STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, ) CONSTRUCTION INDUSTRY )

LICENSING BOARD, )

)

Petitioner, ) Case No. 00-2305

)

vs. )

) KENNETH MCDUFF ROESCH, III, )

)

Respondent. )

_____________________________)

RECOMMENDED ORDER ON REMAND

A hearing was held in this case in St. Petersburg, Florida, on September 13, 2001, before Lawrence P. Stevenson, an Administrative Law Judge with the Division of Administrative Hearings.

APPEARANCES

For Petitioner: William Oglo, Esquire

Department of Business and Professional Regulation

Northwood Centre

1940 North Monroe Street Tallahassee, Florida 32399-2202

For Respondent: Kenneth McDuff Roesch, III, pro se

13650 66th Street, North Largo, Florida 33771

STATEMENT OF THE ISSUE

The issue for consideration is the amount of out-of- pocket expenses incurred by Respondent and his company in

performing theproject that was the subject of the underlying proceeding in this case.

PRELIMINARY STATEMENT

In a five-count Administrative Complaint dated

October 21, 1998, the Department of Business and Professional Regulation, on behalf of the Construction Industry Licensing Board ("Board") charged Respondent with several violations of Section 489.129(1), Florida Statutes. The charges dealt with Respondent's actions pursuant to a contract with David and Linda Maffo to raise their house above flood level and install a new foundation under it.

Respondent requested a formal hearing on the allegations.

The hearing was held on July 11, 2000, in St. Petersburg, before Administrative Law Judge Arnold H. Pollock. On August 16, 2000, Judge Pollock entered a Recommended Order that recommended to the Board, among other disciplinary

measures, that Respondent be required to "reimburse the Maffos such sums as can be considered above actual . . . out-of- pocket costs related to this project."

On April 3, 2001, the Board entered an order adopting Judge Pollock's findings of fact and conclusions of law, but remanding the case to the Division of Administrative Hearings ("DOAH") "solely for the limited purpose of receiving evidence as to the correct amount of out-of-pocket expenses incurred on

the project by Respondent and his company." The Board's order of remand was accepted by DOAH on June 26, 2001, and this hearing was scheduled for September 13, 2001.

At the hearing, Petitioner presented the testimony of David M. Maffo, who owned the property when Respondent performed the elevation. Petitioner offered no exhibits. Respondent presented the testimony of his brother, Mark Roesch, and of James Harazin, the current owner of the property. Respondent's composite Exhibit 1 was admitted into evidence.

A Transcript of the proceeding was filed September 27, 2001. Both parties filed Proposed Recommended Orders on October 4, 2001.

FINDINGS OF FACT

Based on the oral and documentary evidence adduced at the final hearing, and the entire record of this proceeding, the following findings of fact are made:

1. Respondent, Kenneth McDuff Roesch, III, was certified as a building contractor under license number CB C057040, issued initially on December 20, 1993. He is the qualifying licensee for Roesch Housemovers, Inc. ("R.H.I."), the company that contracted with the Maffos to elevate their house.

2. In a letter to the Board, dated November 22, 2000, Respondent claimed the following items as R.H.I.'s expenses for the project:

   1.)	Engineering	$400.00
   2.)	Permits	183.00
   3.)	Foundation Materials	3,282.82
   4.)	Concrete Pump	385.00
   5.)	Foundation Labor	3,400.00

   
   

   Total foundation cost $7,650.82 Other Labor & Payroll

   1.) 2 days remove dirt from under house & get ready for steel frame

   
   

   2.) 2 days fabricated steel frame & get ready to lift building

   
   

   3.) 1 day remove old foundation & haul away

   
   

   4.) 2 days raising house to new elevation

   
   

   5.) 1 day put dirt back under house & compact

   
   

   6.) 2 days remove steel frame & complete job

   
   

   Total of 10 days
   R.H.I. payroll for 10 days	$4,641.04
   J.M.I. payroll for 10 days	8,949.67
   Other related overhead	6,673.12
   Total	$20,263.83
   Total job cost $27,914.56

3. At the hearing, Respondent sufficiently demonstrated that the $7,650.82 claimed as costs for installing the foundation were out-of-pocket expenses. During the foundation portion of the project, R.H.I. was required to make out-of- pocket expenditures to two engineering firms, to the City of St. Petersburg for permits, to suppliers of foundation materials, to the owner of a concrete pump, and to Leo's Repairs, the subcontractor who provided the labor for the foundation installation.

1. Respondent claimed a total of $20,263.83 in "other labor and payroll." Mark Roesch is Respondent's brother and the person most knowledgeable about R.H.I.'s finances.

   Mr. Roesch testified that R.H.I.'s costs exceeded the quoted contract price of $19,500 because problems with water caused the job to take ten days rather than the anticipated six days. Mr. Roesch stated that items such as labor, payroll, and overhead are factored into every R.H.I. contract and therefore should be allowable as out-of-pocket expenses in this case.

