Mississippi State Board of Contractors v. Hobbs Construction, LLC ( 2020 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2018-CA-01389-SCT
MISSISSIPPI STATE BOARD OF CONTRACTORS
v.
HOBBS CONSTRUCTION, LLC
DATE OF JUDGMENT: 09/17/2018
TRIAL JUDGE: HON. CARTER O. BISE
TRIAL COURT ATTORNEYS: AUSTIN CLARK
RUSSELL S. GILL
B. PARKER BERRY
COURT FROM WHICH APPEALED: CHANCERY COURT OF THE SECOND
JUDICIAL DISTRICT OF HARRISON
COUNTY
ATTORNEYS FOR APPELLANT: B. PARKER BERRY
HALEY GREGORY
TOMMIE S. CARDIN
ATTORNEYS FOR APPELLEE: AUSTIN CLARK
RUSSELL S. GILL
MICHAEL B. WALLACE
REBECCA HAWKINS
NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION: AFFIRMED - 03/06/2020
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
EN BANC.
KITCHENS, PRESIDING JUSTICE, FOR THE COURT:
¶1. At stake in this appeal is the ability of Hobbs Construction, LLC, to continue doing
business in this state as a commercial general contractor. The Mississippi State Board of
Contractors revoked the certificate of responsibility (COR) held by Hobbs, and it appealed
to the Chancery Court of the Second Judicial District of Harrison County. The chancery court
granted Hobbs’s motion for a preliminary injunction and enjoined the Board’s revocation
decision during the pendency of the appeal. Later the chancery court entered an order
reversing the Board’s decision and reinstating Hobbs’s COR.
¶2. The Board appeals, arguing that the chancery court erred because the Board’s
revocation decision was supported by substantial evidence, was not arbitrary and capricious,
was within the Board’s power to make, and did not violate Hobbs’s statutory or constitutional
rights. The Board argues also that the chancery court erred by granting a preliminary
injunction. Because the Board violated Hobbs’s constitutional right to due process of law by
not providing sufficient notice of the charges that were considered at the revocation hearing
and were a basis for the revocation decision, we affirm the order of the chancery court. We
find further that the chancery court did not err by granting a preliminary injunction. Thus, we
affirm.
FACTS
¶3. On October 14, 2016, Pyramid Interiors Distributors filed a complaint with the State
Board of Contractors against Hobbs, alleging that Hobbs owed it $13,390 for materials
ordered in April 2016 and used in the Club 24 project in Flowood, Mississippi. The Board
notified Hobbs of the complaint and requested that it respond in writing. Hobbs failed to do
so. On December 16, 2016, the Board filed a complaint against Hobbs and provided
notification that a hearing was set for January 11, 2017. Both the complaint and the notice
of hearing were served on Hobbs by certified mail, as shown by the return receipt.
2
¶4. On January 10, 2017, Hobbs executed a forbearance agreement with Pyramid in which
it agreed to pay a compromised amount of $11,570 by January 31, 2017. Pyramid agreed to
notify the Board that the parties were attempting to resolve the dispute and to request a
continuance of the hearing. According to the agreement, if Pyramid received payment, it
would withdraw its complaint. But if Hobbs failed to pay, Pyramid would proceed with its
complaint before the Board. Hobbs’s president, Allen Hobbs Mize, Jr., signed the agreement,
but no one signed it on behalf of Pyramid. The same day, Garry Condrey, Pyramid’s CFO,
notified the Board by email that “Hobbs reached out to our attorney today and has agreed to
pay Pyramid Interiors in full by 1/31/2016. We do not want to withdraw our complaint at this
time but we would like to delay our hearing until the next available meeting to allow Hobbs
the opportunity to pay us.”
¶5. Hobbs did not pay, and the Board filed an amended complaint on May 10, 2017. The
amended complaint contained these allegations of fault against Hobbs:
It is alleged that Respondent acted irresponsibly in violation of Miss. Code
Ann. § 31-3-13. Specifically, Respondent contracted with Pyramid Interior
Distributors in 2016 for doors and door hardware for use on a commercial
project located [in Flowood]. The balance for this purchase totaled $13,390
and has not been paid.
The amended complaint warned Hobbs that, if it were found guilty, the Board could suspend
or revoke its COR. A hearing was set for July 12, 2017. Again, Hobbs was served with the
amended complaint and notice of hearing by certified mail, as shown by the return receipt.
3
¶6. No representative of either Pyramid or Hobbs appeared at the hearing.1 The only
testimony came from James Cushman, an investigator assigned by the Board to look into the
matter, who presented his report. According to Cushman’s report, Condrey, with whom he
had spoken on November 8, 2016, said that Pyramid had made several attempts to collect the
money owed and had turned the matter over to a collection agency. The report said that
Cushman had spoken with Mize, Jr., on November 9, 2016. According to Cushman, Mize,
Jr., had not disputed the bill and had said that he would pay it the next week. Investigator
Cushman testified that, around that time, he had checked with Pyramid, but Hobbs had made
no payments. Although Hobbs was not given notice that prior, closed matters would be
considered, Investigator Cushman also testified about Hobbs’s history before the Board,
consisting of eight2 prior complaints for failure to pay a subcontractor. All those complaints
had been resolved in Hobbs’s favor.3
¶7. The transcript reveals the Board’s deliberations on the complaint against Hobbs.
