Findings Of Fact Based upon the oral and documentary evidence adduced at the Final Hearing and the entire record in this proceeding, the following findings of fact are made: Petitioner, the Florida Employers Safety Association Self-Insurance Fund (the "Fund"), is a workers' compensation group self-insurance fund, which, during all pertinent time periods was subject to Chapter 440, Florida Statutes, and Chapter 38F-5, Florida Administrative Code. Gulf Atlantic Management Group is the administrator for the Fund. The Fund began operations on April 1, 1990. At the time of the hearing in this case, the Fund was in its fifth year of operation. Prior to July 1, 1994, the state regulatory authority for workers' compensation self-insurance funds was DLES (State of Florida, Department of Labor and Employment Security). As of July 1, 1994, regulatory authority for workers' compensation self-insurance funds was transferred to DOI (State of Florida, Department of Insurance and Treasurer). For purposes of this Recommended Order, the "Department" shall refer to the regulatory authority responsible for workers' compensation group self-insurance funds in Florida during the pertinent time. As a result of the statutory changes, many DLES employees involved in the regulation of worker's compensation group self- insurance funds were transferred to DOI's, Bureau of Property and Casualty Self-Insurance which currently handles all regulatory matters relating to worker's compensation group self-insurance funds. Chapter 38F, Florida Administrative Code, was promulgated by the Department pursuant to its regulatory authority over worker's compensation group self-insurance funds as delineated in Chapter 440, Florida Statutes. The Rules require workers' compensation self-insurance funds to submit certain financial and actuarial documents to the Department on a regular basis. Form BSI-26 is a Department approval form that is to be submitted each year with an actuarial report; Form BSI-25 is another Department form that is filed with the year-end financial statements; and Form BSI-24 is a quarterly, non-financial statistical report on a fund's operations. Before the Department would approve a dividend distribution by a fund for a fiscal year beginning or ending in 1993, the Department required an audited certified financial statement, an annual report of financial condition and a loss reserve review by a qualified actuary to be submitted seven months after the end of a fund's fiscal year. The Fund's fiscal year runs from April 1 to March 31 of each year. Thus, its year-end reports and statements are due on or before November 1. At the time of the hearing in this case, Form BSI-25's had been submitted by the Fund to the Department for each fiscal year of the Fund's existence. Financial statements, independent auditor's reports and actuarial reports had also been submitted by the Fund to the Department for each Fund fiscal year. In addition, all quarterly BSI-24's had been filed. On or about October 29, 1993, the Fund's administrator sent the Department a request for an extension of time to file the required reports for the fiscal year that ended March 31, 1993. This request was denied by the Department in a letter dated November 3, 1993. Shortly thereafter, when the Department realized it had not received the required reports and information from the Fund within seven months from the end of the Fund's fiscal year, the Department sent a letter dated November 18, 1993 to the Fund requesting the required reports. On November 19, 1993, the administrator for the Fund forwarded to the Department the audited financial statements and actuarial report for the fiscal year ending March 31, 1993. In those statements and report, the Fund's loss reserves were discounted. In January 1994, the Department reviewed the required reports submitted by the Fund and determined that the loss reserves reflected on the BSI-25 form for the year ending March 31, 1993 were deficient because they discounted loss reserves contrary to the Department's policy. Gene Smith, the Department's actuary, wrote directly to Mr. Sanz, the administrator of the Fund, and requested the Fund to submit by January 28, 1994 a corrected BSI-25 which did not discount loss reserves. Petitioner responded to the Department's request with a letter from William Larry Shores, the Fund's Certified Public Accountant, to the Department dated January 21, 1994 which set forth Mr. Shores' opinion as to why the Department should allow Petitioner to discount its loss reserves. The Fund did not submit amended or modified financial documents in accordance with the Department's request. The Fund contends there is no rule or statutory basis for the Department to require the Fund to submit a corrected BSI-25 or a corrected financial statement. On or about March 8, 1994, the Fund submitted a written letter request to the Department, pursuant to Section 440.57(5), Florida Statutes, and Rule 38F-5.065(3), Florida Administrative Code, requesting authorization for a distribution in the amount of $781,065.02 from the surplus reflected on the Fund's financial statements and Actuarial Report for the Fiscal Year ending March 31, 1993. As indicated above, prior to the Fund's March 8, 1994 letter request for a disbursement, the Fund had completed and submitted to the Department all financial and actuarial data and reports required by the Florida Statutes and the Florida Administrative Code, but the Department had questioned whether those reports properly reported loss reserves. By letter dated April 1, 1994, the Department denied the Fund's March 8, 1994 request for a distribution. The request was denied pursuant to Section 38F-5.065(4), Florida Administrative Code, which was the applicable rule in effect as of March 31, 1993. This Initial Denial Letter stated that the Department had determined that approval of the requested dividend would impair the financial solvency of the Fund. Prior to denying the Fund's Initial Request, the Department reviewed the BSI-25 forms submitted by the Fund as of March 31, 1993, the Fund's March 31, 1993 financial statement, the Fund's actuarial report for the fiscal year ending March 31, 1993 along with the BSI-26 form, the Fund's June 30, 1993 BSI- 24, and two letters from William Larry Shores, C.P.A. submitted on behalf of the Fund. The first letter was the January 21, 1994 letter discussed in Findings of Fact 14 regarding the discounting of loss reserves. The second letter from Shores addressed excess coverage. For the fiscal year ending March 31, 1993, the financial statement submitted by the Fund to the Department reflected an aggregate surplus 1/ of $1,786,665.00. In this March 31, 1993 financial statement, the Fund's reserves were discounted at a discount rate of 5.5 percent. The 5.5 percent discount rate was determined by the Fund's independent actuary. According to these statements, if the requested dividend was approved and distributed, there would continue to be an excess of assets over liabilities of slightly in excess of $1,000,000.00. However, if loss reserves were not discounted, the Fund's total liabilities would exceed total assets for the fiscal year ending March 31, 1993 if the distribution was made. On or about August 11, 1994, the Fund submitted a second written letter request (the "Second Request") to the Department, pursuant to Section 440.57(5), Florida Statutes, and Rule 38F-5.065(3), Florida Administrative Code, requesting authority to make a distribution of excess surplus in the amount of $781,065.02. Prior to the Fund's Second Request for a disbursement, the Department had received and reviewed the Fund's March 31, 1994 BSI-25 Form, the Fund's March 31, 1994 financial statement, the Fund's March 31, 1994 actuarial report, the Fund's BSI-26 form, the Fund's BSI-25 forms, the Fund's BSI-24 form as of June 30, 1994, along with all of the Funds financial documents and reports submitted as of March 31, 1993. For the fiscal year ending March 31, 1994, the financial statements submitted by the Fund to the Department reflected an aggregate surplus in the amount of $4,163,401.00. In those 1994 year-end financial statements, the Fund's reserves were discounted at a rate of 7 percent. The 7 percent discount rate was determined by the Fund's independent actuary. The Fund's financial statements and reports submitted for the fiscal year ending March 31, 1994, indicated that if the requested dividend was approved and distributed, there would be an excess of assets over liabilities of more than $3,000,000.00. As noted above, an examination of the financial and actuarial documents submitted by the Fund to the Department confirms that, if the dividend request was approved and disbursed, total assets would not be greater than total liabilities for the fiscal year ending March 31, 1993 unless the loss reserves are discounted. It is not entirely clear whether the Fund's total assets would have exceeded total liabilities following the requested distribution for the fiscal year ending March 31, 1994 if the loss reserves were not discounted. One of Petitioner's expert witnesses testified that, without the discounting of loss reserves, the Fund's assets would have exceeded liabilities by only $142,000 for the Fund year ending March 31, 1994. This surplus would not accommodate the Fund's request for a dividend disbursement of $781,065.42. Petitioner's other expert witness testified that "if you back out the discounting of the loss reserves at March of '94, total assets are approximately equal to total liabilities." By letter dated September 7, 1994, the Department denied the Fund's Second Request for a distribution specifically stating that the discounting of loss reserves was not permissible. The Second Denial Letter advised the Fund of its right to a hearing on the matter pursuant to Chapter 120, Florida Statutes. No formal request for hearing was submitted with request to this Second Denial Letter. The Actuarial Reports and financial statements filed by the Fund for the fiscal years ending March 31, 1993 and 1994 contained certified qualifying language regarding the discounting of loss reserves. For example, the Fund's independent actuary provided as follows in the report for the fiscal year ending March 31, 1994: "the discount rate of 7.0 percent [5.5 percent 2/ for 1993] has been selected by [the actuary] for illustrative purposes only. The appropriate use of this discount rate for [the Fund] is not guaranteed by [the actuary]. Establishing loss reserves on a discounted basis requires that future investment income earned on the loss reserves will need to be added to the reserves to strengthen them rather than be recognized as net income. The ultimate accuracy of discounted reserves depends on the accuracy of the ultimate undiscounted loss estimates, the estimated pay out schedule, and the interest rate assumption used to discount the loss pay out schedule. If the discounted loss estimate is used, the management of [the Fund] should carefully review each of these assumptions to assure that they are in agree- ment with them." The discounting of loss reserves is based upon the concept that if you can reasonably predict a payoff pattern and rate of return then you can discount whatever the debit is back to the present to ascertain the present value of the future income stream that will be used to fully fund the future losses whenever they come due. In other words, the discount rate is a function of what is expected to be earned over the pay out period of the claims. The rate of discount for loss reserves is usually calculated