ALJDEC

99F-A0186-ROC-COM · Registrar of Contractors · 2000-11-17

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 13, 2000 APPEARANCES: Jeff Coughlin, Esq. for the Complainant Bruce Rosenberg, Esq. for the Respondent ADMINISTRATIVE LAW JUDGE: Allen Reed _____________________________________________________________________ Findings of Fact 1. On July 28, 1999, the instant case came on for hearing before Judge Kowal of the Office of Administrative Hearings (OAH). The parties settled the case (Settlement), prior to the receipt of any evidence. The Settlement provided that any petition for rehearing or new complaint regarding the case would be confined to whether the parties performed their obligations under the Settlement. 2. The Complainant in this case is a trust which owns the motel where the Respondent re-paved the parking lot. The managers of the motel are Sharon and Victor Eason. The Easons were the Complainant’s representatives at the hearing and were authorized to enter into the Settlement on behalf of the Complainant. 3. To fully understand the issue in this Compliance Hearing, the nature of the underlying problem which was to be corrected, must be addressed. The parking area of the motel is approximately 4500 square feet, is bounded on three sides by motel buildings and can be viewed as a U although the buildings on each side are not connected to each other. The parking area is abutted by concrete sidewalks in front of the buildings. Prior to the re-paving, the sidewalks were slightly higher than the parking area. The open end of the U is the entrance to the motel from the highway which is in a westerly direction. The highway is approximately a foot and a half higher than the parking area and water flow is therefore from west to east or from the highway toward the bottom of the U. Prior to the re- paving done by the Respondent, the parking area apparently had a minor slant toward its center, which allowed the water to run toward the central area of the parking lot, flow easterly, and then follow a route north through a driveway which is between the northern and eastern buildings. The water then ran onto adjacent property. There was no competent evidence that the motel had drainage or flooding problems prior to the re-paving by the Respondent. The contract between the parties did not include or require the removal of the old asphalt in the parking lot, and the Respondent simply put new asphalt on top of the old asphalt. He slanted the asphalt from the center of the lot (two inches thick), toward the sides (a half inch thick). This now altered the flow of water from what had been toward the center of the lot and away from the buildings, to water flowing toward the buildings from the lot. Furthermore, the additional half inch of asphalt at the edge of the parking lot brought it to the same height as the sidewalks in numerous places, allowing water to run across the sidewalks and into the buildings on all sides of the motel during heavy rainstorms. The water flow is toward the east (the bottom of the U), with the building at that location sustaining the majority of the damage. The hearing record indicates that there were other problems besides the drainage, with the paving done by the Respondent (“…other necessary repairs to the asphalt..” referenced in Settlement and Judge Kowal’s Recommended Decision). 4. The terms of the Settlement were that the Respondent would do the corrective work to alleviate the drainage problem allegedly caused by the Respondent’s asphalt work in the parking area. The “details and cosmetics” for the corrective work were to be presented to and pre- approved by the Easons. The Respondent also agreed to make other necessary repairs to the asphalt, to commence the work 90 days from the day of the hearing and complete it 120 days from the date of the hearing or as soon thereafter as is practicable. The Complainant was to provide reasonable access for inspection of the asphalt and corrective work. Respondent was to give 48 hours notice to the Easons, for such access. Upon completion, the work was to be inspected by an inspector from the Registrar of Contractors (Registrar). The Settlement also provided that the complaint would be dismissed and the Complainant waived any claim for additional money damages. 5. After the hearing, the Respondent and the Easons discussed the type of corrective work to be done. At the time, the Respondent suggested putting French drains of 90, 40 and 30 feet at the edge of the sidewalks in front of the respective buildings to catch and divert the water which would then be channeled in the same general direction as prior to the work done by the Respondent. Based on the evidence, the Easons agreed to this proposal subject to approval from the appropriate trust representative. Another proposal, to shear off a four foot width from the center of the lot, had apparently been previously rejected by the Complainant. 6. The Respondent was leaving Arizona to work in Colorado and this was the reason for the 90 and 120 day provisions of the Settlement. 7. Danya Munson (Munson), the accountant for the motel for eight years was included in the Complainant’s internal negotiations with respect to the corrective work. The Easons required ratification of their decisions and at times Munson acted as a go between the Easons and the appropriate trust representative, in processing the information regarding the corrective work which was to be done. 8. Judge Kowal submitted a Recommended Decision to the Registrar with the recommendation that the Registrar accept the Settlement, have the assigned inspector do an inspection once the work is completed and that the Registrar dismiss the case. 9. The Registrar accepted the recommendation but amended it by closing rather than dismissing the case. The Registrar’s Order was issued August 16, 1999, to become effective September 20, 1999. 