ALJDEC

98F-F0237-ROC · Registrar of Contractors · 1998-07-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: July 16, 1998 APPEARANCES: Gary Smith, President, VCI Development Company, Inc., appeared on behalf of the Complainant Terrence Jackson, Attorney at Law, appeared on behalf of the corporate Respondent ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________

FINDINGS OF FACT The Complainant, a general contractor, entered a contract with W.V.L.C. (Owner), to build the Forest Hills apartment complex consisting of 19 buildings with a total of 310 units, in Flagstaff, Arizona. The Complainant and Respondent entered a contract in October, 1995. The Respondent, as subcontractor under the contract, was responsible for the framing (labor only contract). The amount of the framing contract was $1,045,700.00. Limited to the relevant issues of this case, the Respondent was to install interior and exterior sheer wall plywood and fasten it per nailing schedule as well as install exterior wood siding and trim to the Complainant’s satisfaction. An attachment to the contract (Complainant’s exhibit 2”A”) requires the Respondent to inspect and sign all shop drawings for trusses. There are approximately 65 pages of blueprints for the project with 50 or so pages concerned with framing. A detail on one of the pages shows the detail for the sheer panel which was to be installed between trusses in the attic above the four entry ways of each building. The Complainant ordered the truss packages but the packages did not include the sheer panels. The total number of panels which were not installed was 76. On June 3, 1996, during a jobsite meeting attended by the parties, it was discovered that numerous nails were overdriven in the masonite siding, that nails did not hit a stud and some nails were over 16 inches on center. These problems could affect the siding warranty. In October, 1996, the Complainant gave a punch list to the Respondent who satisfactorily completed the work on the list. The list consisted of items brought up by the architect including the nail and siding issue for specific buildings and areas. It apparently did not cover all the nail problems which are part of the instant complaint. The Complainant has also done some remedial work on the siding, has had another subcontractor do some work but not all the siding problem areas have been remedied. The conditions still exist at various buildings. The bids to fill in nail holes, and otherwise patch, paint and seal, run from $13,750.00 to $100,000.00. This spread makes the figures somewhat questionable. In approximately October, 1996, the certificate of occupancy was issued after an inspection of the complex by the City of Flagstaff. The inspection did not discover the omission of the sheer panels. The Owner had an inspection of the complex done. It revealed among other things that the 76 sheer panels were never installed. According to the structural engineering firm (Tribolet), which reviewed the plans, the sheer panels should be installed. There is some hearsay evidence that the panels are necessary for the structural integrity of the buildings (attributed to James Woods, Civil Engineer). Although the local building authority has been informed of this omission, no written directive has been issued by the City of Flagstaff, to correct the condition. Estimates on the cost of installing the sheer panels begin in the $33,000 range. The Complainant’s president, Gary Smith (Smith) has an indirect ownership interest as a family trust in the Owner, which is a limited liability company. Problems disclosed by the inspection and a dispute between Smith who was, but no longer is a managing member and other Owner’s members, led to a suit filed by the Owner against the Complainant. A case before the Registrar concerning a prior dispute between the parties to the instant case, regarding payment, was closed. The parties to the instant case, are currently involved in a civil action, No. C 316896, in Pima County Superior Court, with the Owner and Complainant as plaintiffs and the Respondent as defendant. That case was filed in December 1996. The Complainant is presently holding $102,000.00 retainage ($136,000.00 if certain claims of the Respondent are accepted). The Complainant asserts the retainage does not offset costs attributable to the Respondent. The sheer panel issue is not yet part of the civil complaint which has been supplemented a number of times. The facts in this paragraph are not directly relevant to the case but are presented to give a broader view of the past and current relationship of the parties. The Complainant filed the instant complaint with the Registrar of Contractors (Registrar) on February 3, 1998. On April 12, 1998, Inspector Mark Schweiger (Schweiger), of the Registrar’s Office, issued a Corrective Work Order (CWO) to the Respondent which required the Respondent to correct the siding nail problem to meet industry standards and to correct the sheer panels to comply with the plans and specifications to the acceptance of the local building authority. CONCLUSIONS OF LAW The Citation and Complaint allege violation of A.R.S. §32-1154 (A)(2) departure from plan, (3) violation of any rule, specifically A.A.C. R4-9- 108, workmanship standards, (7) wrongful or fraudulent conduct, and (23) failure to take appropriate corrective action. No violation of A.R.S. §32-1154(A)(7) is found. The evidence shows that everyone (the Respondent, Complainant and the Flagstaff inspector) overlooked the missing sheer panels. The sheer panels were not included in the truss package but were one detail on a rather extensive set of plans. This oversight does not rise to the level of a wrongful act. The nail and siding issue also does not constitute a wrongful act under the facts of this case. This is because the Complainant apparently considered the work satisfactory after the Respondent corrected a limited punch list in October,1996. It was not until recently that the matter again became an issue. The exact reason for the passage of time before the full extent of the problem was discovered was not explained. The Respondent was contractually responsible for interior and exterior sheer wall plywood. The blueprints showed the sheer panel detail. It is unknown if the truss installation instructions included the panels. It is still incumbent on the Respondent to be familiar with those portions of the plan which relate to his work. The evidence was insufficient to establish that the missing sheer panels created a significant problem with the structural integrity of the various buildings, the failure to install the panels according to the plan constitutes a violation of A.R.S. §32- 1154(A)(2). This conclusion is tempered but not altered by the fact that the Complainant and the City of Flagstaff also failed to note the omission. Although the Complainant has some responsibility for the omission, that responsibility is to the Owner. The nail and siding issue constitutes a violation of A.R.S. §32-1154(A)(3)/ A.A.C. R4-9-108. The evidence shows the condition is unacceptable and does not meet workmanship standards. Although the reason for the delay before the full extent of the problem was brought to light, was not specifically addressed, and there was some suggestion that the issue may have been raised in part because of the civil case pending between the parties and the dispute between the Owner and the Complainant, the fact remains that the preponderance of the evidence establishes the violation irrespective of the motives of the Complainant. In view of the conclusions in paragraphs 2 and 3 above, it was incumbent on the Respondent to comply with the CWO issued by Schweiger and a violation of A.R.S. §32-1154(A)(23) is also established. RECOMMENDED ORDER In view of the foregoing, it is recommended commencing sixty (60) days from the effective date of the Order entered in this matter that the Class B license of the Respondent shall be suspended until the Registrar of Contractors receives written proof that the Respondent has installed the sheer panels or otherwise satisfactorily corrected the omission of the panels and has accomplished appropriate and effective remedial work on the nail and siding problems as identified by the Complainant; It is further recommended that the Complainant shall timely provide all materials required for the installation of the sheer panels or any agreed upon substitute for the panels; It is further recommended that if the Respondent accomplishes the above described corrective work on or before sixty (60) days from the effective date of the

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Order entered in this matter, then the aforementioned suspension shall not take place and the Citation and Complaint upon which it is based shall be closed. Done this day, July 24, 1998.

_______________________________ ALLEN REED Administrative Law Judge

Original transmitted by mail this ____ day of July, 1998, to:

Michael P. Goldwater, Director Registrar of Contractors ATTN: Joyce Armijo 800 West Washington, 6th Floor Phoenix, AZ 85007

By _______________________________

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Office of Administrative Hearings 1700 West Washington, Suite 602 Phoenix, Arizona 85007 (602) 542-9826