STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 87-1722

)

JEFFREY HIRSCHBERGER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held on January 19, 1989, before Division of Administrative Hearings Hearing Officer, J. Lawrence Johnston, in Tampa, Florida.

APPEARANCES

For Petitioner: Jack M. Larkin, Esquire

806 Jackson Street

Tampa, Florida 33602

For Respondent: Donald Schutz, Esquire

Battaglia, Ross, Hastings, Dicus and Andrews

Post Office Box 41100

St. Petersburg, Florida 33743 ISSUE

Whether disciplinary action should be taken against the Respondent's contractor license number CG C004432, issued by the State of Florida, based upon the alleged violations of Florida Statutes, Sections 489.129(1)(j), (in two particulars), 489.129(1)(g), 489.129(1)(m), 489.129(1)(h) and 489.129(1)(l)

Florida Statutes, as contained in the Administrative Complaint filed by the Petitioner.

BACKGROUND

On or about December 12, 1986, the Petitioner filed an Administrative Complaint against the Respondent, alleging that the Respondent, on or about August 22, 1984, through a contracting business Respondent was then associated with and responsible for in his capacity as a licensed contractor, contracted with Bretton Woods Enterprises, Inc., to construct a ten-unit condominium project located in Tampa, Florida. The Administrative Complaint further alleged: (1) that at the time the Respondent entered into that contract, he did so under the name First Atlantic Properties, Inc., but that the Respondent failed to qualify that business and that business name did not appear on the

Respondent's state licensing contract, which violated Section 489.129(1)(j), Florida Statutes, by failing to qualify a firm he was operating through, and Section 489.129(1)(g), by operating under a name not appearing on his license;

1. that he violated Section 489.129(1)(m), Florida Statutes, by gross negligence, incompetence, misconduct, fraud, or deceit, in the practice of contracting; (3) that he violated Section 489.129(1)(j), Florida Statutes, by failing to discharge his supervisory duties, as a qualifying agent, in violation of Sections 489.119 and 489.105(4), Florida Statutes; (4) that he violated Section 489.129(1)(h), Florida Statutes, by diversion of funds received for a construction job, causing inability to fulfill contractual obligations; and (5) that he violated Section 489.129(1)(l), Florida Statutes, by signing a statement falsely indicating that all work, labor and material had been paid for, which caused loss to the owner or contractor.

   
   

   Subsequent to the filing of the Administrative Complaint, the Respondent requested a formal hearing by an executed Election of Rights form. The case was referred to the Division of Administrative Hearings for a Section 120.57(1), Florida Statutes, hearing.

   
   

   FINDINGS OF FACT

   
   

   1. At all times material hereto, the Respondent, Jeffrey Hirschberger, was a licensed contractor in the State of Florida, having been issued license number CG C004432 by the State of Florida.

      
      

   2. In 1976, the Respondent formed a corporation known as First Atlantic Properties, Inc., and from 1976 until 1981 built approximately 90 homes. In 1983, First Atlantic Properties, Inc. began expanding and serviced approximately

      130 clients prior to 1985 with no complaints filed with the State or any building department.

      
      

   3. On or about August 22, 1984, Bretton Woods Enterprises, Inc., entered into a contract with First Atlantic Properties, Inc. (a business the Respondent was then associated with and responsible for in his capacity as a licensed contractor), for First Atlantic Properties, Inc., to build for Bretton Woods Enterprises, Inc., a ten-unit condominium project located in Tampa, Florida.

      
      

   4. At all times during the negotiation of that contract, at the time of the signing of the contract and at all times during which construction under that contract was being performed by First Atlantic Properties, Inc., the Respondent failed to qualify the business and operated the business without that name appearing on his State contracting license.

      
      

   5. Subsequent to August, 1984, the Respondent pulled a building permit for First Atlantic Properties, Inc., in his personal name in order to allow the construction project to begin.

      
      

   6. The Respondent began construction pursuant to the contract in the fall of 1984.

      
      

   7. After the construction began, the Respondent, on behalf of First Atlantic Properties, Inc., would submit applications and certificates for payment to the Citizens and Southern National Bank of Florida, which provided Bretton Woods Enterprises, Inc., construction financing. On each of the applications, the Respondent would certify, among other things, that all work covered by each application had been completed in accordance with the contract documents, that all work for which previous certificates were issued had been

      paid for and that the payment request on the current certificate was then due. Along with each application, the Respondent would submit a contractor's affidavit which stated, among other things, that all persons, firms and corporations which furnished any labor, services and/or materials in connection with the construction had been paid in full. Upon receipt of those documents, the bank would issue a draft for the work done made payable to the Respondent's company and the owner. The owner would then endorse the draft, and Respondent would deposit it.