10. On August 4, 1999, counsel for the Respondent sent a letter restating the terms of the Settlement, to the Easons. The letter did not address the manner in which the work was to be done. 11. Sometime after the post hearing meeting between the Respondent and the Easons, the Complainant had another paving contractor, Frontier Excavations (Frontier), look at the parking lot. Frontier made certain negative representations regarding the Respondent’s work, that the French drains would not totally correct the flooding problem and that the asphalt should be torn out and replaced. The latter assertion regarding the efficacy of the French drains is somewhat in conflict with the December 1, 1999, proposal subsequently submitted by Frontier to the Complainant, which proposal, in the amount of $14,500.00, included the installation of a French drain system and replacement of the existing walkways and did not reference tearing out and replacing the asphalt. 12. On September 30, 1999, the Respondent having returned from Colorado, submitted the French drain plan (a hand drawn diagram), for the corrective work to the Complainant. The rather rough diagram does not inspire a great deal of confidence in the engineering, planning or thought that went into it. According to the Respondent, he had a crew and equipment prepared to commence work. 13. The Respondent’s proposal was not accepted by the Complainant. Due to the manner in which decisions had to be ratified, it is uncertain exactly who made the decision on behalf of the Complainant and when it was made. In any event, as of December, 1999, the Complainant would only accept the removal and replacement with appropriate drainage and sealing of the asphalt. 14. The Frontier proposal of December 1, 1999, was forwarded to the Respondent’s counsel who rejected it by letter dated December 29, 1999, on the grounds that certain provisions (removal and replacement of the sidewalks), went beyond the terms of the original Settlement. The letter did state that the Respondent would do the work according to prior plan (the September 30, 1999 diagram). The letter also offered a “full warranty” for the work and to have the work verified (that the French drain plan would accomplish its purpose), by a licensed engineer. By this time both the 90 and 120 day provisions of the Settlement had been exceeded (when counting from the hearing date). Finally the letter represented that the Complainant and Respondent had agreed to wait to do the corrective work until after winter. This latter assertion is not denied by the Complainant. The letter was apparently not received by the Complainant and counsel sent another letter to the Easons on January 13, 2000. That letter made reference to another proposal which had been received by the Complainant from another contractor (to repave the parking lot for $7,528.00). Again, Respondent’s counsel stated that the new proposal went beyond the scope of the Settlement, but counsel offered to split the cost to a maximum of $3,714.00. (It is noted that half the cost of the proposal is $3,764.00), and the Complainant could have another contractor do the work. In the alternative, the Respondent would begin his corrective work according to his plan when the weather permitted. 15. The Complainant, apparently speaking through Munson, informed the Respondent’s counsel by letter dated January 19, 2000, that the asphalt should be torn out and replaced. By letter to Munson, dated March 8, 2000, counsel for the Respondent stated that this would not be done, and restated that the work could commence according to the Respondent’s plan, and that Respondent would retain an engineer. 16. The Complainant obtained counsel in March, 2000. Respective counsel exchanged letters, with the Complainant demanding removal and replacement of the asphalt and the Respondent responding that this was not agreed to. In May 2000, a potential agreement was addressed by counsel for the parties to the extent of having an independent qualified engineer assess the problem, issue a position statement regarding the history, nature of and appropriate corrective work for the problem. It is noted that counsel for the Respondent was aware that the case was back before the Registrar at the time of his May 17, 2000 letter to the Complainant. The Order Reopening Complaint was issued on June 2, 2000, and on June 28, 2000 the matter was set for the instant Compliance Hearing. On August 7, and 28, 2000, counsel for the Complainant requested a response from the Respondent to the May 26, 2000 letter which had been sent to the Respondent. 17. On October 3, 2000, the Respondent’s counsel sent a letter to the Complainant’s counsel stating that there were difficulties in finding an engineer with the requirements requested by the Complainant (the Complainant’s May 26, 2000 letter had provided that the civil engineer must have an acceptable degree of experience in water drainage problems and working with asphalt). What other engineering requirements are at issue is unknown. The Respondent’s October 3, 2000, letter also stated he had a possible engineer who met the requirements. 