10-007772 Department Of Business And Professional Regulation, Construction Industry Licensing Board vs. Thomas Colan, D/B/A Thom Colan Construction, Inc. Status: Closed Recommended Order on Thursday, April 14, 2011.

Summary: Petitioner proved Respondent charged more than the contract price and committed mismanagement and incompetence in the practice of contracting. Respondent failed to prove that exceeding the contract price was due to circumstances beyond his control.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

CONSTRUCTION INDUSTRY )

LICENSING BOARD , )

)

Petitioner , )

)

vs. ) Case No. 10 - 7772

)

THOMAS COLAN, d/b/a THOM COLAN )

CONSTRUCTION, INC. , )

)

Respondent . )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing was held in this case

on February 4, 2011, by video teleconference in Tallahassee and

Sarasota, Florida, before Administrative La w Judge Elizabeth W.

McArthur of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Brian P. Coats, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street , Suite 42

Tallahassee, Fl orida 32399

For Respondent: Gregg M. Horowitz, Esquire

Post Office Box 2927

Sarasota, Florida 34230

STATEMENT OF THE ISSUES

The issues in this case are whether Respondent committed

the violations alleged in the Administrative Complaint, and , if

so, what discipline should be imposed.

PRELIMINARY STATEMENT

Petitioner, Department of Business and Professional

Regulation, Construction Industry Licensing Board (Petitioner) ,

filed a four - count Administrative Complaint against Respondent,

Thom as Colan, d/b/a Thom Colan Construction, Inc. (Respondent or

Mr. Colan), a licensed contractor. The Administrative Complaint

alleged that in carrying out a contract with Kathleen and Robert

Masten to build a house and pool, Respondent committed

violations of sections 489.129(1)(g)1. and 3., (1)(m), and

(1)(l), Florida Statutes (2005). 1/

Respondent timely requested an administrative hearing to

contest the allegations in the Administrative Complaint, and the

matter was referred to the Division of Administra tive Hearings

(DOAH) for assignment of an Administrative Law Judge to conduct

the hearing requested by Respondent.

The final hearing was set for November 15, 2010, in

accordance with the parties' request. On November 10, 2010,

Respondent moved for a cont inuance because of a scheduling

conflict. Petitioner did not oppose the request, and the

hearing was rescheduled for February 4, 2011.

The parties entered into a pre - hearing stipulation in which

they admitted certain facts, which are included in the F ind ings

of F act below. In addition, by the pre - hearing stipulation,

Petitioner voluntarily dismissed Count One of the Administrative

Complaint, which alleged a violation of section 489.129(1)(g)1.

Remaining in dispute for litigation at the final hearing wer e

Counts Two through Four, charging violations of section

489.129(1)(g)3., (1)(m), and (1)(l), respectively.

At the final hearing, Petitioner presented the testimony of

Mrs. Masten and Mr. Colan. Petitioner's E xhibits 1 through 19

and 21 were received in to evidence. Respondent testified on his

own behalf and presented the testimony of Mrs. Masten.

Respondent's E xhibits 1 through 3 were received into evidence.

At the close of the hearing, a transcript was ordered , and

the parties agreed to file their p roposed recommended orders

(PRO) within ten days after the filing of the transcript at

DOAH. The T ranscript was filed on February 24, 2011.

Petitioner timely filed its PRO on March 7, 2011. On March 16,

2011, Respondent f iled a motion to allow the late filing of its

PRO, because counsel for Respondent had failed to properly

calendar the deadline and had just obtained a copy of the

T ranscript. Petitioner objected on the grounds that Respondent

would gain an unfair advantage by being able to respond to

Pe titioner's submittal, when the uniform rules contemplate

simultaneous filings. The undersigned issued an O rder allowing

Respondent additional time to late file its PRO, but affording

Petitioner the opportunity to supplement its PRO within ten days

after s ervice of Respondent's filing. Respondent filed its PRO

by the extended deadline. Petitioner did not supplement its PRO

within the time allowed, but filed a Notice of Scrivener's Error

to correct a statutory citation. Both Petitioner and

Respondent's PR Os, as well as Petitioner's Notice of Scrivener's

Error, have been considered in the preparation of this

Recommended Order.

FINDINGS OF FACT

Admitted Facts Per Pre - Hearing Stipulation

1. Petitioner is the state agency charged with regulating

the practi ce of contracting pursuant to section 20.165 and

chapters 455 and 489, Florida Statutes.

2. Respondent is a state - certified building contractor in

the State of Florida, having been issued license No. CBC 039025.

3. Respondent was the licensed primary qua lifying agent

for Thom Colan Construction, Inc. , from June 10, 2004 , to

September 4, 2008.