based upon the investment yields that the company or the entity is able to obtain in its investment portfolio, taking into consideration certain other factors, such as maturity of that investment portfolio. The discount rates used by the Fund in the reports and statements submitted to the Department for the fiscal years ending March 31, 1993 and 1994 were based upon a combination of industry average and the Fund's history. During the time it was responsible for overseeing worker's compensation self-insurance funds, the DLES Bureau of Worker's Compensation Self-Insurance consistently took the position that the discounting of loss reserves on the financial statements and reports submitted to the Department was not acceptable because there was no explicit authority in either the Florida Statutes or the Administrative Code for discounting reserves. DLES informed all self-insurance funds that any matter submitted to it for review and/or approval would be evaluated without reference to or consideration of discounting. The position that reserve discounting is inappropriate has been maintained by the DOI Bureau of Property and Casualty Self-Insurance. Thus, it has been the consistent position of the regulatory authorities that funds must report total reserves without discounting. Likewise, the evaluation of whether to approve a request to make a dividend disbursement has consistently been based on a determination of whether total assets exceed total liabilities. Under the Department's view, neither total reserves nor total liabilities can be determined when loss reserves are discounted. Some Florida worker's compensation self-insurance funds have discounted loss reserves in reporting their reserves to the Department. The Department has never approved this practice and has not used discounted reserves in analyzing matters within its regulatory control. The issue of whether loss reserves should be discounted is a question of growing controversy and legitimate debate. Petitioner's experts suggest that discounting of loss reserves should be accepted because such discounting is acceptable under Generally Accepted Accounting Principles and various other accounting sources. Generally Accepted Accounting Principles ("GAAP") are principles which are promulgated by authoritative bodies or generally utilized in the accounting industry for companies that report financial information. Prior to December 20, 1993, Chapter 38F-5, Florida Administrative Code, provided that financial statements for workers' compensation self- insurance funds should be prepared in accordance with GAAP. In other words, the Department Rules in effect at the time of the filing of the Fund's March 31, 1993 and March 31, 1994 fiscal year-end financial statements required the financial statements to be prepared in accordance with GAAP. Effective December 20, 1993, Chapter 38F-5, Florida Administrative Code was amended. The amended rule applies to reporting by workers' compensation group self-insurance funds for fiscal years beginning after December, 1993. Thus, the amended Rule 38F-5.059 applies to Petitioner's Fund year beginning April 1, 1994. This Amended Rule effectively implements stable accounting procedures in place of GAAP by incorporating certain guidelines under the National Association of Insurance Commissioners Rules and Regulations, with certain modifications. As amended, Rule 38F-5 clarifies that a discounting of loss reserves is not allowed, but anticipated income from the reserve accounts can be included. 3/ Among the various sources mentioned in support of Petitioner's contention that discounting of loss reserves is acceptable under GAAP are the following: (1) Statement of Financial Accounting Standards Number 60; (2) American Institute of Certified Public Accountants Statement of Position 92-4, Auditing Entities Loss Reserves; (3) Financial Accounting Standards Board Concept Statement Number 5; and (4) an American Institute of Certified Public Accountants guide entitled Audits of Property and Liability Insurance Companies. Other non-authoritative sources were also mentioned. For the most part, these pronouncements simply provide procedure and guidance for how these discounts are to be reported when discounting is being utilized. They do not provide authority for the contention that discounting of loss reserves is always permissible nor do they establish standards for when the discounting of loss reserves should be allowed for regulatory purposes. The more persuasive evidence established that, under GAAP, a discounting of loss reserves is allowed only if it is prescribed by a statute or written rule. In support of its' position, the Department cites guidelines promulgated by the United States Securities and Exchange Commission ("SEC") regarding the propriety of discounting of reserves. These guidelines are only directly applicable to publicly held companies which are SEC registrants. However, the SEC publication known as Staff Accounting Bulletin 62 (SAB 62) is the only written authoritative literature currently in existence regarding the propriety of discounting reserves. SAB 62 provides that discounting of loss reserves is only appropriate if the state in which the entity is domiciled allows discounting of loss reserves. While the Fund is correct in asserting that SAB 62 is not directly applicable to it since it is not a publicly held company, that publication does have some persuasive value in determining whether GAAP should be viewed as allowing a workers' compensation self-insurance fund to discount loss reserves. The Fund contends that discounting of workers' compensation self- insurance fund loss reserves is permissible under Section 625.091, Florida Statutes. As set forth in the Conclusions of Law below, the Fund's reliance upon this statute is misplaced. The statute only directly applies to insurers and not to self-insurance funds. Section 440.5705, Florida Statutes, should not be read as a directive that all provisions of Section 625.091, Florida Statutes, are applicable to self-insurance funds. In summary, for all Fund years ending prior to May 31, 1994, neither the Florida Statutes nor Rule 38F-5, Florida Administrative Code, required statutory accounting for the financial statements submitted to the Department by a workers' compensation self-insurance fund. Consequently, there was no specific statutory authority prohibiting the discounting of loss reserves nor was there any authority permitting such discounting. The evidence indicates that workers' compensation self-insurance funds in some states other than Florida are allowed to discount loss reserves. The standards governing such discounting and the purposes for which it is used are not clear. Other than the discounting of loss reserves, there is no evidence that the March 31, 1993 and March 31, 1994 financial statements for the Fund were not in accordance with the requirements of the Department, including Rule 38F-5, Florida Administrative Code, and/or that the statements were not completed in accordance with GAAP. Petitioner's contention that its marketing efforts for participation in the Fund are hindered by the denial of a distribution is irrelevant to a determination of whether the requested distribution should be approved by the Department.
Recommendation Based upon the foregoing Findings and Facts and Conclusions of Law, it is RECOMMENDED that the Department of Insurance and Treasurer enter a Final Order denying Petitioner's request for authorization to make a dividend disbursement. DONE AND RECOMMENDED this 28th day of June, 1995, in Tallahassee, Leon County, Florida. J. STEPHEN MENTON 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 28th day of June, 1995.
Findings Of Fact The petitioners, Leo A. Price and Elizabeth R. Price, are husband and wife. They have been members of the Florida retirement System (FRS) since their transfer on January 1, 1979. Previously, the petitioners were members of the Teachers' Retirement System (TRS) Plan D. In order to transfer to FRS, they moved from TRS Plan D, to TRS Plan E, on December 31, 1978, and then into FRS on January 1, 1979. In transferring from TRS to FRS, a member is entitled to a refund of excess TRS contributions. In early 1979, Mr. Price received refund warrants totalling $16,060.61 which represented TRS contributions of $10,138.73 and accrued interest of $5,921.88. In early 1979, Mrs. Price received refund warrants totalling $17,515.03 which represented TRS contributions of $11,383.91 and accrued interest of $6,131.12. The petitioners failed to cash these refund warrants and to date have not negotiated them. In November, 1979, the petitioners visited the Division of Retirement and discussed the cashing of these warrants based on questions of taxation. This discussion was followed by a letter dated December 30, 1979, to A. J. McMullian III, State Retirement Director, in which the petitioners again discussed the taxation questions and advised the respondent that they had not cashed the warrants. They asked that new warrants be issued and that they be paid interest on the amount of the warrants for the period of time from the issuance to the cashing of the warrants. By letter dated January 25, 1980, Mr. McMullian advised the petitioners to cash the warrants and further told petitioners that interest could not be paid. In their petition for an administrative hearing, the petitioners alleged that they were under-refunded; however, at the hearing the parties stipulated that only two issues are presented for resolution: Whether the petitioners are entitled to interest on their contributions from July 1, 1978, through December 31, 1978, and Whether the petitioners are entitled to interest on the total amount of the uncashed warrants from the date of issuance to the present. Ruth Sansom, Assistant Bureau Chief, Bureau of Benefits, Division of Retirement, testified that she has worked with TRS and FRS in a supervisory capacity since 1963. In these seventeen years, Section 238.10, Florida Statutes, has consistently been construed as providing for the payment of interest on contributions based on a fiscal year. The fiscal year is from July 1 to June 30. On June 30 of each year, interest is calculated on the total accumulated contributions then on deposit. If no contributions are on deposit on June 30, no interest is credited for this fiscal year. Since the petitioners received refunds of excess accumulated contributions on December 31, 1978, no interest was paid for the 1978-79 fiscal year because no contributions were on deposit on June 30, 1979. At the time that refund warrants are issued, the funds backing the warrants are transferred from the retirement system trust fund to the Treasurer's Office and the Division earns no more interest on these funds. The petitioners contend that they were advised by Leon Burnett of the Division of Retirement not to cash the warrants in their possession pending the outcome of this case. Ruth Sansom testified that it is standard practice to advise members not to cash benefit warrants if the amount of the benefit is in question, but that refund warrants may be cashed and adjustments made in the future. In a separate case (Case No. 80-1029), Mr. Price is challenging the amount of his benefit warrants. However, at the hearing in this case the petitioners did not understand the difference between a refund warrant and a benefit warrant, although this subject was discussed at their November, 1979, meeting with Mr. Burnett, and Mr. Price had in his possession both refund warrants and benefit warrants which had not been cashed.
