vs. ) CASE NO. 78-1689
Respondent. )
Pursuant to notice, an administrative hearing was held before William E. Williams, Hearing Officer, State of Florida, Division of Administrative Hearings, at 10:00 a.m. on October 10, 1978, in Tallahassee, Florida.
For Petitioner: Steven W. Huss, Esquire
For Respondent: John T. Blakeley, Esquire
The Office of Community Medical Facilities of the State of Florida, Department of Health and Rehabilitative Services ("HRS" or Petitioner) issued its Administrative Complaint on August 23, 1978, alleging that Respondent had violated the provisions of Section 381.494(6)(f), Florida Statutes, and Rule 10- 5.13, Florida Administrative Code, in that its Certificate of Need, No. 641 ("certificate") issued on August 9, 1977, for the proposed construction of a 120-bed nursing home in Clearwater, Florida had expired on August 8, 1978, because the facility was not under construction on that date, and that no extension for that certificate had been requested or approved. On the basis of these allegations, Petitioner sought revocation of Respondent's Certificate of Need. By letter dated September 6, 1978, Respondent requested a hearing on the issues raised in the Administrative Complaint. Thereafter, in accordance with the provisions of Section 120.57(1)(b)(3), Florida Statutes, Petitioner requested that a hearing officer from the Division of Administrative Hearings be assigned to conduct the hearing. The final hearing was scheduled by Notice dated September 21, 1978.
At the final hearing, the Petitioner called Richard C. Rosenvold as its witness. The Respondent called Donald Shive and Philip Ostendorf as its
witnesses. The Petitioner offered Plaintiff's Exhibit No. 1, and Respondent offered Respondent's Exhibits Nos. 1 through 11, 13, and 14, all of which were received into evidence. Respondent's Exhibit No. 12 was marked "for identification purposes only."
In April of 1977, Respondent contracted to purchase approximately four and one-half acres of land in Pinellas County, Florida on which it sought to develop a 120-bed nursing home. In May, 1977, Respondent filed an application for a Certificate of Need pursuant to the provisions of Section 381.494, Florida Statutes. The certificate was issued on August 8, 1977 by Petitioner to Respondent for the proposed 120-bed nursing home. The certificate provided on its face that it would terminate on August 8, 1978, " . . . with renewal possible only if applicant clearly demonstrates positive construction efforts." In addition, a cover letter forwarded to Respondent by Petitioner with the certificate indicated that the termination date " . . . is extendable provided you can demonstrate as of that date, positive action toward project accomplishment."
Prior to receiving the certificate, Respondent retained an architect to prepare plans and specifications for the nursing home, and had made preliminary efforts to obtain financing for the construction of the facility. After issuance of the certificate, Respondent and his architect met with Petitioner's architect to submit schematic drawings for review. Respondent's schematic drawings were approved by Petitioner on August 31, 1977.
When Respondent's initial efforts to obtain financing failed, further financing was sought unsuccessfully in Indiana and in Pinellas County, Florida. Respondent's efforts to obtain financing on its own continued to be unsuccessful. As a result, Respondent retained a mortgage broker to attempt to locate an institution to advance the money to construct the project. Public financing through the sale of municipal bonds was attempted, but failed when the City Commission of Safety Harbor, Florida voted against the bond proposal. Subsequently, in June of 1978, after some nine months of continuous attempts to locate an institution to finance construction of the facility, Respondent secured a loan commitment for the project at a cost to Respondent of $13,000.
After obtaining the loan commitment, Respondent contacted its architect and requested that he proceed with preparation of plans and specifications for the preliminary and final stages of the project. The architect had ceased his efforts in this direction on Respondent's instructions after approval of the schematic drawings in August of 1977, because it was felt that further efforts in this regard would be imprudent in the absence of a commitment for financing construction of the project. When Respondent's architect attempted to contact the architect for Petitioner to set up a meeting on June 24, 1978, he discovered that Petitioner's architect would not be available for consultation until the following month. When a meeting was finally arranged for July 24, 1978, Petitioner's architect insisted on certain time-consuming changes in the schematic drawings. However, Respondent's architect indicated that had Petitioner's architect advised him on July 24, 1978 that the final plans were required to be filed by August 8, 1978, he could have accomplished the preparation of those plans and specifications by that date. In any event, the changes in the plans and specifications required by Petitioner's architect as a result of the July, 1978 meeting were completed and submitted to Petitioner on the day prior to hearing in this cause, well after the certificate expired on August 8, 1978. These plans contain much of the data customarily found in final
construction plans, but Petitioner obviously had not had sufficient time to conduct an in-depth review of those plans prior to the hearing. In any event, Respondent's architect indicated that final construction plans could be completed in no more than two weeks, and that actual construction could begin within two to three days from Petitioner's approval of final construction plans.