4. On January 10, 2006, Thom Colan Construction, Inc. ,

entered into a contract with Kathleen and Robert Masten to

construct a house and pool on property located at 547 Bradenton

Road, Venice, Florida (the project).

5. The contract price for the project was $260,000.00.

6. The project was completed with the issuance of a

certificate of occupancy.

Additional Findings of Fact

Based on the weight and credibility of t he testimony and

evidence presented, the following additional facts are found:

7. The contract between Respondent and the Mastens was a

fixed - price contract. Although the contract price was

$260,000.00, the Mastens paid a total of $320.394.19 for the

pr oject. The payments were made by the following methods:

$49,968.58 was paid by check from the Mastens directly to

Respondent; Respondent obtained an additional $222,320.71 in

total bank draws, pursuant to a construction loan that

authorized Respondent to draw funds directly from the bank for

the project; and the remaining $48,104.90 was paid by check or

credit card by the Mastens directly to subcontractors for labor

and materials provided for the project. Thus, the Mastens paid

$60,394.19 more than the c ontract price. At issue, and the

subject of much dispute at the final hearing, was why the

project exceeded the contract price by over $60,000.00 .

8. Respondent asserted that the entire amount by which the

contract price was exceeded was attributable ei ther to changes

to the contract terms required by the Mastens or to

circumstances beyond Respondent's control, such as price

increases by subcontractors. 2/

9. It was difficult to establish the causes for the price

increases, in part , because the parties to the contract did not

adhere to the formalities called for by the contract. For

example, while both witnesses acknowledged that the Mastens

requested changes as the project progressed, there was

substantial disagreement about the extent of these change s and

the cost differential. Unfortunately, there were no written

change orders as required by the contract. Written change

orders would have documented exactly what was changed and what

cost was attributable to the change.

10. Another problematic area in attempting to pinpoint why

the contract price was exceeded was that there was no clear

proof of the contract specifications detailing the design

features of the house and pool. The written contract described

a process of developing "plans" with "specif ications" as to

design elements. Initially, the plans would be preliminary,

with items designated for buyer selections. The contract

contemplated that the buyer would make these selections, which

would become part of the plans, and the plans would then b e

considered final. Thus, certain buyer selections would be part

of the contract. Thereafter, if the buyer wanted to change the

final plans and specifications, the buyer would be responsible

for the increased costs.

11. No evidence was presented as to w hat the plans

provided with respect to design features and which of those

design features provided for buyer selections. Neither the

preliminary plans and specifications for the Masten contract,

nor the final plans and specifications after buyer selection s,

were offered into evidence, and it is unclear whether the

process contemplated by the written contract was even followed.

12. Nonetheless, Mrs. Masten admitted that she requested

certain changes, which she acknowledged were not contemplated by

the co ntract and were more costly than what the contract

contemplated. For example, Mrs. Masten acknowledged that she

requested an upgrade in kitchen appliances, increasing the cost

by $2,703.55. She also acknowledged that she requested an

upgrade in bathroom fixtures, but she was unsure of the cost

attributable to the upgrade. Respondent testified that the

total cost increase for upgrades requested by Mrs. Masten to

plumbing and fixtures was $4,745.42. Mrs. Masten thought that

amount was too high; it include d changes claimed by Respondent ,

but disputed by Mrs. Masten, such as an upgrade to a hot tub

that Mrs. Masten said she did not want but , apparently , was

installed.

13. The circumstances surrounding other apparent changes

were in dispute. For example, an expedition , including

Mrs. Masten and Respondent , trekked to a tile outlet store in

Fort Meyers to pick out tile to use in the shower stall and

floors. For the shower stall, Respondent testified that he

"insisted" on travertine; Mrs. Masten apparently ag reed, but

said that she felt pressured to do so. The purchase was made ,

and Respondent returned to haul the travertine and other tile

for the flooring on a trailer back to Venice. At some point,

Mrs. Masten changed her mind about the travertine after bei ng

told by a competitor that travertine was a high - maintenance bad

choice. Respondent claimed it was too late to return the tile,

which he valued at $750.00, and so he testified that he threw it

away. Mrs. Masten then selected different tile from the

com petitor at a price that was $1,292.16 higher than the

travertine.

14. The circumstances surrounding the selection of

cabinetry w ere also in dispute. Respondent testified that he

planned to use Enrique Benitez, a subcontractor who was doing

other work in the house, to make the cabinets. Respondent

claimed that he had Enrique prepare wood samples with different

stains and that Mrs. Masten approved the samples and picked out

the stain. At that point, Respondent said he paid Enrique

$2,970.00 to begin const ructing the cabinets. Mrs. Masten

claimed that she never approved any samples, was shown only a

rough, long plank of splintered wood that she said was awful and

would not approve, and that she did not like any of the work

this particular subcontractor was doing throughout the house.

