ALJDEC

99F-A0214-ROC · Registrar of Contractors · 1999-08-26

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: August 24, 1999 APPEARANCES: Complainants were represented by their attorney, David Lang and Respondent was represented by its attorney, John Mull. ADMINISTRATIVE LAW JUDGE: Mark A. Silver _____________________________________________________________________

Evidence and testimony were presented and, based upon the entire record, the following Findings of Fact, Conclusions of Law, and Recommended Order are made:

FINDINGS OF FACT

1. Pursuant to contract, Respondent agreed to construct basement walls for Complainants’ new commercial office building construction project. Complainants allege specified deficiencies in the work performed and/or materials provided by Respondent and same are discussed in the findings below. 2. Undisputed evidence of record established that Complainants are experiencing significant water penetration into the basement areas of the aforementioned commercial buildings. The instant complaint was limited to only two of the three buildings.

3. The water appears to be coming through the walls and the floor of said basements and at times results in water ponding that is several inches deep. 4. The following salient facts were adduced at the hearing and are important to note: a. Respondent’s vice-president/secretary, Douglas Stroh (“Stroh”), was the architect for the project in question. b. Complainants desired to construct basements as described in the foregoing finding and therefore, bids were sought for the construction of basements in the conventional manner. These bids were determined by Complainants to be too costly and thus, said bids were rejected. c. Stroh had a business acquaintance, Stephen Jones (“Jones”), in the shotcrete business who advised him that shotcrete with the addition of a special additive, known as KIM, could be utilized to form basement walls at a price significantly below that for conventional basement construction. KIM is manufactured by Kryton International, Inc. d. Based on the representations of Jones referable to KIM and the conclusions of both Stroh and Jones that there would be considerable money to be made if they went into the business of constructing basements at a less expensive cost than conventional basement construction methods, Stroh and Jones formed Respondent company and obtained their contractor’s license in December 1996. e. Complainants ultimately accepted Respondent’s bid to construct the basements utilizing the shotcrete method. Respondent subcontracted the actual shotcrete work to American Shotcrete Construction, Inc. (“American”) with instructions to include the KIM material in the shotcrete mixture. f. American completed the construction of the basements. Shortly after the buildings were completed, water leakage was observed in the basements. When Respondent failed to correct the water leaking deficiency, Complainants ultimately filed the instant complaint with the Registrar of Contractors. g. The instant project is the one and only project that Respondent was involved with in its capacity as a licensed contractor. 5. A jobsite inspection by the appointed inspector for the Registrar of Contractors was held, pursuant to which that Agency sent Respondent a letter directing it to correct the water leaking problems in the two basement areas of Complainants’ commercial buildings. Notwithstanding the terms of said Agency directive, Respondent failed to comply with same. 6. Respondent contends that the responsibility for the failure of the basement construction to provide Complainants with a watertight enclosure rests with the failure of American to properly utilize, mix, and/or apply the KIM material to the shotcrete construction of the basement walls. Although American, who is not a party to the instant matter, may have a degree of responsibility and liability for the above-described deficiencies in the basement construction, it must be noted that the contractual obligations of Respondent, the contractor retained by Complainants to build the basements, are not discharged merely by making demands, albeit reasonable, upon or filing formal complaints against its subcontractors. Deficiencies or substandard workmanship must be corrected notwithstanding the unwillingness or inability of a subcontractor to perform appropriate and necessary remedial work. Complainants contracted with Respondent, not its subcontractors, and thus the “buck stops” on Respondent’s desk. It is of no concern to Complainants that Respondent is having problems forcing its subcontractor to repair the workmanship deficiencies in the basement wall construction. 7. The water leaking into the basements is properly found to be attributable to Respondent and said condition clearly constitutes substandard and unacceptable workmanship in violation of the applicable charged provisions of the State’s Contracting laws. In addition, Respondent’s failure to correct the water leakage problem constitutes a wrongful act within the meaning of the applicable charged section of the State’s Contracting law. 8. It should further be noted that the rights of Respondent against American may not be lost because of remedial measures undertaken by Respondent. In the event Respondent accomplishes all necessary remedial work through others, then it would be able to seek restitution from American for the reasonable cost of such correction in an appropriate forum. 9. Notice is hereby taken of official Registrar of Contractor’s public records, which reveal that Respondent’s contracting license has been deemed by the Registrar of Contractors to be invalid since November 12, 1998. Such invalid license status does not preclude this tribunal from conducting these administrative proceedings nor from recommending the issuance of separate disciplinary orders. Moreover, Respondent’s existing invalid license status must be considered when determining appropriate penalties in this case. Little, if any, motivation would exist for any Respondent contractor to undertake and complete necessary remedial work in order to avoid a suspension of an invalid license.

CONCLUSIONS OF LAW

1. Respondent violated the provisions of A.R.S. § 32-1154A (23), (7), and (3); namely Rule R 4-9-108.

RECOMMENDED ORDER

In view of the foregoing, it is recommended that Respondent’s Class L- license shall be revoked on the effective date of the Order entered in this matter. It is further recommended that if Respondent causes a properly licensed contractor to accomplish appropriate and effective remedial work on the basement water leaking problem described in the foregoing findings of fact, on or before the effective date of the Order entered in this matter, then the above-provided license revocation shall not take place but instead Respondent’s Class L-09 license shall be placed on active suspension for a period of 7 days followed immediately by a period of disciplinary probation for 180 days. This alternative penalty shall commence, if at all, on the effective date of the Order entered in this matter. It is further recommended, if the alternative penalty is applicable and in addition to the above-provided alternative disciplinary penalties, that Respondent pay the sum of $400.00 to the Registrar of Contractors by way of a civil penalty pursuant to A.R.S. §32-1154D. The failure by Respondent to pay the entire amount of the aforesaid civil penalty, on or before 30 days following the effective date of the Order entered in this matter, shall result in the automatic revocation of Respondent’s contractor’s license, effective on such deadline date. No future license shall be issued to any entity consisting of persons associated with Respondent , as defined in A.R.S. §32-1101A(5), unless payment of any outstanding prior civil penalty is tendered. It is further recommended, if the alternative penalty is applicable and in addition to the above-provided alternative disciplinary penalties, that any restoration of Respondent’s contracting rights, whether or not probationary, shall be subject to a condition that Respondent first post an additional surety bond, cash deposit or alternative deposit for a period of twenty-four (24) months, including future renewal periods, in the amount of $1,500.00, such bond or deposit to be in addition to the required surety bond or cash deposit set forth in A.R.S. § 32-1152(D). Cash or alternative additional deposits, if utilized, shall be returned only after the expiration of an additional two year period following the above-provided twenty-four (24) month period and only if no claims are then pending.

Done this day, August 27, 1999.

______________________________________ MARK A. SILVER Administrative Law Judge

Original transmitted by mail this ____ day of August, 1999, to:

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

By ______________________________ -----------------------

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