STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL ) REGULATION, FLORIDA CONSTRUCTION ) INDUSTRY LICENSING BOARD, )

)

Petitioner, )

)

vs. ) CASE NO. 82-446

)

JAMES J. RUSSO, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for administrative hearing before P. Michael Ruff, duly designated Hearing Officer of the Division of Administrative Hearings, on June 21, 1982, in Coral Gables, Florida.

APPEARANCES

For Petitioner: John O. Williams, Esquire

547 North Monroe Street, Suite 204 Tallahassee, Florida 32301

For Respondent: A. J. Ryan, Jr., Esquire

A. J. Ryan, III, Esquire Hollywood Federal Building 700 East Dania Beach Boulevard Dania, Florida 33004

Pursuant to an Administrative Complaint filed October 21, 1981, the Department of Professional Regulation has charged the Respondent, James J. Russo, with various violations of Section 468.112(2)(h), Florida Statutes (Supp. 1978), since substantially reenacted as Section 489.129(1)(k), Florida Statutes (1981). Specifically, it is alleged that the Respondent abandoned construction of a duplex prior to its completion. Petitioner also charges that Respondent has violated Section 468.112(2)(e), Florida Statutes (Supp. 1978), now substantially reenacted as Section 489.129(1)(h), Florida Statutes (1981), in that he allegedly diverted funds received for the construction of said duplex and, as a result of that diversion of funds, was unable to fulfill his obligation to complete construction of the duplex according to the subject contract. It is also charged that the Respondent signed three separate statements or affidavits with respect to the construction of the duplex project, falsely indicating that payment had been made for subcontracted work, labor and/or materials, which allegedly resulted in financial loss to the owner. The Respondent is charged with violation of Section 489.129(1)(m), Florida Statutes (1979), in that, if all the alleged violations are considered to be true, they constitute proof and continued evidence of deceit, fraud or gross negligence, incompetency or misconduct in the practice of contracting.

Petitioner presented the testimony of Aurlyn George, Thomas S. Gavin, Cindy Huffman, Mark Valentino, William Frye, Marcie Demartino George K. Beebe, Kathleen Beebe and Ronald Sales. Petitioner introduced 15 exhibits, all of which were admitted into evidence. The Respondent testified on his own behalf and introduced eight exhibits into evidence.

At the conclusion of the hearing, the parties elected to have the proceedings transcribed and to file proposed findings of fact and conclusions of law. In conjunction therewith, the parties waived the 30-day requirement for rendition of a recommended order contained in Rule 28-5.402, Florida Administrative Code. All proposed findings of fact and conclusions of law were considered herein. To the extent they are consistent herewith, they are adopted; and, to the extent said proposed findings of fact and conclusions of law are inconsistent with the Findings of Fact and Conclusions of Law contained herein, they are deemed not supported by substantial, competent evidence and not creditable.

The issues to be resolved herein concern whether the Respondent abandoned construction of the project before it was completed, diverted the funds with which he was to pay subcontractors, laborers and materialmen in order to finish the project, and was thus unable to complete the project; whether that resulted in financial loss to the owner; and whether he is concomitantly guilty of deceit, fraud or gross negligence, incompetency or misconduct in the practice of contracting.

FINDINGS OF FACT

1. The Respondent is a registered building contractor having been issued license No. RB0032203. At all times material to this proceeding, he was the president and qualifying officer of RBR Construction Corporation.

   
   

2. The Petitioner is an agency of the State of Florida charged with the licensing, regulation of licensure status and appropriate practice standards as pertinent hereto of construction contractors in the State of Florida.

   
   

3. On April 11, 1979, the Respondent, doing business as RBR Construction Corporation, entered into a contract with Kathleen R. and George K. Beebe, pursuant to which he was to construct a duplex for the Beebes for a net contracted amount of $47,500. The Respondent engaged in the construction of the duplex until it was approximately 86 percent complete and then ceased all work on the project. At the time the Respondent ceased work on it, he had already received $44,290 of the contracted price.