At some point, Mrs. Masten impressed upon Respondent that she

would not accept these cabinets, and she selected different

cabinets at an increased cost of $6,886.00. If Enrique ever

built cabinets for the Mastens, he kept the m.

15. Another outing was made to select countertops.

Mrs. Masten did not like the granite pieces that Respondent had

intended to use, and the result was that the cost of the granite

countertops selected by Mrs. Masten was $5,000.00 higher.

16. Responde nt and Mrs. Masten also could not agree on the

extent of requested changes to the plans for flooring or the

cost of those changes. Respondent testified that Mrs. Masten

changed the mix of tile and carpeting, but Mrs. Masten

disagreed. Respondent testifie d that Mrs. Masten required an

upgraded carpet style, and although Mrs. Masten acknowledged

that she selected a different carpet style, there was no

evidence pinpointing the cost difference of the carpet upgrade.

Additionally, Respondent acknowledged that one reason why the

total cost for flooring was higher than expected was that

Enrique Benitez increased the price to install the tiles from

$3,000.00 to $7,500.00. Respondent sought to blame Mrs. Masten

for the increased installation price, claiming that Mrs. Masten

"fired" Enrique over the cabinet debacle, but Respondent had to

rehire Enrique to install the floors and had to pay the

increased price to overcome Enrique's hurt feelings.

Mrs. Masten denied the claim that she "fired" Enrique, though

she ackn owledged that she was not happy with his work and that

she refused to approve the cabinets Enrique was supposed to

build , because the sample was unacceptable.

17. Respondent testified that an additional $3,079.90 was

spent for upgraded lighting and fans r equested by the Mastens

and for other electrical upgrades to accommodate other changes ,

such as the pool heater and spa tub.

18. The cost to construct the pool increased by $3,700.00.

According to Respondent, this increase was due to the cost of

adding a pool heater that was not part of the original plans, at

the request of the Mastens. Mrs. Masten disputed that this was

a change.

19. Respondent testified that there was a $323.00 cost

increase because of the Mastens' request for an upgraded water

soft ener.

20. Post - contract changes made by the engineer to relocate

the septic tank system necessary to obtain the requisite

permits, altered the elevation and slope of certain parts of the

property, including the space where the air conditioner would

sit. Those changes resulted in the need to add a concrete slab

and platform for the air conditioner. This additional cost was

$419.25.

21. Also because of the septic system design change, the

county imposed additional landscaping requirements in order to

obta in a certificate of occupancy. This resulted in an

additional $979.05 spent to purchase trees.

22. Respondent testified that permitting fees imposed by

the county exceeded the estimated cost by $2,365.63. Respondent

attributed the increase to the higher impact fee charged by the

county as a condition to obtain a certificate of occupancy

because the post - construction value of the house was higher than

estimated. In other words, the combination of cost increases

and upgrades led to imposition of a higher impact fee.

23. The rest of the difference between the contract price

and the total paid by the Mastens was attributable to increases

in costs because of the delay in completing the project or

increases in prices charged by subcontractors for their labor

and materials. These included increases in the price of

concrete, plumbing work, framing, insulation, roofing, drywall,

hauling trash, installation of flooring, electrical work,

equipment rental, and electricity charges. Respondent explained

that he obta ined "bids" for various components of the project in

September 2005, although he did not sign the contract with the

Mastens until January 10, 2006. Respondent anticipated that he

would start the project that month, but the start was delayed by

more than t wo months because of the septic system permitting

difficulties encountered by the project engineer who had been

retained by the Mastens.

24. Mr. Colan utilized the estimates he received from

others to develop his overall cost estimates for the project,

wh ich he used to establish the contract price. There was no

allowance built into the cost estimations for inflation, price

increases, or contingency reserves.

25. Although Respondent characterized the price estimates

he obtained from subcontractors as "bid s," they were not bids in

the sense of being firm offers to do work or supply material at

a specific cost; they were essentially price estimates subject

to change. Respondent testified that at least in some cases, he

could count on a bid price being "good " for six months and , in

some cases , for as long as seven months. However, Respondent

did not lock in any of the bid prices by contracting with the

subcontractors in September 2005 or in January 2006 when the

Masten contract was executed. Thus, Responden t's reliance on

the price estimates given to him in September 2005 was not shown

to be reasonable. These estimates would have been four months

old before Respondent anticipated starting the project and

closer to seven months old before the project actuall y began.