By letter dated August 4, 1978, Petitioner advised Respondent that its certificate would expire on August 8, 1978 and that a six-month extension might be granted if requested, and if the following four criteria had been met:
"1. If applicable, has a site been firmly secured?
Has firm financing been secured?
Have final construction plans and speci- fications for the project been submitted for review by the Bureau of Health Facilities?
Can it reasonably be expected that the project can be under construction within the requested additional time?"
Respondent, through its President, testified that it had never been advised by Petitioner that all four of these criteria would have to be met in order to obtain a six-month extension of the certificate. In fact, Respondent apparently relied on the wording in the certificate itself that an extension would be possible " . . . only if applicant clearly demonstrates positive construction efforts . . .", and the language of the covering letter from the Administrator of the Office of Community Medical Facilities which indicated that the expiration date of the certificate would be extendable upon a showing of " .
. . positive action toward project accomplishment."
By letter dated August 4, 1978, to the Director of the Office of Community Medical Facilities, Respondent requested an extension of its certificate. As grounds for this extension, Respondent advised Petitioner that its earlier unsuccessful attempts to obtain financing had caused inordinate delay in preparing to begin construction of the facility. In fact, in Petitioner's six-month review of the status of Respondent's certificate, Respondent informed Petitioner on March 20, 1978, that it had been unable to procure permanent financing. Subsequently, on June 6, 1978, Respondent informed Petitioner that it had obtained the necessary financing, and furnished a copy of the commitment letter from the Community Bank of Seminole, Florida, to Petitioner.
As further justification for an extension of its certificate, Respondent advised Petitioner that as a result of a change in criteria by the City of Clearwater, Florida, an impact study which it was required to submit to the city had to be revised, thereby causing a delay in rezoning the property which it had acquired for construction of the facility a Respondent further advised Petitioner in its August 4, 1978 letter that its working drawings for the facility were fifty percent complete, and that it expected to begin construction by November 1, 1978.
Petitioner contends that Respondent's certificate should be revoked, and that the requested extension should not be granted because Respondent has not firmly secured a site for the facility; has not secured firm financing; has not submitted final construction plans and specifications for review; and that, as a result, it cannot reasonably be expected that the project can be under construction within the requested additional time.
Respondent's contract to purchase the land on which the facility is to be constructed contains a provision that the purchase of the property must be concluded on or before October 15, 1977. This provision of the contract was not performed by October 15, 1977. However, testimony established that Respondent and the sellers of the property have continued through the present time a joint effort to obtain rezoning of the land to allow construction of the facility. Consequently, the parties have apparently, as between themselves, agreed not to consider the October 15, 1977, closing date binding.
The land purchase contract also contains a contingency which would relieve Respondent from its obligation to purchase the property should it be unable to obtain a rezoning of the parcel to an RM-28 zoning classification. Although evidence introduced at the hearing indicates that the local government might not be agreeable to rezoning the property to RM-28, there is nothing in the record to indicate that the facility might not be constructed on the property should it be rezoned to a different classification. Further, the contingency in the contract for rezoning to RM-28 was obviously intended for the benefit of Respondent, and Respondent would, therefore, be free to waive that requirement should the facility be allowed to be constructed on the property in a different zoning classification.
Although final construction plans have admittedly not been filed with Petitioner for review, the evidence is uncontradicted that this failure was due to a combination of the Respondent's inability to obtain financing, and Petitioner's architect's unavailability to consult with Respondent's architect following issuance of the loan commitment. In addition, evidence of record is also uncontradicted to the effect that final construction plans could be submitted within two weeks after granting of an extension of the certificate, and that construction on the project could commence within two to three days after approval of the final plans and specifications.
Respondent's mortgage loan commitment contains requirements that necessary rezoning of the property be obtained by September 1, 1978, and that the commitment in its entirety expires on September 15, 1978. However, Respondent's Predisent testified that he had obtained a 60-day extension of this commitment. In any event it appears that the loan commitment was in existence and effective as of the date of the expiration of the certificate and the date on which Petitioner issued its Administrative Complaint.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Sections 120.57(1), 120.60, Florida Statutes.
Section 381.494(6)(f), Florida Statutes, provides that: A certificate of need shall terminate
1 year after the date of issuance, unless
the applicant has commenced construction, if the project provides for construction
or incurred an enforceable capital expendi- ture commitment for projects not involved in construction, or unless the certificate of need validity period 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. [Emphasis added].
