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OAH 15-1902-19012-2 Agency No. BC2605873/TMS |
STATE OF
OFFICE OF ADMINISTRATIVE HEARINGS
FOR THE DEPARTMENT OF LABOR AND INDUSTRY
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In the Matter of the Residential Building Contractor’s License of Dean R. Johnson Construction, Inc., License No. 1609 |
FINDINGS OF FACT, CONCLUSIONS AND RECOMMENDATION |
Appearances: Michael J. Tostengard, Assistant Attorney General, for the Department of Labor and Industry (Department); Robyn N. Moschet, McCollum, Crowley, Moschet & Miller, Ltd., for Dean R. Johnson Construction, Inc. (Respondent).
1. Did the Respondent conduct business under a name other than the one for which it was licensed, in violation of Minn. Stat. § 326.91, subd. 1 (2) and Minn. R. 2891.0040, subp. I (E)[1]?
2. Did the Respondent engage in a practice that demonstrates that it is financially irresponsible, in violation of Minn. Stat. § 326.91, subd. 1 (6)?
Based on the evidence in the hearing record, the Administrative Law Judge makes the following:
1.
The Respondent is licensed as a residential
building contractor by the Department and holds License No. 1609. Respondent is actively engaged in the
business of building homes. It is a
2. Dean R. Johnson is the president and sole shareholder of the Respondent, and he is the “qualifying person” for the residential building contractor license. Mr. Johnson’s wife, Peggy, is the secretary of Respondent.[4]
3. Mr. Johnson is also involved in other business ventures.
4.
Johnson and Johnson Land Development Company,
LLC (Johnson and Johnson) was formed to do site development at
5.
Fox Meadows of Lakeville LLC (Fox Meadows LLC)
is a limited liability company owned by Dean R. Johnson and John Hanson. Fox Meadows LLC was formed to develop a
residential townhome project in
6. Wynfield Place LLC, Johnson and Johnson and Fox Meadows LLC have no employees. Any bills incurred by them are mailed to the Respondent’s business address. Under Dean Johnson’s direction, Peggy Johnson has done the bookkeeping and paid the bills for all three of the companies.[9] Diane Parell handled bills for the Respondent. If there was a question, the bill would be reviewed by Dan Cates, Respondent’s project manager, or Dean Johnson to determine which entity should pay the bill.[10]
7. The Department issued its initial Statement of Charges against the Respondent on June 19, 2007. It contained allegations that the Respondent had failed to pay three subcontractors, North Metro Landscaping, Inc., Burschville Construction, Inc., and Driveway Designs, resulting in mechanic’s lines being placed on customers’ homes. It also alleged that the Respondent did business as “Dean Johnson Homes,” a business name not registered with the Department.
8.
A First Amended Statement of Charges was issued
on August 22, 2007, alleging that Respondent failed to pay Allied Excavating,
Inc., for work performed and that Allied Excavating had placed a lien on the
9. A Second Amended Statement of Charges was issued on January 3, 2008, alleging that the Respondent owed money to Diversified Images, Inc., for work on various residential construction sites prior to October 26, 2007.
10. A Third Amended Statement of Charges was filed on April 23, 2008, alleging that Respondent owed Wagner Paving, Ostertag Cement, Inc., Kali Construction, Inc., Beck Drywall, Inc., Plymouth Plumbing, Inc., West Star Electric, Inc., and Diversified Wall Systems, Inc., for work performed on various residential construction sites, and that Diversified Wall Systems, Inc., had filed mechanic’s liens on homes purchased from Respondent.
11.
Based on these charges, the Department alleged
that Respondent had violated Minn. Stat. § 326.91, subd. 1 (2) and
12. At no time was the Statement of Charges amended to allege wrongdoing by an individual or by any entity other than the Respondent.
13. The Respondent filed Answers denying that it had committed any violations of the law.
14. On September 29, 1999, the Respondent registered with the Secretary of State to conduct business under the name “Dean Johnson Homes,” but did not file a copy of it with the Department of Commerce. The Respondent admitted that the failure to file was an oversight and it was immediately rectified upon receipt of notice from the Department.[11]
15. By the date of the hearing, the Department had dropped the claims of financial irresponsibility tied to nonpayment of North Metro Landscaping, Inc., Athertons Lawns & Landscaping, LLC, Plymouth Plumbing, Inc., Diversified Wall Systems, Inc., and West Star Electric, Inc.
