SC Administrative Law Court Decisions

This is an appeal from an Order of the Contractor's Licensing Board, sanctioning Appellant by imposing a fine of $500.00 and suspending its general contractor's license for one year for violation of S.C. Code Ann. § 40-1-110(1)(c) (Supp. 1997). The final decision of the Board was issued September 2, 1998. Oral arguments were presented on January 4, 1999 at the Administrative Law Judge Division in Columbia, South Carolina. For the reasons stated herein, the decision of the Board is Affirmed.

The facts of this case are not at issue. Appellant is a construction management business that holds a Group I General Contractor's License which prohibits it from entering or engaging in contracts which exceed $250,000. In February, 1997 Appellant was awarded a contract with the Dorchester County School District Two (DCSD II) as construction manager on Spann Elementary School in Summerville, South Carolina. The primary contractor for the Spann project was awarded to TWC Commercial Construction Company (TWC). TWC holds an unlimited General Contractor's License. TWC was terminated September 29, 1997 as prime contractor due to construction problems. After TWC was terminated, Appellant advised and assisted DCSD II in the hiring and supervising of subcontractors to complete the project and correct any problems resulting from TWC's work. During the course of the completion of the project (September 1997 to April 1998), at least five workers who were unlicensed were hired and performed various projects. One of the subcontractors was paid over $30,000 for its work. The overall project to construct Spann Elementary School exceeded Appellant's license limitation for a Group 1 General Contractor.

TWC filed a Complaint against Appellant with the South Carolina Contractors' Licensing Board in January, 1998, alleging that Appellant had engaged in general contracting in excess of its license limitation, and had knowingly or intentionally, directly or indirectly, aided and abetted the DCSD II in violating the prohibition against engaging in contracting in South Carolina without a valid license. On May 13, 1998, an evidentiary hearing was held before a panel of the Board. The panel issued the Hearing Panel Report and Recommendation which stated that the State failed to prove by a preponderance of the evidence that Appellant was acting as a general contractor, but Appellant had knowingly or intentionally, directly or indirectly, aided and abetted the DCSD II in violating the prohibition against engaging in contracting in South Carolina without a valid license. The Panel recommended that Appellant's license be revoked and that it must pay a $500.00 fine. Appellant filed exceptions to the Panel's Report. On July 23, 1998, the Contractor's Licensing Board met and issued an Order dated September 2, 1998. The Board adopted the findings of fact and conclusions of law of the Hearing Panel, but modified the Panel's recommendation by suspending Appellant's license for a one year period. The Board still required the payment of a $500.00 fine.

Appellant filed a Notice of Appeal with the Administrative Law Judge Division from this Order.

I. Did the Board correctly rule that all contractors working on a project must be licensed if the cost of the entire project is $30,000.00 or more?

II. Did the Board correctly apply S.C. Code Ann. § 40-1-110(1)(c) to Appellant?

III. Did the Board have the statutory authority to sanction Appellant for aiding and abetting a party in engaging in general contracting without a license?

IV. Was the Board's decision to impose a fine and suspend Appellant's license arbitrary and capricious, or an abuse of discretion in light of the circumstances?

In conducting an appellate review of a final administrative decision, the Administrative Law Judge may reverse or modify the decision if:

substantial rights of the appellant have been prejudiced because the findings, inferences, conclusions or decisions are:

(a) in violation of constitutional or statutory provisions;

(b) in excess of the statutory authority of the agency;

(c) made upon unlawful procedure;

(d) affected by other error of law;

(e) clearly erroneous in view of the reliable, probative and substantial evidence on the whole record; or

(f) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

S.C. Code Ann. § 1-23-380(A)(6) and (B) (Supp. 1997). This tribunal, however, may not substitute its judgment for that of the administrative agency as to the weight of the evidence on questions of fact. Id.; see also Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304 (1981).

Issue I

The Board determined that after terminating the prime contractor, all subcontractors working on the project must possess a contractor's license. It is unlawful for general contractors who undertake construction in excess of $30,000 to do so without first obtaining a license in South Carolina. W & N Construction Co. Inc., 322 S.C. 448, 472 S.E.2d 622 (1996). The relevant statutory provision is S.C. Code Ann. § 40-11-10 (1986):

A "general contractor" shall be one who for a fixed price, commission, fee or wage undertakes or offers to undertake the construction or superintending of constriction of any building, highway, sewer, grading, improvement, reimprovement, structure or part thereof, when the cost of the undertaking is thirty thousand dollars or more. Anyone who engages or offers to engage in such undertaking in this State shall be deemed to have engaged in the business of general contracting in this State. (Emphasis added)

None of the other contractors hired by DCSD II and Appellant to assist in completion of the project held a valid contractor's license in South Carolina. Appellant holds a General Contractor's License with a Group 1 license limitation. This limitation prevents Appellant from contracting on (or supervising any work on) any project with a cost greater than $250,000. The limitation on Appellant's license prevented it from supervising a project such as the Spann school, and therefore prevented Appellant from including the subcontractors under its own license for purposes of the project.