      
      

   8. The foregoing procedure was followed until approximately December 26, 1984, without any problems. At that time, the owner discovered that the Respondent had installed incorrect beams in one of the units. The units were supposed to have cathedral ceilings and the Respondent had ordered regular beams for all the units and had installed regular beams in one of the units before the owner recognized the mistake. The Respondent readily acknowledged his mistake and ordered all new beams. The new beams were ordered and installed at no cost to the owner.

      
      

   9. Construction proceeded again without any other apparent problems until around January 25, 1985. However, at about this time, the project began to suffer the effects of the Respondent's over-expansion of First Atlantic Properties since 1983. First Atlantic was doing about $500,000 of business a month. The Respondent and his project supervisors were stretched to the limit; so were his other employees. The Respondent began having difficulty keeping all of his projects adequately staffed. He also lost control over the finances of his company. Payments to his subcontractors and suppliers began to get slower. While the project still was on schedule, the results of these financial and operational problems began to surface.

      
      

   10. On or about January 25, 1988, the rough-in electrical work, among other things, was done. After the units were completed and were occupied by the owners, it was discovered that the electrical work done at this time was done incorrectly. It was discovered that when the power was hooked up, the breakers would trip, a lot of the switches and outlets did not work, the breakers were not spaced properly, a potential fire hazard existed and there were some wires hanging which were not connected. The owner had to bring in a new electrician to correct the problem and had to pay the new electrician additional monies over and above the contract price. Prior to incurring that expense, the owner attempted to have the electrician employed by the Respondent correct the mistakes. However, it was determined that the electrician had filed bankruptcy.

       
       

   11. Thereafter, construction continued without any apparent problems until February 20, 1985. At this particular point in time, about the only work that was being done was on the pool.

       
       

   12. On or about March 4, 1985, the Respondent was having his employees do ceiling and plastering work inside the units during the night and weekends. In the process, the workers' cleanup was lacking. The owner discovered that the ceilings and plastering inside the units had been improperly done.

       
       

   13. About March 20, 1985, the Respondent's assistant signed the affidavit for payment because the owner could not find the Respondent. The assistant told the owner that the Respondent left on an emergency. The owner later discovered that the Respondent had gone on a ski vacation.

   14. On or about March 26, 1985, work on the pool slowed down or ceased. The owner tried to call the pool contractor with whom the owner was dealing directly, but could not do so and could not get the pool inspected.

       
       

   15. When the Respondent returned to the job site, there were several meetings between him and the owner. The Respondent told the owner that he was broke and could not complete the project and that he had bills from subcontractors and suppliers that had not been paid.

       
       

   16. On or about April 4, 1985, the owner and Respondent went to Cox Lumber at the request of the Respondent. At that time, Cox Lumber wanted a guarantee of payment by the owner, and the owner refused. At that point Cox had liened the job. The owner obtained copies of all invoices regarding the job and also invoices regarding other jobs of the Respondent. After the owner obtained that information from Cox, he determined that materials supposedly delivered to his job site could not have been because all units were substantially complete and there was no need for lumber at the time of the stated delivery dates. Based upon that information, Cox withdrew its lien and dropped its previously filed suit.

       
       

   17. The subcontractors and suppliers began to receive word that the Respondent was having financial difficulties and that the owner was becoming more and more involved in the project. In late March and early April, 1985, the owner and bank started receiving notices to owner for the first time. During that time frame, it was decided that the owner would meet with each subcontractor, materialman and supplier to see if a payment schedule could be worked out so that they could be paid and would continue to work and supply materials.

       
       

   18. On or about April 9, 1985, it was determined that the sum of $26,425 was needed to keep the job going. The bank issued a check for $26,425 made payable to Bretton woods Enterprises and First Atlantic Properties. The Respondent endorsed the check, and the owner put it in his account. The owner paid the money to the subs, materialmen and suppliers. Each check was payable jointly with the Respondent.

