STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BONNIE M. MOBLEY and )

COUNCIL ENTERPRISES, INC., )

)

Petitioner, )

)

vs ) CASE NO. 88-2436

) STATE OF FLORIDA, DEPARTMENT OF ) GENERAL SERVICES, )

)

Respondent. )

)

RECOMMENDED ORDER

Following the provision of notice a formal hearing was held in this cause on December 16, 1988 in Tallahassee, Florida. The authority for the conduct of the hearing is set forth in Section 120.57(1), Florida Statutes. Charles C. Adams was the hearing officer. This Recommended Order is being entered following the receipt and review of the transcript of proceedings which was filed with the Division of Administrative Hearings on January 9, 1989. Exhibits as offered by the parties have also been considered. Counsel to the parties have presented proposed recommended orders as filed with the Division of Administrative Hearings on February 2, 1989. To some extent the fact finding suggested in the proposed recommended orders has been utilized in the preparation of this recommended order. Otherwise that fact finding is distinguished in an Appendix to the recommended order which is attached.

APPEARANCES

For Petitioners: Donald S. Modesitt, Esquire

320 West Park Avenue Tallahassee, Florida 32301

For Respondent: Sandra D. Allen, Esquire

Office of General Counsel Department of General Services Room 452 Larson Building

200 East Gaines Street Tallahassee, Florida 32399-0955

ISSUE

The issues in this case concern the question of whether the Petitioners are entitled to certification as a Minority Business enterprise within the meaning of Chapter 288, Florida Statutes and Rule 13-8.005, Florida Administrative Code. The basic question is whether Bonnie M. Mobley, who is the minority person in Council Enterprises, Inc., and majority stockholder controls the management and daily operations of that corporation.

FINDINGS OF FACT

1. On July 1, 1984 council Enterprises, Inc. was incorporated as a Florida corporation. From that date until the Fall of 1985 the corporation was engaged in the business of plumbing and mechanical services in Florida.

   
   

2. At the inception Luther E. Council, Jr., who is also known as "Snipes" Council, was the president, a director and stockholder within the corporation. His mother Bonnie M. Mobley, a minority person, was the majority stockholder and a director in the corporation. At the commencement of the corporation, Bonnie Mobley was secretary/treasurer. Her percentage of stock ownership was 51 percent and the other 49 percent was held by the son. The money which was used to capitalize the corporation in its inception was provided by the mother in the amount of $50,000.

   
   

3. On June 14, 1985 by action of the Board of Directors, namely the mother and son, Luther E. Council, Jr. submitted his resignation as president. As the minutes of that meeting state, he did this having secured jobs for employees of Council Enterprises, Inc. with a firm known as Hays Heating and Plumbing Company. Council took a job with that company as manager. On the same date of the Board of Directors meeting, Bonnie M. Mobley was appointed as president, secretary and treasurer, in furtherance of a concern that each of these corporate officers be installed during the life of this corporation. When Luther E. Council, Jr. left Council Enterprises, Inc. to go and work with Hays he was no longer a director. It was further recommended by the son that his mother secure a Leon County Mechanical Contractor's License and serve as a qualifying agent and gain registration with the State of Florida. Other recommendations pursuant to Article II of the Articles of Incorporation were that she consider brokering mechanical equipment as a livelihood and secure a wholesaler's license as well. The events that took place by the corporation was in recognition of the fact that the corporation had concluded its business of offering plumbing and mechanical services. In fact, Bonnie Mobley had gone to work with Hays Heating and Plumbing Company on February 1, 1985 and would remain in her position as office manager at that company until January 9, 1987. During that time she was responsible for secretarial and bookkeeping responsibilities for Hays. During part of that time, as an aside, through Council Enterprises, Inc., she sold supplies to Hays for its use in projects. She tried to gain other contracts for supplies from companies other than Hays, without success.

   
   

4. Luther E. Council, Jr., while working at Hays as a manager, was his mother's supervisor. He stayed with Hays from February 1, 1985 until June 19, 1987.

   
   

5. As a consequence of leaving Council Enterprises, Inc. to go and work with Hays, Luther D. Council, Jr. transferred his stock in Council Enterprises, Inc. to his mother and she continues to hold all the stock in that company.

   
   

6. In August, 1987 and to the present, Bonnie Mobley and her son Luther E. Council, Jr. reconstituted Council Enterprises, Inc. for purposes of offering services in plumbing, mechanical, fire protection, underground utilities, pollutant storage and as builders. They opened an office at 110 Perkins Street, Tallahassee, Florida, which continues to be their business location.