Board Member Laws noted that Hobbs had signed a forbearance agreement promising to pay
1
The Board contends that, under Rule 2.1(c) of the Rules and Regulations of the
State Board of Contractors as Applied to Commercial Contractors, Hobbs’s failure to appear
at the hearing “may be taken by the Board as evidence of the facts alleged in the formal
complaint.” But because Rule 2.1 sets forth the procedures for imposing a monetary penalty
for a violation of Mississippi Code Section 31-3-21 (Supp. 2019), which governs bidding
and awards, that regulation does not apply to this case.
2
Investigator Cushman’s report listed nine prior complaints, but one had been
withdrawn by the subcontractor.
3
Hobbs contends that all the complaints were resolved favorably after Hobbs had paid
the subcontractors and that the amounts at issue ranged from two for around $500, five for
less than $5,000 and two for more than $10,000, including Pyramid’s.
4
Pyramid by the end of January but that he never had paid. He complained, “[w]e’ve seen this
guy every meeting.” Board Member Laws moved to revoke Hobbs’s license, saying, “we
know this guy is irresponsible. You know, if we let him continue doing business like he is
it’s just gonna be a matter of time before we see him again.” Another member expressed
concern that revoking Hobbs’s license rather than suspending it would provide no incentive
for Hobbs to settle its debt with Pyramid. Then the following occurred:
BY BOARD MEMBER LAWS: I agree with you, but we’ve done that with
him several times. To me it’s just to the point that by letting him continue
forward he’s gonna be hurting somebody else. That’s where I am.
BY BOARD MEMBER FORDICE: I understand.
BY THE CHAIRPERSON: In reality does Pyramid have—they have a case
against him in civil court?
BY MR. BERRY: Presumably. I don’t have all the facts, but certainly if they
have a contract with him and he’s breached the contract to pay they would, you
would think, have a separate civil action.
BY THE CHAIRPERSON: It looks to me like when they’re not paid that’s the
first place they ought to go, not here. They ought to just go to court.
BY MR. BERRY: It’s often cheaper to just file a complaint here and let y’all
deal with it than having to hire an attorney to go to court. They may end up
going there but this is the cheaper route to try to get him to pay.
Without further discussion, the Board voted 5-1 to revoke Hobbs’s COR, with one member
voting to suspend the COR.
¶8. In its findings of fact and conclusions of law, the Board found that Hobbs was not
responsible under Mississippi Code Section 31-3-13, considering the debt owed to Pyramid
5
and the “numerous prior violations.”4 On July 12, 2017, the Board revoked Hobbs’s COR.
Hobbs appealed to the chancery court on July 21, 2017. At an October 11, 2017 hearing
before the Board, Hobbs requested reconsideration, but the Board refused to reinstate the
COR.
¶9. Hobbs moved for a preliminary injunction in chancery court. Hobbs alleged that it has
been in the construction industry for thirteen years, and its experience includes building
“restaurants, medical clinics, hurricane shelters, shopping centers, retail buildings,
apartments, condominiums, government housing, and government recruiting offices.” Hobbs
averred that it employs twenty people and has business relationships with thirty
subcontractors who work exclusively with Hobbs. Hobbs alleged that, without a preliminary
injunction, it would lose business relationships and hundreds of thousands of dollars in
expected profits, and its employees would have to seek other work. Hobbs requested a
preliminary injunction to prevent irreparable harm. Hobbs attached an affidavit of Mize, Jr.,
in which he averred that he had executed the forbearance agreement under duress because
he was under threat of having his license suspended. Hobbs also attached copies of the
Board’s records of the prior complaints and of pleadings in related litigation, noting that the
Board had not considered the actual records of the prior complaints and instead had based
its decision on the scanty information in Investigator Cushman’s report. The Board opposed
the preliminary injunction motion.
4
Section 31-3-13(f) provides that the Board may revoke a COR upon a finding that
the contractor is “not responsible.” Miss. Code Ann. § 31-3-13(f) (Supp. 2019).
6
¶10. The chancery court granted a preliminary injunction, finding that Hobbs had a
substantial likelihood of prevailing on the merits. The chancery court also found that the
Board had failed to afford Hobbs due process because it had not identified or applied any
statutory or administrative guidance defining “responsible,” and it had relied on the prior
complaints, all of which Hobbs ultimately had paid. And the chancery court found that Hobbs
had made the requisite showing that irreparable harm would result without injunctive relief
and that a preliminary injunction would not harm the Board.
