STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA CONSTRUCTION INDUSTRY ) LICENSING BOARD, )

)

Petitioner, )

)

vs. ) CASE NO. 80-733

) IRA L. VARNUM d/b/a GENERAL ) CONTRACTORS OF FLORIDA, INC., ) and d/b/a STRUCTURAL CONCRETE ) FORMING OF FLORIDA, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a formal hearing in this case on August 18, 1980, in West Palm Beach, Florida.

APPEARANCES

For Petitioner: Barry Sinoff, Esquire

2400 Independent Square

Jacksonville, Florida 32202

For Respondent: Philip T. Crewshaw, Esquire

1125 North Dixie Highway Suite Three

Lake Worth, Florida 33460 ISSUES PRESENTED

Whether Respondent violated the Florida Construction Industry Licensing Law, as alleged, by filing a false and misleading Change of Status Application with the Licensing Board; and, if so, the appropriate disciplinary action.

CONCLUSIONS AND RECOMMENDATION

Although Respondent made a false background on his Application--that there were no outstanding liens or judgments against him--the Petitioner Licensing Board, failed to establish that Respondent knew, or should have known that the statement was false. To the contrary, the evidence shows that Respondent made the false statement innocently, and upon a reasonable belief that it was true. Respondent is, therefore, not guilty of the charges, and the Board's Second Amended Administrative Complaint should be DISMISSED.

PROCEDURAL BACKGROUND

On March 24, 1980, the Florida Department of Professional Regulation, Florida Construction Industry Licensing Board ("BOARD"), filed an Administrative Complaint against Respondent ("VARNUM") charging him with violating Section 468.112(2), Florida Statutes (1978), by making a false statement on his Change of Status Application filed with the BOARD. VARNUM requested a Section 120.57(1) hearing on the charges, and on April 16, 1980, the case was forwarded to the Division of Administrative Hearings for appointment of a hearing officer to conduct such a hearing.

Thereafter, VARNUM filed two motions to dismiss based on alleged deficiencies in the Administrative Complaint. Following orders which granted such motions, in whole or in part, the BOARD filed an amended complaint on May 23, 1980, and a Second Amended Administrative Complaint on July 3, 1980. VARNUM filed answers to each complaint, and a Motion for Judgment on the Pleadings on July 23, 1980, which motion was denied. He also moved to continue the hearing, initially scheduled for August 11, 1980; such motion was granted, and final hearing was reset for August 18, 1980. On August 13, 1980, a Prehearing Stipulation was filed by the parties pursuant to hearing order.

At hearing, the BOARD called Wallace Norman, its field investigator, as its only witness and offered Petitioner's Exhibits 1/ 1 through 22, inclusive, each of which was received into evidence. VARNUM testified in his own behalf, and called Richard Gale, his business associate, and Colin K. Varnes, a certified public accountant familiar with U.S. Internal Revenue Service execution and collection procedures. VARNUM also offered Respondent's Exhibits 1/ 1 through 4, inclusive, each of which was received. VARNUM's motion to dismiss, made at the close of the BOARD's case-in-chief, was denied.

The parties requested and were granted the opportunity to submit posthearing proposed findings of fact and conclusions of law, while the BOARD did not. The parties also agreed that the time period for filing the Recommended Order would begin to run on September 2, 1980.

FINDINGS OF FACT

Based on the evidence presented at hearing, the following facts are determined:

1. The BOARD is the state agency charged with the duty to license, regulate, and discipline construction industry contractors pursuant to Chapter 489, Part I, Florida Statutes (1979). VARNUM is a licensed, certified general contractor holding two currently active licenses, CG C000832 and CG CA00832 (Prehearing Stipulation).

   
   

2. Here, the BOARD seeks to discipline VARNUM'S licenses on the ground that he submitted to the BOARD a false, erroneous, and misleading Change of Status Application ("Application") which failed to disclose outstanding judgments and liens; VARNUM claims that he either did not know of the outstanding judgments and liens, or that he reasonably believed that they had been satisfied prior to the filing of this Application. (Prehearing Stipulation, Testimony of Varnum).

   
   

3. On September 28, 1978, VARNUM filed his Application with the BOARD.

   The purpose of the Application was to qualify, under his licenses, a corporation known as General Contractors of Florida, Inc.; Richard Gale was identified as

   its president, VARNUM, its executive vice president. Within the Application, VARNUM answered the following questions in the negative:

   
   

   "12(b) Are there now any unpaid past due bills or claims for labor, materials, or services as a result of the construction operations of any person named in (i)

   below or any organization in which any such person was a member of the personnel?

   Yes ( ) No (x)

   * * *

   "(c) Are there now any liens, suits, or judgments of record or pending as a result of the construction operations of any person named in (i) below or any organization in which any such person was a member of the personnel?

