Arkansas Contractors Licensing Board v. Pegasus Renovation Co.

64 S.W.3d 241, 347 Ark. 320, 2001 Ark. LEXIS 700
CourtSupreme Court of Arkansas
DecidedDecember 20, 2001
Docket01-708
StatusPublished
Cited by33 cases

This text of 64 S.W.3d 241 (Arkansas Contractors Licensing Board v. Pegasus Renovation Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Arkansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Arkansas Contractors Licensing Board v. Pegasus Renovation Co., 64 S.W.3d 241, 347 Ark. 320, 2001 Ark. LEXIS 700 (Ark. 2001).

Opinions

J IM HANNAH, Justice.

Appellant Arkansas Contractors Licensing Board (the Board) appeals the Saline County Circuit Court’s decision to reverse the Board’s decision to revoke Appellee Pegasus Renovation Company’s (Pegasus) contractors license for a violation of Ark. Code Ann. § 17-25-308 (Repl. 1995), allowing revocation of a contractor’s license for, among other things, “misconduct in the conduct of the contractor’s business.” Both parties agree that the facts are undisputed in this case.

During the mid-to-late Spring of 2000, Pegasus, a painting and drywall subcontractor, backed out of two projects, the Petit Jean Electric Cooperative project and the Farm Bureau Child Care Facility project, on which it was the lowest bidder, and breached a third contract already signed with general contractor Flynco, Inc. for the Carlton Bates Office/Warehouse expansion project. The three general contractors who relied on Pegasus’s bids filed complaints with the Board. Flynco, Inc., the general contractor with whom Pegasus signed the contract, also filed suit against Pegasus for breach of contract.

After Flynco, Inc.’s complaint was filed, the Board issued an initial Notice of Hearing on June 21, 2000, regarding the Petit Jean Electric Cooperative project. An Amended Notice of Hearing and Notice of Continuance of Hearing was mailed to Pegasus on July 14, 2000, with the additional notice of the other two complaints on the Farm Bureau and Carlton Bates projects. The notices indicated that Pegasus was being cited for violating Ark. Code Ann. § 17-25-308 for “misconduct in the conduct of the contractor’s business.”

The hearing was held before the Board on August 11, 2000. The Board presented its evidence first, questioning Victor Smith of V.R. Smith and Sons, Inc., the general contractor hired to perform the Petit Jean Electric Cooperative project. Smith testified that his company took bids from various subcontractors for painting and sheet rock work, with Pegasus entering the lowest bid. Smith used that bid in making his company’s contract for the project, and prior to signing the final contract with Petit Jean Electric Cooperative, Smith confirmed Pegasus’s bid with Pegasus’s estimator. However, when Smith sent Pegasus the final contract to sign, Pegasus declined the job by letter and indicated that it would not take any calls from Smith regarding the matter. Smith hired the next lowest bidder, who entered a bid approximately $12,000 higher than Pegasus’s bid. Pegasus’s attorney did not cross-examine Smith.

The Board’s second witness was Bill Mullinax, an investigator with the Board. Mullinax testified that after sending Smith’s complaint to Pegasus, the Board received a response letter from Pegasus indicating that Pegasus had never signed a contract with Smith, and that the next lowest bidder’s $12,000 bid was “a false statement.” Mullinax also indicated that the second complaint came from Alessi Keyes Construction, the general contractor on the Farm Bureau project. Again, the evidence indicated that Pegasus submitted a bid and failed to follow through on signing the contract with the general contractor who relied on that bid for its final bid to Farm Bureau. Finally, Mullinax testified that a third complaint was filed by Flynco, Inc., regarding Pegasus’s breach of contract on the Carlton Bates project.

Finally, the Board’s attorney called J.Wl Henderson, Pegasus’s owner. Questioning verified that Henderson had sent the letters to the general contractors and that Henderson reneged on his low bid offers and on the contract with Flynco, Inc. Pegasus’s attorney, Larry Hartsfield, did not cross-examine Henderson to develop any further information about Pegasus’s failure to honor its bids and contract, nor did he call any other witnesses. However, at the close of evidence, Hartsfield argued to the Board that Ark. Code Ann. § 17-25-308 is unconstitutionally vague because the word “misconduct” does not have a legally recognized meaning, thus leaving the statute without a basis on which to judge the term. Hartsfield also argued that regarding the VR. Smith and Alessi Keyes jobs, there was no legal basis to find misconduct if a bidder withdraws a bid prior to signing the final contract. Furthermore, Hartsfield argued that the term “gross” in the statute modifies, among other words, the word “misconduct” to raise the standard of proof.

After deliberations regarding whether failure to honor a bid rose to the level of misconduct and whether, en masse, these actions by Pegasus reached the level of misconduct, the Board voted three-to-one to revoke Pegasus’s contracting license for violation of the statute. In a decision entered on August 11, 2000, the Board found that Pegasus “failed and refused, without good cause, to perform the work on said projects.” The Board found Pegasus guilty of misconduct in the conduct of its business, thus violating Ark. Code Ann. § 17-25-308. The Board did not rule on Pegasus’s argument that the statute was void for vagueness for use of the term “misconduct.”

Following this decision, Pegasus filed a Petition for Judicial Review in the Saline County Circuit Court pursuant to the Arkansas Administrative Procedure Act. The Board answered on September 13, 2000, and on October 31, 2000, the circuit court stayed the Board’s revocation of Pegasus’s license until the court made its final decision on the case. Pegasus filed its brief to the court on November 27, 2000, again arguing that Ark. Code Ann. § 17-25-308 is void for vagueness because of its use of the term “misconduct.” Pegasus also argued that the statute is an unlawful delegation of legislative power, that the action of the Board was arbitrary and capricious given the facts before it, and that the penalty imposed was too harsh under the circumstances. The Board responded by brief on December 21, 2000, arguing that the statute is not unconstitutional wherein the Board is given the power of the State to act, and that the burden to prove whether the statute is unconstitutional is on Pegasus. The Board argues that the phrase “misconduct in the conduct of the contractor’s business” is not vague, and cites various other administrative statutes providing for a similar phrase for administrative action. The Board also argued that its action was not arbitrary and capricious, and that the penalty imposed was valid. Pegasus replied on January 17, 2001.

The circuit court issued its decision on March 13, 2001, finding that the Board erred in revoking Pegasus’s license. Specifically, the court found that Ark. Code Ann. § 17-25-305 lists qualifications of an applicant for an “original” or “renewal” license, and that the Board did not consider these eight factors in its decision. Furthermore, the court found that the Board did not address issues raised in the general contractors’s complaints regarding Pegasus’s “ability and willingness ... to conserve the public health and safety of the citizens” of Arkansas, and that the grounds for revocation of these licenses with respect to misconduct means “misconduct inimicable to public health ánd safety issues.” As such, the court found “[t]hat to the extent the Arkansas Contractors Licensing Board revoked the contractors license of Pegasus Renovation Company on grounds not relevant to public health and safety issues was arbitrary and capricious.” The court also specifically noted that it declined to rule on the constitutionality of the statute. The court then remanded the case to the Board for a determination consistent with the opinion. The Board appealed to this court instead on April 4, 2001.

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Bluebook (online)
64 S.W.3d 241, 347 Ark. 320, 2001 Ark. LEXIS 700, Counsel Stack Legal Research, https://law.counselstack.com/opinion/arkansas-contractors-licensing-board-v-pegasus-renovation-co-ark-2001.