       
       

   19. At the time the Respondent requested the payment of the $26,425, the Respondent signed an affidavit saying that all persons, firms and corporations who had furnished any labor, services and/or materials in connection with the construction of the work had been paid in full. Additionally, he certified that all work for which previous certificates of payment had been issued had been paid for. Those statements were false when made.

       
       

   20. As of April 9, 1985, (with the $26,425 payment), the Respondent had received $587,165 of the contract price. (The project was 75 percent to 80 percent complete.) At that point, the owner went to the Respondent and demanded he receive copies of his paid invoices. The Respondent supplied him a computer run showing paid invoices of $228,978. Those paid invoices, plus the pool payment of $9,000, plus the last draw of $26,425, comes to $264,403. In addition, the Respondent supplied the owner a computer run showing that the Respondent paid his laborers the sum of $41,189 through April 6, 1985. Adding the $41,189 to the $264,403, payments that the Respondent can document paying out total $305,592. The deficit at that point in time was $281,573.

       
       

   21. On or about April 25, 1985, the Respondent submitted to the owner a list of unpaid invoices of $182,237.

   22. Little work was done after April 9, 1985. During the period of April 18-20, 1985, the owner and the Respondent met concerning completing the job but no conclusions were reached. On April 21, 1985, the Respondent called the owner and left a message on his answering machine as to how he intended to complete the job. The plan was not acceptable to the owner. On April 21, the board of directors of the owner met and decided to fire the Respondent effective April 22, 1985. Later, the owner hired a second general contractor at a fee of

       $200,000 to complete the project.

       
       

   23. The total liens filed on the job were $135,651.77. But not all of the work represented by the liens was done prior to the Respondent being discharged. Burton Construction, the general contractor the owner hired after firing the Respondent, liened the project for $40,184. Other work, or at least some portion of it, related to the swimming pool on which the owner dealt directly with the pool contractor under an agreement between the owner and the Respondent. Other work related to extras asked for by the owner directly and not part of the Respondent's contract. Still, at least $100,000 of unpaid invoices, approximately $100,000 of which were for valid bills, was outstanding at the time the Respondent was fired. This represents work for which the owner had paid the Respondent. As a result of those liens being filed, the owner had to employ counsel and paid counsel approximately $80,000 in attorney's fees. Additionally, he had to post bonds on the amount of the liens, plus 18 percent to cover interest and costs. The owner could not sell some of the units because of the problems, and some of the units sold after the problems developed had to be sold at reduced prices in order to obtain money to pay the bank.

       
       

   24. Respondent (through his statement in mitigation and through Respondent's counsel) admitted that mistakes had occurred during the construction of the project and that the owner, subcontractors, materialmen and suppliers had been damaged as a result. The amount of damage to the owner and the others with whom the Respondent dealt on the Bretton Woods project is in dispute and was not resolved by the evidence in this case. However, the evidence did prove that the monetary damage to the owner was at least $120,000. (Evidence on further damage was inadmissible hearsay on which no finding of fact could be based or was speculative.) The owner and the Respondent were involved in a civil action at the time of the final hearing to resolve their civil responsibilities to one another, efforts to resolve them by agreement having failed up to that time.

       
       

       CONCLUSIONS OF LAW

       
       

   25. Under Section 489.129(1), Florida Statutes (1987), the Construction Industry Licensing Board is empowered to revoke, suspend or otherwise discipline the license of a contractor for violating any of the following paragraphs of that statute: (j) failure in any material respect to comply with the provisions of this act; (m) by gross negligence, incompetence, misconduct, fraud, or deceit in the practice of contracting; (h) by diversion of funds received for a construction job, causing inability to fulfill contractual obligations; and (1) by signing a statement falsely indicating that all work, labor, and material had been paid for, causing loss to the owner or contractor.

       
       

   26. The Respondent violated Section 489.129(1)(j) by failure to qualify First Atlantic Properties, Inc., the firm he was operating through, in violation of Section 489.119, Florida Statutes.

       
       

   27. The Respondent violated Section 489.129(1)(g), Florida Statutes, by operating under a name not appearing on his license.