Since many of the price estimates were for items that would not

be needed for months after the project began (such as bathroom

fixtures, appliances, cabinetry, flooring, and lighting), even

under the best - case scenario without any delays, Respond ent was

plainly taking a risk by using September 2005 cost estimates as

if they were guaranteed prices in determining the contract price

for the Mastens' project. Not surprisingly, many subcontractors

were not willing to honor the stale price estimates wh en

Respondent sought to contract with them many months later.

26. Respondent suggested that he should not bear the risk

of others' price increases, because they were not within his

control. But Respondent controlled how he went about estimating

his costs for the project and how he established the fixed price

he agreed to in the contract. No credible evidence was

presented to establish that the price increases by Respondent's

subcontractors were due to such extraordinary market conditions

or delays that t hey could not have been reasonably anticipated

and addressed sufficiently through inflation allowances or

contingency reserves built into the cost estimations.

27. While Respondent attempted to characterize certain

price increases, such as the rise in the price of cement and

copper or the increased cost of dirt, as attributable to a

"heated up" construction market, which caused unanticipated

demand, Respondent's testimony was not credible and was not

supported by any independent non - hearsay evidence. Inde ed,

Respondent admitted that in most cases, he did not shop around

before accepting the price increases demanded by his

subcontractors. In some cases, he had checked on prices within

the two - county area when obtaining the cost estimates in

September 2005, and then he assumed that by identifying the

lowest price or best supplier in September 2005, there was no

need to check around when that supplier demanded a price

increase later. In no instance did Respondent check prices

outside of his local area.

28. Respondent acknowledged that the total amount spent

for engineering and surveying fees exceeded his estimate by

$4,177.12. Respondent argued that these fees were beyond his

control , because the Mastens had retained the engineer and

surveyor before Respond ent entered into a contract with the

Mastens. However, Respondent included the engineer and surveyor

fee expenses in his cost estimates and assumed the

responsibility for covering these fees as part of the overall

construction of the house and pool within the fixed contract

price. No credible evidence established that the fees were

unusually high and could not have been anticipated or addressed

by appropriate contingency reserves.

29. Respondent attempted to blame many of the price

increases on the tw o - plus month delay in starting the project

because of the engineer's need to relocate the septic system to

resolve permitting issues. As pointed out above, this delay did

not in and of itself cause the problem of price increases by

subcontractors unwillin g to honor price estimates quoted in

September 2005. In any event, Respondent did not testify that

the delays were extraordinary and not reasonably anticipated,

even if the exact reason for the delays may not have been known.

Instead, various delays for various reasons are to be expected,

and , indeed , are expressly contemplated throughout the written

contract. Notably, in a section called "Price Guarantee," the

contract form allowed the parties to specify a month by which

construction had to begin or els e the builder would have a

qualified right to adjust the contract price. Respondent waived

that right by specifying "N/A" in the blank where a start - by

month could have been named:

This Contract price is guaranteed to Buyer

only if it is possible for Buil der to start

construction on or before the month of N/A .

If start of construction is delayed beyond

this time by Buyer, or due to any ruling or

regulation of any governmental authority, or

due to any other cause which is not the

fault of the Builder, the Contract price may

be adjusted to the current list price or to

cover any cost increases incurred by

Builder.

30. A plausible explanation for Respondent's lack of care

in developing reasonable, achievable cost estimates is that

Respondent did not conside r the fixed - price contract to be a

fixed - price contract. Respondent testified that even though the

contract on its face is a fixed - price contract, he believed that

he had an understanding with the Mastens that the contract was

really a "cost - plus" contrac t. Respondent testified that

despite what the contract said, the Mastens had agreed that they

would pay whatever the ultimate costs were, even if the prices

went up from his estimates, plus an additional $37,000 for

Respondent's profit. Respondent testif ied that the only reason

that the contract was written up as a fixed - price contract was

to secure the bank loan. That suggestion would be troubling, if

true, because the implication is that Respondent was a party to

fraud or deception to induce the constr uction loan. However,

there was no credible evidence to support Respondent's attempt

to justify recovering full costs , plus full profit , when the

fixed price he contracted for proved inadequate.

Notwithstanding Mr. Colan's apparent view that there was a

secret deal standing behind the written contract, he signed the

written contract, is bound by the fixed - price term, and must

bear the consequences of his inadequate cost estimations.

