vs. ) CASE NO. 75-2072
) License No. CGC 005977
Respondent. )
By Administrative Complaint filed September 20, 1975 the FCILB seeks to revoke or suspend the general contractors license of Raymond Harrison and licensee's right to practice contracting thereunder. As grounds there for it is alleged that licensee failed to qualify WHS Development Corporation (WHS) under which name he was doing business, as required by Section 468.107 F.S; and that licensee filed petition in bankruptcy for WHS which subjects licensee's license to suspension pursuant to Section 468.112(7) F.S. Three witnesses, including Respondent, were called and four exhibits were admitted into evidence.
For Petitioner: Barry S. Sinoff, Esquire
The facts here involved are largely undisputed. Raymond Harrison is a registered general contractor who obtained his initial registration in late 1973 after passing the prescribed examination. He was an officer and part owner of WHS and WHS entered into construction contracts although not registered with the FCILB. At least one other of the three owners of WHS was also a registered general contractor.
Harrison filed a voluntary petition in bankruptcy on behalf of WHS on March 7, 1975 and discharge was entered June 26, 1975.
Upon receipt of the Administrative Complaint Harrison submitted a letter dated 9/30/75, which was admitted into evidence as Exhibit 3, in which he states that he first learned of the requirement for WHS to be registered in January, 1975 and thereupon submitted a request for application forms to qualify the corporation. The bankruptcy petition was filed before response was received from that inquiry. Exhibit 4, which purports to be the completed first page of
an application for registration for a contractor's license, was also admitted into evidence without objection. This indicates that Harrison commenced an application for registration on 1/8/74, after he had received his registration, in which he listed WHS as the company name under which he was working. Exhibit
4 is inconsistent with Harrison's position as stated in Exhibit 3 that he first learned of the requirement to qualify the corporation in January, 1975. The former statement is believed to be correct.
CONCLUSIONS OF LAW
Section 468.112 F.S. provides in pertinent part that: "The board may take appropriate disciplinary
action if the contractor is found to be
guilty of or has committed any one or more of the acts or omissions set out herein or
adopted as rules or regulations by the board.
(2) The following acts constitute cause for disciplinary action:
* * *
(d) Acting in the capacity of a contractor under any certificate or registration issued hereunder except in the name of the certi- ficate holder or registrant, or in accordance with the personnel of the certificate holder or registrant as set forth in the application for the certificate or registration, or as later changed as provided in this part."
Harrison has acknowledged violation of this provision of the statutes through ignorance of the law.
Section 468.112(7) F.S. provides:
"The filing of a petition in bankruptcy, either voluntary or involuntary, or the making of a composition of creditors
or the appointment of a receiver for the business of the registrant or certificate holder may be considered by the board as just cause for suspension of a certificate or registration."
The licensing laws pertaining to the construction industry are contained in Part II of Chapter 468 F.S. The purpose of Part II, Chapter 468 is stated in Section 468.101 which provides:
"It is hereby declared to be the public policy of the State that, in order to safeguard the life, health, property and public welfare of its citizens, the business of construction
and home improvements is a matter affecting the public interest, and any person desiring to obtain a certificate to engage in the business as herein defined on a statewide basis shall be required to establish his competency and qualifications to be certified as herein provided."
One qualification for certification is contained in Section 568.106(3)
F.S. which provides in part:
"... the board shall investigate the financial responsibility and credit and business reputa- tion of the applicant and of any business organization on behalf of which he proposes
to engage in contracting "
With respect to the registration or certification of business organizations Section 468.107(2) F.S. provides in pertinent part:
"If the applicant proposing to engage in contracting is a ... corporation the
applicant shall state the name of the
corporation and of its officers and directors .... Such applications shall also show that the person applying for the examination is legally qualified to act
for the business organization in all matters connected with its contracting business;
and that he has the authority to supervise construction undertaken by such business organization."
From the above it is clear that the legislature has declared it to be in the public interest to regulate contractors and in so doing to ascertain that they are financially healthy and therefore unlikely to cause injury to the public. On the other hand a long standing national policy exists with respect to the rights of individuals to limit their liability through incorporation and the right to relieve themselves from the burden of improvident debt by petitioning for bankruptcy.
Here Respondent is charged with engaging in the construction business under a name not registered with the FCILB, to wit: WHS Development Corporation; and with filing a petition in bankruptcy on behalf of WHS. The Respondent readily admitted the facts involved in both allegations.