   28. The Respondent violated Section 489.129(1)(m), Florida Statutes, by gross negligence, incompetence, misconduct, fraud or deceit in the practice of contracting. Clear and convincing evidence was presented to establish that the Respondent violated the foregoing statute. The Respondent received $587,165 of the contract amount yet could only document expenditures of $305,592. Numerous liens were filed totaling $135,651.77. Approximately $100,000 of these liens were for valid bills for work for which the Respondent previously had been paid. The owner incurred attorney fees of approximately $80,000 defending those liens, plus had to post bonds on the amount of the liens, plus 18 percent for interest and costs. The owner employed a second contractor to finish the job and, when the units were completed, had to sell them at a lower price in order to meet its increased financial obligations. The Respondent falsely signed financial affidavits saying that all materialmen, subcontractors and suppliers had been paid.

       
       

   29. The Respondent violated Section 489.129(1)(j), Florida Statutes, by failure to discharge his supervisory duty as a qualifying agent, in violation of Section 489.119 and Section 489.105(4), Florida Statutes. Since the Respondent obtained the building permit for this particular job, and there was no other licensed contractor on the job, he was the qualifying agent for First Atlantic Properties, Inc. The law is clear that Sections 489.119(1) and 489.105(4) impose on qualifying agents for a contractor the statutory duty to supervise the contractor's work. Complete failure to supervise the contractor's work is a violation. See Hunt v. Department of Professional Regulation, 444 So.2d 997 (Fla. 1st DCA 1983); Alles v. Department of Professional Regulation, 423 So.2d 624 (Fla. 5th DCA 1982). Sections 489.119(1) and 489.105(4) do not form the basis of a separate violation for simple negligence in supervising a construction job under Section 489.129(1)(j), Florida Statutes (1987). But inadequate supervision will subject a qualifying agent to discipline under both paragraphs (j) and (m) of Section 489.129(1) if it is incompetent or grossly negligent, as found in this case.

       
       

   30. The Respondent violated Section 489.129(1)(h), Florida Statutes, by diversion of funds received for a construction job, causing inability to fulfill contractual obligations. Clear and convincing evidence was presented to establish that the Respondent received for the Bretton Woods project $281,573 which was not spent on the project, he was unable to finish the job in accordance with the contract, and he was unable to fulfill his contractual obligations to subcontractors, materialmen and suppliers.

       
       

   31. The Respondent violated Section 489.129(1)(l), Florida Statutes, by signing a statement fraudulently indicating that all work, labor and material had been paid. Clear and convincing evidence was presented to establish that the Respondent, on more than one occasion, signed an affidavit falsely stating that all labor, services and materials in connection with the construction or improvements had been paid.

       
       

   32. The provisions of the Florida Administrative Code relating to the discipline appropriate for the violations in this case are:

21E-17.001 Normal Penalty Ranges. The following guidelines shall be used in disciplinary cases, absent aggravating or mitigating circumstances and subject to the other provisions of this Chapter.

(1) 489.129(1)(g), 489.119: Failure to

qualify a firm, and/or acting under a name not on license. First violation, letter of guidance; repeat violation, $250 to $750 fine.

* * *

1. 489.129(1)(l): False payment statements.

   1. False payment statement, liens were filed or customer otherwise injured. First violation, $250 to $750 fine; repeat violation, 1 year suspension and $1,000 to

      $3,000 fine.

   2. Same, but only injury was to another contractor or a supplier. First violation, letter of guidance; repeat violation, $250 to

      $750 fine.

2. 489.129(1)(h): Diversion of funds. First violation, $750 to $1,500 fine; repeat violation, revocation.

* * *

(18) 455.227(1)(a): Fraud, deceit, misleading or untrue representations. First violation, $500 to $1,500 fine; repeat violation, revocation.

(19) 489.129(1)(m): Cross negligence, incompetence, and/or misconduct, fraud or deceit.

1. Causing no monetary or other harm to licensee's customer, and no physical harm to any person. First violation, $250 to $750 fine; repeat violation, $1,000 to $1,500 fine and 3 to 9 month suspension.

2. Causing monetary or other harm to licensee's customer, or physical harm to any person. First violation, $500 to $1,500 fine; repeat violation, $1,000 to $5,000 fine and suspension or revocation.

* * *

(21) The absence of any violation from this Chapter shall be viewed as an oversight, and shall not be construed as an indication that no penalty is to be assessed.

21E-17.002 Aggravating and Mitigating Circumstances. Circumstances which may be considered for the purposes of mitigation or aggravation of penalty shall include, but are not limited to, the following:

1. Monetary or other damage to the licensee's customer, in any way associated with the violation, which damage the licensee has not relieved, as of the time the penalty is to be assessed. (This provision shall not be given effect to the extent it would contravene federal bankruptcy law.)