   Yes ( ) No (x)"

   * * *

   "(d) Are there now any liens of record by the U.S. Internal Revenue Service or the State of Florida Corporate Tax Division against any person named in (i) below or any organization in which any such person was a member of the personnel?

   Yes ( ) No (x)"

   
   

   Paragraph 12(i), referenced in Questions 12(b) through (d) contained the name "Ira L. Varnum", Respondent. (Testimony of Norman: P.E. 4.)

   
   

4. By executing, under oath, the Application, VARNUM expressly vouched for the truth and accuracy of his statements and answers contained therein. The Application expressly warns that "[a]ny wilful falsification of any information contained herein is grounds for disqualification." (P.E. 1.)

   
   

5. From 1969 through 1976, VARNUM engaged in contracting under the following business entities:

   
   

   All Florida Builders Diversified, Inc. Varnum Enterprises, Inc.

   Varnum & Associates, Inc. Structural Concrete Forming, Inc. Ira L. Varnum & Co. (a partnership) Oakridge Construction Co., Inc.

   General Contractors of Florida, Inc.

   
   

   Since 1976, VARNUM engaged in contracting under the name of "Structural Concrete Forming of Florida, Inc.,"; this has been an active corporation with a gross income of 1.5 to 2 million dollars during the last two years. (Testimony of Varnum, Norman, Gale.)

   
   

6. The following tax liens or civil judgments, arising out of VARNUM's prior construction operations, were extant and of record at the time the Application was filed, but were not disclosed by VARNUM in his answers to Questions 12(b) through (d):

   JUDGMENT OR

   DEBTOR LIEN CREDITOR DATE RECORDED AMOUNT

   
   

   Judgments:
   Structural Concrete Forming of Florida, Inc.					Jiffy Johns, Inc.	6/1/77	$ 79.92 plus costs, $14.00
   All Florida Builders Diversified					Morgan Driveway	7/15/74	$ 147.95
   Tax Liens:
   Structural Concrete Forming, Inc.					U.S. Internal Revenue Service	2/11/76	$ 5,002.37
   Ira Ira	L. L.	Varnum Varnum	and and	Co.	U.S. Internal Revenue Service	8/3/73	$18,100.25
   Ira Ira	L. L.	Varnum Varnum	and and	Co.	U.S. Internal Revenue Service	3/19/74	$ 5,061.86
   Ira Ira	L. L.	Varnum Varnum	and and	Co.	U.S. Internal Revenue Service	3/22/73	$13,041.17
   All	Florida Builders				U.S. Internal	8/29/73	$30,721.59
   Diversified, Inc.					Revenue Service
   All Florida Builders Diversified					U.S. Internal Revenue Service	7/27/73	$ 2,404.94
   All Florida Builders Diversified					U.S. Internal Revenue Service	8/30/73	$21,747.76
   All Florida Builders Diversified					U.S. Internal Revenue Service	3/20/73	$10,161.41
   Varnum Enterprises, Inc.					Florida Division of Labor and Employment Opportu- nities	3/11/71	$ 2,700.00 plus int. & penalties
   Varnum and Associates, Inc.					Florida Division of Labor and Employment Opportunities	8/4/70	$ 4,380.88 plus int. & penalties
   Structural Concrete Forming, Inc.					Florida Division of Labor and Employment Opportunities	2/12/75	$ 649.57 plus int.

   
   

   The Jiffy Johns, Inc., judgment was paid by VARNUM prior to filing his Application on September 28, 1978, although the Satisfaction of Judgment was not executed until June 22, 1979, and recorded on June 25, 1979. The Burroughs Corporation may also have held a judgment against Varnum Enterprises, dated May 25, 1973; however, the copy introduced into evidence is illegible and,

   therefore, cannot support an affirmative finding. (Testimony of Norman, Varnum; P.E. 2, 3, 4, 7, 8, 9, 10, 11, 12, 13, 14; R.E. 2.)

   
   

7. VARNUM did not willfully or knowingly falsify or fail to disclose the existence of the outstanding judgments and tax liens when he completed his Application. He believed that those judgments and liens had been satisfied years earlier, and had no reason to believe otherwise. When the tax liens were initially filed, he had turned them over to his attorney, Paul Mueller, for handling. Mueller had been resident agent for many of VARNUM's construction companies and VARNUM retained him to perform business-related legal services. VARNUM had reason to believe that the judgments and liens filed several years earlier had been handled and satisfied by Mueller, in accordance with VARNUM's instructions. The holders of those judgments and liens have not made an effort to collect or enforce them against VARNUM. VARNUM's assertion that he believed there were no outstanding judgments or liens against him at the time of his Application is buttressed by his experience in refinancing and subsequently selling his residence in 1978. Although one Federal tax lien and several other judgments and claims were satisfied and paid-off at the time of these two separate mortgage transactions, the judgments and liens here in question did not surface, were apparently unknown to the parties, and were not noted or included in the closing statement and title insurance policy accompanying the mortgages and sale. (Testimony of Varnum; R.E. 1, 3, 4.)