16.
The claims involving Burschville Construction,
Allied Excavating, Driveway Design, R. P. Utilities and Kali Construction arise
from work performed at
17. The claim involving Diversified Images arises from work at Fox Meadows.
18. Typically, Respondent enters into contracts with subcontractors to complete work on the homes that it is constructing. Prior to starting work on a project, the Respondent issues a purchase order to the subcontractor specifying the work to be performed and the subcontractor signs and returns a copy of the purchase order to the Respondent. Following completion of the work, the subcontractor resubmits the signed copy, indicating that the work has been completed. Respondent reviews the completed work and approves payment as appropriate.[12] The timing of the payment may vary. Some of Respondent’s subcontractors are paid on a draw system. For work done early in a project, such as for excavation, the subcontractors are paid for work done, typically prior to the closing of the project. Other subcontractors are paid at the time of the closing on the sale of the property.[13]
19.
Johnson and Johnson was the site developer of
20.
Although the details are unclear in this record,
Driveway Design filed a legal action against Johnson and Johnson for matters
arising from the development of
Burschville Construction, Inc.
(Burschville)
21.
On May 25, 2005, Burschville filed 14 liens,
each for $26,182.82, against Johnson and Johnson for work performed at
22. There has been litigation between Driveway Design and Johnson and Johnson that includes the liability to pay Burschville. The Respondent was a party to that litigation but the claims against it were dismissed.[18]
Allied Excavating, Inc. (Allied)
23.
Allied does excavation for new home foundations,
installs sewer and water lines for new homes, and does grading work at new home
sites. Pamela Jewison is an owner of
Allied.[19] In 2007, Ms. Jewison filed a complaint with
the Department alleging that Respondent had failed to pay Allied for a portion
of the work done, and had also failed to pay other subcontractors, listed in
the complaint.[20] In particular, Allied claimed that it had
done work for the Respondent at
24.
Allied entered into a subcontractor agreement
with the Respondent on July 7, 2005.
That agreement stated that Respondent would not pay for any work unless
the work had been ordered by “a purchase order or variance purchase order,
signed by an authorized representative of the contractor.”[23] Purchase Orders signed by Allied were
submitted to the Respondent.[24] Also, on October 14, 2005, the Respondent
agreed to pay for removal of dirt at
25. On December 19, 2007, Peggy Johnson notified Allied that invoices 8978, 9076, 9078 and others should be re-billed to Johnson and Johnson.[29] Allied divided the invoices and resubmitted them as directed.[30]
26. Johnson and Johnson did not have the funds to pay Allied for all services rendered for site preparation. Thirty percent of the payments are still pending and the balance is in litigation.[31] Johnson and Johnson has counterclaimed against Driveway Design for the payment to Allied; the Respondent was dismissed from the litigation. It claims that it did not contract for the disputed services.[32] There is still a separate action by Allied pending against the Respondent.[33]
27.
On June 7, 2007, in a separate conciliation
court action, Allied obtained a judgment against the Respondent for $3,280 for
work performed in
R. P. Utilities, Inc. (R. P. Utilities)
28.
R. P. Utilities was hired to haul dirt away from
the
Diversified Images, Inc. (Diversified
Images)
29. Diversified Images did site preparation including erosion control at Fox Meadows in Lakeville and Glen Rose, another development in which Dean Johnson had an interest. Diversified Images sent invoices for each project in care of Respondent. On October 22, 2007, Diversified Images filed a complaint with the Department against the Respondent for nonpayment of the invoices, alleging that it was owed approximately $4,700.[39] Fox Meadows LLC paid some invoices submitted by Diversified Images.[40] Mr. Johnson acknowledged that Respondent also paid $630 to Diversified Images for work at Fox Meadows.[41] There was no written contract between Diversified Images and the Respondent or any of the other companies under Mr. Johnson’s control.[42] The owner of Diversified Images, Todd Staber, communicated with Dan Cates or the superintendent at the Fox Meadows site, Sean MacNamara,[43] about the work to be done.[44] It is unclear whether there is a substantive dispute about the remaining invoices.[45]
30. Mr. Cates confirmed that he and Mr. MacNamara were responsible for approving payment for site work at Fox Meadows. Both were employed by the Respondent.[46]
Wagner Paving
31.
