ALJDEC

99F-1687-ROC · Registrar of Contractors · 2000-02-17

STATE OF ARIZONA IN THE OFFICE OF ADMINISTRATIVE HEARINGS

The above-entitled matters came on for two separate sessions of consolidated hearings on February 16, 2000 and February 17, 2000. On both occasions, Michie Concrete (herein called “Michie”) was represented by its attorney, Gail M. Ledward, Esq., and Tyree Organization, Ltd. (herein called “Tyree”) was represented by its attorney, Denise J. Henslee, Esq. Evidence and testimony were presented, and based upon the entire record, the following Findings of Fact, Conclusions of Law, and Recommended Orders are made.

FINDINGS OF FACT

1. The above matters were consolidated for the purposes of hearing since both involved the same or similar underlying issues of law and fact, as well as entailing the use of mostly the same testimonial and documentary evidence.

2. Tyree was serving as the general contractor on a commercial project for a property owner encompassing the construction of a convenience store, gas station and parking area. Michie was the selected subcontractor for all contemplated concrete work on the project.

3. It was not disputed that the subcontract agreement between Tyree and Michie provided for an agreed cost price for the project’s concrete work in the total amount of $121,355,00, of which the aggregate amount of $108,332.32 has been paid to Michie by or on behalf of Tyree. The remaining balance of $13,022.68 was further reduced by the parties’ mutual agreement to equally share the cost of a back-charge item amounting in total to $1,774.96. Michie’s one-half share of such item, or $887.48, effectively reduced the balance to $12,135.20, which sum almost exactly coincided with the total retention amount customarily withheld from periodic progress payments payable under a general contract or a subcontract, to be released subsequently.

4. Although the contractually specified concrete work was completed by Michie in August, 1998, the last progress payment to Michie was made in November, 1998. No part of the unpaid retention balance of $12,135.20 has since been transmitted by Tyree despite numerous and repeated requests and demands from Michie. The ostensible reason for the withholding by Tyree was the failure to receive an even greater unpaid balance from the property owner, claimed to have been attributable in

large part to the owner’s dissatisfaction with portions of the jobsite concrete work. However, the entire project was shown to have been substantially complete in early September, 1998 and the premises has been occupied by and continuously open for business use by the property owner since that time.

5. A civil arbitration, fully binding on the participants, has been concluded very recently between Tyree and the property owner. Michie was not involved in such arbitration and is not bound by any adverse findings with respect to the concrete work. In any event, Tyree was awarded, and has a reasonable expectation of soon receiving, the full monetary amount claimed (over $80,000.00), including 10% interest from a date approximately months earlier than the award date.

6. The failure by Tyree to have timely received monies owed by its customer is not found to constitute a valid defense to the asserted non- payment violation hereunder. The evidence did not indicate any inability or unwillingness on the part of Michie to rectify any concrete problems for which it may be determined to be responsible, in whole or in part. On the contrary, it was credibly demonstrated that several tenders of remedial work were communicated by or on behalf of Michie but were rejected by the property owner or its legal representative.

7. The evidence revealed that various deficiencies presently exist in the concrete installed on the jobsite, all of which reflect adversely upon Michie’s workmanship in its performance of the construction work under the parties’ subcontract. Although no structural defects were shown to exist, except for two very small triangular areas that have failed, the other identified deficiencies were such that, if left uncorrected, they would constitute substandard and unacceptable concrete work according to applicable prevailing industry standards and tolerances.

8. Most all of the identified deficiencies were shown by the evidence to be capable of being corrected so as to conform to prevailing acceptable standards by methods short of complete removal and replacement, except as expressly noted below. Additionally, none of the demonstrated deficiencies were shown to have been attributable to the nature or compaction of the underlying soils or to any soil or slab movement. Consequently, the admitted preparation of the undersurface by Tyree through other specialty tradesmen is not found, under the facts of this case, to have generated any shared responsibility for the resulting concrete problems encountered on this project. Moreover, the inconclusive showing of the prior existence of a “borrow pit” in a location somewhat near to some of the described deficiencies that may possibly have been a source of undesirable soil materials over which Michie’s concrete work was performed need not be further explored or otherwise resolved.

9. The above-referenced workmanship deficiencies consisted of the following:

a) Compound shrinkage cracking was shown to exist at scattered locations thought the slabs, necessitating appropriate corrective action by Michie. b) Excessive spalling is present around or on several saw-cut areas, requiring proper remedial measures by Michie. c) Some degree of deflection in elevation of adjacent slab sections has been experienced at few concrete surface locations, and an effective repair must be undertaken and completed by Michie. d) a substantial portion of the concrete slab surface has subsequently developed numerous pop-outs which warrant appropriate treatment by Michie to clear, re-fill and re- finish all such pop-out locations.

e) Approximately two-thirds of the concrete surface in the gasoline pump area under a canopy reveals excessive wear and deterioration over a relatively short time period, visibly exposing much of the aggregate, thereby indicative of Michie’s poor finishing efforts or its preparation and use of materials with an overly high moisture content. Proper, and perhaps extensive, remedial work on this surface is required, potentially including significant replacement or resurfacing efforts. f) Two small triangular-shaped sections of concrete have wholly failed and must be removed and replaced by Michie.

10. The evidence revealed that a separate complaint item relating to the alleged placement of two of the site light bases in the wrong location was ultimately resolved by the undertaking and completing of corrective work by Michie, albeit reluctantly. Additionally, it was not sufficiently shown by the preponderance of the evidence that the thickness of any of the concrete slabs was less than the design thickness called for under the applicable plans and specifications.