Recommendation BASED UPON the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the petition of Leo A. Price and Elizabeth R. Price, seeking interest on their contributions for the period of time from July 1, 1978, through December 31, 1978, be denied. It is further RECOMMENDED that the claim of the petitioners, Leo A. Price and Elizabeth R. Price, for interest on the total amount of their uncashed warrants from the date of issuance, be denied. THIS RECOMMENDED ORDER entered on this 19 day of September, 1980. WILLIAM B. THOMAS Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-1779 Filed with the Clerk of the Division of Administrative Hearings this 19th day of September, 1980. COPIES FURNISHED: Leo A. Price and Elizabeth R. Price 1000 N.E. 96th Street Miami, Shores, Florida 33138 Diane R. Keisling, Esquire Cedars Executive Center Suite 207C, Box 81 2639 North Monroe Street Tallahassee, Florida 32303
The Issue The issues in each case are whether, pursuant to Sections 489.141 and 489.143, Florida Statutes (2003), a claimant is entitled to payment from the Construction Industries Recovery Fund, and, if so, whether, pursuant to Section 489.143(7), Florida Statutes (2003), Respondent may automatically suspend the residential contractor's license of Petitioner until Petitioner reimburses Respondent for the paid claim.
Findings Of Fact Petitioner is licensed as a certified residential contractor, holding license number CRC 013599. Respondent first issued a residential contractor's license to Petitioner in 1978, and Petitioner has been continually licensed since that time. Petitioner has never been disciplined by Respondent or any local governmental agency. On January 29, 2004, Respondent transmitted to the Division of Administrative Hearings seven files containing administrative complaints alleging disciplinary breaches against Petitioner for many of the transactions covered in the nine subject cases. These seven new cases have not yet been heard, and Respondent has not yet entered any restitution orders against Petitioner. In the past, Petitioner has placed his residential contractor's license with various corporations to qualify them to perform residential construction. In February 1999, Petitioner met with Lori Thomson, president of Thomson Homes, Inc., to discuss placing his license with her residential construction company. Now inactive, Thomson Homes, Inc., had been in the residential construction business since at least 1994, operating out of an office in Palm Beach County, which is also the location of all but one of the residential construction jobs that are the subject of these cases. Since 1994, Thomson Homes, Inc., had used the general contractor's license of Ms. Thomson's husband, Steven Thomson, to qualify to perform residential construction. During the time that his license qualified Thomson Homes, Inc., Mr. Thomson believed that he and his wife owned the corporation equally and that she served as the president and he served as the vice-president. In the summer of 1998, Mr. Thomson filed for divorce from Ms. Thomson. In February 1999, Ms. Thomson fired Mr. Thomson from Thomson Homes, Inc. Shortly thereafter, Mr. Thomson learned that Ms. Thomson had caused all of the stock to be issued to her when the corporation was formed, and that she had assumed all of the officer and director positions. In early March 1999, Mr. Thomson cancelled all of the building permits that he had obtained on behalf of Thomson Homes, Inc., and withdrew his general contractor's license from Ms. Thomson's corporation, effective March 20, 1999. When Mr. Thomson withdrew his license from Thomson Homes, Inc., it was in the process of building or preparing to build about ten homes. At no time during Petitioner's discussions with Ms. Thomson was he aware that Thomson Homes, Inc., was actively involved in construction. Eventually, Ms. Thomson and Petitioner agreed that Petitioner would place his residential contractor's license with Thomson Homes, Inc., and would supervise the corporation's construction activities. In return, Thomson Homes, Inc., would pay Petitioner $500 weekly and 35 percent of the profits. After filing the necessary documentation in April 1999, Petitioner qualified Thomson Homes, Inc. effective April 22 or 26, 1999. Petitioner advised Ms. Thomson that he had other work to do for another month, so he could not start with Thomson Homes, Inc. immediately. Ms. Thomson told him that she had to get financing arranged for several signed contracts and did not have any construction taking place at the time. The record is unclear whether this delay took place after the initial agreement between Petitioner and Ms. Thomson or after Petitioner formally placed his license with Thomson Homes, Inc. However, in either event, from the date that Petitioner formally placed his license with Thomson Homes, Inc., he never had a substantive conversation with Ms. Thomson about any construction activities of Thomson Homes, Inc. Not hearing from Ms. Thomson, Petitioner eventually called her to learn when he would start work. At first, Ms. Thomson took Petitioner's calls and kept explaining that the financing paperwork had been delayed. She promised to call Petitioner when construction was ready to proceed. However, Ms. Thomson never contacted Petitioner, and she later stopped taking or returning Petitioner's calls. In early August 1999, Petitioner called Thomson Homes, Inc., and learned that its telephone had been disconnected. He visited the office of Thomson Homes, Inc., but found it closed and the premises vacated. In fact, Thomson Homes, Inc., discontinued business on or about August 1, 1999. Between the date that Petitioner had qualified Thomson Homes and the point at which Thomson Homes ceased doing business, Thomson Homes, Inc., had entered into construction contracts, taken deposits and draws on construction loans, and performed residential construction--all unknown to Petitioner. Also unknown to Petitioner was the fact that Thomson Homes, Inc., had failed to perform its obligations under many, if not all, of its construction contracts during that period. The record is unclear when Petitioner withdrew his license from Thomson Homes, Inc. Petitioner sent Respondent a letter on August 30, 1999, advising of the withdrawal of his license from Thomson Homes, Inc. Later advised that he needed to file another form to effect the withdrawal, Petitioner did so in March 2000. The difference is not important in these cases. At no time did Petitioner receive any money from Thomson Homes, Inc., or any of the claimants who contracted with Thomson Homes, Inc. At no time did Petitioner enter into any contracts with any of the claimants. Only after Thomson Homes, Inc., had taken the claimants' money and abandoned work or failed to commence work did Petitioner learn that Thomson Homes, Inc., had done construction business under his license. DOAH Case No. 03-3540 involves the claim of Sandra Harvey. Ms. Harvey entered into a construction agreement with Thomson Homes, Inc., on September 9, 1998. Pursuant to the agreement, Ms. Harvey agreed to pay Thomson Homes, Inc., $25,500 for a lot and $115,260 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. After pouring the slab, constructing the shell, and completing the rough plumbing, air conditioning, and electrical, Thomson Homes, Inc., stopped work on Ms. Harvey's home in early 1999. Ms. Harvey learned of the problem when Mr. Thomson called her in early 1999 and said that he could not finish the home because Ms. Thomson had taken over the business. This call probably took place no later than late March 1999, when Mr. Thomas withdrew as the qualifier for Thomson Homes, Inc. The record does not reveal the extent of payments from Ms. Harvey or her lender or the extent of completed work at the time that Thomson Homes, Inc., abandoned the job. Although the complaint is not part of this record, Ms. Harvey commenced a legal action against Thomson Homes, Inc., but not Petitioner. She obtained a default final summary judgment against Thomson Homes, Inc., on March 30, 2001, for a total sum of $46,267.32, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant breached its contract by accepting Plaintiff's deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and/or materialmen for their labor, services and material provided. As a result of Defendant abandoning the project, Plaintiff was compelled to retain a new contractor to complete her home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, the misapplication of construction funds and financial mismanagement Plaintiff has been forced to borrow additional funds from the construction lender. On May 3, 2001, Ms. Harvey filed a claim with the Construction Industries Recovery Fund (Recovery Fund). In response to a question asking if she had made a diligent effort to collect payment from the contractor, Ms. Harvey answered "yes," explaining she had "filed lawsuit." Ms. Harvey probably filed her claim within two years of when Thomson Homes, Inc., abandoned her job. By the end of March 1999, Mr. Thomson informed Ms. Harvey that his wife had fired him, so he could not work on her home anymore. A change in qualifier does not mean that Thomson Homes, Inc., would necessarily abandon the job, but, as noted in the Conclusions of Law, abandonment presumptively arises upon the expiration of 90 days without work. No work took place on Ms. Harvey's home after Mr. Thomson withdrew as qualifier, so presumptive abandonment took place by the end of June 1999--after May 3, 1999, which is two years prior to the date on which Ms. Harvey filed her claim. By letter dated June 5, 2001, from James Brogan of WEI Consulting Group to Ms. Harvey, Mr. Brogan states that he had investigated the assets of Thomson Homes, Inc. Mr. Brogan found no bankruptcy filing by Thomson Homes, Inc., in Bankruptcy Court in the Southern District of Florida. Thomson Homes, Inc., was a party to 282 legal actions and owed tangible personal property taxes on furniture in a model home, but the furniture was no longer available. On February 28, 2003, Respondent issued an Order approving Ms. Harvey's claim of $25,000 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that Ms. Harvey is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On March 17, 2003, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Ms. Harvey and Respondent, contests the payment to Ms. Harvey and the automatic suspension of Petitioner's license. The petition contests the payment of Ms. Harvey's claim because she had made insufficient efforts to satisfy the judgment; she had failed to submit all required exhibits with her claim; her judgment is against Thomson Homes, Inc., and not Petitioner; her judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Additionally, the petition contests the automatic suspension because the payment to Ms. Harvey is not authorized, her claim is incomplete, and her judgment is not against Petitioner. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3541 involves the claim of John and Kathleen Whitesides. The Whitesides, who lived at the time in Juno Beach, Florida, entered into a construction contract with Thomson Homes, Inc., on February 7, 1999. Pursuant to the agreement, the Whitesides agreed to pay Thomson Homes, Inc., $154,094 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. After the Whitesides paid Thomson Homes, Inc., $5000 and secured a construction loan, Thomson Homes, Inc., never commenced construction. In a complaint filed April 3, 2000, the Whitesides commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to any construction," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction. The Whitesides obtained a default final judgment against Thomson Homes, Inc., on December 21, 2000, for a total sum of $20,146.67, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: "Defendant is in breach of the Contract dated February 7, 1999, and has received unjust enrichment from Defendant's failure to fulfill the terms of the Contract to build a home for Plaintiffs." On August 9, 2001, David Tassell, the Whitesides' attorney in the circuit court action against Thomson Homes, Inc., stated, in an acknowledged statement, that he had performed "numerous" real property searches in Palm Beach and Martin counties' public records and determined that Thomas Homes, Inc., "owns no real property in Martin County." The omission of Palm Beach County in the statement is unexplained. Mr. Tassell's statement adds that he has retained a private investigator, who confirmed that Thomson Homes, Inc., owns no boats, planes, or automobiles. On August 10, 2001, the Whitesides filed a claim with the Recovery Fund. In response to a question asking if they had made a diligent effort to collect payment from the contractor, the Whitesides answered "yes," but did not supply an explanation in the following blank. The completed questionnaire accompanying the claim states that the Whitesides discovered the violation in September 1999 and that it occurred in July to August 1999. On September 17, 2002, Respondent issued an Order approving the Whitesides' claim of $18,526.67 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the Whitesides are the Petitioners, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. The Whitesides probably filed their claim within two years of when they reasonably should have discovered that Thomson Homes, Inc., had wrongfully failed to commence construction, as is required for reasons set forth in the Conclusions of Law. As noted in the Conclusions of Law, presumptive abandonment arose when Thomson Homes, Inc., after entering the contract, performed no work for 90 days. Six months elapsed from the signing of the contract to the date that is two years prior to the filing of the claim. Although the record is not well-developed on the point, it is more likely than not that due diligence did not require that the Whitesides discover the abandonment within the first 90 days after it had presumptively arisen. The Whitesides' judgment is probably based on a violation of Section 489.129(1)(g), (j), or (k), Florida Statutes, as is required for reasons set forth in the Conclusions of Law. Although the record is not well-developed on this point either, it is more likely than not that the judgment is based on Thomson Homes' abandonment after entering into the contract. The judgment does not state this basis explicitly, but the complaint, on which the judgment is based, alleges abandonment. On December 23, 2002, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Respondent and the Whitesides' attorney in the circuit court action against Thomson Homes, Inc., contests the payment to the Whitesides and the automatic suspension of Petitioner's license. The petition contests the payment of the Whitesides' claim because they did not file certified copies of the final judgment and levy and execution documents and their judgment did not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes. Additionally, the petition contests the automatic suspension because Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes; Petitioner received no notice of the hearing that resulted in the Order to pay the Whitesides and suspend Petitioner's license; the Whitesides' claim is incomplete; and the Whitesides' judgment is not against Petitioner. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3542 involves the claim of Richard and Kathleen Beltz. The Beltzes entered into a construction contract with Thomson Homes, Inc., on July 13, 1999. Pursuant to the agreement, the Beltzes agreed to pay Thomson Homes, Inc., $35,500 for a lot and $140,500 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. After the Beltzes paid Thomson Homes, Inc., $17,283.70, Thomson Homes, Inc., never appeared at the closing, which had been scheduled for August 10, 1999. Nor did Thomson Homes, Inc., ever commence construction. The record does not disclose the extent, if any, to which Thomson Homes, Inc., completed construction. The Beltzes' discovery of Thomson Homes' failure to commence construction was hampered by the fact that they resided in California at the time. However, the Beltzes had obviously discovered the wrongful acts and omissions of Thomson Homes, Inc., by September 29, 1999, when they sent a letter to Petitioner demanding that he return the money that they had paid Thomson Homes, Inc. On October 19, 1999, the Beltzes signed a claim under the Recovery Fund, but the record contains no indication when the claim was filed. The completed questionnaire attached to the claim does not ask if the claimants had made a diligent effort to collect payment from the contractor. For reasons set forth in the Conclusions of Law, a claim must follow a judgment, so, the Beltzes could not file a valid claim until they had obtained a judgment. Two years from September 29, 1999, at which point the Beltzes obviously knew of a violation, requires that they file the claim, on an already- secured judgment, prior to September 29, 2001. In a complaint filed February 4, 2002, the Beltzes commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to any construction" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The Beltzes obtained a default final summary judgment against Thomson Homes, Inc., on May 22, 2002, for a total sum of $23,280.20, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant performed some work on the project. However, Defendant breached its contract by accepting deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and materialmen for their labor, services and material provided. As a result of Defendant failing to pay Lienors who provided labor, service and materials to Plaintiffs [sic] real property, Construction Liens were recorded against same, which Plaintiffs had to satisfy. As a result of Defendant abandoning the project, Plaintiffs were compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay Lienors, the misapplication of construction funds and financial mismanagement, Plaintiffs were forced to borrow additional funds from their construction lender. By unacknowledged statement dated August 23, 2002, Ms. Beltz declared that someone at the Florida Department of State advised her that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. She also declared that she had found on the internet two pieces of real property owned by Thomson Homes, Inc., but they had been transferred within the past year. Ms. Beltz stated that she searched the database of the "Department of Motor Vehicles in Palm Beach County" in May 2000 and found no vehicles or boats registered to Thomson Homes, Inc. Lastly, she reported that she contacted the "Federal Aviation Association" at an unspecified time and found no "airplanes" registered to Thomson Homes, Inc. On November 26, 2002, Respondent issued an Order approving the Beltzes' claim of $17,222.78 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the Beltzes are the Petitioners, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On December 27, 2002, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on the Beltzes and Respondent, contests the payment to the Beltzes and the automatic suspension of Petitioner's license. The petition contests the payment of the Beltzes' claim because they did not submit all of the necessary exhibits with their claim; their judgment is against Thomson Homes, Inc., and not Petitioner; and their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes. Additionally, the petition contests the automatic suspension because Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes; the Beltzes' claim is incomplete; and the Beltzes' judgment is not against Petitioner. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3543 involves the claim of Keith and Karen Deyo. The Deyos entered into a construction contract with Thomson Homes, Inc., on October 31, 1998. Pursuant to the agreement, the Deyos agreed to pay Thomson Homes, Inc., $25,500 for a lot and $123,400 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. Although the Deyos clearly suffered damages from the acts and omissions of Thomson Homes, Inc., the record does not disclose how much they paid the company, how much they had to pay unpaid suppliers and laborers, and how much construction the company completed before abandoning the job. Thomson Homes, Inc., began construction on the Deyos' home about 30-45 days after the parties signed the contract, but all work stopped in July 1999. In an undated complaint, the Deyos commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment] of the project prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The Deyos obtained a final summary judgment against Thomson Homes, Inc., on March 15, 2000, for a total sum of $55,458.64, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant partially performed work under the Contract. However, it breached its contract by accepting deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and materialmen for their labor, services and material provided. As a result of Defendant failing to pay lienors who provided labor, services and materials to Plaintiffs [sic] residence, construction liens were recorded against same, which Plaintiffs had to satisfy. As a result of Defendant abandoning the project, Plaintiffs were compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienor's [sic], the misapplication of construction funds and financial mismanagement Plaintiffs have been forced to borrow additional funds from their construction lender. On April 27, 2000, the Deyos signed a claim under the Recovery Fund, but the record contains no indication when the claim was filed. A cover letter dated May 8, 2000, suggests that the Deyos mailed their claim a couple of weeks after signing it, so it was probably filed in mid-May 2000, although their questionnaire bears a revision date of November 2001, which would be beyond two years after the violation. In the questionnaire, the Deyos did not respond to the question asking if they had made a diligent effort to collect payment from the contractor. By an undated and unacknowledged statement, Mr. Deyo declared that someone at the Florida Department of State advised him