In February 2008, the Department’s investigator,
Thomas Sendecky, received a complaint from a person stating that he was a collection
agent and that Wagner Paving was attempting to collect $3,982 from the
Respondent for work performed in 2005 [47] There was no other evidence in support of the
complaint. Mr. Johnson claimed that
Johnson and Johnson had made some payments to Wagner Paving for work at
Ostertag Cement, Inc. (Ostertag)
32.
On February 25, 2008, Mr. Sendecky was contacted
by Kelly Culver, of Ostertag, regarding outstanding balances for work performed
on behalf of the Respondent from 2004 through 2006. At that time, Ostertag claimed that it was
owed $63,628.49.[49] The invoices showed services for projects in
Kali Construction, Inc. (Kali)
33.
On February 26, 2008, Mr. Sendecky received
information from Gary Dungey at Kali that it was owed $19,515.80 for work performed
for the Respondent at
Beck Drywall
34. The Department received information from Beck Drywall that Respondent owed it $47,493.26 for labor and materials provided. It included an agreement dated November 27, 2007, that Beck Drywall would accept a lump sump payment of $5,000 and carry the balance owing for an undetermined period, and would continue to provide drywall installation and painting for the Respondent, payments to be made at time of closing on the home.[57] The parties stipulated on the record that, if Mr. Beck were called to testify, he would state that he submitted his unpaid invoices at the Department’s request and that he had initiated no action through the Department.[58]
35. Thomas McManus was part owner and employed by Guaranty Title, Inc. until his retirement in 2007. During the time of his employment, he was a licensed attorney and a title examiner. His company provided title insurance and closing services for about 1,500 homes sold by the Respondent between 1984 and his retirement. In instances where mechanic’s liens were filed after closing and Guaranty Title became aware of the lien, notice was forwarded to the Respondent’s attorney to handle the defense on behalf of the homeowner and homeowner’s lender. At no time did Guaranty Title have to pay off any mechanic’s liens filed against Respondent or pay any costs of defense. Respondent also resolved any subcontractors’ unpaid bills.[59]
36. In any instance where a mechanic’s lien has been filed after the closing against a home built by Respondent, the Respondent has taken over the defense or repaid the home owner’s attorneys fees to resolve the matter.[60]
37.
Dale Swenson is an owner of Alpine Capital, a
construction lender for residential home builders in the
Transfer of Authority from Department of
Commerce to Department of Labor and Industry
38. The responsibilities of the Department of Commerce to regulate residential building contractors, as set forth in Minn. Stat. §§ 326.83 through 326.92 and Chapter 327A (2004) were transferred to the Department of Labor and Industry by Reorganization Order No. 193, April 4, 2005.
39. During the 2007 Legislative Session, the Legislature enacted Chapter 140 which codified many of the transfers of authority included in the Reorganization Order. In particular, “the responsibilities of the commissioner of commerce relating to residential contractors…under sections 45.027 to 45.23 and 326.83 to 326.992 [were] transferred under section 15.039 to the commissioner of labor and industry as amended and recodified in this chapter.”[62] The term “responsibilities” was defined to include: “powers, duties, rights, obligations and other authority imposed by law.”[63] These provisions of the law were effective on the day following enactment.[64] The Governor signed the bill on May 25, 2007, and section three, transferring the authority to Labor and Industry, took effect the following day.
40. The same legislation made some substantive amendments to Minnesota Statute Section 326.91.[65] Those changes took effect December 1, 2007.[66] The Revisor of Statutes was directed to recodify certain provisions, including the recodification of section 326.91 as 326B.84, in the 2008 edition of Minnesota Statutes.[67]
Based on these Findings of Fact, the Administrative Law Judge makes the following:
1. The Administrative Law Judge and Commissioner of Labor and Industry have jurisdiction of this matter pursuant to Minn. Stat. §§ 14.50, 45.027, subd. 7, 326B.082, and 326B.84.
2. The Respondent was given timely and proper notice of the hearing in this matter, and the Department has complied with all procedural requirements of law and rule.