2. The evidence established that the item labeled "R.H.I. payroll for 10 days" in the amount of $4,641.04 constituted the salaries of R.H.I.'s four person clerical staff. No evidence was presented to establish that R.H.I.'s office staff performed any function peculiar to the Maffo project, or that payment of the staff's salaries was in any

   way contingent on the Maffo project. Mr. Roesch's contention notwithstanding, it is found that the "R.H.I. payroll for 10 days" constitutes general overhead not directly attributable to the Maffo job, and therefore is not an out-of-pocket expense related to this project.

3. The evidence established that the item labeled "other related overhead" in the amount of $6,673.12 was based on a calculation of R.H.I.'s general overhead, along with attorney's fees paid by Respondent related to his efforts to collect the contract price from Mr. Maffo. The documentation submitted by Respondent does not explain how the figure of

   $6,673.12 was arrived at. In any event, it is found that neither general overhead nor after-the-fact attorney fees can be considered out-of-pocket expenses related to the completion of this project.

4. The evidence established that the item labeled "J.M.I. payroll for 10 days" in the amount of $8,949.67 was based on payments to the leased employees who actually performed the non-foundation work on-site. "J.M.I." is John Mark, Inc., an employee leasing company owned by Mark Roesch. J.M.I.'s employees were sub-contracted to R.H.I. for the Maffo project, and for other R.H.I. projects during this time period.

5. The payroll documentation submitted by Respondent indicated that the total J.M.I. employee payments for the relevant period, calculated by adding gross payroll to the employer's matching FICA payment, was $6,263.77, not the

   $8,949.67 claimed by Respondent. At the hearing, Mark Roesch freely conceded that he may have miscalculated the J.M.I. payments, and that a figure closer to $6,000 was probably more accurate.

6. The evidence presented at the hearing did not establish that the J.M.I. employees worked only on the Maffo project for 10 days. Mr. Roesch admitted that R.H.I. was busy with other projects at the time and that the employees listed on the submitted documents worked on those other projects.

7. Based on the evidence submitted, it is found that the J.M.I. payroll entry does constitute out-of-pocket costs related to this project, but it would be unjust to attribute the full amount of $6,263.77 to the Maffo project where Respondent had conceded that the J.M.I. employees worked on other projects during this period. In the absence of Respondent's submittal of a precise calculation of the time worked by J.M.I. employees on this project, and the fact that the J.M.I. employees were working on multiple projects during this period, it is found that a fair resolution is to allocate one-third of the total J.M.I. payroll for the period, or

   $2,087.92, as out-of-pocket expenses related to the completion of this project.

8. In summary, it is found that the actual, allowable

   
   

   R.H.I. out-of pocket expenses for this project are $7,650.82 related to foundation costs, plus $2,087.92 for labor performed by J.M.I. employees, for a total of $9,738.74.

   CONCLUSIONS OF LAW

   
   

9. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter in this case. Section 120.57(1), Florida Statutes.

10. The Board has already entered an order establishing that Respondent committed violations of Section 489.129(1), Florida Statutes. The hearing in this phase of the case was limited to establishing Respondent's actual out-of-pocket expenses related to the Maffo project. The posture of the case places the burden on Respondent to prove his out-of- pocket expenses, the only alternative being to acquiesce in the Board's basing its restitution order on the full contract price.

11. As noted above, Respondent established $9,738.74 in actual out-of-pocket expenses, for engineering, materials purchased, permitting, and labor directly related to completion of the project. Respondent's other claims were not established, either through simple failure of proof or because

they were items of overhead. In absence of a statutory or rule definition, the undersigned has relied on the definition of "overhead" found in Webster's Ninth New Collegiate Dictionary: "business expenses (as rent, insurance, or heating) not chargeable to a particular part of the work or product." Clerical staff, legal fees, and other general expenses required simply to keep the doors of the business open are items of overhead, not actual out-of-pocket expenses related to completion of the Maffo project that was the subject of this proceeding.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Construction Industry Licensing Board utilize $9,738.74 as the actual out-of-pocket expenses incurred by Respondent and his company related to this project for the Board's determination of the appropriate amount of restitution to be paid by Respondent to the Maffos.

DONE AND ENTERED this 17th day of October, 2001, in Tallahassee, Leon County, Florida.

___________________________________ LAWRENCE P. STEVENSON

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6947 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 17th day of October, 2001.

COPIES FURNISHED:

William Oglo, Esquire Department of Business and

Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, Florida 32399-2202

Kenneth McDuff Roesch, III 13650 66th Street, North Largo, Florida 33771

Kathleen O'Dowd, Executive Director Construction Industry Licensing Board Department of Business and

Professional Regulation

7960 Arlington Expressway, Suite 300

Jacksonville, Florida 32211-7467

Hardy L. Roberts,III, General Counsel Department of Business and

Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of 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: 00-002305

Orders for Case No: 00-002305