that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. He also declared that he had found on the internet two pieces of real property owned by Thomson Homes, Inc., but they had been transferred within the past year. Mr. Deyo stated that he searched the database of the "department of motor vehicles in Palm Beach County" in on April 14, 2000, and found no motor vehicles or boats registered to Thomson Homes, Inc. Lastly, he reported that he contacted the "Federal Aviation Association" on April 21, 2000, and found no "airplanes" registered to Thomson Homes, Inc. On January 22, 2003, Respondent issued an Order acknowledging the Deyos' claim of $55,458.64, approving the payment of the statutory limit of $25,000 against the Recovery Fund, and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that Mr. Deyo is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On February 3, 2003, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Respondent and the Deyos' attorney who represented them in the action against Thomson Homes, Inc., contests the payment to the Deyos and the automatic suspension of Petitioner's license. The petition contests the payment of the Deyos' claim and suspension of Petitioner's license because Petitioner did not receive notice of the hearing at which Respondent entered the Order; the Deyos did not satisfy all requirements for payment from the Recovery Fund; their claim was not accompanied by certified copies of the levy and execution documents; their judgment is against Thomson Homes, Inc., and not Petitioner; their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3544 involves the claim of Sylvia Reinhardt. Ms. Reinhardt entered into a construction contract with Thomson Homes, Inc., on October 14, 1998. Pursuant to the agreement, Ms. Reinhardt agreed to pay Thomson Homes, Inc., $45,000 for a lot and $147,150 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. After Ms. Reinhardt paid Thomson Homes, Inc., $144,769, directly and indirectly, by way of her construction lender, the house was little more than half complete when Thomson Homes, Inc., abandoned the job. Thomson Homes also failed to pay various suppliers that filed liens, so Ms. Reinhardt had to pay $8550.41 to RTS Roofing, $882 to Palm Beach Garage Door, and $3421.32 to Woodworks, Inc. In an undated complaint filed in 1999 (actual date illegible), Ms. Reinhardt commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiff's residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. Ms. Reinhardt obtained a final summary judgment against Thomson Homes, Inc., on March 28, 2000, for a total sum of $61,471.15, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant performed work under the Contract. However, it breached its contract by accepting deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and materialmen for their labor, services and materials provided. As a result of Defendant failing to pay lienors who provided labor, services and materials for the construction of Plaintiff's residence, construction liens were recorded against same, which Plaintiff had to satisfy. As a result of Defendant abandoning the project, Plaintiff was compelled to retain a new contractor to complete their [sic] home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienor's [sic], the misapplication of construction funds and financial mismanagement Plaintiff has been forced to borrow additional funds from her construction lender. On April 17, 2000, Ms. Reinhardt filed a claim with the Recovery Fund. In response to a question asking if she had made a diligent effort to collect payment from the contractor, Ms. Reinhardt answered "yes" and explained: "Telephone calls were unanswered. Certified mail requesting response were [sic] never answered. Our attorney made written and personal contact with the owner and there was no intention to pay." The claim states that the violation took place in July 1999. By acknowledged statement dated July 21, 2000, Ms. Reinhardt declared that she had completed a "reasonable search and inquiry" and had not found any property or assets against which to satisfy her judgment. Ms. Reinhardt stated that someone at the Florida Department of State advised her that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. She also declared that she had found one parcel of property owned by Thomson Homes, Inc., and valued at $115,387, but this had been sold to "Joan Thomson" on February 1, 2000. Ms. Reinhardt stated that she had found tangible personal property worth $5000. She added that she had not found any motor vehicles registered with the Department of Highway Safety and Motor Vehicles, nor had she found anything registered with the "FAA." On November 26, 2002, Respondent issued an Order acknowledging Ms. Reinhardt's claim of $58,661.44, approving the payment of the statutory limit of $25,000 against the Recovery Fund, and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that Ms. Reinhardt is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On December 24, 2002, Petitioner served a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Ms. Reinhardt and Respondent, contests the payment to Ms. Reinhardt and the automatic suspension of Petitioner's license. The petition contests the payment of Ms. Reinhardt's claim and suspension of Petitioner's license because Ms. Reinhardt did not submit certified copies of the levy and execution documents; her judgment is against Thomson Homes, Inc., and not Petitioner; her judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3545 involves the claim of Louis and Ann Mahoney. The Mahoneys entered into a construction contract with Thomson Homes, Inc., on June 28, 1999, for the construction of a home in Martin County. Pursuant to the agreement, the Mahoneys agreed to pay Thomson Homes, Inc., $32,000 for a lot and $149,000 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 150 days from the date of slab pour. After the Mahoneys paid Thomson Homes, Inc., $14,500, directly and indirectly, by way of their construction lender, they suffered damages due to the acts and omissions of Thomson Homes, Inc., although, again, the record does not describe specifically how Thomson Homes caused them damage. In an undated complaint that bears no filing date, the Mahoneys commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The Mahoneys obtained a final summary judgment against Thomson Homes, Inc., on April 13, 2000, for a total sum of $43,084.49, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, Defendant breached its contract by accepting Plaintiffs' deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and/or materialmen for their labor, and/or services provided. As a result of Defendant failing to pay lienor's [sic] who provided labor, services and materials for the construction of Plaintiffs [sic] residence, a construction lien was recorded against Plaintiffs' property, which Plaintiffs will have to satisfy. As a result of Defendant abandoning the project, Plaintiffs were compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienor's [sic], the misapplication of construction funds and financial mismanagement Plaintiffs have been forced to borrow additional funds from their construction lender. On April 30, 2000, the Mahoneys signed a claim under the Recovery Fund. Although the claim form bears no filing date, the completed questionnaire attached to the claim was filed on May 3, 2000, so that is the likely filing date of the claim. In response to a question asking if they had made a diligent effort to collect payment from the contractor, the Mahoneys answered "yes" and explained: "This is explained in General Allegations, enclosed with this paperwork." Evidently, the reference is to a copy of the circuit court complaint. By acknowledged statement dated April 8, 2002, Mr. Mahoney declared that he had completed a "reasonable search and inquiry" and had not found any property or assets against which to satisfy his judgment. Mr. Mahoney stated that someone at the Florida Department of State advised him that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. He also declared that an internet search had disclosed no property owned by Thomson Homes, Inc. Mr. Mahoney stated that the "department of motor vehicles in Palm Beach County" found no motor vehicles or boats registered to Thomson Homes, Inc., and that the "FAA" had found nothing registered to Thomson Homes, Inc. On February 28, 2003, Respondent issued an Order acknowledging the Mahoneys' claim of $38,185, approving the payment of the statutory limit of $25,000 against the Recovery Fund, and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the Mr. Mahoney is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On March 17, 2003, Petitioner served a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on the Mahoneys and Respondent, contests the payment to the Mahoneys and the automatic suspension of Petitioner's license. The petition contests the payment of the Mahoneys' claim and suspension of Petitioner's license because they did not submit all of the required exhibits; their judgment is against Thomson Homes, Inc., and not Petitioner; their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3546 involves the claim of Dennis and Carolyn DeStefanis. The DeStefanises entered into a construction contract with Thomson Homes, Inc., on April 7, 1999. Pursuant to the agreement, the DeStefanises agreed to pay Thomson Homes, Inc., $137,455 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 150 days from the date of slab pour. After the DeStefanises paid Thomson Homes, Inc., $15,765, directly and indirectly, by way of their construction lender, Thomson Homes, Inc. never did any work, except to contract with a surveyor, who, unpaid, filed a claim of lien against the DeStefanises's lot. In an undated complaint bearing no filing date, the DeStefanises commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The DeStefanises obtained a final summary judgment against Thomson Homes, Inc., on March 15, 2000, for a total sum of $36,701.87, including attorneys' fees and costs. The judgment states, in part: Subsequent to entering . . . into the above referenced contract, Defendant, [sic] breached its contract by accepting Plaintiffs [sic] deposits and construction loan disbursements and thereafter abandoning the project. [sic] As a result of Defendant abandoning the project, Plaintiffs were compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, the misapplication of construction funds and financial mismanagement Plaintiffs have been forced to borrow additional funds from their construction lender. On April 19, 2000, the DeStefanises filed a claim with the Recovery Fund. In response to a question asking if they had made a diligent effort to collect payment from the contractor, the DeStefanises answered "yes" and explained: "Went to DBPR Investigative Services, hired Attorney Barry W. Taylor [attorney in circuit court action], got Final Summary Judgment against Thomson Homes, Inc." On March 20, 2003, Respondent issued an Order acknowledging the DeStefanises' claim of $34,965.52, approving the payment of $15,765 against the Recovery Fund, and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the DeStefanises are the Petitioners, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On April 7, 2003, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on the DeStefanises and Respondent, contests the payment to the DeStefanises and the automatic suspension of Petitioner's license. The petition contests the payment of the DeStefanises' claim and suspension of Petitioner's license because they did not submit all of the required exhibits; their judgment is against Thomson Homes, Inc., and not Petitioner; their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. The petition contests the suspension of Petitioner's license on the additional ground that he was not the qualifier for Thomson Homes, Inc., when it and the DeStefanises entered into the construction contract. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3547 involves the claim of James and Donna Barr. The Barrs entered into a construction contract with Thomson Homes, Inc., on September 12, 1998. Pursuant to the agreement, the Barrs agreed to pay Thomson Homes, Inc., $30,000 for a lot and $140,900 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. The Barrs paid Thomson Homes, Inc., $8500 in the form of a down payment. They or their construction lender paid Thomson Homes, Inc., considerably more money and suffered the imposition of claims of lien by unpaid subcontractors and suppliers, but, after negotiating with the bank, emerged from the transaction having lost only the $8500 down payment. Thomson Homes, Inc., obtained permits in April 1999 and started construction in May 1999. Before abandoning the job, Thomson Homes, Inc., worked on the home in May, June, and July of 1999. The Barrs and their lender did not make additional payments after the Barrs found the Thomson Homes, Inc., office empty on August 1, 1999. In a complaint filed October 6, 1999, the Barrs commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiffs [sic] residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. The Barrs obtained a final summary judgment against Thomson Homes, Inc., on May 8, 2000, for a total sum of $45,435.62, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering into the above referenced contract, partially performed work under the Contract. However, Defendant breached the contract by accepting Plaintiffs [sic] deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and/or materialmen for their labor services and materials provided. As a result of Defendant failing to pay lienors who provided labor, services and materials for the construction of Plaintiffs [sic] residence, construction liens were recorded against same, which Plaintiffs will have to satisfy. As a result of Defendant abandoning the project, Plaintiffs will be compelled to retain a new contractor to complete their home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienors, the misapplication of construction funds and financial mismanagement Plaintiffs will be forced to borrow additional funds from their construction lender. On June 2, 2000, the Barrs filed a claim under the Recovery Fund. In response to a question asking if they had made a diligent effort to collect payment from the contractor, the Barrs answered "yes" and explained: "I have looked into the assets of Thomson Homes Inc. and they do not have any. My affidavit is attached." The completed questionnaire states that the Barrs discovered the violation on August 11, 1999. They therefore failed to file their claim within two years of the discovery of the violation. By acknowledged statement dated May 23, 2000, Ms. Barr declared that she had completed a "reasonable search and inquiry" and had not found any property or assets against which to satisfy her judgment. Ms. Barr stated that someone at the Florida Department of State advised her that Thomson Homes, Inc., was administratively dissolved on September 24, 1999. She also declared she had found no property owned by Thomson Homes, Inc., in Palm Beach County. Ms. Barr stated that the Department of Highway Safety and Motor Vehicles found no motor vehicles or boats registered to Thomson Homes, Inc., and that the internet site of the "FAA" had revealed nothing registered to Thomson Homes, Inc. On November 26, 2002, Respondent issued an Order approving the payment of the Barrs' claim of $8500 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that the Barrs are the Petitioners, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On December 27, 2002, Petitioner served a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on the Barrs and Respondent, contests the payment to the Barrs and the automatic suspension of Petitioner's license. The petition contests the payment of the Barrs' claim and suspension of Petitioner's license because they did not submit a certified copy of the levy and execution documents; their judgment is against Thomson Homes, Inc., and not Petitioner; their judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. DOAH Case No. 03-3633 involves the Joanne Myers. Ms. Myers entered into a construction contract with Thomson Homes, Inc., on February 7, 1999. Pursuant to the agreement, Ms. Myers agreed to pay Thomson Homes, Inc., $29,500 for a lot and $125,400 for a home, which Thomson Homes, Inc., agreed to construct to "substantial completion" within 120 days from the date of slab pour. Ms. Myers directly or indirectly paid Thomson Homes, Inc., $12,840. According to Ms. Myers' claim, Thomson Homes, Inc., never commenced construction before going out of business in August 1999. In an undated complaint bearing no filing date, Ms. Myers commenced a legal action against Thomson Homes, Inc., but not Petitioner. The two-count complaint alleges a breach of contract, based on Thomson Homes' alleged "abandon[ment]" of the job "prior to completion" and "fail[ure] and refus[al] to pay subcontractors and/or materialmen which resulted in Claims of Liens against Plaintiff's residence, which Defendant has failed and refused to satisfy," and unjust enrichment, based on Thomson Homes' alleged receipt of funds and failure to complete construction and pay for goods and services provided by subcontractors and materialmen. Ms. Myers obtained a final summary judgment against Thomson Homes, Inc., on May 31, 2000, for a total sum of $28,307.77, including attorneys' fees, costs, and prejudgment interest. The judgment states, in part: Subsequent to entering . . . into the above referenced contract, Defendant breached the contract by accepting Plaintiff's deposits and construction loan disbursements and thereafter abandoning the project and failing to pay subcontractors and/or materialmen for their labor services and materials provided. As a result of Defendant failing to pay lienor's [sic] who provided labor, services and/or materials for the construction of Plaintiff's residence, construction liens were recorded against same, which Plaintiff will have to satisfy. As a result of Defendant abandoning the project, Plaintiff will be compelled to retain a new contractor to complete her home at an additional cost over and above the original contract amount. As a direct result of Defendant abandoning the project, failing to pay lienor's [sic], the misapplication of construction funds and financial mismanagement Plaintiff will be forced to borrow additional funds from her construction lender. On September 18, 2000, Ms. Myers filed a claim with the Recovery Fund. In response to a question asking if she had made a diligent effort to collect payment from the contractor, Ms. Myers answered "yes" and explained: "Contractor closed corporate office--would not answer telephone calls." By letter dated November 30, 2000, from James Brogan of WEI Consulting Group to Ms. Myers, Mr. Brogan states that he had investigated the assets of Thomson Homes, Inc. Mr. Brogan found no bankruptcy filing by Thomson Homes, Inc., in the Southern District of Florida. Thomson Homes, Inc., was a party to 282 legal actions and owed tangible personal property taxes on furniture in a model home. On February 28, 2003, Respondent issued an Order approving the payment of Ms. Myers' claim of $14,080.66 against the Recovery Fund and automatically suspending Petitioner's license until he reimburses the Recovery Fund for the full amount of the paid claim. The Order, copies of which were served on all parties, states that Ms. Myers is the Petitioner, the Recovery Fund is a Respondent, and "Larry Shimkus, d/b/a Thomson Homes, Inc.," is a Respondent. The Order advises that "you" may seek a formal hearing, pursuant to Section 120.57(1), Florida Statutes, if material facts are in dispute. On March 17, 2003, Petitioner filed a Petition for Section 120.57 Formal Administrative Hearing. The petition, which was served on Ms. Myers and Respondent, contests the payment to Ms. Myers and the automatic suspension of Petitioner's license. The petition contests the payment of Ms. Myers' claim and suspension of Petitioner's license because she did not submit evidence of a diligent search for assets; she did not submit all of the required exhibits; her judgment is against Thomson Homes, Inc., and not Petitioner; her judgment does not find that Petitioner violated Section 489.129(1)(g), (j), or (k), Florida Statutes; and Ms. Thomson deceived Petitioner in violation of Section 489.132, Florida Statutes. Lastly, the petition seeks attorneys' fees under Section 57.111, Florida Statutes. On January 4, 2004, Ms. Myers died. However, the probate court of Lancaster County, Pennsylvania, issued letters testamentary on her estate to James W. Myers III, in whose name Ms. Myers' claim is now being prosecuted. At the hearing, Petitioner contended that most, if not all, of the claims failed because the claimants had not exercised reasonable diligence in searching for assets, although Petitioner has dropped this contention in its proposed recommended order. In his petitions for hearing, Petitioner raised this contention only as to Ms. Myers. Ms. Myers, as well as the remainder of the claimants, made or caused to be made a reasonable search and inquiry for the assets of Thomson Homes, Inc. It is obvious that Thomson Homes, Inc., had no assets by the first letter from Mr. Brogan, dated November 30, 2000, nor did it have assets when Mr. Brogan issued his later letter on June 5, 2001, or when the attorney issued his affidavit on August 9, 2001. What is reasonable, in terms of a search, is dictated here by the fact that Thomson Homes, Inc., had no discoverable assets against which it could be made to answer for the considerable fraud that it perpetrated against these nine claimants. Respondent provided all of the parties, including Petitioner, with notice of its hearings at which it entered Recovery Fund orders. The petitions contend that Petitioner received no such notice in the Whitesides and Deyos cases. Although not litigated at the hearing, the presumption of notice, pursuant to the recitations set forth in each of Respondent's orders, results in a finding that Petitioner received timely notice in all cases.