¶11. In its decision on the merits, the chancery court reversed the Board’s order, finding
that a contract dispute between a prime contractor and a subcontractor is outside the Board’s
authority to regulate under Mississippi Code Section 31-3-2. And the chancery court found
that the Board had failed to consider or apply the factors from Mississippi Code Section 31-
3-13 for determining whether the holder of a COR is not responsible. The chancery court
found that the Board’s decision was not supported by substantial evidence, was arbitrary and
capricious, was beyond the Board’s power to make, and violated Hobbs’s statutory or
constitutional rights. The chancery court ordered that Hobbs’s COR be reinstated. The Board
appeals.
DISCUSSION
I. Whether the chancery court erred by reversing the decision of the
Board.
A. Standard of Review
¶12. On appeal of the decision of an administrative agency, all levels of review focus on
the final decision of the agency. Pub. Emps.’ Ret. Sys. v. Howard, 905 So. 2d 1279, 1284-85
7
(Miss. 2005). Thus, this Court applies the same standard of review to the Board’s decision
as that applied by the chancellor. Genesis Hospice Care, LLC v. Miss. Div. of Medicaid, 267
So. 3d 779, 783 (Miss. 2019). “[T]he Court reviews the decision of an administrative agency
to determine whether the decision was supported by substantial evidence, was arbitrary or
capricious, was beyond the agency’s power to adopt, or was violative of a constitutional or
statutory provision.” Mem’l Hosp. at Gulfport v. Dzielak, 250 So. 3d 397, 400 (Miss. 2018)
(internal quotation marks omitted) (quoting King v. Miss. Military Dep’t, 245 So. 3d 404,
407 (Miss. 2018)).
B. Law Governing Contractors
¶13. Mississippi Code Section 31-3-3 establishes the State Board of Contractors, which is
composed of ten members, all contractors, who are appointed by the governor. Miss. Code
Ann. § 31-3-3 (Supp. 2019). Section 31-3-2 sets forth the Board’s purpose:
The purpose of this chapter, is to protect the health, safety and general welfare
of all persons dealing with those who are engaged in the vocation of
contracting and to afford such persons an effective and practical protection
against incompetent, inexperienced, unlawful and fraudulent acts of
contractors.
Miss. Code Ann. § 31-3-2 (Rev. 2010). The Board has the authority to issue CORs to those
contractors whom the Board finds responsible. Miss. Code Ann. § 31-3-13 (Supp. 2019).
When determining the qualifications of an original applicant for a COR or a renewal of a
COR, the Board must consider the following factors, “among other things”:
(i) experience and ability, (ii) character, (iii) the manner of performance of
previous contracts, (iv) financial condition, (v) equipment, (vi) personnel, (vii)
work completed, (viii) work on hand, (ix) ability to perform satisfactorily work
under contract at the time of an application for a certificate of responsibility
8
or a renewal thereof, (x) default in complying with provisions of this law, or
any other law of the state, and (xi) the results of objective, standardized
examinations.
Miss. Code. Ann. § 31-3-13(h) (Supp. 2019).
¶14. The Board may revoke a COR “upon a finding by the board that a particular
contractor or qualifying party is not responsible.” Miss. Code Ann. § 31-3-13(f) (Supp.
2019). The Board may suspend a COR for cause. Id. Before the Board may suspend or
revoke a COR, the Board must afford the contractor ten days’ notice of a hearing at which
the contractor shall have “an opportunity to present all lawful evidence which he may offer.”
Id.C. The Board failed to afford Hobbs procedural due process.
¶15. The Board makes several arguments urging this Court to reverse the judgment of the
chancery court that reinstated Hobbs’s COR. The Board argues that its decision that Hobbs
was not responsible was supported by substantial evidence. It also argues that the chancellor
misinterpreted the governing statutes to require the Board to have considered the factors from
Section 31-3-13(h) in the revocation decision. Further, the Board contends that the chancery
court erred by finding that the Board had deprived Hobbs of procedural due process. Because
we find this issue dispositive, we do not address the Board’s other issues.
¶16. Hobbs argues that the Board’s decision violated its procedural due process rights
because Hobbs was not given notice that the Board would consider the prior complaints in
making the revocation decision. To the contrary, the amended complaint listed only Hobbs’s
failure to pay Pyramid as the sole basis for revocation or suspension of its certificate of
9
responsibility (COR). But the Board’s minutes reflect that its members decided, after learning
from the investigator that Hobbs had eight prior complaints, that they were tired of dealing
with him and that his license should be revoked. The Board based its final decision that
Hobbs was not responsible under Section 31-3-13 on both the debt owed to Pyramid and the
“numerous prior violations.” Applying the clear precedent of the United States Supreme
Court and this Court, the Board violated Hobbs’s right to procedural due process by failing
to inform it that the prior violations would be considered.
