STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 82-1390

)

BERTHOLD KINAST, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on August 31 and September 1, 1982, in Panama City, Florida.

Petitioner Department of Professional Regulation, Construction Industry Licensing Board, was represented by John O. Williams, Esquire, Tallahassee, Florida, and the Respondent Berthold Kinast represented himself.

Petitioner filed an Administrative Complaint against the Respondent, and Respondent timely requested a formal hearing on the allegations contained within that Administrative Complaint. Accordingly, the issues for determination are whether Respondent is guilty of the charges contained in that Administrative Complaint and, if so, what disciplinary action should be taken, if any.

Petitioner presented the testimony of William R. Owens, Gary Lee Nelson, Robert Hodges, Harriet Nelson, Laurence A. Hardee, Jim Kochevar, John C. McHaffie, John C. Johnson, Alton P. Cape, Sr., Robert F. Adams, Frank Bobe, Jr., Joseph Broome, Den Trumbull, Rachel McCain, Milton Buckley, Jr., William Smith, Julia Mae Smith, William E. Lark, Doug Smith and James E. Parker. Additionally, Petitioner's Exhibits numbered 1 through 29 were admitted in evidence.

Respondent presented the testimony of Ronnie Tyndal, John Hutt, Jr., Roy Whitehurst, Joyce Giandolfi and Linda Kinast. Additionally, Respondent's Exhibits numbered I through 9 and 11 through 15 were admitted in evidence.

Both parties have submitted posthearing findings of fact in the form of a proposed recommended order. To the extent that the proposed findings of fact have not been adopted in this Recommended Order, they have been rejected as not having been supported by the evidence, as having been irrelevant to the issues under consideration herein, or as constituting unsupported argument of counsel or conclusions of law.

FINDINGS OF FACT

1. Respondent is a registered residential contractor, having been issued license number RR 0032366.

2. On March 29, 1979, Respondent, doing business as Bert Kinast Construction Co., entered into a contract with Gary and Harriet Nelson to construct a residence for the sum of $65,122.

   
   

3. On April 15, 1979, Respondent signed an affidavit stating that all bills for materials and labor performed as of that date for the construction of the Nelson residence had been paid.

   
   

4. Respondent signed the affidavit for the express purpose of obtaining a draw payment for construction performed and, as a result of the affidavit, did receive a draw payment of $9,765.30.

   
   

5. At the time Respondent signed the affidavit, Panama Machinery & Supply Co. was owed $193.98 for material furnished to Respondent for the construction of the Nelson residence.

   
   

6. On June 4, 1979, Respondent signed an affidavit stating that all bills for materials and labor performed as of that date for the construction of the Nelson residence had been paid.

   
   

7. Respondent signed the affidavit for the purpose of receiving a draw payment for construction performed and, as a result of the affidavit, did receive a draw payment of $22,792.70.

   
   

8. At the time Respondent signed the affidavit, he owed Panama Machinery & Supply Co. $1,249.94.

   
   

9. During August, 1979, Respondent signed an affidavit stating that all bills for materials and labor performed for the construction of the Nelson residence had been paid.

   
   

10. At the time Respondent signed the affidavit, certain materialman and subcontractors who furnished labor and material for the Nelson construction project were not paid, to wit: Panama Machinery & Supply Co., Coastal Insulation, West Florida Natural Gas Company, Culligan Water Services, Inc., Dixie Window Co. and Rachel's Lighting & Home Accessories.

    
    

11. Respondent violated Section 1115.7 of the 1979 Edition of the Standard Building Code by not providing adequate head room in the stairwell at the Nelson residence.

    
    

12. On or about August 3, 1979, Respondent entered into a contract with John C. and Barbara L. McHaffie to construct a residence for the sum of

$105,475.

1. On or about October 11, 1979, Respondent endorsed an instrument, specifically a check, acknowledging that all bills for labor and materials furnished for the McHaffie residence had been paid in full.

   
   

2. Respondent endorsed the check to obtain payment for construction he had performed to that date. At the time Respondent signed the check containing that acknowledgment, certain material-men and subcontractors were unpaid, to wit: Buckley's Plumbing, Moore Concrete Products, William Smith and Panama Machinery & Supply Co.

3. On or about November 20, 1979, Respondent endorsed an instrument, specifically a check, acknowledging that all bills for labor and materials furnished for the McHaffie residence had been paid in full.

   
   

4. Also on November 20, 1979, Respondent signed an affidavit entitled "Partial Release of Lien on Progress Payment," stating that all bills for labor and materials furnished for the construction of the McHaffie residence were paid in full.