Recommendation It is RECOMMENDED that Respondent enter a final order dismissing the claims against the Recovery Fund of the Beltzes and Barrs; paying the claims against the Recovery Fund of the remaining claimants, pursuant to the provisions of the orders of Respondent already issued in these cases and pursuant to the provisions of Section 489.143(1)-(6), Florida Statutes; and dismissing Respondent's request for the automatic suspension of Petitioner's license, pursuant to Section 489.143(7), Florida Statutes, without prejudice to any separate disciplinary proceedings that Respondent has commenced or may commence against Petitioner or others for the acts and omissions involved in these nine cases. DONE AND ENTERED this 17th day of February, 2004, in Tallahassee, Leon County, Florida. S ROBERT E. MEALE 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) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 2004. COPIES FURNISHED: Bruce G. Kaleita Law Office of Bruce G. Kaleita, P.A. 1615 Forum Place, Suite 500 West Palm Beach, Florida 33401 Adrienne C. Rodgers Assistant General Counsel Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-1023 Tim Vaccaro, Director Construction Industry Licensing Board Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Nancy Campiglia, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
The Issue The issue for determination is whether Respondent, Construction Industries Recovery Fund ("Respondent"), should reimburse Petitioners for damages caused by a contractor.
Findings Of Fact 1. Respondent is the governmental agency responsible for processing claims against it pursuant to Sections 489.140 through 489.143. Petitioners are natural persons within the meaning of Section 489.140(1). Except for the matters to be determined in this proceeding, Petitioners are otherwise eligible to seek recovery from Respondent within the meaning of Section 489.141. Initial Agreement On June 10, 1993, Petitioners entered into a written contract of sale with Klingshirn & Associates, Inc. ("Klingshirn") to construct a home at 6617 Southfork, Titusville, Florida (the "initial agreement"). The total purchase price was $134,000. The home was to be completed by November 24, 1993. The initial agreement required Petitioners to pay $24,000 of the total purchase price from their own funds3 and to make a good faith effort to obtain financing for the remaining $110,000. If Petitioners were unable to obtain financing, Klingshirn reserved the option to provide financing. The terms of financing were prescribed in paragraph 3 of the initial agreement. Paragraph 3 stated: . . . MORTGAGE PROVISION . . . within five (5) days [Petitioners] will make a good faith application with . . . a lender approved by [Klingshirn] for a mortgage loan in the amount set forth above at the prevailing interest rate not to exceed 8 1/2% 30 year and terms of the lender as of closing. If [Petitioners are] not approved for the mortgage within 30 days or any extension [Klingshirn gives them], or if [Petitioners] application is rejected, [Klingshirn] can either provide [Petitioners] with the mortgage on the same terms and conditions as the lender [Petitioners] applied with, or (ii) refund [Petitioners] deposits . . . and terminate this contract. . . . Petitioners and Klingshirn changed the printed text in the initial agreement. They struck through the phrase, "at the prevailing interest rate," and inserted the phrase, "not to exceed 8 1/2% 30 year." Condition Precedent A condition precedent is one which calls for the performance of some act, or the happening of some event, after a contract is entered into upon the performance or happening of which an obligation to perform depends.4 The initial agreement was subject to a condition precedent by its express terms and by oral agreement. The express terms of the initial agreement made the agreement subject to a condition precedent. Petitioners' obligation to perform was expressly dependent on the procurement of financing for $110,000, over a 30 year term, at an interest rate not to exceed 8 1/2 percent per annum. Even if the initial agreement were not expressly subject to a condition precedent, it was subject to such a condition by oral agreement. Prior to and at the time that Klingshirn and Petitioners signed the initial agreement, Petitioners and Klingshirn agreed that the initial agreement would become operative only upon the occurrence of financing. Even if the initial agreement were not subject to a condition precedent, the requisite financing was part of a contemporaneous oral agreement that induced Petitioners to enter into the initial agreement. There was no mutual intent for Petitioners to be obligated unless they procured the prescribed financing from either a commercial lender or Klingshirn. Construction Contract The condition precedent to the initial agreement was never satisfied. The initial agreement never became operative. On July 7, 1993, Petitioners obtained a financing commitment from Harbor Federal Savings & Loan Association in Fort Pierce, Florida ("Harbor"). Harbor agreed to provide financing for $105,000 rather than the $110,000 prescribed in the initial agreement. Petitioners agreed to increase their cash investment. On August 4, 1993, Petitioners and Klingshirn executed a Construction Loan Agreement for $105,000 (the "construction loan agreement"). The construction loan agreement stated: [Klingshirn] hereby . . . agrees to the terms and conditions of the [construction loan], and further agrees that where the [construction loan] conflicts with the terms and provisions of any construction contract existing with Borrower, that the [construction loan] shall control. Petitioners executed the construction loan agreement as borrowers. Klingshirn executed the builder's assent to the construction loan agreement. On August 4, 1993, Petitioners and Klingshirn executed a construction contract within the meaning of Section 489.141(1)(a) (the "construction contract"). The construction contract included the construction loan agreement and those terms in the initial agreement which did not conflict with the construction loan agreement and which Petitioners and Klingshirn adopted when they executed the construction contract.5 The construction contract was executed after July 1, 1993. It controlled the construction of Petitioners' home until it was modified on December 9, 1993. On December 9, 1993, Petitioners agreed to extend the completion date to March, 1994. Klingshirn agreed to repair specified defects and to increase the landscaping allowance. Mismanagement And Misconduct Petitioners did not know that Klingshirn was a corporation engaged in contracting without a qualifying agent in violation of Section 489.119. Mr. Michael R. Harvey, a financially responsible officer of Klingshirn and one of its employees, was licensed as a certified building contractor (the "contractor" or "licensee"). However, the contractor neglected to qualify Klingshirn. The contractor illegally used his license to obtain the necessary building permit on behalf of Klingshirn. He procured the building permit in his own name on August 27, 1993. The contractor knowingly violated Section 489.129. He committed mismanagement and misconduct in the practice of contracting that caused financial harm to Petitioners in the amount of $58,534.46. The contractor failed to ensure that the home was constructed according to either the plans and specifications of the project or the Southern Building Code. He also failed to remedy the violations. The contractor failed to satisfy subcontractor liens after Petitioners gave him the funds to do so. He obtained at least three draws of unspecified amounts from Harbor. The contractor abandoned the job. He failed to perform work without just cause for over 90 consecutive days when the percentage of completion was less than the total contract price paid to him at the time of abandonment. The project was not completed on November 24, 1993. On December 9, 1993, Petitioners and Klingshirn entered into an Addendum to the initial agreement. The Addendum extended the completion date to March, 1994. The contractor failed to meet the extended deadline. On April 4, 1994, construction ceased. On April 14, 1994, the contractor removed himself and his license from the project. Final Order On August 11, 1995, the Department of Business and Professional Regulation filed an Administrative Complaint against the contractor alleging violations of Sections 489.129(d), (h), and (k). The Construction Industry Licensing Board (the "Board") entered a Final Order on January 16, 1996. The Final Order found the contractor guilty of the allegations in the Administrative Complaint. The Board directed the licensee to pay restitution to Petitioners in an unspecified amount based on violations of Sections 489.129(d), (h), and (k) that occurred on or after July 1, 1993. Civil Action On October 23, 1995, Petitioners filed a civil action against the contractor. Petitioners filed the civil action in the Circuit Court of the Eighteenth Judicial Circuit in and for Brevard County, Florida. Daniel J. Johnson and Doris S. Johnson v. Michael R. Harvey, Case Number 95-16601-CA-F. On December 1, 1995, the contractor filed a Suggestion of the Pendency of Bankruptcy in the civil case. On November 25, 1994, the contractor had filed for bankruptcy in the United States Bankruptcy Court, Middle District of Florida. In Re: Michael R. Harvey, Debtor, Case Number 94-11514-8B7. On March 8, 1995, the Bankruptcy Court entered a Discharge of Debtor Order. On December 1, 1995, the bankruptcy trustee notified Petitioners that no assets were available for distribution from the bankruptcy estate except exempt assets. Claim Against Respondent On March 29, 1996, Petitioners filed a claim against Respondent. On June 13, 1996, the Construction Industries Recovery Fund Committee (the "Committee") denied the claim. The Committee determined that Petitioners are required by law to execute a construction contract on or after July 1, 1993, to recover from Respondent. The Committee found that Petitioners executed the required contract on June 10, 1993. On June 14, 1996, the Board ratified the Committee's action. The Board entered a Final Order on August 20, 1996. Payment To Respondent Petitioners paid money to Respondent in statutorily prescribed amounts through a surcharge of one-half cent per square foot of the project. The surcharge is imposed pursuant to Sections 489.140(2) and 468.631. Petitioners received no reimbursement from Respondent. Nor did Petitioners receive restitution from the licensee.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and thereinGRANT Petitioners' claim for recovery against Respondent. RECOMMENDED this 20th day of March, 1997, in Tallahassee, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 20th day of March, 1997.