¶17. The holder of a license issued by the government that entitles the holder to perform
specific kinds of work to earn a living has a protected property interest in the license and
must be afforded due process before being deprived of the license. Simpson v. Brown Cty.,
860 F.3d 1001, 1006 (7th Cir. 2017). “This Court has held that ‘an administrative [agency]
must afford minimum procedural due process under the Fourteenth Amendment to the United
States Constitution and under Art. 3, § 14 of the Mississippi Constitution consisting of (1)
notice and (2) opportunity to be heard.’” Molden v. Miss. State Dep’t of Health, 730 So. 2d
29, 35 (Miss. 1998) (alteration in original) (quoting Booth v. Miss. Emp’t Sec. Comm’n, 588
So. 2d 422, 428 (Miss. 1991)). Notice must be “reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency of the action and afford them an
opportunity to present their objections.” Id. at 37 (quoting Booth, 588 So. 2d at 427). “The
notice must be of such nature as reasonably to convey the required information . . . .”
Mullane v. Cent. Hanover Bank & Tr. Co., 339 U.S. 306, 314, 70 S. Ct. 652, 94 L. Ed. 865(1950) (citing Grannis v. Ordean, 234 U.S. 385, 34 S. Ct. 779, 58 L. Ed. 1363 (1914)). “The
10
means employed must be such as one desirous of actually informing the absentee might
reasonably adopt to accomplish it.” Id. at 315.
¶18. The right to an opportunity to be heard includes “a reasonable opportunity to know
the claims of the opposing party and to meet them.” Morgan v. United States, 304 U.S. 1,
18, 58 S. Ct. 773, 82 L. Ed. 1129 (1938). “Those who are brought into contest with the
Government in a quasijudicial proceeding aimed at the control of their activities are entitled
to be fairly advised of what the Government proposes and to be heard upon its proposals
before it issues its final command.” Id. at 18-19. Therefore, “[a] party is entitled . . . to know
the issues on which decision will turn and to be apprised of the factual material on which the
agency relies for decision so that he may rebut it.” Bowman Transp., Inc. v. Ark.-Best
Freight Sys., Inc., 419 U.S. 281, 288 n.4, 95 S. Ct. 438, 42 L. Ed. 2d 447 (1974).
Additionally, the United States Supreme Court has held in the context of an attorney
disbarment proceeding that the government may not add charges based upon testimony about
new misconduct that was received at the hearing. In re Ruffalo, 390 U.S. 544, 551, 88 S. Ct.
1222, 20 L. Ed. 2d 117 (1968) (“The charge must be known before the proceedings
commence. They become a trap when, after they are underway, the charges are amended on
the basis of the testimony . . . .”).
¶19. This Court has recognized the constitutional due process requirement that a license
holder be given notice of the specific charges to be used as the basis for revoking the license.
Miss. State Bd. of Nursing v. Wilson, 624 So. 2d 485, 494-95 (Miss. 1993). The Court of
Appeals applied this rule in Holt v. Mississippi State Board of Dental Examiners, 131 So.
113d 1271 (Miss. Ct. App. 2014). In Holt, the Mississippi State Board of Dental Examiners
suspended Dr. Holt’s license to practice dentistry based on an assortment of violations. Id.
at 1275. Dr. Holt complained that he was given insufficient notice of three counts of
misconduct for oversedating some of his patients. Id. at 1279. The Court of Appeals
recognized that due process does not require a particular form of notice to satisfy the
constitution. Id. (quoting Miss. Bd. of Veterinary Med. v. Geotes, 770 So. 2d 940, 943 (Miss.
2000)). Rather, “[d]ue process is flexible and calls for such procedural protections as the
particular situation demands.” Id. (internal quotation marks omitted) (quoting Geotes, 770
So. 2d at 943). What is required is “the opportunity to be heard at a meaningful time and in
a meaningful manner.” Id. (internal quotation mark omitted) (quoting Geotes, 770 So. 2d at
943). But a party must be afforded such notice as affords an opportunity to present his
objections. Id.
¶20. The Court of Appeals relied on this Court’s holding in Miller v. State Board of
Pharmacy, explaining that
The revocation of a professional license is a matter of the most serious
consequences. Proceedings directed toward that end have not been regarded
in Mississippi as criminal in character. Nevertheless, the professional man
accused of derelictions of such gravity as to justify revocation of his license
to practice his profession, is entitled, as a matter of right, to be informed of the
nature of the charge against him, if not with the exact specificity required in
a criminal indictment, the charge must be made with not less exactitude and
fullness than would be necessary in a bill of complaint or declaration in a civil
case. Moreover, he is entitled to demand and obtain a bill of particulars or
require that the charge be made more definite and certain under circumstances
prescribed in the statutes, practice and procedure of this State.
12
Holt, 131 So. 3d at 1280 (quoting Miller v. State Bd. of Pharmacy, 262 So. 2d 188, 189
(Miss. 1972)). The Court of Appeals concluded that, because Dr. Holt had not been charged
with oversedating patients, his right to due process had been violated by the Board’s decision
to suspend his license based in part on that misconduct. Id.
