letter in Exhibit R-D details the findings of the work performed by Excel, and the reasons why EEA determined that the Excel work is not complete and could not be recommended to Caylor for acceptance. The manufacturer of the Daikin Split Systems reported on its review of the installation of the Dalkin systems by Excel to determine if it met manufacturer specifications.[14] By its August 8, 2018 report,[15] Excel’s installation did not meet manufacturer specifications as follows: Units do not maintain proper clearances from other units or obstructions; Unit labeled 3-1 RZQ24 with serial number ending in 6377 has a refrigerant line set length of 185ft.; Shielded cable was used; leak lock used on flare connections.

Installed units do not meet manufacture installation recommendations; Units are discharging outdoor unit air into intake of units located in front; The use of leak lock can lead to refrigerant system contamination.

Dalkin recommended the following actions were required to bring these installations in conformity with manufacturer specifications:

Unit line set lengths should not exceed manufacture specifications.; Recommend changing units to meet recommended clearances; Unit labeled 3-1 RZQ24 with serial number ending in 6377, refrigerant line set must not exceed 164ft; Any other unit with the exception of RZQ36 must not exceed 164ft.; Units should be set so discharge air does not enter intake of other units.

In a letter from Adams to Excel on April 2, 2018,[16] Adams wrote EAA to summarize Adam’s recommendation that the installed outdoor condensing units be re-located as a possible solution to noted deviations from the manufacture’s specifications. Adams noted that “Detail #1 on sheet M201 - Boxed note stating, "Mechanical contractor to field coordinate exact location of all outdoor condensing units with Architect, General Contractor and Electrical Contractor prior to start of construction" [emphasis added]. . . .The mechanical contractor did not just follow the construction documents …The mechanical contractor determined the final layout for all 24 condensing units within the mechanical well without any support or confirmation from other members of the design or construction teams. Also noted was Mechanical specification that “The mechanical contractor shall install all equipment per manufacturer's installation instructions.” Pursuant to the terms of the parties’ sub-contract agreement,[17]

Final payment shall be due thirty (30) days after completion, final inspection, and final acceptance of the Work by Caylor unless otherwise stated on the bid documents or specifications or as Caylor is contractually obligated by the owner of said project. [emphasis added]…[18]

Hearing in this matter was conducted on August 27, 2018 before the Office of Admistrtive Hearings. Testifying for the Complainant, Trever J. Zarling, President of Excel, stated that Excel’s scope of work in this job was to install 24 Daikin Split Systems [HVAC]. He said that these systems have special performance attributes and are part of the newest technology. He said that Excel and the manufacturer representative work together to insure, per plans, that the installed units work to their full potential. Although he denies all units displayed issues with the discharge of condensing air, he admits that six units were not discharging condensate as they were designed to do. He admits that he did not field coordinate with Adams or EEA before commencing work, but believes that William Goldinez, for Excel, did. He said all the units are installed and operating. He said he would like to be paid for the units installed and the work plumbing work that was completed. Mr. William Goldinez, testifying for Excel, testified that he did not field coordinate with Adams of EEA before work was commenced. Jared Morgan, Vice-President of Operations for Excel, testified that he was present on site when the roof-top set up for the units was done. No architect or Engineer was present. Mr. Morgan agreed that Excel moved forward on this project without coordinating with Adams or EEA before commencing the installation. He agrees that Excel did not adhere to the box note stamped on the project plans that required Excel to Mechanical contractor “…to field coordinate exact location of all outdoor condensing units with Architect, General Contractor and Electrical Contractor prior to start of construction. Testifying for Caylor, David Tyrel, Mechanical Engineer for Adams and the Mechanical Engineer of record on this project, testified that Excel did not coordinate with Adams or EEA before it commenced installation of the 24 Dalkin units. He said he authored that Field Report #1[19] and in it requested a shop drawing of the installation to review. That shop drawing was eventually submitted by Excel, but it was not provided until after all of the units were installed. He said, had Excel coordinated with Adams and EEA prior to commencing installation, the problems posed by this contractor would likely have been completely avoided. He said the units are not installed in conformance with the manufacturer’s required specifications. The units are discharging condensate into the outdoors that is being taken into intakes located in the front of the units – thus causing the product’s efficiency to be significantly impaired. Inasmuch as the manufacturer has indicated the units are not in compliance with its specifications and thus will not back the manufacture’s warranties. He said EEA will not approve the installation without Excel curing the issues raised by the manufacturer.

