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7-1902-16674-2 |
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE COMMISSIONER OF LABOR AND INDUSTRY
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FINDINGS
OF FACT, CONCLUSIONS,
AND RECOMMENDATION |
The above matter came on
for a hearing before Administrative Law Judge (ALJ) Richard C. Luis on November
15, 2005 at 10:30 a.m. at the Office of Administrative Hearings,
Michael J. Tostengard, Assistant Attorney General,
NOTICE
This report is a recommendation, not a final decision. The Commissioner of Labor and Industry will
make the final decision after a review of the record. The Commissioner may adopt, reject or modify
the Findings of Fact, Conclusions, and Recommended Decision. Under Minn. Stat. § 14.61, the final decision
of the Commissioner shall not be made until this Report has been made available
to the parties to the proceeding for at least ten days. An opportunity must be afforded to each party
adversely affected by this Report to file exceptions and present argument to
the Commissioner. Parties should contact
Nancy Leppink,
If the Commissioner fails to issue a final decision within 90 days of the close of the record, this report will constitute the final agency decision under Minn. Stat. § 14.62, subd. 2a. In order to comply with this statute, the Commissioner must then return the record to the Administrative Law Judge within 10 working days to allow the Judge to determine the discipline to be imposed. The record closes upon the filing of exceptions to the report and the presentation of argument to the Commissioner, or upon the expiration of the deadline for doing so. The Commissioner must notify the parties and the Administrative Law Judge of the date on which the record closes.
Under Minn. Stat. § 14.62, subd. 1, the agency is required to serve its final decision upon each party and the Administrative Law Judge by first class mail or as otherwise provided by law.
STATEMENT OF ISSUES
Did Respondent demonstrate financial irresponsibility in violation of Minn. Stat. § 326.91, subd. 1(6), by failing to satisfy three outstanding judgments?
Did Respondent violate Minn. Stat. § 326.91, subd. 1(4), by failing to perform services under the Jorgenson contract?
Is discipline of Respondent in the public interest?
Based upon all of the proceedings herein, the Administrative Law Judge makes the following:
FINDINGS OF FACT
1.
Respondent
is currently licensed as a residential building contractor, license no.
20214236. Adam Forsberg formed Respondent
Energy Star Builders, Inc. in January 2000.[1]
The Jorgenson Project
2.
On June
26, 2002, Respondent contracted with Gene and Leona Jorgenson to build the
couple a new residence in
3.
Subsequent
to the contract, Mr. Jorgenson requested an estimate for a concrete slab
driveway. In a proposal from Respondent
to Gene Jorgenson, dated August 8, 2002, Respondent estimated the cost of the
driveway to be $14,400.[5]
4.
Due to a
delay in the delivery of Insulspan, Respondent did not begin work on the
Jorgenson project for a few months. In
the fall of 2002, Respondent began work on the Jorgenson’s garage. In addition, by November, when the Insulspan
arrived, Respondent had completed the digging of the house’s foundation.[6] The walls and roof of the house structure
were completed in December 2002, and the roof shingles were installed in
January 2003.[7]
5.
Between
January 2003 and July 2004, Respondent completed interior structural work in
the Jorgenson residence. Mr. Jorgenson
was displeased with the results of the structure. Specifically, he alleged that parts of the siding
blew off, the deck was sagging, the bathroom was not done according to the
plans, and a door was installed incorrectly.[8]
6.
On July
25, 2004, Mr. Jorgenson fired Respondent.[9] By that time, Gene Jorgenson had paid
approximately $200,000 to Respondent.
Mr. Jorgenson obtained an estimate on finishing the project in the
amount of $54,000.[10]
Unsatisfied Judgments
Against Respondent
7.
While
dealing with a lawsuit related to the Jorgenson project, Respondent incurred
legal fees with the law firm of Dunkley, Bennett, Christensen & Madig. At the same time, he was not receiving timely
payments from all of his customers.[11] As a result, Respondent fell behind on some
of his debts.
8.