   
   

4. During the course of the construction, at various times, the Respondent requested and received payments or draws from the First Federal Savings and Loan Association of Broward County in the following amounts for the following purposes:

   
   

   1. Approximately $1,500 for electrical work;

   2. Approximately $1,744.32 for mill- work (cabinetry, door trim, etc.);

   3. Approximately $1,331 for installation of insulation in the duplex.

      
      

      The Respondent was established to have failed to pay these sums to the appropriate subcontractors who did the work. On or about March 7, 1980, the

      Respondent signed an affidavit required to obtain a draw payment from First Federal of Broward County. The Respondent stated in the affidavit that the millwork and trim for the duplex had been paid or would be paid from the proceeds of that draw request, which was $5,150. At the time he signed that affidavit, however, the millwork and trim had not been (as yet) paid, and they remained unpaid through the date of the hearing in the amount of $1,744.32. On or about February 13, 1980, the Respondent executed a similar affidavit in conjunction with a request for a draw payment from First Federal for the stated purpose of paying for insulation installed in the duplex. That draw amounted to

      $13,905. At the time he signed that affidavit, the insulation had not been paid for and remained unpaid through the date of the hearing in the amount of $1,331.

      
      

5. On January 21, 1980, the Respondent executed a similar affidavit supporting a request for a draw payment from First Federal of Broward. In that affidavit, the Respondent affirmed that the electrical work provided for in the construction plans for the duplex had been paid for or would be paid from the proceeds of that draw request, which was in a total amount of $2,060. At the time the Respondent signed the affidavit, however, the electrical work had not yet been paid for, and it remained unpaid through the date of the hearing to the extent of $1,500.

   
   

   CONCLUSIONS OF LAW

   
   

6. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Section 120.57(1), Florida Statutes (1981).

   
   

7. The Construction Industry Licensing Board is charged with carrying out the provisions of Chapter 489, Florida Statutes. Part I of that act sets the standards for licensure in the field of construction contracting and provides for disciplinary proceedings when the prescribed standards are violated. Pursuant to Section 489.129(1)(k), Florida Statutes (1981), the Board is authorized to revoke or suspend the certificate of registration of a contractor or to impose an administrative fine not exceeding $1,000 or other sanctions if the contractor is found guilty of abandonment of a construction project. Section 489.129(1)(k), Florida Statutes (1981), provides as follows:

   
   

   Abandonment of a construction project in which the contractor is engaged or under contract as a contractor. A pro- ject is to be considered abandoned after

   90 days if the contractor terminates said project without notification to the pros- pective owner without just cause.

   
   

8. Subsection (8) of that statute authorizes those penalties on proof of diversion of funds received by the Respondent for a specific project, which make the Respondent unable to complete his obligations on that project. Section 489.129(1)(h), Florida Statutes (1981), reads as follows:

   
   

   Diversion of funds or property received for prosecution or completion of a specified construction project or operation when as a result of the diversion the contractor is or will be unable to fulfill the terms of his obligation or contract.

9. Section 489.129(1)(1), Florida Statutes, provides pertinently as follows:

   
   

   Signing a statement with respect to a project or contract falsely indicating that the work is bonded; falsely indi- cating that payment has been made for

   all subcontracted work, labor and materials which results in a financial loss to the owner, purchaser or contractor; or falsely indicating that Workmen's Compensation and public liability insurance are provided.

   
   

10. Section 489.129(1)(m), Florida Statutes (1981), provides that the same penalties are assessible if it is found:

    
    

    Upon proof and continued evidence that the licensee is guilty of fraud or deceit or

    of gross negligence, incompetency or miscon- duct in the practice of contracting.