¶21. Other states’ courts have come to similar conclusions involving similar factual
scenarios. See Sternberg v. Dept. of Prof’l Regulation, Bd. of Med. Exam’rs, 465 So. 2d
1324, 1325 (Fla. Dist. Ct. App. 1985) (The district court of appeal held that the Board of
Medical Examiners denied a physician due process by finding him guilty of an offense not
charged in the administrative complaint.); Wolfenbarger v. Hennessee, 520 P.2d 809, 812
(Okla. 1974) (The Supreme Court of Oklahoma reversed the revocation of a pawnbroker’s
license on procedural due process grounds because the licensee was not notified of the
factual basis of the charges.). These fundamental precepts of due process also were applied
by the Court of Appeals of North Carolina in the specific context of a contractor’s license.
In In re Trulove, 282 S.E.2d 544, 547 (N.C. Ct. App. 1981), a licensure board suspended a
contractor’s license for placing his seal on engineering work which had not been prepared
under the contractor’s charge and for gross negligence for sealing the work of another
knowing the plans were not in compliance with the building code. The North Carolina Court
of Appeals found that, although the Board’s ultimate findings were sufficient to support the
suspension of the contractor’s license, the suspension was reversible error because the Board
had not provided the contractor sufficient notice of the charged facts before the hearing. Id.
at 548. The Court held,
13
Trulove was notified only that the charges against him involved gross
negligence, incompetence or misconduct resulting from his noncompliance
with [governing statutes and rules]. Thus, the Board gave Trulove absolutely
no notice that he was being charged with knowingly sealing non-conforming
plans or that he was being charged with sealing the work of others for the
purpose of procuring planning board approval of the plans, knowing that the
plans were not in compliance with the North Carolina State Building Code.
Id. (footnotes omitted) (citations omitted). Due to the lack of notice, the contractor was
deprived of the opportunity to prepare his defense in violation of due process. Id.
¶22. Due process requires some form of notice, be it by statute, rule, regulation, applicable
judicial decision, agency decision, or communication from the licensing authority to the
licensee reasonably calculated to inform the licensee that history will be considered. This
point is illustrated by Disciplinary Bd. of N.D. v. Garcia (In re Garcia), 366 N.W.2d 482,
483 (N.D. 1985). In Garcia, an attorney discipline matter, Attorney Garcia was charged with
misconduct in an informal complaint and, later, a formal complaint that culminated in the
suspension of his license to practice law. Id. at 483-84. He argued that his due process rights
had been violated because he was not given notice that the Inquiry Committee would
consider his disciplinary history in the disposition of the informal complaint. Id. at 485. The
Supreme Court of North Dakota held that Attorney Garcia’s due process rights had not been
violated for two reasons: (1) a bar rule had placed him on notice that the Inquiry Committee
would consider his disciplinary history, and (2) the formal complaint made allegations
concerning his disciplinary history, thereby giving him an opportunity to attack any
inaccuracies during the formal complaint hearing. Id. Because Garcia had, in fact, been
afforded sufficient notice that his disciplinary history would be considered in the adjudication
14
of the new charge, the North Dakota Supreme Court found that his due process rights were
not violated. Id. Notably, the North Dakota Supreme Court did not hold that the licensing
entity automatically could consider the licensee’s history without notice as part of its inherent
powers. This is because notice sufficient to satisfy the Due Process Clause differs from a
licensing entity’s authority to carry out its business.
¶23. Turning to the facts of this case, the amended complaint provided the following notice
to Hobbs:
It is alleged that Respondent acted irresponsibly in violation of Miss. Code
Ann. § 31-3-13. Specifically, Respondent contracted with Pyramid Interior
Distributors in 2016 for doors and door hardware for use on a commercial
project located [in Flowood, Mississippi]. The balance for this purchase totaled
$13,390 and has not been paid.
The amended complaint gave no indication that any prior complaints against Hobbs would
be considered. Because the amended complaint clearly set forth the charge relating to
Pyramid, and Pyramid alone, nothing in the notice reasonably should have prompted Hobbs
to request that the charge be made more definite and certain. Not only did the amended
complaint’s specific charging language omit any reference to the prior complaints, it was
devoid of even a subtle hint that would have put Hobbs on notice that prior complaints before
the Board would be considered. Nor does any statute or regulation applicable to the Board
suggest that the Board might consider prior complaints when evaluating a complaint against
the holder of a COR.5 Therefore, a careful perusal of the amended complaint and of the
5
Nothing in the statutes applicable to the Board can be said to be reasonably
calculated to place COR holders on notice that, in a revocation proceeding, the Board will
look beyond the four corners of a given complaint to the COR holder’s disciplinary history.
While the factors in Mississippi Code Section 31-3-13(h) (Supp. 2019) for determining
15
applicable law reveals that, unlike in the Garcia case, Hobbs was given no notice whatsoever
that the Board would consider the prior complaints when it adjudicated the matter of his
contract dispute with Pyramid.
¶24. In Mullane, the United States Supreme Court emphasized that notice must be
sufficient to enable the recipient to make an informed decision whether “to appear or default,
acquiesce or contest.” Mullane, 339 U.S. at 314. It is clear that one charged with license-
imperiling conduct legitimately may choose to default or acquiesce rather than to appear and
defend the charges. But in order to make a fully informed choice whether to appear, contest,
default, or acquiesce, the licensee must have notice sufficient to enable its defense of the
charges that will be considered by the government in deciding whether to suspend or revoke
the license.