On
September 2, 2003, a Notice of Entry of Judgment was entered in Hennepin County
District Court against Adam Forsberg, doing business as Energy Star Builders,
Inc., in favor of the Dunkley, Bennett firm in the amount of $10,327.16.[12]
9.
On
October 21, 2003, a Notice of Entry and Statement of Judgment was entered in
Ramsey County District Court against Energy Star Builders, Inc. and Adam Forsberg,
in favor of Cemstone Ready-Mix, Inc. in the amount of $9,031.56.
10.
In 2004,
Hengel Ready Mix & Construction, Inc. filed a Statement of Claim and
Summons against Energy Star Builders, Inc. in Crow Wing County District Court
claiming $3,222.70 in unpaid products and services.[13]
11.
In
November 2004, the Department received a complaint from a former employee of
Respondent. An investigation by the
Department revealed that judgments had been entered against Respondent as
follows: Cemstone Ready-Mix, $9,031.56;
Dunkley, Bennett, Christensen & Madig, $10,327.16; and Hengel Ready Mix
& Construction, $3,222.70.
12.
In
January 2005, the Department received a complaint from Gene Jorgenson regarding
his June 26, 2002 contract with Energy Star Builders, Inc., alleging that
Respondent failed to complete the construction of his residence as called for
in the contract.
13.
In April
2005, Respondent reached an agreement with Cemstone Ready-Mix in which Mr.
Forsberg would make monthly payments of $300.00.[14] Respondent made payments of $300.00 in May
and June and then ceased making payments.
As a result, Cemstone levied on Respondent’s bank account and recovered
approximately $2,000.00.
14.
Respondent
also reached an agreement with the Dunkley, Bennett firm to make monthly
payments toward the past due legal fees.[15] Respondent made three payments of $400.00 on
or about May 5, June 5, and June 30, 2005, and then ceased making payments.
15.
The
Department issued a Notice of and Order for Hearing, Order for Prehearing
Conference, Order to Show Cause, and Statement of Charges to Respondent on June
27, 2005. The Prehearing Conference
occurred on August 19, 2005, at which time the Administrative Law Judge set the
hearing for November 16, 2005.
16.
At the
end of the hearing, the ALJ allowed time to Respondent, through November 23,
2005, so that Respondent could submit information regarding satisfaction of the
three judgments. Respondent submitted
Satisfactions of Judgment from Cemstone Ready-Mix, Inc. and Hengel Ready Mix &
Construction, Inc., both dated November 22, 2005. Respondent also submitted a letter from the
Dunkley, Bennett firm confirming that its account had been paid in its entirety
as of November 23, 2005.[16]
Based upon the Findings of Fact, the Administrative Law Judge makes the following:
CONCLUSIONS
1. The Administrative Law Judge and the Commissioner of Labor and Industry have jurisdiction in this matter under Minn. Stat. §§ 14.50, 45.027, and 326.91.
2. The Respondent was given timely and proper notice of the hearing in this matter.
3. The Department has complied with all procedural requirements of law.
4. The Department must prove by a preponderance of the evidence that the alleged violations occurred.[17]
5. Minn. Stat. § 326.91, subd. 1(6) allows the Commissioner to deny, suspend, revoke, censure, or fine any licensee if the licensee “has been shown to be incompetent, untrustworthy, or financially irresponsible,” and if the action is in the public interest.
6.
7. The Department has proved by a preponderance of the evidence that Respondent is financially irresponsible.
8. The Department has not shown that Respondent performed negligently or in breach of contract.
9. The Department has established that discipline of Respondent is in the public interest as to the charge of financial irresponsibility.
Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:
IT IS RECOMMENDED that disciplinary action be taken against the residential building contractor’s license of Energy Star Builders, Inc. as to the charge of financial irresponsibility.
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Dated this |
11th |
day of |
January |
2006. |
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/s/ Richard C. Luis |
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RICHARD C. LUIS |
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Administrative Law Judge |
Reported: Tape-Recorded.
One Tape, No Transcript Prepared.