31. At some point when the Mastens became concerned about

the extent to which they were apparently exceeding the contract

price while Respondent was still drawing bank funds from the

Mastens' construction loan, Mrs. Masten testified that she told

Respondent not to draw any more bank funds. The evidence did

not clearly establi sh whether Respondent violated Mrs. Masten's

instructions by withdrawing more bank funds after the

instructions were given. The Administrative Complaint had

alleged that the Mastens contacted the bank and ordered the bank

to make no further disbursements, and that the next day,

Respondent attempted to withdraw all remaining funds in the

construction loan account. No evidence was presented to

substantiate this allegation.

32. Petitioner incurred total costs of $299.36 in the

investigation of this matter, excluding costs associated with

attorney time.

CONCLUSIONS OF LAW

33. The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter of this

proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2010).

34. Petitioner has the burden of pleading with

particularity in the Administrative Complaint the facts and law

on which it relies to take disciplinary action against

Respondent. United Wisconsin Life Ins. Co. v. Off. of Ins.

Reg. , 849 So. 2d 417, 422 (Fla. 1st DCA 2003); Cottr ill v. Dep't

of Ins. , 685 So. 2d 1371, 1372 (Fla. 1st DCA 1996); Willner v.

Dep't of Prof ' l Reg., Bd. of Medicine , 563 So. 2d 805, 806 (Fla.

1st DCA 1990).

35. In addition, Petitioner has the burden to prove the

allegations in the Administrative Complain t by clear and

convincing evidence. Dep't of Banking and Fin. v. Osborne Stern

and Co. , 670 So. 2d 932 (Fla. 1996). The clear and convincing

evidence standard was defined in Slomowitz v. Walker , 429 So. 2d

797, 800 (Fla. 4th DCA 1983), as follows:

[C]lea r and convincing evidence requires

that the evidence must be found to be

credible; the facts to which the witnesses

testify must be distinctly remembered; the

testimony must be precise and explicit and

the witnesses must be lacking in confusion

as to the f acts in issue. The evidence must

be of such weight that it produces in the

mind of the trier of fact a firm belief or

conviction, without hesitancy, as to the

truth of the allegations sought to be

established.

36. The four - count Administrative Complaint charged

Respondent with violations of section 489.129(1)(g)1. (Count

One); (1)(g)3. (Count Two); (1)(m) (Count Three); and (1)(l)

(Count Four). Section 489.129(1) provides in pertinent part:

The board may take any of the following

actions against any c ertificateholder or

registrant: place on probation or reprimand

the licensee, revoke, suspend, or deny the

issuance or renewal of the certificate,

registration, or certificate of authority,

require financial restitution to a consumer

for financial harm di rectly related to a

violation of a provision of this part,

impose an administrative fine not to exceed

$10,000 per violation, require continuing

education, or assess costs associated with

investigation and prosecution, if the

contractor, financially respon sible officer,

or business organization for which the

contractor is a primary qualifying agent, a

financially responsible officer, or a

secondary qualifying agent responsible under

s. 489.1195 is found guilty of any of the

following acts:

* * *

( g) Committing mismanagement or

misconduct in the practice of contracting

that causes financial harm to a customer.

Financial mismanagement or misconduct occurs

when:

1. Valid liens have been recorded against

the property of a contractor's customer fo r

supplies or services ordered by the

contractor for the customer's job; the

contractor has received funds from the

customer to pay for the supplies or

services; and the contractor has not had the

liens removed from the property, by payment

or by bond, wit hin 75 days after the date of

such liens; [or]

* * *

3. The contractor's job has been

completed, and it is shown that the customer

has had to pay more for the contracted job

than the original contract price, as

adjusted for subsequent change order s,

unless such increase in cost was the result

of circumstances beyond the control of the

contractor, was the result of circumstances

caused by the customer, or was otherwise

permitted by the terms of the contract

between the contractor and the customer .

* * *

(l) Committing fraud or deceit in the

practice of contracting.

(m) Committing incompetency or misconduct

in the practice of contracting.

37. Petitioner voluntarily dismissed Count One of the

Administrative Complaint via the parties' p re - hearing

stipulation. Thus, Respondent is not charged with a violation

of section 489.129(1)(g)1.

38. Count Two charged Respondent with a violation of

section 489.129(1)(g)3., because the Mastens had to pay more

than the contract price, adjusted by any change orders.

Respondent claimed that the increased price was attributed

solely to either the increased cost of the Mastens' changes or

price increases caused by circumstances beyond Respondent's

control or caused by the Mastens.

39. In Dep't of Bus. a nd Prof ' l Reg., Constr. Indus.

Licensing Bd. v. Battaglia , Case No. 07 - 0052PL (Fla. DOAH May 8,

2007), Administrative Law Judge Stuart Lerner examined this

statute and reached the following conclusions with regard to

burden of proof:

To meet its burden of proving a violation of

Section 489.129(1)(g)3., the Department must

establish that the "contractor's job ha[d]

been completed, and . . . that the customer

ha[d] had to pay more for the contracted job

than the original contract price, as

adjusted for subseq uent change orders."