CONCLUSIONS OF LAW

Complainant bears the burden of proof to establish violations of the statutes quoted above by a preponderance of the evidence.[20] Respondent herein bears the burden to prove by a preponderance of the evidence any affirmative defenses “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[21] A preponderance of the evidence is “evidence which is of greater weight or more convincing than evidence which is offered in opposition to it; that is, evidence which as a whole shows that the fact sought to be proved is more probable than not.”[22] A.R.S. § 32-1154(A) provides the “grounds for suspension or revocation of license,” including the following:

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: . . . 11. Failure by the licensee or agent or official of a licensee to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased.

Pursuant to the terms of the Agreement between the parties,[23] final payment is not due until thirty days after completion, final inspection, and final acceptance of the Work by Caylor. By a preponderance of the evidence, the evidence demonstrates that Excel has never obtained final acceptance of its work from Caylor. Moreover, Caylor has proven that based upon the findings of Adams, EAA and the manufacturer, work on this installation is not complete and is not in conformity with manufacture specifications. Therefore, by a preponderance of the evidence, it is proven that payment to Excel is not due. Caylor has met its burden to prove that it has not failed as a licensee to pay monies in excess of seven hundred fifty dollars when due and therefore, by a preponderance of the evidence, Caylor has proven it has not violated A.R.S. § 32-1154(A)(10). Compliance with the terms of the Agreement between the parties[24] requires, as a condition precedent to right to payment, that Excel complete the contract, obtain a final inspection by Caylor, receive final acceptance of the Work by Caylor. Inasmuch as Excel has yet to meet the conditions precedent to its right to payment, Excel’s Complaint is not ripe and this case should be dismissed.

In its Answer to the Citation and Complaint Caylor has requested an award of attorney’s fees in the amount of $10.000.00. The undersigned recommends that the Registrar deny this request because the Legislature has not empowered either the Registrar or the Office of Administrative Hearings to award such fees.[25]

RECOMMENDED ORDER Based upon the foregoing, IT IS HEREBY RECOMMENDED that this matter be dismissed. Done this day, October 24, 2018.

/s/ Randolph D. Wolfson Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director Registrar of Contractors

----------------------- [1] Administrative Judicial Notice is taken of the entirety of the ROC record in this matter including, but not limited to, the ROC public website’s content. [2] Agency Record, “Intake Complaint Submittal1.pdf.” [3] A.R.S. § 32-1154(A) (10): 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 by a licensee or agent or official of a licensee to pay monies in excess of seven hundred fifty dollars when due for materials or services rendered in connection with the licensee’s operations as a contractor when the licensee has the capacity to pay or, if the licensee lacks the capacity to pay, when the licensee has received sufficient monies as payment for the particular construction work project or operation for which the services or materials were rendered or purchased. [4] Exhibit R-A [5] Agency Record, “Intake Complaint Submittal1.pdf, page 3 “ [6] Ibid. [7] “Intake Complaint Submittal1.pdf.,” supra. [8] Agency Record, Response of Robert Caylor Construction Company Filed July 19, 2018. [9] Exhibit R-A, supra, General Conditions to subcontract, Section 2 and 12. “ ... Final payment shall be due thi1ty (30) days after completion, final inspection, and final acceptance of the Work by Caylor. [10] Exhibit R-B. [11] Exhibit R-C, Adams Field Report# I. [12] See Exhibit R-D, letter from William Williams, [13] Ibid. [14] Exhibit R-G. [15] Ibid. [16] Exhibit R-D. [17] Exhibit R-A, supra. [18] Ibid, Page 4, Section 2, “Payment, Lien Waivers, Contract Price.” [19] See, Exhibit R-C, Adams Field Report# I., supra. [20] See A.A.C. R2-19-119(B)(1); see also Culpepper v. State, 187 Ariz. 431, 438, 930 P.2d 508, 515 (App. 1996).

[21] Morris K. Udall, Arizona Law of Evidence § 5 (1960).

[22] Black’s Law Dictionary at page 1182 (6th ed. 1990).

[23] Exhibit R-A, Page 4, Section 2, “Payment, Lien Waivers, Contract Price,” supra. [24] Ibid. [25] See Semple v. Tri-City Drywall, Inc., 172 Ariz. 608, 611, 838 P.2d 1369, 1372 (Ct. App. 1992) (Declining to award attorney’s fees that party incurred in administrative action under A.R.S. § 12-341.01 because “[t]he common definition of ‘action’ is ‘a proceeding in a court of justice by which one demands or enforces one’s right.”).

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826