While a clear violation of the first allegation above has been proven, more difficult questions are involved in the allegation regarding bankruptcy.
First, WHS, albeit due to the fault of Harrison or other officers of the corporation, was not registered with the FCILB. Thus a "registrant" did not institute bankruptcy proceedings. No evidence was presented that the registrant, Harrison, instituted bankruptcy proceedings in his own name.
Second, pursuant to 468.112(7) F.S. above quoted, it must be shown that the filing of the petition in bankruptcy was for the business of the registrant or certificate holder". As a principal shareholder and qualifying contractor for the corporation, it follows that, as intended by Chapter 468.
F.S. the functions performed by the corporation was the business of the registrant, Harrison.
Third, no complaint has been filed against Sheldon Willis, who was another registered general contractor with WHS and, apparently, at least an equal owner to Harrison of WHS. Since Willis did not sign the petition in
bankruptcy it is apparent that no consideration has been given to preferring charges against him similar to the charges against Harrison; although, unless Harrison was the majority shareholder, which the evidence does not indicate, the majority of the board of directors of WHS would have to approve the filing of the petition in bankruptcy and designate the officer of the corporation to submit the petition. Had this officer been a non-registrant, would charges have been filed, and if so, against whom?
The primary purpose of incorporating a business is to limit the liability of the shareholders. Roberts Fish Farm v. Spencer, 153 So.2d 718 (Fla. 1963). It is beyond cavil that this is a legitimate purpose. While shareholders of a corporation who file a petition in bankruptcy generally lose at least a part, if not all, of their investment in the corporation, it does not necessarily follow that these shareholders also become financially insecure or irresponsible so as to render them incompetent to continue in the construction industry under their registration. If they do become financially irresponsible it would be appropriate for the board to suspend such general contractor's licenses until such time as they can demonstrate financial responsibility.
With respect to the second allegation of the Complaint we are dealing with a situation where the Board seeks to suspend the license of the registrant on the sole ground that he filed a petition in bankruptcy on behalf of a corporation. There is no allegation that registrant is financially irresponsible or that his continued registration is inimical to the welfare of the public with whom he may do business. To hold that this issue is raised by the simple allegation that Harrison filed a petition in bankruptcy on behalf of the corporation appears to go too far.
Filing a petition in bankruptcy on behalf of a corporation is certainly a legal act and the law permits any ordinary business corporation to file petition in bankruptcy to avail itself of the benefits of the bankruptcy statute (11 USCA Section 95(a)). Porterfield v. Gerstel, 222 F.2d 137 (5th Cir. 1955). Ordinarily it is unimportant what may be the purpose or motive of a corporation in filing voluntary bankruptcy petition if in truth and fact it is an act of corporation and not of officers and directors acting for their own behalf as distinguished from that of a corporation for which they have fiduciary responsibility, but a voluntary petition may not be filed to perpetrate fraud. (id. at p. 140)
The federal bankruptcy statutes are founded on principles of humanity, as well as justice, and confer on debtor privileges tending toward his rehabilitation while protecting his creditors' substantial rights. Atlantic Coast Line RR Co. v. St. Joe Paper Company, 216 F.2d 832, Cert. den. 75 S. Ct. 523.
Bankruptcy laws do not permit recidivist debtors to perennially avoid creditors. An individual or a corporation may not file a petition in bankruptcy within six years of a previous discharge. This provision of the bankruptcy laws is deemed sufficient to provide the protection to the public intended by Section
468.101 F.S. above quoted.
Under circumstances such as those here involved it would appear appropriate for the Board to issue an order to Respondent Harrison to show cause why his certificate of registration should not be suspended and thereby require Harrison to go forward with evidence that his continued operation under his general contractor's license is not contrary to the public welfare. As noted
above this was not done and no evidence was presented from which a determination can be made that Harrison's license should be suspended.
From the foregoing it is concluded that Respondent, Harrison is guilty of failing to register WHS Corporation with the FCILB and entering into contracts on behalf of WHS Corporation while WHS was not so registered. It is further concluded that under the allegations made herein Respondent Harrison's registration may not be suspended solely upon proof that he filed a petition in bankruptcy on behalf of said WHS Corporation. It is therefore,
RECOMMENDED that the registration of Raymond Harrison be suspended for a period of four (4) months.
DONE and ENTERED this 19 day of November, 1976, in Tallahassee, Florida.
K. N. AYERS Hearing Officer
Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304
Barry S. Sinoff, Esquire 1010 Blackstone Building