Once it makes such a showing, the burden

shifts to the licensee to demonstrate that

"such increase in cost was the result of

circumstances beyond the control of the

contractor, was the result of circumstances

caused by the customer, o r was otherwise

permitted by the terms of the contract

between the contractor and the customer."

Cited in support of these conclusions were a number of cases

explaining that the structure of this statute, with exceptions

following the main sentence, suc h as where the main part of the

sentence is followed by a phrase starting with the word

"unless," means that the phrase following "unless" serves as a

qualifier to the main part of the sentence and demonstrates that

the phrase is intended to be an affirmat ive defense. Battaglia ,

Case No. 07 - 0052PL, RO at 35 - 36 n. 9.

40. Thus, under the Battaglia analysis, which is adopted

here, it was Petitioner's burden to prove by clear and

convincing evidence that the price paid by the Mastens exceeded

the contract pri ce as adjusted by change orders. It was

Respondent's burden to prove as affirmative defenses that any

increase in contract price was the result of circumstances

beyond his control, was caused by the Mastens, or was otherwise

permitted by the contract.

41 . Petitioner met its burden of proof, by clear and

convincing evidence, that the amount the Mastens paid for the

project exceeded the contract price as adjusted by change

orders, in violation of section 489.129(1)(g)3. However, in

terms of the amount by w hich payment exceeded the adjusted

contract price, Respondent will be given credit for : (1) the

amount of proven cost increases caused by changes to which the

Mastens admitted; and (2) the amount of cost increases

established by credible testimony by Resp ondent for additional

project changes made at the Mastens' request that were not

contemplated by the final plans. Although the second category

of claimed changes was disputed, Petitioner bears the burden of

proving the adjusted contract price, and Petitio ner failed to

refute the claimed changes by clear and convincing evidence. 3/

42. Accordingly, the contract price of $260,000.00 is

adjusted upward by the following amounts: $2,703.55 for the

upgrade to energy efficient appliances; $4,745.42 for chang es to

plumbing and fixtures; $1,292.16 for tiles; $6,886.00 for

cabinets; $5,000.00 for countertops; $3,079.90 for lighting and

other electrical material; $3,700.00 for the pool heater;

$323.00 for the water softener upgrade; $419.25 for the air

conditioni ng slab and platform; $979.05 for trees; and $1,182.82

for one - half of the increase in the county permitting and impact

fees. 4 / The specific costs of other claimed changes were not

sufficiently established by competent substantial evidence. The

resulting adjusted contract price is $290,311.15. 5 /

43. Respondent did not meet his burden of proof with

regard to the claimed affirmative defenses. A preponderance of

the more credible evidence does not support Respondent's

assertion that exceeding the contract price was justified

because of circumstances beyond his control or because of

circumstances caused by the Mastens.

44. Respondent's position that he should be entitled to

adjust the contract price any time a supplier increases its

price because that is a circumstance he does not control, is

rejected. To the contrary, when Respondent chooses to enter

into a fixed - price contract without locking in the prices of

subcontractors whose estimates Respondent uses, then Respondent

bears the risk of price changes, at least absent evidence of

circumstances beyond the realm of reasonable anticipation.

Market fluctuations in prices, particularly in what was

admittedly a "hot" construction market, should be expected. It

was wholly within Respondent's control to build price

fluctuations into his estimates. While Respondent testified

that in a few instances, the price increases were higher than

what he had seen in some time, Respondent did not adequately

support his position. Moreover, Respondent's attempted

rationale fails to explain why absolutely no price increases or

contingency reserves were built into his cost estimates. The

only apparent explanation was that Respondent was improperly

relying on a secret deal and thought he could charge the Mastens

the actual cos ts, whatever they were, plus his profit.

45. Respondent likewise did not meet his burden of proving

his claim that he should be allowed to adjust the contract price

because the delay in starting construction was a circumstance

beyond his control. As poin ted out in the F indings of F act,

Respondent could have designated a limit to the guaranteed fixed

contract price by specifying a month by which, if construction

did not start, Respondent would have had a limited right to

adjust the contract price. Respond ent waived this option by

writing in "N/A , " instead of naming a specific start - by month.

46. Petitioner met its burden of proving by clear and

convincing evidence that Respondent violated section

489.129(1)(m) as charged in Count Three, by committing

mis management or incompetence in the practice of contracting.