Rule 10-5.13(1), Florida Administrative Code, provides that:
A Certificate of Need issued under the provisions of Sections 381.493-381.497 Florida Statutes, as amended, shall be valid
for a period of 12 months from the date issued and shall become null and void upon conclusion of the 12 months period unless the project
is under construction or the validity of the Certificate is extended for not more than
6 months by the DPA upon show of good cause for the extension. Only one extension of
6 months may be granted and, unless the project is under construction at the con- clusion of this additional 6 months, the Certificate becomes null and void. To reinstate an expired Certificate, an applicant will be required to submit an updated application for review and approval.
Rule 10-5.13(5), Florida Administrative Code, provides that:
An applicant desiring a 6 month validity extension to a Certificate of Need . should submit such request to the DPA providing documentation of good cause upon which such request is based. Criteria against which the DPA shall consider requests for such extensions are:
If applicable, has a site been firmly secured?
Has farm financing been secured?
Have final construction plans for the proposed project been submitted for
review by State licensing authorities (Office of Licensure and Certification)?
Can it reasonably be expected that the project can actually be under construction within the requested extension period?
Petitioner contends that Respondent's certificate should be revoked for failure to comply with the four criteria for considering requests for extensions contained in Rule 10-5.13(5), Florida Administrative Code. However, from the evidence contained in this record, it is specifically found that Respondent has complied with the provisions of Rule 10-5.13(5)(a) and (b), Florida Administrative Code, in that it has secured a site for the facility, and that, as of August 8, 1978, had secured firm financing. Although final construction plans had not been submitted for review by the expiration date of the certificate, the uncontradicted evidence establishes that such plans could be filed within two weeks of the granting of an extension. In addition, the evidence establishes that actual construction on the project could begin within two to three days after approval by the Petitioner of final construction plans.
Petitioner contends that Respondent's failure to comply with each of the four criteria contained in Rule 10-5.13(5), Florida Administrative Code, renders rejection of Respondent's requested extension mandatory. However, it is concluded that such a literal interpretation of the Rule is both inappropriate and inconsistent with the statutory authority contained in Section 381.494(6)(f) Florida Statutes. That statute conditions the granting of an extension ". . . upon showing of good cause . . . " The statute does not refer to any of the four criteria contained in Rule 10-5.13(5), Florida Administrative Code. It is, therefore, concluded as a matter of law that the criteria contained in the rule are only four of many criteria which may be considered in determining whether an applicant has shown "good cause for extension of a Certificate of Need. The wording of the rule itself supports this construction, in that the four areas for consideration are referred to as " . . . [c]riteria against which the DPA shall consider requests for such extensions . . . ." As a result, it is specifically concluded, as a matter of law, that statutory "good cause" for an extension of a Certificate of Need may properly be established by factors in addition to those contained in Rule 10-5.13(5), Florida Administrative Code.
In the instant case, it is concluded as a matter of law that Respondent has shown sufficient good cause to merit an extension of its certificate. The record in this case admits of no other conclusion than that Respondent diligently pursued this project from the date of insurance of the certificate, until it requested an extension of the certificate on August 4, 1978, and the certificate in fact expired on August 8, 1978. In the six-month review of the certificate, after approval by Petitioner of Respondent's schematic drawings, Respondent advised Petitioner that it was having difficulty obtaining financing. As soon as financing was secured, Respondent made every effort to pursue starting construction of the project, and, when it appeared that that would not be possible by the expiration date, requested an extension of time. From this record, it appears ill-advised to penalize Respondent for unforeseen, and unforeseeable, complications arising through no fault of its own, in the process of attempting to obtain financing and rezoning of the property. To require Respondent to begin again the procedure for applying for a new certificate, when it has devoted substantial amounts of time and money to the existing certificate, would fly directly in the face of the "good cause" provision of Section 381.494(6)(f), Florida Statutes. Since the requested extension is the only extension available to Respondent under the law, it is concluded from this record that Respondent should be allowed this final opportunity to attempt completion of the facility.
Accordingly, the relief sought by Petitioner in the Administrative Complaint should be denied, and, statutory "good cause" having been shown, Respondent's request for an extension should be granted, and Respondent should be allowed an additional period of 6 months from the date of final agency action on this Recommended Order in which to comply with the provisions of Chapter 381, Florida Statutes.
Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED:
That a Final Order be entered by the State of Florida, Department of Health and Rehabilitative Services, denying the relief sought in the Administrative Complaint against Respondent, Shive Nursing Centers of Florida, Inc., and that
Respondent's certificate be extended by the Department for a period of 6 months from the date of final agency action in this cause.
RECOMMENDED this 14th day of December, 1978, in Tallahassee, Florida.
WILLIAM E. WILLIAMS
Steven W. Huss, Esquire Building 1, Room 310
John T. Blakeley, Esquire 911 Chestnut Street