3. The Department has failed to show that the Respondent engaged in a fraudulent, deceptive, or dishonest practice in violation of Minn. R. 2891.0040, subp. 1 E (2007), or Minn. Stat. § 326.91, subd. 1 (2) (2006),[68] by failing to file a copy of the certificate of assumed name with the commissioner. Although the Respondent did fail to file the copy, it had registered the name “Dean Johnson Homes” with the Secretary of State. The assumed name was so similar to the name on file that there was no possibility of fraud, deceit or dishonesty. The Respondent immediately corrected the oversight by filing a copy upon receiving notice of the violation from the Department.
4. The Department has failed to demonstrate by a preponderance of the evidence that the Respondent’s failure to pay Burschville was financially irresponsible, in violation of Minn. Stat. § 326.91, subd. 1 (6). There was no evidence that the Respondent had entered into a contract with Burschville, and the liens were filed by Burschville against Johnson and Johnson. The Department also failed to show that any actions taken by Dean Johnson as the qualifying person were financially irresponsible.
5.
The Department has demonstrated by a
preponderance of the evidence that the Respondent’s failure to pay Allied for
work performed at
6. The Department has demonstrated by a preponderance of the evidence that the Respondent’s failure to pay R. P. Utilities was financially irresponsible, in violation of Minn. Stat. § 326.91, subd. 1 (6).
7. The Department has demonstrated by a preponderance of the evidence that the Respondent’s failure to pay Diversified Images was financially irresponsible, in violation of Minn. Stat. § 326.91, subd. 1 (6).
8. The Department has failed to demonstrate by a preponderance of the evidence that the Respondent’s failure to pay Wagner Paving was financially irresponsible, in violation of Minn. Stat. § 326.91, subd. 1 (6).
9. The Department has failed to demonstrate by a preponderance of the evidence that the Respondent’s failure to pay Ostertag was financially irresponsible, in violation of Minn. Stat. § 326.91, subd. 1 (6).
10. The Department has demonstrated by a preponderance of the evidence that the Respondent’s failure to pay Kali was financially irresponsible, in violation of Minn. Stat. § 326.91, subd. 1 (6).
11. The Department has failed to demonstrate by a preponderance of the evidence that the Respondent’s failure to pay Beck Drywall was financially irresponsible, in violation of Minn. Stat. § 326.91, subd. 1 (6).
12. Disciplinary action against the Respondent is in the public interest.
Based upon these Conclusions, and for the reasons explained in the accompanying Memorandum, the Administrative Law Judge makes the following:
The Commissioner of Labor and Industry take adverse action against Respondent’s license, censure Respondent, or impose a civil penalty upon Respondent.
Dated: January 14, 2009
s/Beverly Jones Heydinger
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BEVERLY JONES HEYDINGER Administrative Law Judge |
Reported: Transcript Prepared
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 these Findings of Fact, Conclusions, and
Recommendations. The parties have 10
calendar days after receiving this report to file Exceptions to the
report. At the end of the exceptions
period, the record will close. The
Commissioner then has 10 working days to issue his final decision. Parties should contact Steve Sviggum,
Commissioner of the Minnesota Department of Labor and Industry,
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.
Transfer of Authority from the Commissioner
of Commerce to the Commissioner of Labor and Industry
Prior to April 4, 2005, the Department of Commerce regulated residential building contractors. On that date, by Reorganization Order No. 193, the authority to regulate residential building contractors, as set forth in Minn. Stat. §§ 326.83 through 326.92 and Chapter 327A (2004), was transferred to the Department of Labor and Industry.
As required by law, a bill must be submitted to the legislature to make the statutory changes resulting from reorganization orders.[69] During the 2007 Legislative Session, the Legislature enacted Chapter 140 which codified many of the transfers of authority included in Reorganization Order No. 193. As part of the bill, “the responsibilities of the commissioner of commerce relating to residential contractors…under sections 45.027 to 45.23 and 326.83 to 326.992 [were] transferred under section 15.039 to the commissioner of labor and industry as amended and recodified in this chapter.”[70] The Governor signed the bill on May 25, 2007, and section three, transferring the relevant authority to Labor and Industry, took effect the following day.
Section 45.027, subdivision 7, grants authority to deny, suspend or revoke the authority or license if the commissioner finds that:
(4) the person has engaged in an act or practice, whether or not the act or practice directly involves the business for which the person is licensed or authorized, which demonstrates that the applicant or licensee is untrustworthy, financially irresponsible, or otherwise incompetent or unqualified to act under the authority or license granted by the commissioner.