   
   

5. Respondent endorsed the check and signed the affidavit in order to obtain a construction draw and did, as a result, obtain the construction draw for labor and materials used in the construction of the McHaffie residence.

   
   

6. At the time that Respondent endorsed the check and signed the affidavit, certain materialmen and subcontractors were not paid, to wit: Parker Heating & Cooling, Culligan Water Services, Inc. , Moore Concrete Products, Overhead Door Company of Panama City, Inc., Coastal Insulation, Panama Machinery & Supply Co., G & H Building Materials and William Smith.

   
   

7. Respondent received $50,937.50 which was to be used by Respondent to pay for materials and/or labor provided by various materialmen and/or subcontractors for the construction of the McHaffie residence.

   
   

8. Certain materialmen and/or subcontractors were not paid from the monies received by Respondent for that purpose, to wit: Parker Heating & Cooling, Culligan Water Services, Inc., Buckley's Plumbing, Moore Concrete Products, Overhead Door Company of Panama City, Inc., Coastal Insulation, Hodges Lumber, Panama Machinery & Supply Co., G & H Building Materials and William Smith.

   
   

9. On August 17, 1979, Respondent obtained permit number 5260 from Bay County, Florida, to perform the McHaffie construction.

   
   

10. Respondent represented on the application for the above-referenced permit that his estimate of the building costs for the McHaffie residence was

    $57,250.

    
    

11. Since the contract for the McHaffie residence was for $105,475, the price of the building permit would have been nearly $160 more since Bay County charges $3 permit cost per every $1,000 construction cost.

    
    

12. During his construction of the McHaffie residence, Respondent violated Sections 1603 and 1706.8(1) of the 1979 Edition of the Standard Building Code in that the concrete floor in some areas was less than three and a half inches thick and caulking or flashing was not installed around the sliding glass doors.

    
    

13. On or about November 25, 1981, Respondent was convicted of passing a worthless check, in violation of Section 832.05, Florida Statutes. Respondent's worthless check was given by Respondent to West Building Materials on or about March 25, 1981, as payment for building materials.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto. Section 120.57(1), Florida Statutes.

15. Counts One and Two of the Administrative Complaint filed in this cause charge Respondent with violating Section 468.112(2)(a), Florida Statutes (Supp. 1978), now Section 489.129 (1)(d), Florida Statutes (1979), in that he willfully disregarded and violated Section 713.35, Florida Statutes (1979), in that he willfully furnished an affidavit containing a false statement in connection with the improvement of real property in the State of Florida, knowing that the Nelsons might rely on it and that the Nelsons parted with value relying on the truth of the statement. The affidavit signed by the Respondent on April 18, 1979, forms the basis for the charges in Count One, and the affidavit signed by the Respondent on June 4, 1979, forms the basis for Count Two of the Administrative Complaint. Petitioner has met its burden of proving that at the time that Respondent executed those affidavits stating that all bills for material and labor performed on the Nelsons' residence had been paid, the affidavit was false in that Panama Machinery & Supply Co. remained unpaid. Respondent specifically provided those affidavits to the Nelsons and the Nelsons' lending institution in order to obtain draw payments. Based upon Respondent's affidavit on April 18, 1979, the Nelsons and their lending institution released to Respondent the first draw payment in the amount of

    $9,768.30. Likewise, based upon Respondent's June 4, 1979, affidavit, the Nelsons and their lending institution released to him the second draw payment in the amount of $22,792.70.

    
    

16. Count Three charges the Respondent with violating Section 489.129(1)(1), Florida Statutes (1979), in that he signed a statement with respect to the Nelson project falsely indicating that payment had been made for all subcontracted work, labor and materials, which resulted in a financial loss to the Nelsons, and further charges Respondent with violating Section 489.129(1)(c), to wit: Section 455.227(1)(a), Florida Statutes (1979), in that he made a misleading, deceptive, untrue or fraudulent representation in the practice of contracting. Count Three is based upon the affidavit Respondent executed in August, 1979, in order to obtain the third draw payment. By the time Respondent executed that affidavit, the Nelsons had become aware that there were several materialmen and subcontractors who were not paid and did not provide the draw payment requested by the Respondent. The Nelsons then replaced Respondent as the contractor on their residence, and Respondent was prohibited from returning to the construction site. Although the Nelsons did suffer a financial loss in that the construction project cost them more than the price agreed to in their contract with Respondent, the loss was not directly related to the affidavit and, therefore, there is no violation of Section 489.129 (1)(1), Florida Statutes (1979). Since Respondent knew that there was a large amount of money owed to various materialmen and subcontractors at the time that he executed the August, 1979, affidavit, Respondent has, however, violated Section 489.129(1)(c), Florida Statutes (1979), in that he made a false, untrue or fraudulent representation in the practice of contracting, which is in violation of Section 455.227(1)(a) , Florida Statutes (1979).