Petitioner proved at least mismanagement and incompetence by

proving the poor job Respondent did in estimating costs used to

establish the fixed contract price, by not making a greater

effort to a chieve those estimates, and by apparently believing

he could pass all cost increases on to the Mastens because of

the secret deal he thought would override his written contract.

47. Petitioner did not prove by clear and convincing

evidence the allegation in Count Four that Respondent committed

fraud or deceit in violation of section 489.129(1)(l) by

attempting to withdraw all remaining funds from the construction

loan account after being instructed not to make further

withdrawals. The only evidence offer ed on the subject of

Respondent's withdrawal attempts was hearsay -- what Mrs. Masten

was told by someone at the bank and even that testimony did not

support the allegation underlying Count Four's charge.

Petitioner offered no documentation or testimony by a bank

representative with direct knowledge of the allegation that

Respondent attempted to withdraw the remaining balance of nearly

$38,000 after the Mastens discontinued his authority to make

bank draws by freezing the account.

48. Respondent's own testi mony was suggestive of different

fraudulent conduct. According to Respondent, there was a secret

deal for the Mastens to pay actual costs, whatever they were,

plus Respondent's profit, and that the only reason the contract

with the Mastens was written as a fixed - price contract was in

order to secure the Mastens' construction loan. This suggestion

is troubling, but as it was not charged in the Administrative

Complaint, it cannot be the basis for disciplinary action.

However, Mr. Colan's explanation for wh at he understood to be

the secret agreement standing behind the actual agreement puts

into context his apparent inattention to developing realistic

cost estimates to arrive at the contract price. If Mr. Colan

never believed that the contract price was any kind of cap and

that he would not have to live with his estimates, good or bad,

high or low, that would explain why he did not use more care in

obtaining bids, shopping around for lower - cost suppliers or , at

least, building inflation and contingency reser ves into his cost

estimates.

Appropriate Penalty

49. Section 455.2273(5) provides that the A dministrative

L aw J udge, in recommending penalties, must follow the penalty

guidelines established by the board or department and must state

in writing the mitigat ing or aggravating circumstances upon

which the recommended penalty is based.

50. Petitioner's penalty guidelines are codified in

Florida Administrative Code Rule 61G4 - 17.001, which, effective

January 24, 2005, provided in pertinent part:

(1) The follo wing guidelines shall be

used in disciplinary cases, absent

aggravating or mitigating circumstances and

subject to other provisions of this chapter .

* * *

(g) Section 489.129(1)(g), F.S.:

Mismanagement or misconduct causing

financial harm to the c ustomer. First

violation, $1,500 to $2,500 fine,

restitution and/or probation.

* * *

(m) Section 489.129(1)(m), F.S.:

Misconduct or incompetence in the practice

of contracting shall include, but is not

limited to:

* * *

2. Violation of any provision of Chapter

61G4, F.A.C., or Chapter 489, Part I., F.S.

* * *

First violation, $1,000 to $2,500 fine.

* * *

(l) Section 489.129(1)(l), F.S.:

Committing fraud or deceit in the practice

of contracting.

* * *

1. Causin g no monetary or other harm to

licensee's customer or physical harm to any

person. First violation, $1,000 to $2,500

fine and/or probation. . . .

51. Aggravating and mitigating circumstances established

by Petitioner are codified in r ule 61G4 - 17.002, pr oviding in

pertinent part:

Circumstances which may be considered for

the purposes of mitigation or aggravation of

penalty shall include, but are not limited

to, the following:

(1) Monetary or other damage to the

licensee's customer, in any way associ ated

with the violation, which damage the

licensee has not relieved, as of the time

the penalty is to be assessed. . . .

(2) Actual job - site violations of

building codes, or conditions exhibiting

gross negligence, incompetence, or

misconduct by the lic ensee, which have not

been corrected as of the time the penalty is

being assessed.

(3) The danger to the public.

(4) The number of complaints filed

against the licensee.

(5) The length of time the licensee has

practiced.

(6) The actual dama ge, physical or

otherwise, to the licensee's customer.

(7) The deterrent effect of the penalty

imposed.

(8) The effect of the penalty upon the

licensee's livelihood.

(9) Any efforts at rehabilitation.

(10) Other mitigating or aggravating

ci rcumstances.

52. Petitioner's r ule 61G4 - 17.003 addresses the effect of

repeat violations on penalty assessments. No evidence was

presented of any prior violations by Respondent.

53. In recommending penalties for the proven violations

charged in Counts Two and Three, the undersigned finds the

following aggravating circumstances: Respondent's violations

caused financial harm to the Mastens which Respondent has not

corrected; and imposition of a fine and restitution should have

a deterrent effect in that Respondent should understand that he

can avoid the problems presented here by adhering to the

formalities of the contracts he signs and using greater care and

caution in developing the cost estimations underlying his

contract prices.

