SC Administrative Law Court Decisions

On or about January 4, 1996, Appellant entered into a contract with William D. and Olinda Miller to construct a single-family residence in Georgetown, South Carolina. The construction of the home progressed smoothly at first. However, by late spring, problems and tension arose between the homeowners and Appellant. Tensions continued to escalate, and in July and September, Mr. Miller left threatening messages on the answering machine at Appellant's office. Appellant and the homeowners were unable to resolve their differences and Appellant filed a mechanic's lien against the property on August 19, 1996. Soon thereafter, several subcontractors also filed liens against the property. On August 30, 1996, Mr. Miller filed a complaint with the Contractor's Licensing Board alleging construction defects in the house. The Millers moved into the house on October 30, 1996.

In response to Mr. Miller's August 30 complaint, John Kendall, an Inspector with the South Carolina Department of Labor, Licensing and Regulation Contractor's Licensing Board, conducted an inspection of the property on November 13, 1996. Kendall was accompanied by David Stubbs, a representative of Appellant. During the inspection, Kendall pointed out numerous building code violations to Stubbs, and Appellant was notified in writing of the deficiencies on November 22, 1996. The Board gave Appellant thirty days to correct the deficiencies. On December 19, 1996, Appellant served an answer to the issues raised in the inspection report, and indicated that he was willing to make corrective repairs if some "assurance was given that the homeowner would not harass, threaten or interfere with Appellant" in making the repairs. Appellant also requested a hearing before the Board.

On May 12, 1997, Kendall conducted a follow-up inspection and found that none of the previously noted deficiencies had been corrected. Appellant was served with notice of a hearing and complaint alleging gross negligence and misconduct in the practice of his profession in violation of S.C. Code Ann. section 40-11-240 (Supp. 1996) and 23 S.C. Code Ann. Regs. 29-11 (Supp. 1996). The Board held a hearing in this matter on June 10, 1997. At the conclusion of the hearing, the Board ruled that Appellant was guilty of misconduct and that the proper sanction was revocation of Appellant's license.

Appellant appealed to this Division pursuant to S.C. Code Ann. section 1-23-380 (Supp. 1996). Oral arguments were heard at the Administrative Law Judge Division on February 3, 1998. Upon consideration of the record, applicable law, and the arguments made in this case, the Order of the Board is affirmed.

An appeal from an action of the Board is governed by the provisions of the South Carolina Administrative Procedures Act. Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304 (1981). Under the APA, the decision of an administrative agency must be sustained if there is substantial evidence to support it. Id. Therefore, in reviewing the findings of the Board, this tribunal is limited to determining whether the findings are supported by substantial evidence. S.C. Code Ann. §§ 1-23-380(A)(6) and (B) (Supp. 1997). " [A]n agency's findings of facts may be reversed or modified only if clearly erroneous in view of the reliable, probative, and substantial evidence of record." S.C. Code Ann. § 1-23-380(A)(6). See also Anonymous v. State Bd. of Medical Examiners, 329 S.C. 371, 796 S.E.2d 17 (1998). In applying the substantial evidence test, this tribunal "shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact." S.C. Code Ann. § 1-23-380(A)(6) (Supp. 1997).

"Substantial evidence is not a mere scintilla of evidence, nor the evidence viewed blindly from one side of the case, but is evidence which, considering the record as a whole, would allow reasonable minds to reach the conclusion that the administrative agency reached or must have reached in order to justify its action." McGuffin v. Schlumberger-Sangamo, 307 S.C. 184, 414 S.E.2d 162 (1992); Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304 (1981) (emphasis added). This tribunal cannot substitute its judgment for that of the Board upon a question as to which there is room for a difference of intelligent opinion. Chemical Leamen Tank Lines v. South Carolina Pub. Serv. Comm'n, 258 S.C. 518, 189 S.E.2d 296 (1972). Appellant has the burden of proving convincingly to this tribunal that the Order of the Board is unsupported by the evidence. See Greyhound Lines, Inc. v. South Carolina Pub. Serv. Comm'n, 274 S.C. 161, 262 S.E.2d 18 (1980).

I. Did Appellant's Failure to Correct Construction Deficiencies Found by the Contractor's Licensing Board Constitute Misconduct under S.C. Code Ann. Section 40-11-240 and 23 S.C. Code Ann. Reg. 29-11, Thereby Subjecting Appellant's License to Revocation?

Appellant first contends that the construction deficiencies found by the Board amount to negligence or breach of contract, at most, but not misconduct. (Appellant Br. at 5.) The grounds for revocation of a contractor's license are set forth in S.C. Code Ann. section 40-11-240 . According to the statute, when a contractor has committed "misconduct in the practice of his profession," such misconduct is a proper ground for revocation of his license. Further, section 40-11-240 provides that "[t]he board may revoke the bidder's or contractor's license of any general or mechanical contractor licensed hereunder who is found guilty of any fraud or deceit in obtaining a license, or of gross negligence, incompetence, or misconduct in the practice of his profession." S.C. Code Ann. § 40-11-240 (Supp. 1997).