   
   

7. Following the August, 1987 restructuring of the business Bonnie Mobley made her son vice-president and named him a director. This meant from that point forward, that there were two directors, Ms. Mobley and her son, Luther E. Council, Jr.

8. In the past, Ms. Mobley had some familiarity with the heating, ventilation and air conditioning and plumbing business which her ex-husband, father of Luther E. Council, Jr. began in 1959. This business was Council Brothers, a company which her former husband and his brothers had started. Her awareness of that business corresponded to about an 11 year period in which at times she was involved to some extent in doing "take offs", cost estimating on jobs for her husband's company. Her principal occupation during the course of this period related to working in the Lewis State Bank as a secretary, receptionist and in the personnel department associated with payroll. She had also done some bookkeeping work for a small business which her ex-husband had relating to an air conditioning and heating service.

   
   

9. Ms. Mobley has a license with Council Enterprises, Inc. related to Leon County in the mechanical field. As such, she is the qualifying agent for the corporation. Her son, by contrast, holds certified licenses with the State of Florida, Department of Professional Regulation, in the fields of plumbing contracting, mechanical contracting, building contracting, underground utility contracting, and pollutant storage contracting. In order to gain these licenses he had to have requisite experience in these fields and pass an examination. He also holds a First Class Fire Protection Contractor's License, and a Florida LP Underground Gas License issued by the State of Florida, Department of Insurance.

   
   

10. Since the corporation returned to the active contracting business in August, 1987 Ms. Mobley's duties include giving instructions to an office secretary, Laverne Taylor, as needed, and generally keeping things running in the office. She is involved with final decisions about business choices to include an awareness of Dodge reports which advertise contract job opportunities and looking at the local newspaper to see about available work. She is involved in the purchase of equipment and has a say in those choices. She is involved with answering the phone at the office, paying bills, and taking care of the payroll. She sometimes goes to jobsites and stays a number of hours or even may stay all day.

    
    

11. Luther E. Council, Jr. describes his position with the company as one of doing whatever needs to be done from running equipment, writing letters, raking and shoveling at jobs and doing job estimating.

    
    

12. The mother and son and their field foreman, John W. Edwards, III, all involve themselves in bidding jobs which the company is interested in.

    
    

13. The arrangement for hiring employees in the company is one in which a number of the employees who work for the company were associated with Hays and came to work at Council Enterprises, Inc. when Luther E. Council, Jr. returned from Hays to Council Enterprises, Inc. Mr. Edwards was an individual whom Luther E. Council, Jr. knew through their interest in law enforcement. Edwards as field manager is responsible for obtaining additional employees as needed in the field, subject to the approval of Ms. Mobley. Ms. Mobley has on occasion fired a couple of foremen with the company. This was against the recommendation of the field foreman Edwards. Another example of hiring relates to Laverne Taylor whom Ms. Mobley hired. The basic arrangement for hiring and firing in the company is premised upon consultation among Ms. Mobley, her son and the field foreman Edwards.

    
    

14. Although 95 percent of the checks in the bank account by the company have been signed by Ms. Mobley, her son has signed the other 5 percent of the

    checks and has the authority to sign checks on the company's single signature accounts.

    
    

15. In the bidding process which has been alluded to, all three persons, namely Ms. Mobley, Mr. Edwards and her son, Luther E. Council, Jr. are involved. Edwards is not as experienced as the son and neither is Ms. Mobley. Luther E. Council, Jr. has a better grounding in the business and in the more complicated issues that may arise in the bidding process.

    
    

16. Ms. Mobley has been involved in the financial end of the corporation's activities and is well-grounded in that aspect of the business, to include major purchases, heavy equipment, the payment of routine items such as phone bills, and other account activities.

    
    

17. Ms. Mobley, Luther E. Council, Jr. and Mr. Edwards are full-time employees for Council Enterprises, Inc.

    
    

18. In obtaining recent loans in the amounts of $60,000 and $22,500, the initial amount being for cash flow on accounts receivable and the second amount having to do with a line of credit, it was necessary for Ms. Mobley and her son Luther E. Council, Jr. to guarantee the loans. In a related matter in the purchase of major pieces of equipment, both Ms. Mobley and her son signed the financial agreements involving the lease purchase of equipment. Bonding for the company in its projects include references to the resume's of both Ms. Mobley and her son.

