vs. ) CASE NO. 83-1519
) ROBERT E. KLEIN; CONVALESCENT ) MANAGEMENT, )
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William E. Williams, held a public hearing on August 15, 1983, in Tallahassee, Florida.
For Petitioner: Steven W. Huss, Esquire
For Respondent: Douglas L. Stowell, Esquire
Gary J. Ahton, Esquire Post Office Box 1019
By letter dated April 5, 1983, Petitioner, Department of Health and Rehabilitative Services ("HRS"), advised Respondent, Robert E. Klein ("Respondent"), that Certificate of Need No. 1645 previously issued to Respondent was null and void by virtue of the project not having been under physical and continuous construction beyond site preparation by January 25, 1983, the expiration date of the certificate. Respondent contends that the project was, in fact, under construction by the expiration date of the Certificate of Need, or, alternatively, that Petitioner is estopped from revoking the certificate.
Final hearing in this cause was scheduled for August 15 and 16, 1983, by Amended Notice of Hearing dated June 8, 1983.
At the final hearing, Petitioner called Nat Ward as its only witness. In addition, Petitioner offered Petitioner's Exhibits 1 through 15, which were received into evidence. Respondent testified in his own behalf, and called Earl Helms, James White, Carlton C. Wilson, and Jennings Knox as his witnesses.
Respondent offered Respondent's Exhibits 1 through 7, which were received into evidence.
Counsel for each of the parties have submitted proposed findings of fact for consideration by the Hearing Officer. To the extent that those proposed findings of fact are not included in this Recommended Order, they have been specifically rejected, either as being irrelevant to the issues involved in this proceeding, or as not having been supported by evidence of record.
Certificate of Need No. 1645 was issued to Respondent on July 27, 1981, for construction of a 120-bed nursing home at a cost of $1,830,000 in the city of Safety Harbor, Pinellas County, Florida. Termination date of the certificate was originally July 25, 1982, but was subsequently extended for a period of six months at the request of Respondent. The expiration date of the certificate, as extended, was January 25, 1983. At the time the six-month extension was granted, Petitioner advised Respondent that the project was required to be ". .
. under physical and continuous construction prior to the new termination date to have a valid and continuing Certificate of Need."
Subsequent to the issuance of the certificate, Respondent retained and engaged personnel and organizations to assist in pursuing the project. The architectural firm of Wilson and Associates ("the architect") was engaged in August of 1981. Additionally, Respondent engaged the Kissell Company to secure financing, and the Hermanson Construction Company ("Hermanson") as the general contractor for the project.
Respondent obtained preliminary approval of its site plan for the project from the City of Safety Harbor ("the City"). Additionally, the City created a zoning ordinance specifically for the project to permit a health care facility to be constructed at the proposed site.
On September 21, 1981, the architect met with representatives of the HRS Office of Licensure and Certification, Jacksonville, Florida, to submit and review schematic plans for the project. HRS gave preliminary approval to the schematic plans on that same date.
The HRS plan review process consists of three stages. The first stage consists of the submission of schematic plans; the second stage is the submission of preliminary plans; and, the third stage consists of submission of construction documents together with the required fee for final plan review.
On November 13, 1981, the architect submitted additional schematics to HRS to complete the first stage of the plan submission process. In addition, the architect provided additional information previously requested by HRS on that same date.
On December 14, 1981, the architect submitted the second stage documents to HRS. The HRS Office of Licensure and Certification, however, never responded to or commented on the submissions made by the architect in November and December of 1981.
In early January, 1982, Respondent closed the purchase of the project site in Safety Harbor. Respondent paid a total of $165,000 for the site. In April, 1982, Respondent met with representatives of the City to discuss the issuance of industrial revenue bonds by the City to finance the project.
Further, on April 19, 1982, Respondent purchased a corporate office in Safety Harbor at a cost of $80,000. After meetings between representatives of the City and Respondent, the City agreed to consider the issuance of industrial revenue bonds. Respondent paid $10,000 to the City in June, 1982, to offset any costs that the City would incur in considering the bond issue proposal. In addition, Respondent paid $4,000 to the City to resolve a dispute between the City and the previous owner of the property on which the project was to be located.
On June 1, 1982, Respondent entered into a construction contract with Hermanson to construct the proposed nursing home project. A copy of the contract was furnished to the HRS Office of Community Medical Facilities.
In August of 1982 Hermanson commenced its activities under the contract. These activities included obtaining proposals from subcontractors for materials and services to be used in the project, and hiring engineers to survey the site, conduct soil borings, and to conduct a tree survey required by local governmental authorities.