Appellant contends that its duties regarding the project were restricted to that of a construction manager and not a general contractor. "Construction manager" is defined as an entity working for a fee whose duties are to supervise and coordinate the work of design professionals and multiple prime contractors, while allowing the design professionals and contractors to control individual operations and the manner of design and construction. S.C. Code Ann. § 40-11-20 (Supp. 1997). Appellant was instrumental in the hiring of other contractors for the Spann project and supervised their work. Licensure of a general contractor is not required for any person, company, or corporation acting as a construction manager in South Carolina so long as the duties of the construction manager are supervisory only and the construction manager does not directly oversee and superintend the work force of the various multiple prime contractors or actively direct the means and manner of construction of the project on which he is employed. 1980 Op Att'y Gen, No 80-94, p. 146. Appellant did just that on this project. It did not supervise and coordinate other contractors who controlled individual operations. Appellant supervised and controlled unlicensed workers on the job.

Appellant contends the $30,000 undertakings limitation in the statute applies to each portion of the job handled by a subcontractor separately, not to the cost of the job as a whole. In deciding statutory construction, the first and most basic inquiry is asking whether the language of the statute is plain and unambiguous and whether the statute conveys a clear and definite meaning. If the answer is yes, no occasion exists for employing rules of statutory interpretation and the court has no right to look for or impose another meaning. Paschal v. State Election Comm'n, 317 S.C. 434, 454 S.E.2d 890 (1995). All rules of statutory construction are subservient to the one that the legislative intent must prevail if it can be reasonably discovered in the language used and that language must be construed in the light of the intended purpose of the statute. Ray Bell Construction Co. Inc. v. School District of Greenville County, 331 S.C. 19, 501 S.E.2d 725 (1998). The statute cannot be interpreted to mean that a general contractor with a limitation on its license relating to project cost can participate in a project that exceeds that license limitation by hiring several subcontractors and applying the $30,000 limit to each separate subcontractor's project part. This interpretation would render the limitation on the general contractor's license useless.

The Regulations promulgated to clarify the meaning of the $30,000.00 general contracting threshold. S.C. Code Regs. 29-4 (Supp. 1998) provides in part:

D. The Board will not tolerate the splitting up of a project awarding separate contracts to various individuals in order for that individual to be able to do a portion of the job for less than $30,000.00 for general contracting and $17,500 for mechanical contracting. The awarding of contract by stages is illegal if the total cost of the entire undertaking is $30,000 or more for general contracting and $17,500 or more for mechanical contracting.

E. The overall or total cost of the undertaking, including all material, labor and profit, is the determining factor as to whether a licensed contractor will be required or not. The person or company responsible for the construction of the framework of the building will be considered as the principal or primary general contractor....

F. A licensee may utilize the services of unlicensed subcontractors to perform work within the limitations of the licensee's license group and classification, provided the licensee provides full-time, direct supervision personally or by a qualifier who holds an appropriate certificate. The licensee is fully responsible for any violations of the act or regulations resulting from the action of unlicensed subcontractors performing work for the licensee.

These regulations were properly promulgated and have the force and effect of law.

Further, the General Assembly addressed this issue in S.C. Code Ann. § 40-11-300 (Supp. 1998), which goes into effect April 1, 1999. This section states in part that

It is unlawful for an ... entity with contracting or hiring authority on a construction project to divide work into portions so as to avoid the financial or other requirements of this chapter as it relates to license classifications or subclassifications or license groups or both. The total cost of the construction must be used to determine the appropriate license group for a project. (Emphasis added).

The amendment incorporates the regulations and indicates the intent of the legislature not to allow limited license holders to avoid the required financial requirements by splitting the project.

Issues II, III, and IV.

Appellant argues that S.C. Code Ann. § 40-1-110(1)(c) does not apply to it as the statute specifically speaks to the practice of an "individual", not a corporation. Title 40 of the South Carolina Code defines "person" to mean individual, partnership, or corporation. Therefore, these terms may be used interchangeably within Title 40 unless the context requires a different meaning. Appellant as a corporation is required to comply with S.C. Code Ann. § 40-1-110(1)(c).

Appellant takes further issue with the nature of the sanctions imposed upon it and argues that the Board was not within its statutory authority to impose a fine and a period of suspension. S.C. Code Ann. § 40-1-110 (1976) states:

In addition to other grounds contained in this article and the respective board's chapter:

(1) A board may cancel, fine, suspend, revoke, or restrict the authorization to practice of an individual who:...

(c) has intentionally or knowingly, directly or indirectly, violated or has aided or abetted in the violation or conspiracy to violate this article or a regulation promulgated under this article;

The School Board fired TWC before the project was complete due to problems with the work product. Appellant assisted DCSD II in supervising the other contractors hired to assist on the Spann project. It is unlawful for any person who falls within the statutory definition of general or mechanical contractor to engage or offer to engage in general or mechanical contracting in this State without first obtaining the required license. S.C. Code Ann. § 40-11-100 (1976). DCSD II participated in hiring and supervising the contractors with Appellant's assistance. DCSD II does not hold a general contracting license in South Carolina. Appellant holds a limited license that prevented it from working as a general contractor on projects such as this school due to its overall cost. The statute clearly gives the Board the authority to suspend the license or fine a participant in any of these activities. The fine and the suspension imposed are penalties within the Board's statutory authority.

IT IS THEREFORE ORDERED that the Order of the Contractor's Licensing Board be affirmed.

AND IT IS SO ORDERED.

______________________________

ALISON RENEE LEE

Administrative Law Judge

March 2, 1999

Columbia, South Carolina.