Also, section 326.91, subd. 1 (6), in effect until December 1, 2007, stated that negative action could be taken against a licensee upon a finding that the licensee “has been shown to be incompetent, untrustworthy, or financially irresponsible.” The provision was in effect during the time when the facts alleged to be violations of this provision occurred. Effective December 1, 2007, this precise provision was struck, but a broader provision was enacted. It states that an adverse licensing action may be taken upon a showing that the licensee:
Has engaged in an act or practice whether or not the act or practice directly involves the business for which the person is licensed, that demonstrates that the applicant or licensee is untrustworthy, financially irresponsible, or otherwise incompetent or unqualified to act under the license granted by the commissioner.[71]
Although the authority to enforce both of these provisions previously belonged to the commissioner of commerce, both are now enforceable by the commissioner of labor and industry. Respondent’s argument to the contrary is directly contradicted by Laws of 2007, Chapter 140, Article 2, Section 3 quoted above.
Section 15.039 further clarifies that the transfer of authority is complete and is expansive. Specifically, it states that a new agency is a continuation of the former agency as to the matters within the jurisdiction of the former agency and that the new agency has full authority to carry out the responsibilities. Moreover,
[a]ny proceeding, court action, prosecution, or other business or matter pending on the effective date of a transfer of responsibilities may be conducted and completed by the new agency in the same manner under the same terms and conditions, and with the same effect, as though it involved or were commenced and conducted or completed by the former agency prior to the transfer.[72]
Thus, the commissioner of labor and industry has authority to pursue the alleged violations that arose during the time that either commissioner had authority to enforce the law. Section 15.039 assures that reorganizations will not affect the enforcement authority of the agency when that authority is transferred.
Respondent claims that the Department has the authority to enforce the law only in its current form, and not to enforce the law in effect when the claims arose. This argument has no merit. The law in effect at the time of the alleged violations applies, and the language of section 15.039, subdivision 4 assures that those claims survive. See also Minn. Stat. § 645.35, preserving the right to conclude an action commenced prior to repeal. Moreover, it is doubtful that there is any substantive difference that would affect the outcome of the claims in this case. The amended language deletes section 326.91, subdivision one (6), but replaces it with a comparable, broader prohibition, now codified at 326B.84 (15).
Failure to File Change of Name
The Department has the authority to enforce Minn. R. 2891.0040, subp. 1E, which requires a licensed residential building contractor to file its business name with the Secretary of State and file a copy with the Department. The Licensee filed the assumed name with the Secretary of State but failed to file a copy as required. Under the circumstances, the omission was de minimus and could not meet any reasonable standard for “fraudulent, deceptive or dishonest.” Moreover, the omission had no adverse effect on the public. Because the name was filed with the Secretary of State, anyone seeking to locate information about the business would have easily done so. The business name is so similar to the licensed name that no confusion was likely, nor would any person who checked the licenses with the Department be deceived or misled. Also, Respondent filed a copy with the Department as soon as it learned that its attorney had failed to do so. Under section 45.027, subd. 7, a sanction is appropriate if there is a demonstrated violation and the order is in the public interest. Under the circumstances of this case, no public interest would be served by imposing a sanction for failure to strictly comply with the language of the rule. It should be noted that the Department did not address this violation in its posthearing memorandum.
Financial Irresponsibility
The Notice of and Order for Hearing and initial Statement of Charges was served on June 20, 2007, directed to Dean R. Johnson Construction, Inc. and Dean Raymond Johnson. The Notice stated that pursuant to sections 45.027, subdivision 7, and 326.91, subdivision 1, Dean R. Johnson Construction, Inc. must show cause why “his” residential building contractor’s license should not be revoked or suspended and why “he” should not be subject to a civil penalty. All of the allegations in the initial Statement of Charges and subsequent amendments allege violations by Dean R. Johnson Construction, Inc., and there are no allegations against Mr. Johnson personally.
