STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

)

Petitioner, )

)

vs. ) CASE NO. 94-5890

)

DAVID J. HAYES, )

)

Respondent. )

)

RECOMMENDED ORDER

Final hearing was held on February 13, 1995, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings. Respondent, his witness, and the court reporter attended the hearing in Ft. Myers. Petitioner's counsel and Robert E. Meale, Hearing Officer of the Division of Administrative Hearings, participated by videoconference from Tallahassee.

APPEARANCES

The parties were represented at the hearing as follows: For Petitioner: Kelly Anne Cruz

Department of Business and Professional Regulation

1940 North Monroe Street Tallahassee, Florida 32399-0792

For Respondent: David J. Hayes, pro se

17131 Pleasure Road

Cape Coral, Florida 33909 STATEMENT OF THE ISSUE

The issue in this case is whether Respondent is guilty of mismanagement or misconduct in the practice of contracting that causes financial harm to a customer.

PRELIMINARY STATEMENT

By Administrative Complaint dated March 25, 1994, Petitioner alleged that Respondent was a certified general contractor and contracted with Richard R. Cote for the construction of a home for a price of $92,500. The Administrative Complaint alleges that Respondent received a down payment of $18,500 from Mr.

Cote, but never started construction and never refunded the money to Mr. Cote. The Administrative Complaint alleges that Respondent violated Section 489.129(1)(h)2 by committing mismanagement or misconduct in the practice of contracting that causes financial harm to a customer.

Respondent requested a formal hearing.

At the hearing, Petitioner called no witnesses and offered into evidence five exhibits, of which all but Petitioner Exhibit 2 were admitted. Respondent called two witnesses and offered no exhibits into evidence.

The transcript was filed March 14, 1995. Rulings on timely filed proposed findings of fact are in the appendix.

FINDINGS OF FACT

1. At all material times, Respondent has been a certified general contractor, holding license number CG CA19293. In September 1983, he was, according to a form filed with Petitioner, "legally appointed to act for [Ebbtide Construction & Development, Inc.] in all matters connected with its contracting business, and given authority to supervise construction undertaken by the business organization."

   
   

2. Ebbtide was engaged in the home construction business. Paul Gregg purchased Ebbtide in 1988. Respondent still served as an employee and primary qualifying individual for the corporation.

   
   

3. Erroneously believing that at least three persons were required by law to serve as officers of the corporation, Mr. Gregg appointed Respondent and a third person to serve as officers and directors with Mr. Gregg, who owned all of the stock of the company.

   
   

4. On August 27, 1991, Mr. Gregg, on behalf of Ebbtide, entered into a construction contract with Richard and June Cote, who were neighbors of Mr. Gregg in Connecticut. The contract calls for the Ebbtide to construct a certain style of home for the Cotes. In return, the Cotes would pay Ebbtide a total of

   $72,500.

   
   

5. The contract intentionally omits the location of the homesite because, at the time of the execution of the contract, neither party knew where the house would be built. The contract inadvertently fails to require Ebbtide to purchase a lot for the Cotes, but the total contract price was to include a lot.

   
   

6. The contract was contingent on financing. If the Cotes failed to obtain financing, "either party may cancel this Contract." The contract does not provide that Ebbtide could retain any part of the money paid by the Cotes in the event of cancellation for the Cotes' failure to obtain financing, nor did the parties so intend.

   
   

7. On November 1, 1991, the parties executed a new contract. The new contract was identical to the original contract, except that a $15,000 pool had been added and the cost of the house increased $5000. The total was now

   $92,500. The contract reflects the fact that the Cotes had now paid Ebbtide a total of $18,500 in deposits.

   
   

8. At the time of the execution of the November 1 contract, the parties still had not identified a lot on which Ebbtide could build the home. Sometime in early 1992, the Cotes found a lot with Mr. Gregg's assistance. The Cotes applied for a mortgage loan, contemplating a closing during the summer. The Cotes were approved for the loan on April 27, 1992, but were unable to close due to a title problem with the lot.

9. Respondent had nothing to do with the location of the lot. Mr. Gregg was the only person on behalf of Ebbtide involved with this aspect of the transaction.

   
   

10. Later, Mr. Gregg, on behalf of Ebbtide, located another lot, in which he owned an interest. For some reason, however, this lot also proved unsuitable.

    
    

11. When the second lot fell through in March 1993, the Cotes demanded of Mr. Gregg that Ebbtide return their money, which had been deposited in Ebbtide's general account and used for general overhead. Mr. Gregg did not do so, and months went by without any progress. Mr. Gregg showed real interest in the problem only after the Cotes complained to Petitioner. Without denying liability for the deposit, Mr. Gregg has not returned any of the money, nor has he worked out a repayment plan.

    
    

12. Although Respondent was a signatory on the company's checking account, he only became involved in financial matters when a construction account was set up for a house for which construction had actually started. Otherwise, Respondent did not involve himself in financial matters and limited himself strictly to the supervision of construction.