    
    

17. Count Four charges Respondent with violating Section 468.112(2)(a), Florida Statutes (Supp. 1978), now Section 489.129 (1)(d), Florida Statutes (1979), in that he deliberately disregarded and violated the applicable building code. During the construction of the Nelson residence, Respondent constructed the stairwell, which had inadequate head room. The Standard Building Code being enforced by Bay County required in Section 1115.7 that the minimum head clearance at the stairwell should be six feet, eight inches. The minimum head clearance of the stairwell was five feet, 11 inches, or nine inches below the minimum required by that building code. No testimony was presented to indicate that Respondent attempted to obtain a variance from the building code. Since the contractor is charged with construction in conformance with the applicable

    building code, he knew, or should have known, what the requirements are with regard to head room for a stairwell and, therefore, deliberately disregarded the specific provision of Section 1115.7 by building a stairwell with inadequate head room. The actions of the Respondent are somewhat exculpated by the fact that he was not allowed to continue construction by the Nelsons after August 15, 1979, and, therefore, did not have an opportunity to correct the violation. In spite of the exculpating circumstances however, the Respondent did violate Section 489.129(1)(d), Florida Statutes (1979).

    
    

18. Counts Five, Six and Seven relate to the McHaffie construction and charge Respondent with violating Section 489.129 (1)(1) , Florida Statutes (1979), in that he signed a statement with respect to that construction project falsely indicating that payment had been made for all subcontracted work, labor and materials, which resulted in a financial loss to the owner, purchaser or contractor; with violating Section 489.129(1)(m), Florida Statutes (1979), in that the false statements are proof and continued evidence that Respondent is guilty of fraud or deceit or misconduct in the practice of contracting; and with violating Section 489.129(1)(c), to wit: Section 455.227(1)(a), Florida Statutes (1979), in that Respondent made a misleading, deceptive, untrue or fraudulent representation in the practice of contracting. In order to obtain construction draw payments on October 11, 1979, and on November 20, 1979, Respondent endorsed two checks and signed one affidavit acknowledging that all bills for labor and materials in reference to the McHaffie construction had been paid, when he knew that substantial monies were on those dates due and owing to certain subcontractors and materialmen. As a consequence thereof, the McHaffies were subsequently required to pay several of those unpaid bills although monies had been released to the Respondent to cover those charges. Respondent's repeated execution of false statements constitutes continuing proof of his fraud, deceit and misconduct in the practice of contracting, as charged, in that he knowingly made misleading, deceptive, untrue and fraudulent representations in his practice of contracting. Petitioner has proven the allegations contained in Counts Five, Six and Seven of the Administrative Complaint herein.

    
    

19. Count Eight charges Respondent with violating Section 489.129(1)(h), Florida Statutes (1979), in that he diverted funds received for the completion of the McHaffie construction project and, as a result, could not fulfill his obligations. As a result of liens being filed against their residence, and as a result of learning that many materialmen and subcontractors remained unpaid, the McHaffies terminated Respondent as their contractor. Before discontinuing construction, however, Respondent had received a total of $50,937. 50, which was to be used by the Respondent to pay for materials and labor provided by various materialmen and subcontractors for the completion of the McHaffie residence. The record in this cause indicates that the value of the labor and the material placed into the residence at the time of Respondent's termination as the contractor was approximately $53,000, and the unpaid bills exceeded half that amount. Respondent failed to make any accounting for the discrepancy in the amount of money received and the amount of money used for construction. It is, therefore, concluded that the Respondent diverted monies received to construct the McHaffie residence to other uses and has, therefore, violated Section 489.129(1)(h), Florida Statutes (1979), in that he diverted monies received for the completion of the McHaffie project and as a result could not fulfill his obligation to the McHaffies or to the various subcontractors to whom he owed money.

    
    

20. On August 17, 1979, Respondent obtained the permit for the construction of the McHaffie residence. He represented on the application for the permit that the total cost of that residence was $57,250. Respondent had

    previously signed a contract with the McHaffies for $105,475 and was, therefore, certainly aware that the estimate of construction cost was significantly in error. Since the cost of a building permit was $3 per $1,000 of construction cost, it can only be concluded that Respondent knowingly made a false representation in order to save approximately $160 by not reporting the full value of the improvements which he was under contract to construct. His actions, therefore, are continued proof and evidence of fraud, deceit and misconduct in the practice of contracting in violation of Section 489.129(1)(m), Florida Statutes (1979) , and are also misleading, deceptive, untrue and fraudulent representations in the practice of contracting in violation of Section 489.129(1)(c) and of Section 455.227(1)(a), Florida Statutes (1979).