11. The contractual specifications applicable to Michie’s concrete work called for the materials to have a strength of 3000 psi within 28 days after poured. Credible evidence tended to demonstrate that the installed concrete materials had been below applicable tolerance levels for such designated strength. However, uncontroverted evidence further revealed that the poured concrete had gained additional strength with the passage of more time and that the specified 3000 psi has now been attained. The failure to achieve the specified strength at the earlier point in time, as well as a likelihood that the prepared and applied materials contained excessive moisture or slump generated some degree of suspicion that the extent and nature of experienced cracking and surface problems were exacerbated by these factors, all within the control of Michie and its selected materials supplier.

12. Construction is not a perfect science, and it is customary to subsequently experience or discover various aspects of the original work that is or becomes in need of further adjustment or correction. In point of fact, the necessity to repair or otherwise attend to the rectifying of numerous items, often complied on “punch lists,” is most often the rule rather than the exception. A license holder is not in violation of the statutory provisions leading to disciplinary action unless, after advance notice and an opportunity to rectify reported problems, it fails or refuses to accomplish appropriate remedial measures within a reasonable time.

13. Despite a prior rejection by the property owner of Michie’s tender of remedial work, no waiver of entitlement to these corrections is found to be properly applicable under all the circumstances. Any such communicated rejection of tendered work is determined to have been the product of and attributable to the property owner’s lack of a complete understanding as to the nature and extent of a licensee’s obligations under the State’s contracting laws.

14. Notwithstanding the foregoing, it is further found not to be unreasonable for a property owner to require a contractor to disclose and to communicate “generalized” descriptions of the intended manner in which corrective measures are to be accomplished and of the materials intended to be utilized. Such disclosures need not be in the form of elaborate plans, drawings or specifications, but may be made in broad descriptive terms in advance of the contemplated remedial work, so as to enable a reasonably informed decision to accept or to reject the tendered work effort.

15. The Registrar’s assigned Inspector had issued a directive, and subsequently an amended directive, to Michie following jobsite visits, seeking to prompt the performance of corrective action on some of the enumerated complaint items. Although

several of the alleged deficiencies were omitted from these directives, it was adequately proven at the hearing that Michie was responsible for the correction of some of the deficient items that had been omitted from the directive. However, since there was an actual performance of work to relocate the site light bases and a subsequent timely tender by Michie of remedial work that was reasonably calculated to achieve successful results with respect to other items specifically identified in the Inspector’s directive, as amended, no finding of any violation by Michie of the statutory provisions relating to non-compliance with written agency directives would be supportable.

16. Mindful of the fact that the monetary amount awarded to Tyree against the property owner did include sums attributable to interest from a date shortly after the substantial completion of the project, it is nevertheless concluded that such consequential losses, although genuine, are not the type of damages properly recoverable in these administrative disciplinary proceedings. However, the inclusion of the monetary amount representing the unpaid subcontract balance as an appropriate condition in the Registrar’s Order is expressly intended to be and is without prejudice to the future rights, if any, of Michie to seek and obtain a possible award of interest or other collection-related costs by pursuing available civil remedies against Tyree. This Finding of Fact shall also serve as a Conclusion of Law.

CONCLUSIONS OF LAW

1. The evidence adequately established that Tyree has failed to pay an amount of money to Michie that was shown to have been long past due and owing, in violation by Tyree of the provisions of A.R.S.§32-1154A(11). However, no violations by Tyree of the wrongful act provisions contained in A.R.S.§32-1154A(7) were sufficiently proven hereunder.

2. The evidence as to the existing concrete deficiencies adequately established that Michie has violated the workmanship provisions contained in A.R.S.§32-1154A(3); namely, Rule R4-9-108, and the showing that Michie used or allowed the use of materials that were not in accordance with the contractually specified strength requirements supports a further determination that Michie has committed a wrongful act to the detriment of Tyree in violation of A.R.S.§32-1154A(7). However, no violation by Michie of A.R.S.§32-1154A(23) was sufficiently proven hereunder.

3. No valid basis is perceived for imposing conditions precedent to the performance of any payment or corrective work conditions deemed appropriate for inclusion in the respective Orders as a means to reduce or eliminate any otherwise appropriate disciplinary penalty against either licensee. Consequently, the Registrar need not and should not formulate a requirement that remedial work must first be accomplished or attempted by Michie before Tyree is obligated to pay or tender the amount found past due and owing to Michie. Conversely, the Registrar need not and should not include any preliminary condition that Michie must first receive payment from Tyree before Michie is required to comply or attempt to comply with its obligations to rectify deficient items.

RECOMMENDED ORDER

In view of the foregoing, it is recommended, with respect to Case Number 99-1687, that commencing on the effective date of the Registrar’s Order, the Class B-01 license of Tyree shall be suspended until the Registrar receives proof that Tyree has paid or tendered to Michie the sum of $12,135.20

It is further recommended that if Tyree pays or tenders the aforesaid monetary sum to Michie on or before this Order’s effective date, then no license suspension shall be imposed and the entire Citation and Complaint in Case Number 99-1687 against Tyree’s license shall be closed.

It is further recommended, with respect to Case Number 99-3629, that commencing on the effective date of the Registrar’s Order, the Class L-09 license of Michie shall be suspended until the Registrar receives proof that Michie has properly accomplished all corrective work on items set forth in Findings of Fact Numbered 9-a through 9-f, inclusive.

It is further recommended that if Michie accomplishes all identified corrective work in a proper, workmanlike manner on or before this Order’s effective date, or if Michie is unable to accomplish such work because of the unwillingness of Tyree or of the property owner to accept the same or to grant and arrange for reasonable and timely access to the premises, then no license suspension shall be imposed and the entire Citation and Complaint in Case Number 99-3629 against the Michie’s license shall be closed.

Dated: February 28, 2000.

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: Joyce Armijo -----------------------

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