¶25. Hobbs, having been served with several prior notices of its failure to pay a
subcontractor that had resulted in the suspension of its license followed by reinstatement
once the payment dispute was resolved, reasonably could have assumed from the amended
complaint that the Pyramid matter would be resolved in the same fashion, obviating its need
whether a contractor is responsible for the purpose of issuing or renewing a COR might be
construed to place a COR holder on notice that the Board can consider past conduct in a
suspension or revocation decision, Hobbs was not notified that the Board would consider
those factors in this case. Rather, the complaint was based solely on the debt to Pyramid, and
the Board strenuously argues that it did not, and does not have to, consider the factors in a
suspension or revocation decision.
Rule 2.2 of the Rules and Regulations of the State Board of Contractors as Applied
to Commercial Contractors does say that a prior violation may be considered when
determining the amount of a monetary penalty under Section 31-3-21, which governs
bidding and awards. Miss. Code Ann. § 31-3-21 (Supp. 2019). But Rule 2.2 does not apply
to the revocation of a COR.
16
to appear at the hearing. From the notice provided, Hobbs would have been justified in
believing that the hearing would focus solely on the dispute with Pyramid, not on that matter
in addition to the prior complaints. The notice was such that, if Hobbs had appeared at the
hearing, it would not have been prepared to defend its conduct related to the prior
complaints. But if Hobbs had received the requisite notice, it would have been fully informed
of all the conduct to be considered by the Board and could have adjusted its response
accordingly. Indeed, Hobbs argues that, regarding five of the prior complaints, it did not pay
the subcontractor due to payment dispute litigation with the project owner. But because
Hobbs was not informed in advance of the hearing that the Board would consider the prior
complaints, nothing prompted it to place this rebuttal evidence before the Board. We note
that the due process problem in this case easily could have been obviated by a simple
statement in the notice to Hobbs that the Board would consider prior disciplinary
proceedings.
¶26. Because the notice given Hobbs was limited to the charge of its alleged failure to pay
Pyramid and did not inform it that the Board would consider prior complaints, the notice was
insufficient. The notice did not afford Hobbs a full opportunity to know the charges against
it and to present a responsive defense. Therefore, the Board violated Hobbs’s right to
procedural due process by revoking its license on grounds other than those for which it was
provided notice in advance of the hearing. For that reason, we affirm the decision of the
Chancery Court of the Second Judicial District of Harrison County that reversed the decision
of the Board to revoke Hobbs’s COR.
17
¶27. Alternatively, Hobbs argues that the resolution of a payment dispute is a judicial
function outside the purview of the Board’s authority under Section 31-3-2. It is true that the
Board lacks any statutory mandate to adjudicate contract disputes. Rather, a subcontractor
has the options of either filing a lawsuit and/or of placing a lien on the project under
Mississippi Code Section 85-7-405 (Supp. 2019). According to the Board’s minutes, the
purpose of many of the prior complaints was to threaten Hobbs with suspension with the
object of coercing its payment to a subcontractor. As Chief Justice Randolph discusses in
his separate opinion, Pyramid used such tactics before the Board in this very case. But the
Board had no authority to condition Hobbs’s ability to engage in the contracting business
on its payment of a disputed debt, and no judicial determination exists that Hobbs owed
anything to those subcontractors. Indeed, the Supreme Court of Nevada has found that a
board of contractors cannot assume a judicial role by using its power to suspend a
contractor’s license to resolve a contract dispute between a contractor and a subcontractor.
Bivins Constr. v. State Contractors’ Bd., 809 P.2d 1268, 1270 (Nev. 1991). In so handling
the prior complaints against Hobbs, the Board coerced payment of disputed debts. The fact
that such action was and is outside the Board’s authority is an additional reason that those
complaints should not have been considered in revoking Hobbs’s COR.
II. Whether the chancery court erred by granting a preliminary
injunction.
¶28. The Board argues that the chancery court lacked authority to grant a preliminary
injunction under the statutory scheme applicable to appeals from the State Board of
18
Contractors. Alternatively, it argues that the grant of a preliminary injunction was an abuse
of discretion.
¶29. The chancery court considers the following factors in granting a preliminary
injunction: “(1) There exists a substantial likelihood that plaintiff will prevail on the merits;
(2) The injunction is necessary to prevent irreparable injury; (3) Threatened injury to the
plaintiffs outweighs the harm an injunction might do to the defendants; and (4) Entry of a
preliminary injunction is consistent with the public interest.” A-1 Pallet Co. v. City of
Jackson, 40 So. 3d 563, 568-69 (Miss. 2010) (quoting City of Durant v. Humphreys Cty.
Mem’l Hosp./Extended Care Facility, 587 So. 2d 244, 250 (Miss. 1991)). On appeal, this
Court reviews the grant of injunctive relief for abuse of discretion. City of Durant, 587 So.
2d at 250. Questions of law are reviewed de novo. Miss. Power Co. v. Hanson, 905 So. 2d
547, 549 (Miss. 2005).