In its Order, the Board found that Appellant committed misconduct "in that he failed to correct code violations and items not meeting the standards of the profession relating to the construction at the residence . . . ." (Board's Order at 3.)

Specifically, the Board found the following deficiencies: 1) nine windows were scratched and mortar stained; 2) three exterior doors and the interior double French door were not shimmed and without support blocking beneath the door thresholds; 3) one French door unit was not level and plumb; 4) the exterior wall behind the kitchen cabinets was not level and plumb causing the wall to bow in excess of industry standards; 5) the kitchen floor had a dip of one-half inch in a five foot section exceeding the industry standard of no more than one-fourth inch; 6) sheet rock throughout the residence had nail pops, seam splits, holes, exposed seam tape, and exposed corners; 7) windows in the residence were not mounted into supporting wood jamb and wrapped with insulation, and wood trim was not installed between the drywall gypsum and the windows' metal frames causing condensation buildup on the windows; 8) insulation under the floor of the residence had fallen to the ground; and 9) Appellant had failed to pay three subcontractors a total of approximately $23,000 for construction materials and services on the project.

"Misconduct" is not defined by section 40-11-240 or by Regulation 29-11. Moreover, no South Carolina appellate court has outlined specific behavior which constitutes misconduct as it relates to contractors.⁽¹⁾ Black's Law Dictionary defines "misconduct" as "a transgression of some established and definite rule of action, a forbidden act, a dereliction from duty, unlawful behavior, wilful in character, improper or wrong behavior . . . but not negligence or carelessness." Black's Law Dictionary 999 (6th ed. 1990).

In an administrative proceeding, the standard of proof is generally a preponderance of the evidence. Anonymous, 329 S.C. 371, 496 S.E.2d 17. In the instant case, the Department presented substantial evidence by which the Board could reasonably conclude that Appellant committed misconduct, as his failure to take corrective action to cure the defects constituted a dereliction from duty. The inspector testified to numerous, serious construction defects. Further, when questioned by the Board, even the job foreman, had no plausible explanation for the majority of the construction defects or for the failure to correct such deficiencies.

II. Did the Board, under Error of Law, Fail to Consider Threats Made by the Homeowner as Justification for Appellant's Failure to Correct Construction Deficiencies?

Appellant next argues that he failed to correct the acknowledged construction deficiencies because of fear of physical violence and or harm from the homeowners. Appellant further argues that the Board failed to consider the audiotape of Mr. Miller's threats as justification for his inaction. In his brief, Appellant states that

[f]ailure to undertake an action cannot be a rational basis for misconduct where there is a rational reason for the inaction. It is an implied condition of every contract that one party will not prevent performance by the other party, and it follows that a contracting party who prevents the other party from performing under the contract cannot urge or avail himself of the nonperformance which he himself has brought about.

(Appellant Br. at 6.)

As support for his argument, Appellant points to the audiotape of a message which Mr. Miller left on the answering machine at Appellant's office. According to Appellant's brief, on the audiotape, Mr. Miller stated,

I told the subs that you've been paid. You must be chicken s_ _ t, you send Dave to do your dirty work instead of you coming. I'm not paying no more damn insurance so if it burns down, I don't give a damn. You're gonna lose, not me. I'm not paying anymore interest either, I'm not gonna take anymore s _ _ t from you. You come on down big boy, I got something for you.

(Appellant Br. at 4)

Appellant argues that the threats made by Mr. Miller were sufficient justification for his refusal to take corrective action. Moreover, he questions whether the Board considered the tape when making its decision. In his brief Appellant stated that

[t]he Board made no finding of fact, and no mention in its Order, relative to the threats of physical violence from Mr. Miller toward the Appellant. . . . It is not clear if the Board even listened to or considered the audiotape of the threats directed toward Appellant. It was an error of law not to consider and issue a finding in connection with Appellant's position that it could not correct the work without some reasonable assurance of safety."

(Appellant Br. at 6.)

Appellant would have this tribunal speculate as to whether the Board considered all of the evidence when making its decision. This type of unfounded speculation would be error. The failure to mention the audio tape in its Order is not proof that the Board failed to consider the tape in rendering a decision. "There is no legal requirement that an Order shall make specific reference to each item of evidence presented." In re Estate of Hicks, 327 S.E.2d 345, 347, 284 S.C. 462, 465 (1985) (holding invalid appellant's argument that, because Probate Judge did not mention existence of previous will in Final Order, Probate Judge failed to consider it as evidence when subsequent will was contested). Further, unless Appellant has proof to the contrary, this tribunal must assume that the Board considered all of the evidence in the record when making its decision. Id.

Presumably, the Board was unpersuaded that the threats justified Appellant's failure to take corrective action. Appellant's counsel alleged that fear of the homeowner kept Appellant from taking corrective action. However, the audiotape, standing on its own, establishes only that threats were made. The tape does not establish that Appellant was actually fearful or that such fear was the reason he failed to correct the deficiencies. Without corroborating testimony or evidence, the Board had no proof that Appellant feared for his safety. Further, David Stubbs, Appellant's representative, testified that Mr. Miller made threats in July and again in September. However, despite the initial threats in July, Stubbs returned to "complete" the project in August. (Tr. at 80.) During direct examination by Appellant's counsel, Stubbs never mentioned that he feared for his safety; he simply indicated that Mr. Miller had made threats on two occasions.