Findings Of Fact All parties submitted proposed findings of fact. The Applicant's proposed findings 1-5 and 7-14 are hereby accepted except where they might specifically conflict with the findings stated in this Final Order or where they constitute conclusions of law. The Applicant's proposed finding 6 is accepted, with the exception of fourth sentence which is not supported by competent substantial evidence in the record. Proposed findings 1-6 of the Protestant, First Federal, are accepted except where they might specifically conflict with the findings stated in this Final Order or where they constitute conclusions of law. Proposed findings 7 through 9 of Protestant, First Federal, are rejected in that they constitute conclusions of law. Proposed findings 1, 2, 4, and 5 of the Protestant, United, are accepted except where they might specifically conflict with the findings stated in this Final Order. Its proposed finding 3 is accepted with the exception that the record showed that the primary market area is served by four savings and loan association offices. Its proposed finding 6 and 7 are rejected as not supported by competent substantial evidence in the record adduced at the hearing. The Department's proposed findings 1 through 9 and 11 through 13 are accepted except where they might specifically conflict with the findings stated in this Final Order. The Department's proposed finding 10 is accepted except for the finding as to net income which is not supported by competent substantial evidence in the record and conflicts with the findings stated in finding 11.
The Issue The issue in this case is whether Respondent failed to provide workers' compensation insurance coverage for employees, and, if so, what penalty should be assessed.
Findings Of Fact Petitioner is the state agency responsible for, inter alia, monitoring businesses within the state to ensure that such businesses are providing the requisite workers' compensation insurance coverage for all employees. The Division's headquarters are located in Tallahassee, Florida, but its investigators are spread throughout the state in order to more effectively monitor businesses. Respondent is a construction company that has been operating in excess of 30 years. It is a small company and usually only has a few employees at any given time. The company is located in Charlotte Harbor, Florida. Workers' compensation coverage is required if a business entity has one or more employees and is engaged in the construction industry in Florida. Workers' compensation coverage may be secured via three non-mutually exclusive methods: 1) The purchase of a workers' compensation insurance policy; 2) Arranging for the payment of wages and workers' compensation coverage through an employee leasing company; or 3) Applying for and receiving a certificate of exemption from workers' compensation coverage, if certain statutorily-mandated criteria are met. On January 8, 2009, Ira Bender, investigator for the Division, was doing on-site inspections in Port Charlotte, Florida. Bender stopped at the site on Edgewater Drive where new construction was underway at a YMCA. Bender observed a man (later identified as Thomas Woodall) sweeping the floor. Bender questioned Woodall and was told that Woodall worked for Respondent. When asked about his workers' compensation insurance coverage, Woodall advised that his insurance was maintained through Frank Crum Leasing Company ("Crum"). Bender called Crum and found that although Woodall had been carried as an employee of Respondent in the past, he had been released from coverage. The reason for his release was that his employment had been terminated for lack of business. Bender called Respondent to inquire about workers' compensation coverage. He was told that Respondent did not realize Woodall had been dropped from the Crum insurance coverage and that he would be reinstated immediately. In fact, coverage was restarted on that same day. Based on his finding that an employee had been working without coverage, Bender called his supervisor and provided his findings. The supervisor authorized issuance of a SWO based on the findings. The SWO was served on Respondent via hand- delivery at 11:45 a.m., on January 8, 2009. The SWO was also posted at the work site. The Division then requested business records from Respondent in order to determine whether there were any violations. If there were violations, then the Division would ascertain the amount of penalty to assess. Respondent cooperated and submitted the business records, as requested. After review of the business records, the Division issued its first Amended Order of Penalty Assessment ("Order") on January 14, 2009. The process employed by the Division was to locate all uncovered employees, i.e., those working without workers' compensation insurance for any period of time. The employees were then assigned a class code from the National Council on Compensation Insurance (NCCI) publication. Each trade or type of employment is assigned a code which sets the rate to be applied to an individual depending on the type of work he/she is performing. The Division assigned codes to the employees, determined how much the employee had been paid during the period of non-coverage, assigned the rate to the gross pay, and calculated the insurance premium needed to cover the worker for the time in question. A penalty of 1.5 times the premium was then assigned. The Order assessed a total penalty of $21,165.98 against Respondent. Respondent objected to the amount and refused to sign it due to errors contained in the Penalty Worksheet attached to the Order. Signing the Order would have allowed Respondent to return to work, but he refused to sign because he knew it was not correct. Pursuant to discussions between the parties and "additional records received," the Division issued a second Order on January 16, 2009, assessing a penalty of $6,501.27. Respondent believed that the Division was still in error and provided yet additional information--some verbal--to the Division. A third Order was issued on January 21, 2009, reducing the penalty to $3,309.56. However, Respondent still believed the penalty worksheet contained errors. Again, Respondent refused to sign and provided additional information to the Division. The Division issued a fourth Order on January 28, 2009, assessing a penalty of $2,822.24. That Order had an error concerning the spelling of an employee's name, but the penalty amount was correct. Respondent would not sign the fourth Order, because he did not believe he had intentionally violated any statute or rule concerning workers' compensation coverage for his employees. A corrected (fifth amended) Order was ultimately issued on May 19, 2009.1 The fifth Order asserts the amount of penalty now in dispute, which is the same amount appearing in the fourth amended Order. Respondent signed the fifth Order and entered into a payment plan for payment of the penalty, paying a down payment of $1,000 and monthly payments of $30 until paid in full. Respondent takes great offense to the fact that the penalty assessments were not faxed to him more quickly. He maintains that he had every intention to resolve this matter as quickly as possible, but the Division delayed and dragged out the process. The penalty worksheet attached to the fifth Order listed nine "Employee Names" that are subject to the penalty assessment. Each will be discussed below. The first "employee" is listed as "Cash" and is assigned Class Code 5403. This "employee" represents checks found in Respondent's records with the payee listed as "cash- casual labor" totaling $2,178.00 in gross payroll. Code 5403 was assigned because that is the code used by Crum for Respondent's general business. The manual rate for Code 5403 is $24.74. A penalty of $808.26 was assessed for that employee. The second employee is Jacob Prewitt. Prewitt was assigned Class Code 5221, due to the word "driveway" appearing on a check issued to him. Driveway work falls under a lower approved manual rate ($10.37) than general construction. The gross payroll amount was $1,960, and the penalty assigned to Prewitt was $304.88. The third employee is Woodall, assigned a Class Code of 5606, with a manual rate of $3.84. That code is used for supervisors and is, again, not as dangerous an occupation as general construction. The gross payroll for this entry was $1,008, and the penalty assessed for Woodall was $58.07. Cash is the fourth employee and has been covered in the discussion in paragraph 16, above. Barry Lawrence is the fifth employee; he is assigned Class Code 5437 as a cabinet maker/installer with a manual rate of $13.01. Lawrence had a Verification Letter issued by the Division indicating he was exempt from workers' compensation coverage. However, that exemption was limited to cabinet- making. By installing the cabinets, Lawrence performed work outside his exemption status. The gross payroll for his work was $6,200, and the penalty assessed for Lawrence was $1,209.33. Respondent was completely unaware that the exemption letter did not cover installation and had, in fact, always allowed cabinet- makers to install the cabinets as well. Brunderman Builders is listed as the sixth employee. It is assigned Class Code 5403 with a manual rate of $14.39. The gross payroll for this entry was $550, resulting in a penalty assessment of $118.73. The seventh employee is Jorge Gonzolas, assigned Class Code 5403, the general contracting code. Gonzolas was the employee of a contractor who was subcontracting with Respondent. The contractor died unexpectedly, and Gonzolas was left without payment for the work he had performed. Respondent generously decided to pay Gonzolas for his work, thereby, effectively making Gonzolas a de facto employee. The amount paid Gonzolas was $599.00; the penalty assessed for Gonzolas was $129.30. Woodall is again listed as employee number eight, this time with Class Code 5610, reflecting casual labor he did on one date that his insurance was not in place. The payroll amount for this work was $37.50. The penalty assessed for Woodall was $4.02. The ninth employee was Julio Garcia, assigned Class Code 8742 for outside sales, with a manual rate of $.64. The payroll amount for Garcia was $1,300. His penalty assessment amount was $12.48. Garcia was another one of the deceased subcontractor's employees that Respondent volunteered to pay for work Garcia had performed. The total payroll at issue for Respondent was $14,477.50. The total premium for that amount of payroll would have been $1,881.48, and the penalty assessed was $2,822.84. This is a fairly insignificant portion of Respondent's $5.5 million annual payroll. Respondent did not intentionally attempt to avoid the payment of workers' compensation insurance for its employees. There is no pattern of avoidance or indication that non-payment was Respondent's goal. Rather, there are plausible and reasonable explanations about the unpaid premiums. For Woodall, Respondent believed he was still covered through the Crum policy. For Gonzolas and Garcia, Respondent was simply attempting to be a nice guy. For Prewitt, the employee's exemption had unknowingly lapsed. For Lawrence, Respondent relied upon a Verification Letter from the state, but misinterpreted its scope. The Division, on the other hand, only pursued Respondent based on an actual finding of non-coverage. But for Woodall's presence at a work site doing manual labor (sweeping the floor), the Division would not have looked at Respondent's records. There is no indication the Division acted other than in strict accordance to its governing rules.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Financial Services, Division of Workers' Compensation, upholding the assessment of a penalty of $2,822.24 against Respondent, Brunderman Building Company, Inc. DONE AND ENTERED this 9th day of October, 2009, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of October, 2009.