54. The undersigned f inds the following mitigating

circumstances: N o evidence was presented to show that

Respondent has any prior disciplinary history or has had

complaints filed against him in the past; and according to

Respondent's licensure record, Respondent held a licens e from

December 5, 1986, which was current and active through

September 21, 2008, when the status changed to current , but

inactive through August 31, 2010. However, as of the final

hearing, Respondent's licensure status had changed to

"delinquent, inactiv e."

55. Upon consideration of the foregoing penalty guidelines

and the aggravating and mitigating circumstances found above,

the undersigned recommends the following as the appropriate

penalties: for Count Two, a fine of $1,500.00, plus restitution

in th e amount of $30,083.04; and for Count Three, an additional

fine of $1,500.00.

56. Section 455.227(3)(a) authorizes imposition of the

costs associated with investigation and prosecution of a

disciplinary complaint, excluding costs associated with an

attorn ey's time, in addition to any other discipline imposed.

Under the authority of this statute, imposition of investigation

costs in the amount of $299.36 is warranted.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMMENDED that a final order be entered by Petitioner,

Department of Business and Professional Regulation, Construction

Industry Licensing Board, finding that Respondent, Thomas Colan ,

d/b/a Thom Colan Construction, Inc. :

1. V iolated section 489.129(1 )(g)3 . and (1)(m), as charged

in Counts Two and Three, and for those violations, imposing a

total fine of $3,000.00;

2. R equiring Respondent to pay restitution to the Mastens

in the total amount of $30,083.04;

3. R equiring Respondent to pay costs of $299.36; and

further

4. D ismissing Count One (based on Petitioner's voluntary

dismissal) and Count Four (based on an absence of proof).

DONE AND ENTE RED this 14th day of April , 2011 , in

Tallahassee, Leon County, Florida.

S

ELIZABETH W. MCARTHUR

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 14th day of April , 2011 .

ENDNOTE S

1/ Unless otherwise indicated, all references to the Florida

Statutes are to the 200 5 version.

2/ Although Respondent argued in his Proposed Recommended Order

that he bears n o responsibility for any of the cost increases,

at the final hearing, Mr. Colan candidly accepted responsibility

for one small item, a $527.73 cost increase for trash hauling:

"[O]verall, it was just a matter of underestimating on my

part -- I'll admit to th is -- that it was going to be a lot more

trash on this job than I expected." Transcript at 82.

3/ Petitioner argued that there should be no contract price

adjustment for change orders , because the change orders were not

in writing. Even though the contra ct requires written change

orders, the statute does not limit adjustments to only written

change orders or only change orders that comply with the

contract. However, because there were no change orders in

writing to document the cost difference, adjustmen ts could only

be made when competent substantial evidence was presented of

what was called for by the contract, how much the contract item

would have cost, and what the cost of the changed item was. For

example, although Respondent indicated in his testim ony that the

contract called for a certain mix of tiles and carpeting, and

that mix was changed, there was no evidence establishing what

exactly the contract called for, what it would have cost, what

exactly was changed, and what th e cost difference would be .

Vague testimony about "more tile" costing "more," or different

carpet costing "more" was insufficient to support an upward

adjustment to the contract in a specific dollar amount.

4/ While the increase in permitting fees attributable to just

the up grades requested by the Mastens cannot be determined with

precision to the extent the increased value of the house (and ,

thus , the increased impact fee) is attributable to upgrades,

then that portion of the increased impact fee should be fairly

included as an upward adjustment to the contract price. Since

roughly one - half of the increased cost of the project was

attributable to upgrades, the contract price is adjusted upward

by one - half of the increased permitting fees.

5/ No upward adjustment to th e con tract price is made for the

cost of the travertine tile that Respondent claimed to have

thrown away. Respondent's claim is not found to be credible and

would , in any event , be considered an unreasonable action that

is not chargeable to the Mastens. Likew ise, the contract price

is not adjusted for payments made by Respondent to Enrique

Benitez to begin building cabinets. Mrs. Masten credibly

testified that she did not approve any samples or authorize

construction of cabinets after seeing the unacceptable sample.

COPIES FURNISHED :

G.W. Harrell, Executive Director

Construction Industry Licensing Board

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399

Layne Smith, General Counsel

Department of Busin ess and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399

Gregg M. Horowitz, Esquire

Post Office Box 2927

Sarasota, Florida 34230

Paul Nathan Rendleman, Esquire

Department of Business and

Professional Regulation

1940 Nor th Monroe Street, Suite 42

Tallahassee, Florida 323 99

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.