   
   

8. Furthermore, since 1976 VARNUM has conducted in the same community a construction business under the name of "Structural Concrete Forming of Florida, Inc." That company has enjoyed a good credit rating with its suppliers, and has had no judgments or tax liens filed against it. The holders of the judgments and liens here in question never contracted the company to discuss, or seek collection of these outstanding claims. (Testimony of Gale, Varnum).

   
   

9. VARNUM has filed proposed findings of fact and conclusions of law. Findings of Fact Nos. 9, 10, 11, 12, 16, 17, 18, 21, 22, 23, 24, 25 and 28 are hereby adopted. To the extent that his proposed findings of fact are not adopted herein, they are specifically rejected as being either irrelevant to the issues in this cause or as not having been supported by the evidence.

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings had jurisdiction over the parties and subject matter of this proceeding. Section 120.57(1), Florida Statutes (1979).

    
    

11. The BOARD charges that VARNUM violated Sections 489.129(1)(d), 2/ 489.129(1)(j), 3/ and 489.129(1)(a), 4/ Florida Statutes (1979), by willfully making a false statement in his Change of Status Application, to wit: that there were no existing liens or judgments of record as a result of his prior construction operations.

    
    

12. Section 489.129(1)(d)2, Florida Statutes (1979), in pertinent part, prohibits the willful or deliberate violation of any "laws of the State". The State laws allegedly violated are (a) Section 489.127(1)(d)5, which, in pertinent part, prohibits any person from giving false evidence to the BOARD for the purpose of obtaining certification; and (b) Sections 837.06 and 117.03, Florida Statutes (1979), which prohibit the making of a false written statement with intent to mislead a public official, and the commission of perjury, respectively.

13. Section 489.129(1)(j)3, Florida Statutes (1979), prohibits a contractor from failing to comply with the Construction Industry Licensing Law. The BOARD, then, realleges the violations described in the preceding paragraph.

    
    

14. Finally, Section 489.129(1)(a)4, Florida Statutes (1979), prohibits the obtaining of a certificate or registration by fraud or misrepresentation.

    
    

15. Each of these alleged statutory violations requires a showing that VARNUM either (1) knowingly and willfully made a false and misleading statement on his Application, or (2) made a statement on his Application without actual knowledge of its truth or falsity, but under circumstances in which he should have known it was false. Sections 489.129(1)(d), 489.129(1)(j), 489.129(1)(a);

    14 Fla. Jur., Fraud and Deceit, Section 32, pp. 563-564 (1957).

    
    

16. The burden of proof rests upon the BOARD to prove its charges against VARNUM by a preponderance of the evidence. See 1 Fla. Jur.2d, Administrative Law, Section 81, pp. 658-659 (1977).

    
    

17. In this case, the BOARD failed to sustain its burden; it must be concluded, therefore, that VARNUM is not guilty of violating Sections 489.129(1)(d), 489.129(1)(j), 489.129(1)(a), and other provisions of law incorporated by the BOARD's Second Amended Administrative Complaint.

    
    

18. The BOARD failed to prove the essential element underlying each of its charges--that VARNUM actually intended to make a false statement, or made a statement which, under the circumstances, he should have known was false. The evidence establishes that his statement denying the existence of judgments and liens against him (or companies in which he was interested), was false; but the evidence also shows that the false statement was made innocently, based upon his reasonable belief that these long standing judgments and liens had, pursuant to his instructions, been handled and satisfied by his attorney. The BOARD presented no evidence from which it can be fairly inferred that VARNUM knew of the continued existence of such judgments and liens at the time of his Application. Fraud can never be presumed, and it must be established by clear and convincing evidence. Biscayne Boulevard Properties v. Graham, 65 So.2d 858 (Fla. 1953). This rule should apply, in like fashion, to charges of willfully making a false official statement.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED:

That the Second Amended Administrative Complaint filed against VARNUM be DISMISSED.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 15th day of October, 1980.

R. L. CALEEN, JR. Hearing Officer

Division of Administrative Hearings Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 1980.

ENDNOTES

1/ Petitioner's and Respondent's Exhibits will be abbreviated as "P.E. " and "R.E. ", respectively.

2/ Formerly Section 468.112(2)(a), Florida Statutes (Supp. 1978). 3/ Formerly Section 468.112(2)(g), Florida Statutes (Supp. 1978). 4/ Formerly Section 468.112(2)(i), Florida Statutes (Supp. 1978).

COPIES FURNISHED:

Barry Sinoff, Esquire 2400 Independent Square

Jacksonville, Florida 32202

Philip T. Crewshaw, Esquire 1125 North Dixie Highway Suite Three

Lake Worth, Florida 33460

Docket for Case No: 80-000733

Orders for Case No: 80-000733