Respondent argues that the actions taken by Dean Johnson on behalf of businesses other than the Respondent may not be taken into account in determining whether the Respondent itself has been financially irresponsible. This argument might have merit under section 326.91, prior to the statute’s amendment, if the actions were independent and unrelated to the Respondent’s operation. However, Mr. Johnson is the owner, president and qualifying person who is, by his own testimony, responsible for the business decisions of the Respondent and the related businesses, including the allocation of invoices to the appropriate business entity. Respondent was acting through Mr. Johnson with other companies under Mr. Johnson’s control, directing the work of subcontractors, reviewing the work and approving and allocating payment among the companies. Mr. Johnson’s actions on matters that involved the Respondent and were intertwined with another one of his businesses are indistinguishable from those of the Respondent as the licensee. No other person took such actions on behalf of the Respondent, nor was anyone else authorized to do so. The other business entities with which he was involved had no employees, and Mr. Johnson admitted that Dan Cates, his project manager, was his “eyes and ears”[73] on site for the other companies. When either Dean Johnson or Dan Cates spoke to subcontractors without a specific contract with the other entity, or failed to clearly state the scope of their authority or the entity on whose behalf they spoke, there was good reason for the subcontractors to expect that the Respondent was responsible for the commitments made.
However, the Department carries this argument too far. In instances where the subcontractor had a written contract with one of the other companies and pursued its claims against that company, the Department must show that actions taken by Mr. Johnson brought the interests of the Respondent into the dispute. Absent such evidence, under section 326.91, subdivision one, every dispute by a subcontractor with one of the other business entities may not be imputed to the Respondent merely because Mr. Johnson is associated with those other businesses. Moreover, it is inappropriate to argue that Mr. Johnson and hence the Respondent is financially irresponsible because, as an individual, Mr. Johnson failed to provide additional funding to the unlicensed businesses for debts that are not the Respondent’s responsibility. Such an argument might be made under the amended section 326B.84 (15), but does not apply to actions that arose prior to the effective date of that amendment.
Applying these principles, Burschville
had contracts with Johnson and Johnson and filed liens against that
company. Although the work occurred at
In contrast, the claims by Allied, R. P. Utilities, Diversified Images and Kali show that the commitments of the various business entities were intertwined: the work to the done, the absence of clear contracts delineating the obligations, and the actions of Respondent’s employees on behalf of the other businesses. Where the Respondent and the other companies were operating jointly on the site, where there were no clear written agreements that set forth the terms for payment, and where the Respondent’s employees were the only individuals in communication with the subcontractors, it is reasonable to conclude that the Respondent was financially irresponsibile because it did not assure that the subcontractors were paid for the work performed. In addition, there is no apparent disagreement that money is owed to Allied, R. P. Utilities and Kali. For Diversified Images, although Respondent claimed that there was a substantive dispute, it offered no evidence to support the claim, Mr. Cates was unaware of any dispute, and the owner of Diversified Images testified to the contrary.
The Department failed to prove by a preponderance of the evidence that there was any evidence of financial irresponsibility in Respondent’s dealings with Wagner Paving. Its only evidence was a complaint to Mr. Sendecky from a bill collector. The Department made no effort to corroborate the claim. Such a statement by itself is insufficient to conclude that the Respondent was financially irresponsible. The Department also failed to prove by a preponderance of the evidence that Respondent’s agreement with Beck Drywall was financially irresponsible. At a time when homes sales are poor, it is not unreasonable to develop payment terms tied to the sale of the homes. Beck Drywall agreed to the terms and did not complain to the Department.
The Department failed to prove by a preponderance of the evidence that Respondent’s failure to pay disputed payments to Ostertag was financially irresponsible. The evidence was equivocal. Although Ostertag complained to the Department that the Respondent had not fully paid for services, the Respondent provided evidence that Ostertag had not submitted the necessary documentation to be paid, that Respondent had notified Ostertag of the need for additional documentation, and Ostertag had not provided it. The Department asserted that work had been done and money was owed under the theory of quantum meruit. Absent additional evidence about the work done and the reasons why the payment requests were rejected, there is insufficient evidence to conclude that Respondent improperly denied payment and was financially irresponsible.
In instances where this is a legitimate dispute about the money owing and no home owner has been disadvantaged, it is not financially irresponsible to dispute a subcontractor’s charges. However, when the dispute is not over the appropriate payment but solely over which of several companies will pay and those companies are under the control of the licensed business’s owner and qualifying person and working on the same project, it is financially irresponsible to compel the subcontractors to hold the bag.