    
    

13. When Mr. Gregg purchased the company in 1988, Respondent was a salaried employee. Respondent remained a salaried employee, without commissions or bonuses, until he left the company. In fact, his salary was never increased. Worried about the financial condition of Ebbtide, Respondent withdrew his license from the company on December 9, 1993.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes.)

    
    

15. Section 489.129(1)(h) provides that the Construction Industry Licensing Board may impose discipline if a "contractor, or the business organization for which the contractor is a primary qualifying agent . . .., is found guilty of any of the following acts:"

    
    

    1. Committing mismanagement or misconduct in the practice of contracting that causes financial harm to a customer. Financial mismanagement or misconduct occurs when:

       1. Valid liens have been recorded against the property of a contractor's customer for supplies or services ordered by the contractor for the customer's job . . ..

       2. The contractor has abandoned a customer's job and the percentage of completion is less than the percentage of the total contract price paid to the contractor as of the time of abandonment, unless the contractor is entitled to retain such funds under the terms of the contract or refunds the excess funds within 30 days after the date the job is abandoned.

       3. The contractor's job has been completed, and it is shown that the customer has had to pay

          more for the contracted job than the original contract price, as adjusted for subsequent change orders . . ..

          
          

16. This is a case of Ebbtide's financial misconduct or mismanagement, as opposed to misconduct or mismanagement in the actual construction process. As such, the financial misconduct or mismanagement must fall into one of the three categories set forth in the statute.

    
    

17. No liens have been recorded against the job, nor has the job been completed with the owner having had to pay more than the agreed amount. Thus, the question is whether the contractor has abandoned the job with the percentage completion less than the percentage of the contract price paid.

    
    

18. No job can be abandoned unless it has been started. Here, a key element of the contract was missing, without which no job could have started. The parties never agreed upon the location of the homesite. This was not a responsibility that Respondent had assumed, nor did the Cotes look to Respondent to assume this responsibility. They instead trusted their neighbor, Mr. Gregg, to find them a suitable homesite.

    
    

19. Petitioner argues in its proposed recommended order that construction is considered to have commenced when the contract is executed and the contractor has accepted funds from the customer or lender. Petitioner cites in support of this assertion Section 489.129(1)(h)2, (k), and (r).

    
    

20. Petitioner's reliance on these statutory provisions is misplaced. Subparagraph (h)2, which is quoted above, provides that abandonment justifies discipline and is the basis on which Petitioner is prosecuting Respondent.

    
    

21. Subparagraph (k) provides that grounds for discipline include "[a]bandoning a construction project in which the contractor is engaged or under contract as a contractor." First, Petitioner never alleged that Respondent violated Section 489.129(k). Second, the acquisition of a suitable homesite was a condition precedent to the commencement of the contract. Through no fault of Respondent, the parties to the contract never found a suitable homesite. Thus, there was no contract with respect to which Respondent could abandon construction.

    
    

22. Subparagraph (r) provides that grounds for discipline include the failure to satisfy a judgment relating to the practice of the licensee's profession. Petitioner never alleged that Respondent violated Section 489.129(r), and the Cotes have never obtained a judgment. It is unnecessary to determine whether, under the facts, the acts and omissions of Mr. Gregg and Ebbtide relate to the practice of Respondent's profession.

    
    

23. Once the parties secured an acceptable homesite, the Cotes would then look to Ebbtide to construct the home for the contract price, and Respondent's license would stand behind the corporation's performance of its construction responsibilities. But, under Section 489.129(1)(h), Respondent's license is at risk only for the financial wrongs committed by Ebbtide that are described in the statutes and not for the failure of Ebbtide and Mr. Gregg to obtain a suitable homesite or refund the deposit.

RECOMMENDATION

It is

RECOMMENDED that the Construction Industry Licensing Board enter a final order dismissing the Administrative Complaint.

ENTERED on March 27, 1995, in Tallahassee, Florida.

ROBERT E. MEALE

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 on March 27, 1995.

APPENDIX

Rulings on Petitioner's Proposed Findings

1: adopted or adopted in substance. 2: rejected as irrelevant.

3-5: adopted or adopted in substance.

6: rejected as unsupported by the appropriate weight of the evidence. 7-15: adopted or adopted in substance.

16-19: rejected as subordinate.

20: adopted or adopted in substance. 21-23: rejected as subordinate.

24-26: adopted or adopted in substance.

27: rejected as subordinate and irrelevant. 28-29: adopted or adopted in substance.

30-35: rejected as irrelevant.

36-37: rejected as unsupported by the appropriate weight of the evidence.

Rulings on Respondent's Proposed Findings

1-5: adopted or adopted in substance. 6-11: rejected as irrelevant.

COPIES FURNISHED:

Daniel O'Brien Executive Director

Construction Industry Licensing Board Post Office Box 2

Jacksonville, FL 32202

Kelly Anne Cruz

Department of Business and Professional Regulation

1940 North Monroe Street Tallahassee, FL 32399-0792

David J. Hayes 17131 Pleasure Rd.

Cape Coral, FL 33909

Linda Goodgame, General Counsel Department of Professional Regulation 1940 North Monroe Street

Tallahassee, FL 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 94-005890

Orders for Case No: 94-005890