Additionally, Appellant argues that "there was no showing on behalf of the Complainant, or the State that it was unreasonable on the part of Appellant to be fearful of going onto the homeowners' property without adequate safeguards." (Appellant Br. at 7.) This argument is flawed. In civil cases, generally, the burden of proof rests upon the party who asserts the affirmative of an issue. 29 Am. Jur. 2d Evidence § 127 (1994); Alex Sanders, et al., South Carolina Trial Handbook § 9:3 Party With Burden, Civil Cases (1994). Thus, although the State must prove that Appellant failed to take the proper action, Appellant has the burden of proving any defense that he asserts. Considering the lack of proof presented to substantiate the allegation that fear was the reason for Appellant's inaction, the Board reasonably concluded that Mr. Miller's threats did not justify Appellant's failure to take corrective action.

Appellant's argument that "one party cannot prevent the other from performing the terms of a contract and then urge or avail himself of the nonperformance which he himself has brought about" is also without merit. The Board found Appellant guilty of misconduct because of his failure to take corrective action, and not because of his substandard performance of the terms of the contract.⁽²⁾

III. Did Appellant's Failure to Pay Subcontractors Who Contracted Directly With Him and Who Were Hired Directly by Him Constitute Misconduct, or Was Appellant's Failure to Pay Excused by the Homeowners' Failure to Pay Appellant?

Finally, Appellant argues that his failure to timely pay several subcontractors for work and services involved in the construction of the project was caused solely by the homeowners' refusal to pay him the last draw and, therefore, does not constitute misconduct. The Board, however, found that Appellant's failure to timely pay the subcontractors also constituted misconduct. The Board's Order stated that Appellant owed approximately $23,000 to subcontractors, and because of Appellant's failure to make payment, three subcontractors filed mechanics liens against the property.⁽³⁾

Although the record is convoluted with regard to the exact amounts owed to each subcontractor, the total amount owed to the three subcontractors clearly was considerably more than the amount of the last draw ($16, 269.43). Thus, Appellant's argument that the only reason the subcontractors were not paid was because of the Millers' failure to pay the last draw is flawed. According to the record, Appellant apparently owed subcontractors even more than the $23,000 approximated by the Board.⁽⁴⁾ The Board reasonably concluded that Appellant's failure to make payment to subcontractors rose to the level of misconduct.

After careful review of the evidence presented to the Board, I find that the evidence substantially supports the conclusion that Appellant committed misconduct. John Kendall testified to numerous, serious construction defects. Further, Appellant failed to present the Board with justification for his failure to correct these problems. Finally, it is undisputed that Appellant failed to timely pay several subcontractors for goods and or services used in the project. Viewing the evidence in the record as a whole, the Board reasonably concluded that Appellant committed misconduct.

ORDER

IT IS THEREFORE ORDERED that the Order of the Board is affirmed. Appellant's license shall be suspended for a period not to exceed one year.

____________________________

John D. Geathers

Administrative Law Judge

June 17, 1998

Columbia, South Carolina

1. While the Court of Appeals addressed misconduct by a contractor in Lite House, Inc. v. North River Ins. Co., 316 S.C. 326, 450 S.E.2d 63 (1994), the Court did not define misconduct.

2. It should be noted that there is absolutely no evidence in the record to substantiate a claim that the homeowners prevented Appellant from performing the terms of the contract. The threats made by Mr. Miller were made in July, when Appellant claims the job was substantially completed, and in September, after Appellant had already "completed" the job. Thus, even assuming that Mr. Miller's threats were "interference," such "interference" came after the attempted substantial "performance" of the contract. In other words, there is no evidence or allegation in the record that the Millers interfered with Appellant or attempted to keep Appellant from performing the terms of the contract as originally agreed.

3. Rather than release the last draw to Appellant, the homeowners paid American Marble and Brown's Heating and Air in full. With the remaining money, the Millers paid Thomas Supply approximately $4,700 of the money Appellant owed the company for the Miller job. As a result, American Marble and Brown's Heating and Air released their liens on the property. Additionally, the lien filed by Thomas Supply was lifted because of an error on the part of the company attorney.

4. Mrs. Miller testified that American Marble and Brown's Heating and Air were paid in full out of the $16,000 last draw. She also testified that "the difference"was paid to Thomas Supply. (Tr. at 49.) Johnny Cribb, Credit Manager at Thomas Supply, testified that at the time of hearing, Appellant still owed Thomas Supply $11,763.30. Mr. Cribb also testified that because Thomas Supply's attorney failed to foreclose on the mechanic's lien in the required time, there was no lien against the Miller's property. However, Thomas Supply had a suit pending against Appellant for the balance owed the company. Thus, even after the Millers paid a total of $16,000 to subcontractors, Appellant still had a balance of $11,763.30 with Thomas Supply.