In summary, the Department has proven a few of the allegations and some sanction may be warranted. In determining the appropriate sanction, it is reasonable to take into account the large number of subcontractors Respondent has dealt with over the years and its general reputation for protecting home buyers and conducting its business in a financially responsible manner. All but one of the violations arose from one building project where the respective financial obligations of several companies are in litigation. There was no evidence that this dispute is typical of Respondent’s business dealings.
B.
J. H.
[1] Unless noted, statutes are cited to the 2006 edition, and rules are cited to the 2007 edition.
[2] Hearing Transcript (T.) at 100 (D. Johnson).
[3] T. at 101 (D. Johnson).
[4] T. at 101 (D. Johnson).
[5] T. at 111 (D. Johnson); Ex. 115; Ex. 125, Attach. 1. It is unclear if Lynette (ph) Johnson is a co-owner of Johnson and Johnson.
[6] Ex. 115; T. 112 (D. Johnson)
[7] T. 103-106 (D. Johnson); T. 142 (Cates).
[8] T. 125
[9] T. 178-180 (P. Johnson); T. 199 (D. Johnson).
[10] T. 199 (D. Johnson). But see Ex. 118, Invoice 44474, directing “Di” to redo bill to Fox Meadows LLC from Diversified Images Incorporated.
[11] T. 102 (D. Johnson).
[12] T.105-109 (Johnson); T. 141 (Cates).
[13] T. 108-110 (D. Johnson).
[14] T. 110-113 (D. Johnson).
[15] Ex. 125.
[16] Exs. 105 and 106.
[17] Ex. 1-2.
[18] T. 117 (D. Johnson).
[19] T. 11-12 (Pamela Jewison).
[20] Ex. 3.
[21] T. 13 (Jewison).
[22] T. 13, 24 (Jewison).
[23] Ex. 112-1.
[24] Ex. 112-2.
[25] Ex. 3-12.
[26] Ex. 3-14.
[27] Exs. 3-13, 3-16, 3-17, 3-18.
[28] T. 119-120 (D. Johnson); T. 145-147 (Cates); See also Ex. 111, invoices 9000, 9011, 9076, 9078, 9105.
[29] Ex. 112.
[30] Exs. 112-3; 112-4; T. 148-149 (Cates).
[31] T. 121 (D. Johnson).
[32] T. 122 (D. Johnson); Mr. Johnson has also filed a counterclaim against Driveway Design on his own behalf in a separate legal action. T. 165 (Johnson).
[33] T. 171 (D. Johnson).
[34] Ex. 3-32 – 3-34.
[35] T. 15 (Jewison).
[36] Exs. 5, 117; T. 123-124 (D. Johnson).
[37] This statement is hearsay. It was on the correspondence forwarded to the Department from R. P. Utilities. It was not admitted for the truth of its statement but only to show that there was a basis for the Department to be concerned that the Respondent was not being financially responsible and was intertwining the business interests of different companies.
[38] T. 122 (D. Johnson); T. 150 (Cates).
[39] Ex. 6; T. 38 (Staber).
[40] Ex. 118
[41] T. 125 (D. Johnson).
[42] T. 47 (Staber); T.126 (D. Johnson).
[43] The spelling of this name is phonetic.
[44] T. 155 (Cates); T. 47 (Staber).
[45] T. 30, 39, 45 (Staber); T. 125-126 (Johnson); T. 153 (Cates).
[46] T. 155-157 (Cates); T. 167-168 (D. Johnson). See also Mr. MacNamara’s approval on the invoices included in Ex. 118.
[47] T. 69-70 (Sendecky).
[48] T. 128 (D. Johnson); Ex. 119.
[49] T. 72, 88 (Sendecky); Ex. 8-4.
[50] Ex. 8.
[51] T. 130 (D. Johnson).
[52] T. 176 (P. Johnson)
[53] T. 73-74 (Sendecky); Ex. 9.
[54] Ex. 9-4.
[55] T. 131 (Johnson).
[56] T. 151-152 (Cates).
[57] T. 50-52 (Sendecky); T. 132-133 (D. Johnson); Ex. 10.
[58] T. 193-194.
[59] T. 182-186 (McManus).
[60] T. 137 (D. Johnson).
[61] T. 188-192 (Swenson).
[62]
[63]
[64]
[65]
[66]
[67]
[68]
Recodified as
[69]
[70]
[71]
[72]
[73] T. 168 (D. Johnson).