18. As of the hearing no further action has been taken by either side to resolve the issue. Conclusions of Law Under the original Order entered in this case, the sole issue for determination of any new complaint or petition for rehearing in this case (the instant Compliance Hearing), is whether the parties performed their respective obligations under the terms of the Settlement. 1. The law requires good faith and best efforts on the part of both parties to ensure the success of an agreement entered into by the parties. Normally this means the Respondent is obligated to do corrective work which will accomplish its primary purpose (correction of the drainage problem), in an effective and workmanlike manner under the circumstances of the case. The Complainant is required to cooperate by providing reasonable approval and access in order to allow the Respondent to do the work. Under the facts of this case, the Complainant has some added discretion to dictate the work by virtue of the pre-approval of “details and cosmetics” clause. 2. The Respondent strongly argues that the “details and cosmetics“ clause does not give the Complainant the right to dictate or determine the nature of the corrective work (removal and replacement of asphalt vs. an engineering report and French drains). The Respondent further argued that the Complainant’s refusal to accede to the method of the Respondent’s correction and deny access is unreasonable in light of the post hearing acceptance of the type of correction by the Easons. 3. The Complainant’s response is that the initial work done by the Respondent created the problem. There is no competent evidence that flooding was a problem prior to the work. The Respondent admitted that making the parking area higher in the center was a mistake. The Complainant also argued that the “details and cosmetic” clause allows the Complainant to veto the type of correction since the Complainant should not have to accept something which physically alters the parking lot by adding French drains which require some maintenance. Furthermore the Respondent has not provided any assurances that the French drains will work as represented. 4. Although both the Complainant’s and Respondent’s positions have some merit, the following considerations are deemed persuasive in the case. The Respondent has the greater responsibility for taking the initiative in correcting its acknowledged error. The “details and cosmetics” clause give the Complainant certain rights to reasonably dictate the appearance of the correction. If both methods of correction (removal and replacement or French drain), are equally effective, then the Complainant’s choice of one over the other is not necessarily unreasonable under the terms of the agreement. The Respondent has the responsibility of showing that its method of correction is significantly more effective (including cost effective), so as to preclude the Complainant’s method. The Respondent has had four months (May to October), to obtain a competent engineer to assess the parking lot to ensure the Complainant that the French drain will be effective. The Respondent failed to do this during that time period. According to Respondent’s counsel this was because the parties were in a stalemate. This assertion is not accepted in light of the Complainant’s suggestion in May, 2000, regarding the engineer, and the Respondent’s failure to respond until October, 2000. The evidence strongly shows a lack of good faith and best efforts by the Respondent. It also suggests a negligent or an intentional dilatory response to the agreement. 5. The quality of the Respondent’s initial work brought the Respondent’s competence into question. The Respondent therefore has the responsibility of providing reasonable assurance that the corrective work will be competently and professionally done. There is nothing in this record which shows that the Respondent has made a reasonable and good faith attempt to ensure that his method of correction will be effective or to otherwise provide reasonable assurances to the Complainant that the corrective work would be satisfactory. 6. The Respondent has breached its duty by failing to comply with the Settlement Agreement. Recommended Order In view of the foregoing it is recommended commencing on the effective date of the Order entered in this matter that the Respondent’s Class A-14 license shall be revoked unless the Registrar of Contractors receives written proof that the Respondent has removed or caused to be removed the existing asphalt from the resurfaced parking lot and has re- surfaced or caused the parking lot to be resurfaced by a qualified and duly licensed contractor. It is further recommended that if the Respondent accomplishes the above described corrective work on or before the effective date of the Order entered in this mater, then the aforementioned license revocation shall not take place and that the Respondent’s A-14 license shall be placed on probation for a period of 180 days from the date of compliance with said Order; It is further recommended that the Complainant is free to agree but is not required to agree to another method of remedial action such as the French drain system, a financial settlement or a combination of these, as may be offered by the Respondent, prior to the effective date of the Order entered in this matter. Done this 27th day of November, 2000.

______________________________________ Allen Reed Administrative Law Judge

Original transmitted by mail this ____ day of ____________, 2000, to:

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

By ___________________________

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