    
    

19. Approximately 80 percent of the work of Council Enterprises, Inc. involves underground utility installation and 20 percent is related to plumbing. In this process, Luther E. Council, Jr. is an indispensable person in deciding the direction which the company will pursue in its business activities, most especially related to understanding of the technical aspects of this company's business and the necessity to rely upon his licensing credentials in order to pursue its business functions. For thin's reason, Bonnie Mobley is not in a position to independently control the corporation's affairs and, in fact, has not controlled it, independent of her son a non-minority person. In this connection, Article II, Section 1 of the By Laws of the corporation, Council Enterprises, Inc., speaks in terms' of the business of that corporation being managed and its corporate powers being reposed in its Board of Directors. Further, Article II, Section 6 of those By Laws requires that the majority of the directors shall be necessary as participants at a meeting to constitute a quorum and that it is the act of the majority of those directors present at the meeting where there is a quorum that constitutes the actions of the Board of Directors. Given this circumstance, there are only two directors and Luther E. Council, Jr. has as much authority as Ms. Mobley in his capacity as director.

As a result, he necessarily shares in the management of the company.

1. Against this background information concerning Council Enterprises, Inc. it had sought to gain certification as a Minority Business Enterprise by the State of Florida, Department of General Services. It was denied that opportunity by action of the Department on April 8, 1988 and sought a formal hearing under Section 120.57(1), Florida Statutes, to resolve the question of its entitlement to such certification. The basis of denial was briefly described in the issue statement to this recommended order and will be more specifically referred to in the Conclusions of Law section of the recommended order which follows.

   CONCLUSIONS OF LAW

   
   

2. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action under Section 120.57(1), Florida Statutes (1987).

   
   

3. Petitioner corporation asks that it be certified as a Minority Business Enterprises and bears the burden of proving its entitlement to that recognition. The requirements for this proof are contemplated by the holding Florida Department of Transportation v. J.W.C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

   
   

4. The definition of "Minority Business Enterprise" is announced at Section 288.703(2), Florida Statutes, as follows:

   
   

   `Minority Business Enterprise' means any small business concern as defined in subsection (1) which is organized to engage in commercial transactions, which is domiciled in Florida, and which is at least

   51 percent owned by minority persons and whose management and daily operations are controlled by much persons.

   
   

5. Council Enterprises, Inc. is organized and engages in commercial transactions and is domiciled in Florida. It is 51 percent owned by a minority person, in that Bonnie M. Mobley is a "minority person" as defined by Section 288.703(3), Florida Statutes. The conflict between these parties concerns the matter of whether Bonnie M. Mobley as the minority person controls the management and daily operations of Council Enterprises, Inc.

   
   

6. In answering the question of whether Bonnie Mobley is in control of the management and daily operations of the corporation, the Respondent agency is called upon, pursuant to Sections 288.703(4) and 287.0943(1), Florida Statutes, to consider that issue and in aid of that function has promulgated Rule 13- 8.005(3), Florida Administrative Code. That provision of the Code establishes certain criteria for considering the question of whether the minority person is in control of the management and daily operations of the corporation. The pertinent provisions of that Rule which are at issue here are as follows:

   
   

   1. An applicant must establish that the minority owners possess control over the management and daily operations of the business. The Department will consider the following factors:

   2. Whether the minority owners have control over the purchase of goods, equipment, business inventory and services needed in the day-to-day operation of the business.

      1. Whether the minority owners have the authority to hire and fire employees.

      2. Whether the minority owners have knowledge of the financial structure of the business and control over all financial affairs.

      3. Whether the minority owners control business accounts - checking, savings, and

         other financial affairs.

      4. Whether the minority owners have the capability knowledge, and experience required to make decisions regarding that particular type of work.

      5. Whether the minority owners have displayed independence and initiative in seeking and negotiating contracts, accepting and rejecting bids and in conducting all major aspects of the business.

      
      

7. In addition, in view of the fact that this is a corporation, the requirements of the Florida laws concerning corporate entities are also instructive in examining the question of control of the management and daily operations of the corporation. References within Chapter 607, Florida Statutes are those which pertain. At Section 607.111(1), Florida Statutes, it states:

   
   

   All corporate powers shall be exercised by or under the authority of, and the business and affairs of a corporation shall be managed under the direction of, a board of directors, except as may be otherwise provided in this chapter or in the articles of incorporation. If any such provision is made in the articles of incorporation, the powers and duties conferred or imposed upon the board of directors by this chapter shall be exercised or performed to such extent and by such person or persons as shall be provided in the articles of incorporation.

   
   

8. It is also stated in Section 607.121, Florida Statutes that:

   
   

   A majority of the number of directors fixed by, or in the manner provided in, the bylaws or, in the absence of a bylaw fixing or providing for the number of directors, then of the number stated in the articles of incorporation shall constitute a quorum for the transaction of business, unless a greater number is required by the articles of incorporation or the bylaws. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors unless the act of a greater number is required by the articles of incorporation or the bylaws.