MEMORANDUM
The Department argues that Respondent is financially irresponsible under the statute based upon the failure to satisfy the three judgments before they were entered. According to the Department, Respondent’s satisfaction of the judgments prior to the issuance of this Report does not mitigate the fact that the judgments went unsatisfied for up to two years. The Department maintains that it has a duty to protect the public from contractors that are irresponsible with customers’ money, so discipline of Respondent is in the public interest.
Respondent testified that each of the three judgments resulted from customers not paying for services performed by Respondent. Further, Mr. Forsberg maintains that he was surprised to receive the Dunkley, Bennett legal bill and learn that he was responsible for paying the fees. Respondent does not dispute that the judgments went unsatisfied until late November 2005.
The ALJ agrees with the Department that Respondent’s failure to satisfy the judgments before they were entered is evidence of financial irresponsibility. Additionally, Respondent entered into payment plans with Dunkley, Bennett and Cemstone Ready-Mix, which he honored for two to three months before terminating payments. There is no evidence that Respondent attempted to explain to either company his failure to honor the payment agreements. The fact that Respondent did finally satisfy the judgments is not a sufficient reason to ignore Respondent’s failure to pay these three debts, totaling in excess of $20,000, for approximately two years.
The Department argues also that Respondent performed in breach of the Jorgenson contract. The Department’s case consisted of the testimony of Gene Jorgenson, who testified that he hired Respondent to build the structure of the house, as well as to finish the interior, within 180 days. Mr. Jorgenson complained that the work was not started in a timely manner and that the project was never completed. Specifically, he claimed that some of the siding blew off the house, the deck was sagging, the bathroom was not constructed according to the plans, and a door was installed incorrectly.
Respondent contends that he was only hired to build the structure of the house and not to finish the interior. Respondent supports this argument by referencing the contract, which obligates the company to “construct a 56’ x 44’ dwelling using polysteel and Insulspan for basement and exterior walls,” and obligates the Jorgensons to complete the interior finishing work. Respondent also contends that, under the contract, he was not responsible for the delay in getting the Insulspan, which led to the delay in starting and finishing the exterior structure. When the materials did finally arrive at the construction site, the foundation was dug out and ready for the installation of the materials. Respondent argues that the completed structure is up to code and states that if Gene Jorgenson didn’t like the work Respondent was doing, he should have fired Respondent well before July 2004. Finally, Respondent asserts that his company has never received a complaint regarding workmanship since it was started in January 2000.
The ALJ concludes that the Department has not shown by a preponderance of the evidence that Respondent performed negligently or in breach of contract on the Jorgenson project. The contract clearly set out the responsibilities of each party and indemnifies Respondent against delays in material delivery. While Mr. Jorgenson was undoubtedly frustrated by the amount of time it took to complete his new house, that frustration does not satisfy the Department’s burden of proof.
R.C.L.
[1] Testimony of Adam Forsberg.
[2] Ex. 1. An invoice from Respondent to Gene Jorgenson, dated May 25, 2002, shows labor and materials to build a detached garage, in addition to the structure of the residence. Document submitted with Respondent’s post-hearing submissions on November 23, 2005.
[3] The Insulspan system consists of solid, one-piece, pre-cut structural insulating panels that are installed as wall, floor, or roof components of residential and commercial structures.
[4] Ex. 1.
[5] Document submitted with Respondent’s post-hearing submissions.
[6] Testimony of Gene Jorgenson.
[7] Testimony of Gene Jorgenson. The deck was also built during this time period.
[8] Testimony of Gene Jorgenson.
[9] Testimony of Respondent and Gene Jorgenson.
[10] Testimony of Gene Jorgenson.
[11] Testimony of Adam Forsberg.
[12] Ex. 4.
[13] Ex. 4.
[14] Ex. 3.
[15] Ex. 2.
[16] Subsequently, by fax dated December 12, 2005, Respondent submitted a Satisfaction of Judgment from Dunkley, Bennett, dated November 30, 2005.
[17] Minn. R. pt. 1400.7300, subp. 5.