Respondent secured financing for the project in September, 1982. On September 20, 1982, the City passed a Resolution of Inducement agreeing to issue revenue bonds to finance acquisition, construction, equipping, and furnishing the project. On September 20, 1982, Respondent and the City also entered into a Memorandum of Agreement regarding issuance of revenue bonds. In the latter part of 1982, Respondent was required to obtain approval of the project from numerous other local governmental entities. Specifically, Respondent obtained approval of the Site Development Plan and an amendment to the Land Use Plan from the City's Planning and Zoning Board, the City Commission, and Pinellas County. As part of the Site Development Plan approval, the City required Respondent to agree to make a number of offsite improvements, including the dedication of a 25-foot right-of-way, the paving of an adjacent roadway at Respondent's expense, and the construction of sidewalks. Respondent agreed to the conditions and the City and Pinellas County approved the Site Development Plan and the amendment to the Land Use Plan. Because of the City's requirement that Respondent dedicate a 25-foot right-of-way, Respondent was required to obtain a setback variance from the City because the proposed building location did not meet the City's property line setback limitations.
On November 5, 1982, the architect submitted the third stage construction documents and plan review fees to HRS to complete the plan review process. On that same date, the architect spoke with representatives of the HRS Office of Licensure and Certification about obtaining HRS permission for an early construction start on the foundation work for the project. The architect was advised that an early start could not be granted until the third stage submissions had been reviewed.
Throughout 1982, Respondent made numerous submissions to the Federal Housing Authority (FHA) and the Department of Housing and Urban Development (HUD) to obtain an FHA commitment to insure project financing. On November 26, 1982, Respondent obtained a conditional commitment from HUD for that purpose.
Subsequently, on January 21, 1983, Respondent obtained FHA approval for an early start of project construction. The early start permitted construction costs to be covered by the insurance guarantee, prior to the issuance of the firm commitment. On January 25, 1983, Respondent obtained a firm commitment from HUD to insure project financing. The firm commitment insured both the construction and permanent financing. The FHA and HUD commitments and guarantees were still valid and effective at the time of final
hearing in this cause, although a month-to-month extension had to be obtained by Respondent.
Prior to January 25, 1983, Respondent had also obtained the following permits or approvals: an exemption from the Florida Department of Environmental Regulation from stormwater discharge permitting requirements; water and sewer service availability from the City; a City occupational license; a building permit from the City; a tree removal permit from Pinellas County; and business licenses from both the City and Pinellas County.
Prior to January 25, 1983, the following work had been performed on the project site: a construction trailer was placed on the site; a fence removed and utilities, with the exception of water, were installed; a large lake and related storm sewer system had been relocated on the site; a survey had been performed and the site cleared and trees removed; the site was cut to subgrade and a pad prepared for the building foundation; and the building site had been roughed out and finished floor elevations had been set. As a result, the site is now ready for the placement of footers and foundations. Although the footers and foundation work have not been constructed, the record in this cause establishes that they could be in place within two weeks from the time approval is given for such work. At the time of final hearing in this cause, HRS had not given its approval for construction of the building foundation.
Approximately $130,000 has been spent by Respondent on construction work at the site, which includes money paid to subcontractors for work and services provided.
When contacted by the architect on January 24, 1983, one day prior to the expiration date of the certificate, the HRS Office of Licensure and Certification advised the architect that the third stage plan review process was at that time only 60 to 75 percent complete. On February 8, 1983, the HRS Office of Licensure and Certification first responded to Respondent's third stage construction documents which had been submitted by the architect on November 5, 1982. HRS advised the architect that it could not approve the project plans and submitted a number of comments and revisions to be incorporated into the plans. On February 17, 1983, the architect submitted the changes and corrections to HRS to comply with the February 8, 1983, HRS letter. On or about February 17, 1983, the architect again spoke with HRS representatives about obtaining permission for an early construction start but, again, permission was not granted.
In the first week of March, 1983, Respondent contacted HRS to inquire about the status of his certificate. Respondent was concerned that HRS had not responded to his letter of January 14, 1983, in which he advised HRS that the project was under construction. HRS representatives advised Respondent in the first week of March, 1983, that an investigation of the matter would be made and that HRS would respond at a later date.
In late March, 1983, after having received no notification from HRS, Respondent again contacted HRS representatives about the status of the certificate, and was advised that the certificate was considered to be null and void. Subsequently, on April 5, 1983, HRS sent a letter to Respondent advising him that the certificate was null and void since ". . . the project was not under physical continuous construction beyond site preparation by January 25, 1983."
Effective June 5, 1979, HRS promulgated Rule 10-5.02(21), Florida Administrative Code, which defined the term "construction" to mean:
. . . the commencement of and continuous activities beyond site preparation normally associated with erecting, altering or modifying a health care facility pursuant to construction plans and specifications approved by the department (Emphasis added.)