    
    

11. The evidence in this record is unrefuted in establishing that the Respondent discontinued construction during March of 1980. According to his own testimony, Respondent required $18,000 before he could finish the construction of the duplex for which he had contracted to complete for $47,500 by contract. At the time of abandonment, he had already received $44,290. The Respondent contends that he required the extra $18,000 because of unexpected building costs encountered beyond his control. Even if his testimony is believed in its entirety, the extra costs totalled only approximately $4,500, including those his testimony indicates would be related to extra costs of the roof, driveways, stonework and plumbing.

    
    

12. Specifically, the Respondent testified that he allowed $1,500 for the roof and paid $4,500. The record does not indicate how much extra cost was attributable to widening the driveway. The total cost of the driveway in its entirety was established, however, to be $1,900; therefore, even if the cost of the driveway had doubled, only $950 could have been allocated as an extra cost. The extra stonework was shown to amount to approximately $650, and the extra plumbing amounted to some $250. Thus, the total of Respondent's extra costs described in his testimony established them to be far less than the $18,000 he demanded to complete construction of the project.

    
    

13. The Respondent offered no accounting to the Beebes with which to support his demand for $18,000 extra. The Respondent's own records indicate that he disbursed a total of $45,576.29 during the time period of the construction of the duplex for items associated with his construction business. During that same time, he received $44,290 as draws at First Federal of Broward County toward the construction of the subject duplex, plus approximately $1,600 extra, which Mr. Beebe agreed to pay to obtain the necessary sewer and water permits, including the posting of a trash, sewer and water bond. Thus, the total sum received by the Respondent was $45,890. The Respondent's own Exhibit

    5 indicates on its face that approximately $11,431.80 was used for his general overhead in the operation of his construction company and could not be specifically associated to the Beebe duplex project. Respondent's Exhibit 5 likewise does not represent any accurate depiction of what was done with the funds received and how they were disbursed in that there is no indication of any specific supplies, materials or subcontractors which could be matched against

    those funds drawn for use on the Beebe duplex for specific portions of the work, such as trim, doors, and millwork, electrical work and plumbing work. Exhibit 5 is unspecific as to what portion of the overhead figure should be actually associated with the Beebe duplex.

    
    

14. The Petitioner has demonstrated in an unrefuted way that the construction draws to the Respondent were current at the point that the Respondent discontinued construction; and since there was no accounting by the Respondent to the owner nor any explanation in his testimony at the hearing to justify the demands for most of the extra $18,000 the Respondent contends he needed to finish the project, it is concluded that the Respondent discontinued construction without just cause and has therefore abandoned the construction project.

    
    

15. Respondent requested and received payment from First Federal of Broward County for both the millwork and the insulation for the construction of the duplex for which there remains $1,744.32, as well as an unpaid amount of

    $1,131 for insulation. The Respondent indeed admitted to not paying for either trim, the millwork nor the insulation and that he paid only a small part of the electrical subcontractor's cost. Mr. Beebe's unrefuted testimony establishes that that cost was approximately $1,900.

    
    

16. The Respondent, in attempted rebuttal, contended that the funds allegedly diverted were spent in other areas of the project. That testimony is not convincing. It is not supported by any corroborative evidence which should normally be expected to be in the Respondent's possession. There is no showing that the subcontractors for the electrical, insulation, and millwork were ever paid. It is accordingly concluded that the Respondent devoted approximately

    $4,500 received for the construction project to other undisclosed uses and as a result was unable to fulfill his obligation in violation of Section 489.129(1)(h), Florida Statutes (1981).

    
    

17. It is concomitantly established that the Respondent executed certain affidavits indicating that certain specific material and subcontracting costs were paid or would be paid from the various draws requested and received on the strength of those affidavits; to wit, the above-described electrical work, millwork and insulation. At the time that the Respondent executed the affidavits, he had not paid for that specified material and subcontracting work and has not yet paid for the same. Indeed, the Respondent admitted to a large portion of this nonpayment. He has therefore violated Section 489.129(1)(1), Florida Statutes (1981), by signing statements with respect to construction projects falsely indicating that payment had been made or would be made for subcontracted work, labor and materials which resulted in a financial loss to Mr. Beebe, who had to secure completion of the work from other sources.