¶30. Hobbs argues that the issue of whether a preliminary injunction should have issued
to allow Hobbs to continue in business during the pendency of the chancery court appeal is
moot. This Court has held that an issue on appeal is moot when any action taken by the
appellate court would be of no consequence to either party and deciding the issue would
amount to nothing more than an academic exercise. In Electronic Data Systems Corp. v.
Mississippi Division of Medicaid, 853 So. 2d 1192, 1207 (Miss. 2003), the chancery court
had denied a motion for a preliminary injunction pending an appeal of an administrative
agency decision. This Court found that the issue of whether the chancellor erred by denying
the preliminary injunction was moot. Id. But in other instances, this Court has reviewed the
19
propriety of a preliminary injunction on appeal despite the apparent lack of benefit or
detriment to either party. Am. Legion Post #134 v. Miss. Gaming Comm’n, 798 So. 2d 445,
455 (Miss. 2001).
¶31. In this case, the preliminary injunction issued, and Hobbs was permitted to engage in
the business of commercial contracting during the pendency of the chancery court appeal.
Once the chancery court had entered its decision, the preliminary injunction dissolved. At this
point, a decision on the merits of the preliminary injunction would not be beneficial or
detrimental to either party. But the Board argues that the issue is not moot because this
statutory interpretation question will arise in future appeals from Board decisions.
This Court will not consider a case to be moot if the challenged action is
capable of repetition yet evading review, meaning that “(1) The challenged
action was in its duration too short to be fully litigated prior to its cessation or
expiration, and (2) There was a reasonable expectation that the same
complaining party would be subject to the same action again.”
Barrett v. City of Gulfport, 196 So. 3d 905, 912 (Miss. 2016) (quoting Strong v. Bostick,
420 So. 2d 1356, 1359 (Miss. 1982)). We find that this case meets these criteria, and we
consider the Board’s argument that the language of Section 31-3-23 forecloses the grant of
a preliminary injunction.
¶32. Section 31-3-23 governs appeals to chancery court from the Board and provides, in
pertinent part, that
Appeals may be had to the Supreme Court of the State of Mississippi
as provided by law from any final action of the chancery court. The board may
employ counsel to defend such appeals, to be paid out of the funds in the State
Board of Contractors Fund.
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On appeal, any order, judgment or action of the board revoking a
certificate of responsibility or residential license shall remain in full force
unless the chancery court or Supreme Court reverses such order, judgment or
action of the board.
The remedies provided under this chapter for any aggrieved person
shall not be exclusive, but shall be cumulative of and supplemental to any
other remedies which he may otherwise have in law or in equity, whether by
injunction or otherwise.
Miss. Code. Ann. § 31-3-23 (Supp. 2019).
¶33. The Board cites Falco Lime, Inc. v. Mayor and Aldermen of Vicksburg for the
proposition that “[a]n injunction will not issue when the complainants have a complete and
adequate remedy by appeal.” Falco Lime, Inc. v. Mayor and Aldermen of Vicksburg, 836
So. 2d 711, 716 (Miss. 2002) (internal quotation mark omitted) (quoting Benedict v. City of
Hattiesburg, 693 So. 2d 377, 381 (Miss. 1997)). In Falco Lime, the complainant sought
injunctive relief in circuit court instead of appealing from the decision of a municipal body.
Id. The Court found that injunctive relief was not proper because the appropriate avenue for
relief was the appeal allowed by statute. Id. at 717. Falco Lime is distinguishable from this
case because the language of the appeal statute in Falco Lime was different from that in
Section 31-3-23. Unlike in Falco Lime, Section 31-3-23 says that the appeal is “cumulative
and supplemental of any other remedies he may otherwise have in law or equity, whether by
injunction or otherwise.”
¶34. Anticipating this argument, the Board counters that other language in Section 31-3-23
removes a chancellor’s ability to grant a preliminary injunction. In 2015, Section 31-3-23 was
amended to include the language that “[o]n appeal, any order, judgment or action of the
21
board revoking a certificate of responsibility or residential license shall remain in full force
unless the chancery court or Supreme Court reverses such order, judgment or action of the
board.” S.B. 2508, Reg. Sess., 2015 Miss. Laws ch. 410, § 10. The Board argues that,
because a preliminary injunction prevents the Board’s revocation of a COR from remaining
in full force until the chancery court reverses the Board’s order, Section 31-3-23 prohibits
a preliminary injunction.
¶35. We observe that the language of Section 31-3-23 does seem to be in conflict. Section
31-3-23 does provide that the chancery court may grant any equitable relief, including
injunctive relief. But the statute also provides that the Board’s order shall remain in full force
until reversed. “When statutes are ambiguous and potentially in conflict, as in this case, we
look to the rules of statutory construction for guidance.” Tunica Cty. v. Hampton Co. Nat.
Sur., LLC, 27 So. 3d 1128, 1133 (Miss. 2009). If possible, statutory language in apparent
conflict must be construed harmoniously to give effect to all statutory language. Id. at 1134(quoting Miss. Gaming Comm’n v. Imperial Palace of Miss., 751 So. 2d 1025, 1029 (Miss.