That rule was challenged and ultimately invalidated by a DOAH Hearing Officer by Final Order entered April 18, 1980. The order of the Hearing Officer was subsequently upheld by the First District Court of Appeal in Westchester General Hospital v. State of Florida, Department of Health and Rehabilitative Services,
417 So.2d 261 (Fla. 1st DCA 1982). As a result, on January 25, 1983, the date of expiration of the Certificate of Need at issue in this proceeding, HRS had no "rule" that defined the terms "construction" or "commencement of construction." It is, however, clear from the record in this proceeding that the definition of "construction" contained in the invalidated rule is more restrictive than that generally utilized in the construction industry. In fact, the record in this cause establishes that "construction," as that term is used in the industry, "commences with the execution of a construction contract. Other factors indicative of "commencement of construction" would include the ordering of building materials, the solicitation and signing of contracts with subcontractors, the acquisition of required permits from various governmental entities, the preparation of drawings associated with the project, and the like. All of these activities necessarily precede "site preparation" and the pouring of footers and foundations and the placement of steel. It is undisputed that Respondent had not placed any concrete, steel, or footings on the project site prior to January 25, 1983. However, it is equally clear that those activities outlined above which Respondent had, in fact, accomplished prior to January 25, 1983, conformed to the definition of "commencement of construction" generally accepted by professionals in the construction industry. Conversely, there is no competent or persuasive evidence of record to "elucidate," "explicate," or otherwise support the purported HRS policy of requiring the placement of foundations, footings, concrete, or steel on the job site prior to the expiration date of a certificate of need. Neither is there any evidence of record in this cause to establish that HRS at any time advised Respondent of its policy requiring the placement of footers, foundations, or steel in order to comply with HRS's purported policy.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, this proceeding. Section 120.57(1), Florida Statutes.
Section 381.494(7)(f), Florida Statutes, provides, in part, that:
A certificate of need shall terminate one year after the date of issuance, unless the applicant has commenced
construction, if the project provides for construction . . . or unless the certificate-of-need validity is extended by the department for an additional period
of up to 6 months, upon showing of good
cause by the applicant for the extension. The department shall monitor the progress of the holder of the certificate of need in meeting the timetable for project development specified in the application
and may revoke the certificate of need . . . if the holder of the certificate of need is not meeting such timetable and is not making a good faith effort to meet it.
(Emphasis added.)
As previously indicated, HRS had no rule in force on January 25, 1983, which defined the term "commencement of construction" for purposes of revocation of a certificate of need. The 1983 Florida Legislature passed Section 381.493(3)(u) Florida Statutes, which defines the phrase "commenced construction." However, that section of the statute did not become effective until July 1, 1983, and is, therefore, not applicable in this proceeding. Petitioner has correctly pointed out that agencies should apply a licensing statute in effect at the time it makes its decision in cases involving the initial issuance of a license. Bruner v. Board of Real Estate, 399 So.2d 4 (Fla. 5th DCA 1981). However, as the court in Thayer v. State, 335 So.2d 815, 817-818 (Fla. 1976), pointed out:
A statute operates prospectively unless the intent that it operate retrospectively is clearly expressed. Indeed, an act should never be construed retrospectively unless this was clearly the intent of
the legislature. This is especially so where the effect of giving it a retroactive operation would be to interfere
with an existing contract, destroy a vested right, or create a new liability in connection with a past transaction. The presumption is that it was intended to operate prospectively, unless its language requires that it be given a retroactive operation. The basis for retrospective interpretation must be unequivocal and leave no doubt as to
the legislative intent. (Emphasis added.)
Respondent's rights under its Certificate of Need, attached at the time the certificate was issued, and any attempt to retroactively apply an amended statute to rights accruing under that certificate would be void as an impairment of a vested right. See, Hunter v. Richie's Economy Cars, 406 So.2d 1285 (Fla.
1st DCA 1981).
Since HRS had no rule in place defining the term "commence construction" as it appears in Section 381.494(7)(f), Florida Statutes; and since the agency adduced no testimony to substantiate its "policy" requiring the placement of foundations, footers, or steel on the job site; and further, since the evidence in this cause clearly establishes that steps taken by Respondent prior to the expiration date of the Certificate of Need constitute "commencement of construction" as that term is generally accepted in the construction industry, it is specifically concluded that HRS has failed to establish, by a
preponderance of the evidence, that Respondent's Certificate of Need should be revoked.
Accordingly, based upon the foregoing Findings of Fact and Conclusions of Law, it is
That a Final Order be entered by the State of Florida, Department of Health and Rehabilitative Services, dismissing this proceeding against Respondent.
DONE AND ENTERED this 28th day of October, 1983, at Tallahassee, Florida.
WILLIAM E. WILLIAMS
Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 1983.
Steven W. Huss, Esquire David H. Pingree, Secretary Department of Health and Department of Health and
Rehabilitative Services Rehabilitative Services 1323 Winewood Boulevard 1323 Winewood Boulevard
Douglas L. Stowell, Esquire Gary J. Anton, Esquire