    
    

18. In consideration of the totality of the evidence in the record, it has been clearly established that the Respondent has diverted money from the construction project which is the subject of this Administrative Complaint, that he abandoned that project and that he signed three false affidavits in connection therewith. These acts constitute proof of continued evidence of misconduct in the practice of contracting; and, therefore, the Respondent has additionally violated Section 489.129(1)(m), Florida Statutes (1981). In view of these multiple violations, a substantial penalty should be imposed. It is, however, improper to impose consecutive fines and penalties for the same wrongful acts or act related to the same fact pattern or transaction for which the Respondent is Prosecuted. Finally, it should be pointed out that the

Respondent was not shown to have ever had any similar violations or prosecutions by the Petitioner.

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence in the record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is

RECOMMENDED:

That the Respondent be found guilty of violating the statutory authorities cited hereinabove in that he abandoned the subject construction project, diverted funds received for the construction of the project with the result that he could not fulfill his obligations with regard to the project, that he signed three separate false statements with respect to the construction of the project, and is guilty of misconduct in the practice of contracting. For these violations, his license should be suspended for a period of one (1) year.

DONE and ENTERED this 20th day of January, 1983, in Tallahassee, Florida.

P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 20th day of January, 1983.

COPIES FURNISHED:

John O. Williams, Esquire

547 North Monroe Street Suite 204

Tallahassee, Florida 32301

A. J. Ryan, Jr., Esquire

A. J. Ryan, III, Esquire Hollywood Federal Bldg. 700 East Dania Beach Blvd. Dania, Florida 33004

James Linnan, Executive Director Construction Industry Licensing Board Dept. of Professional Regulation

Post Office Box 2 Jacksonville, Florida 32202

Samuel R. Shorstein, Secretary Dept. of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32301

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF PROFESSIONAL REGULATION CONSTRUCTION INDUSTRY LICENSING BOARD

DEPARTMENT OF PROFESSIONAL REGULATION,

Petitioner, DPR Case No. 0011535 DOAH Case No. 82-446

vs.

JAMES J. RUSSO

R-B-R Construction Corp. RB 0032203 1412 Washington Street

Hollywood, Florida 33020

Respondent.

/

FINAL ORDER

This case came for final action by the Construction Industry Licensing Board on March 10, 1983, in Jacksonville, Florida. An administrative hearing held pursuant to s120.57(1), F.S., resulted in the issuance of a Recommended Order (attached hereto as Exhibit A) which was reviewed by the Board.

Petitioner filed Exceptions to said Order. Upon consideration of the Recommended Order, Exceptions and following a review of the complete record in the proceeding, it is ORDERED:

l. The findings of fact in the Recommended Order are approved and adopted and incorporated herein by reference.

1. The conclusions of law in the Recommended Order are approved and adopted and incorporated herein by reference.

   
   

2. The recommendation in the Recommended Order is rejected as inappropriate under the circumstances. The Board adopts Petitioner's Exceptions to said Recommendation.

THEREFORE, it is ordered and adjudged that the registered building contractor's license of the Respondent be and the same is hereby suspended for a period of five years, and that the Respondent pay a $2000.00 administrative fine, provided, however, that the Respondent's license may be reinstated after a

period of two years if he provides the Construction Industry Licensing Board with competent and substantial evidence that the electrical, millwork and insulation on the George K Beebe residence hake been paid in full and that restitution has been made to the Beebes for their loss due to his abandonment of their residence.

DONE and ORDERED this 29th day of March, 1983.

FLORIDA CONSTRUCTION INDUSTRY LICENSING BOARD

John Henry Jones, Chairman

Docket for Case No: 82-000446

Orders for Case No: 82-000446