2. Actual job-site violations of building codes, or conditions exhibiting

   gross negligence, incompetence, or misconduct by the licensee, which have not been corrected a of the time the penalty is being assessed.

3. The severity of the offense.

4. The danger of the public.

5. The number of repetitions of offenses.

6. The number of complaints failed against the licensee.

7. The length of time the licensee has practiced.

8. The actual damage, physical or otherwise, to the licensee's customer.

9. The deterrent effect of the penalty imposed.

10. The effect of the penalty upon the licensee's livelihood.

11. Any efforts at rehabilitation.

12. Any other mitigating or aggravating circumstances.

21E-17.003 Repeat Violations.

(1) As used in this rule, a repeat violation is any violation on which disciplinary action is being taken where the same licensee had previously had disciplinary action taken against him or received a letter of guidance in a prior case; and said definition is to apply (i) regardless of the chronological relationship of the acts underlying the various disciplinary actions, and (ii) regardless of whether the violations in the present and prior disciplinary actions are of the same or different subsections of the disciplinary statutes.

21E-17.005 Penalties Cumulative and Consecutive. Where several of the above violations shall occur in one or several cases being considered together, the penalties shall normally be cumulative and consecutive.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:

(1) that the Respondent be found guilty of violating Florida Statute Sections 489.129(1)(j), (in two particulars), 489.129(1)(g), 489.129(1)(m), 489.129(1)(h) and 489.129(1)(l); (2) that, as punishment, the Respondent be fined the sum of $2,000 payable within 30 days; (3) that, upon his failure to pay the fine within thirty days, his license be immediately suspended indefinitely until the fine is paid; and (4) that he be on probation for one year after payment of the fine.

DONE and ENTERED this 13th day of April, 1989, in Tallahassee, Leon County, Florida.

J. LAWRENCE JOHNSTON Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 13th day of April, 1989.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-1722

To comply with Section 120.59(2), Florida Statutes (1987), the following rulings are made on the parties' proposed findings of fact:

1. Petitioner's Proposed Findings of Fact.

   
   

   1.-6. Accepted and incorporated.

   1. Last sentence, rejected as not proven by the evidence; the rest is accepted and incorporated.

   2. Accepted and incorporated.

   3. First and last sentences, accepted and incorporated. The rest is rejected as not proven by the evidence. The Respondent was having financial and operational problems during this time period and may well have mentioned this to Chernoff. But the evidence did not prove that the work was not still approximately on schedule. Only the pool was being worked on at this particular time, but a substantial portion of the work already had been completed, and additional work (mostly finishing and trim) was done by the Respondent after this.

   4. Last sentence, rejected as not proven. The rest is accepted and incorporated.

   5. Rejected that the Respondent used "unskilled workers," that no cleanup was taking place, and that the owner "had to employ additional contractors at additional cost" to correct the work. Not proven. (It is not clear that the Respondent would not have corrected the work himself if the owner had not fired him. Also, it is not clear whether this cost was added to, or figured into, the

   $200,000 fee paid to the second general contractor after the Respondent was fired.)

   12.-13. Accepted and incorporated.

   14. Last sentence, accepted but unnecessary. 15.-21. Accepted and incorporated.

   1. Rejected, as not proven, that the plan was "non-sensical." (It was, however, unacceptable to the owner.)

   2. Accepted but unnecessary.

   3. Rejected in part as not proven. The total was $135,651.77, and not all represented work the Respondent had done on the project. The attorney fees were approximately $80,000.

   4. Last sentence, accepted and incorporated. Rest, rejected as subordinate in part to facts found and in part to facts contrary to those found.

   
   

2. Respondent's Proposed Findings of Fact.

1.-3. Accepted and incorporated.

4. Accepted but unnecessary.

COPIES FURNISHED:

Jack M. Larkin, Esquire 806 Jackson Street

Tampa, Florida 33602

Donald Schutz, Esquire Battaglia, Ross, Hastings,

Dicus and Andrews Post Office Box 41100

St. Petersburg, Florida 33743

Fred Seely, Executive Director Construction Industry Licensing

Board

111 East Coastline Drive Jacksonville, Florida 32202

Kenneth E. Easley, Esquire General Counsel

Department of Professional Regulation

130 North Monroe Street Tallahassee, Florida 32399-0750

Docket for Case No: 87-001722

Orders for Case No: 87-001722