   
   

9. Beginning with an analysis of the language of the corporate statute compared to the corporate structure of Council Enterprises, Inc., Bonnie Mobley and Luther E. Council, Jr. are the sole directors of the Petitioner corporation. The bylaws of that corporation indicate that the business of the corporation shall be managed and its corporate powers exercised by those directors. Since there are only two directors in the corporation, they must agree to carry forward the corporate business Luther E. Council, Jr. necessarily has influence available to him in carrying out corporate functions. It does not matter that he has not chosen to oppose the purposes of his mother in the business

   decisions. The fact that, in law, he may oppose the minority person within the firm, his mother, creates a legal arrangement by the corporate conditions which is an impediment to the control of the management and daily operations on the part of the minority person. See Barton S. Amy Company, Inc. v. State of Florida Department of General Services, DOAH Case No. 86-3954, recommended order, March 5, 1987, as adopted by Final Order, April 21, 1987 and per curiam affirmed in action of the First District Court of Appeal, State of Florida on February 11, 1988.

   
   

10. Beyond the inherent problems in the corporate structure as referred to, the minority person also has difficulty satisfying all review the criteria that have been described before. In this sense, Bonnie Mobley does not have effective control of the purchase of goods, equipment, business inventory and services without resort to the opinions of her son. She does have the authority to hire and fire employees. She does have adequate knowledge of the financial structure of the business, but not adequate control over the financial affairs. In particular she shares this responsibility with her son. She does not control the checking, savings and other financial affairs. She does not have capability, knowledge and experience required to make decisions regarding the type of work. She has displayed initiative in seeking and negotiating contracts but she is not sufficiently conversant with the nature of the business to be independent in efforts at seeking and negotiating contracts, nor has she sufficient understanding to make the independent decision on accepting and rejecting bids and conducting all major aspects of the business. Her most obvious shortcoming in this regard has to do with the technical nature of the business.

    
    

11. In order to proceed with the business activities of this corporation in contracting for plumbing and underground utilities work in Florida, a qualifying agent is necessary. See Section 489.119(2), Florida Statutes. Ms. Mobley could use any person as a qualifying agent in those instances where her qualifying agent position as a mechanical contractor for Leon County would not suffice, namely in those areas related to plumbing and underground utility. She has chosen to use her son. This arrangement is one which enhances his influence as a corporate director. Given their past history in the company in which the son has been the more dominant figure in the business operations, this influence is documented. These opinions are held notwithstanding the basic familiarity which Ms. Mobley has with the company's activities and her more than adequate understanding of the office operations and financial affairs of the company.

    
    

12. On balance, taking into account the corporate structure and the requirements of the terms of incorporation related to control by the directors and given Ms. Mobley's inadequacies in the areas as described, the minority person Bonnie M. Mobley is not in management and daily control of the operations of the company. Consequently, the request for certification as a Minority Business Enterprise should be rejected.

RECOMMENDATION

Based upon consideration of the findings of fact and conclusions of law reached, it is,

RECOMMENDED:

That a Final Order be entered which denies the application of Council Enterprises, Inc. to be certified as a Minority Business Enterprise.

DONE and ENTERED this 6th day of March, 1989, in Tallahassee, Leon County, Florida.

CHARLES C. ADAMS

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 6th day of March, 1989.

APPENDIX

The following disposition is made of the proposed fact finding of the parties:

Petitioner's Facts

The Petitioner's facts are subordinate to the fact found in the recommended order.

Respondent's Facts

1.-6. Subordinate to facts found.

1. Subordinate to facts found with the exception of the next to the last sentence which is not necessary to resolution of the dispute.

2. Subordinate to facts found with the exception of the first sentence which is contrary to facts found.

3. First sentence is contrary to facts found. The balance of the sentences within that paragraph are subordinate to facts found with the exception of the discussion of use of Luther E. Council, Jr.'s licenses as qualifying to allow the company to conduct certain business in the contracting field. Although it may be customary to use someone else's license as a qualifier for the benefit of the company, under the present circumstances the person who is the qualifying agent is a director who must be appeased before the corporation can conduct its affairs and who by the facts of thin case, is the dominant figure in the pursuit of the business of the corporation.

4. Contrary to facts found.

COPIES FURNISHED:

Donald S. Modesitt, Esquire

320 West Park Avenue Tallahassee, Florida 32301

Sandra E. Allen, Esquire Office of General Counsel Department of General Services Room 452 Larson Building

200 E. Gaines Street Tallahassee, Florida 32399-0955

Ronald W. Thomas Executive Director

Department of General Services

133 Larson Building Tallahassee, Florida 32399-0955

Docket for Case No: 88-002436

Orders for Case No: 88-002436