    Accordingly, Petitioner sustained its burden of proving the allegations contained in Count Nine of the Administrative Complaint.

    
    

21. Count Ten charges Respondent with violating Section 489.129(1)(d), Florida Statutes (1979), in that he deliberately disregarded and violated the applicable building code. During the construction of the McHaffie residence, Respondent violated two specific sections of the Standard Building Code being enforced by Bay County in that the concrete floor was less than three and one- half inches thick and in that neither caulking nor flashing was installed around the sliding doors, thereby allowing water to leak into the structure during construction. Accordingly, the Petitioner has proven the allegations in Count Ten, as charged.

    
    

22. On or about November 25, 1981, Respondent was convicted of passing a worthless check in violation of Section 832.05, Florida Statutes. Since the check was for building materials, Respondent is guilty of a crime directly related to the practice of contracting. There is, however, exculpating evidence in that Respondent did subsequently honor the check and did pay West Building Materials, the damaged party. Since Respondent was convicted of a crime relating to the practice of contracting, however, he has violated Section 489.129(1)(b), Florida Statutes (1979), as charged in Count Eleven of the Administrative Complaint filed herein.

    
    

23. Count Twelve charges Respondent with violating Section 489.129(1)(m), Florida Statutes (1979), based upon proof and continuing evidence that Respondent is guilty of misconduct in the practice of contracting. After reviewing the facts and circumstances involved in the numerous charges against Respondent as a result of only the two construction projects forming the subject matter of the Administrative Complaint filed herein and the charge of passing a worthless check for construction materials, it is concluded that there is a clear pattern of misconduct within the meaning of that statutory prohibition.

    
    

24. Section 489.129(1), Florida Statutes, authorizes the Construction Industry Licensing Board to revoke or suspend the registration of a contractor or to impose an administrative fine not to exceed $1,000 if the contractor be found guilty of any of the acts with which Respondent has been charged. Petitioner, in its proposed recommended order, has recommended that Respondent's license be revoked and that he be fined $5,000, provided however that if the Respondent furnishes conclusive proof that he has made restitution .to the various damaged parties, then the Board should allow Respondent to reobtain his license after a two-year suspension period and have his fine reduced to $500. The fine recommended by Petitioner seems exorbitant in view of the probability that many of Respondent's violations were a result of personal financial hardship. Additionally, requiring restitution of the thousands of dollars lost by the Nelsons, the McHaffies and Respondent's many materialmen and subcontractors involved in those projects would, likewise, be prohibitive and

would result in permanent revocation of his license to practice contracting. It must be borne in mind that testimony in this cause indicates that the practice within the industry is for a contractor to file a "no lien affidavit," obtain the construction draw payment and with the money pay to the materialmen and subcontractors all outstanding bills. Such a practice, if it does exist, does not change the statutory prohibition against filing a false affidavit.

Additionally, a number of the bills were not yet due and owing although the work had been partially performed or the materials had been delivered at the time the affidavits were executed and, therefore, the charges had in fact been incurred. Further, both the McHaffies and the Nelsons prohibited Respondent from returning to the job sites in order to correct the code violations subsequently found. In view of the totality of circumstances, a more appropriate penalty is to suspend Respondent's license to practice contracting for a period of three years, impose an administrative fine of $1,000 and place Respondent on probation for a period of three years after reinstatement of his license, with the terms and conditions to be set by the Board.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding the Respondent guilty of

the allegations contained within the Administrative Complaint, suspending Respondent's license as a registered residential contractor; for a period of three years, imposing an administrative fine against Respondent in the amount of

$1,000 and placing Respondent on probation for three years upon reinstatement of his license, with the terms and conditions thereof to be set by the Board.

DONE and RECOMMENDED this 8th day of March, 1983, in Tallahassee, Leon County, Florida.

LINDA M. RIGOT, 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 8th day of March, 1983.

COPIES FURNISHED:

John O. Williams, Esquire J. K. Linnan, Executive Director

547 North Monroe Street, Construction Industry Licensing Suite 204 Board

Tallahassee, Florida 32301 Post Office Box 2

Jacksonville, Florida 32201

Mr. Berthold Kinast 1244 Airport Road

Panama City, Florida 32401

Frederick Roche, Secretary Department of Professional

Regulation

130 North Monroe Street Tallahassee, Florida 32301

Docket for Case No: 82-001390

Orders for Case No: 82-001390