1999)). We find that harmony is achieved by construing the “full force” language in Section
31-3-23 to prohibit a stay of the Board’s order; but the statutory language providing for
equitable relief, including injunctions, permits the chancery court to issue a preliminary
injunction when all the elements are met. And we hold further that the chancery court did not
abuse its discretion by finding that the elements for a preliminary injunction were met.
22
CONCLUSION
¶36. This Court finds that the Board’s decision revoking Hobbs’s COR violated its right
to procedural due process. We affirm the order of the Chancery Court of the Second Judicial
District of Harrison County, Second Judicial District, reversing the order of the State Board
of Contractors. We also affirm the chancery court’s grant of a preliminary injunction.
¶37. AFFIRMED.
KING, P.J., AND ISHEE, J., CONCUR. GRIFFIS, J., CONCURS IN PART
AND IN RESULT WITHOUT SEPARATE WRITTEN OPINION. RANDOLPH, C.J.,
CONCURS IN RESULT ONLY WITH SEPARATE WRITTEN OPINION JOINED
BY ISHEE AND GRIFFIS, JJ.; KITCHENS, P.J., JOINS IN PART. BEAM, J.,
DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY COLEMAN,
MAXWELL AND CHAMBERLIN, JJ.
RANDOLPH, CHIEF JUSTICE, CONCURRING IN RESULT ONLY:
¶38. I would affirm the chancellor’s judgment. The chancellor found that
[a] contract dispute between the prime contractor and a subcontractor . . . is not
within the parameters of Mississippi Code Section 31–3–2. [Section 31–3–2]
is to protect the health, safety, and general welfare of the public from
incompetent, inexperience, unlawful, and fraudulent acts of contractors. The
Court finds that nonpayment of a debt does not constitute incompetence,
inexperience, unlawful or fraudulent action, under Section 31–3–2 . . . .
¶39. This Court applies the same standard of review to the Mississippi State Board of
Contractors’s (Board) decision as that applied by the chancellor. Genesis Hospice Care, LLC
v. Miss. Div. of Medicaid, 267 So. 3d 779, 783 (Miss. 2019). “[T]he Court reviews the
decision of an administrative agency to determine whether the decision was supported by
substantial evidence, was arbitrary or capricious, was beyond the agency’s power to adopt,
or was violative of a constitutional or statutory provision.” Mem’l Hosp. at Gulfport v.
23
Dzielak, 250 So. 3d 397, 400 (Miss. 2018) (internal quotation marks omitted) (quoting King
v. Miss. Military Dept., 245 So. 3d 404, 407 (Miss. 2018)). Reviewing the record before us,
it is clear that the Board delayed its statutory duty to the public at the whim of the
complainant, acting more like a debt collection service than a public regulator.
¶40. On October 14, 2016, Pyramid Interiors Distributors (Pyramid), a subcontractor
working with Hobbs Construction (Hobbs), filed a complaint with the Board alleging that
Hobbs had failed to pay it $13,390 for materials ordered and used in a project. After Hobbs
failed to answer the Board’s request for a response, the Board filed a complaint against
Hobbs on December 16, 2016. On January 10, 2017, the day before the Board’s hearing,
Hobbs executed a forbearance agreement to pay $1,820 less than the initial claim with
Pyramid. In that agreement, Hobbs promised to pay $11,570 before January 31, 2017. That
same day, January 10, 2017, Pyramid requested and was granted a continuance of the
hearing, in violation of the established rules of the Board.6 Pyramid’s email read, “[w]e do
not want to withdraw our complaint at this time but we would like to delay our hearing until
the next available meeting to allow Hobbs the opportunity to pay us.” Clearly the purpose of
6
Any request for continuance must be made in writing and
presented to the Board staff at least five (5) days prior to the
scheduled hearing or, upon good cause shown, at any time prior
to the hearing. Continuances will not be routinely granted.
Instead, a party must show substantial, legitimate grounds for a
continuance. Where scheduling conflicts are the basis for
requesting a continuance, the party shall provide written proof
of such conflicts in a timely manner as set forth herein.
30 Miss. Admin. Code Pt. 802, R. 2.1(f) (adopted Sept. 8, 2011), Westlaw.
24
the delay was to extract payment, not to have the certificate of responsibility (COR) revoked
to protect the public.
¶41. Hobbs failed to pay on or before January 31, 2017, yet the Board failed to file an
amended complaint until May 10, 2017, once again failing to protect the public in the
interim. A new hearing date was set for July 12, 2017. Neither Pyramid nor Hobbs attended
that hearing. After discussion of the Board’s investigative report at the hearing, we find in
the record the following statements:
BY THE CHAIRPERSON: In reality does Pyramid have - - they have a case
against him in civil court?
BY MR. BERRY7: Presumably, I don’t have all the facts, but certainly if they
have a contract with him and he’s breached the contract to pay they would, you
would think, have a separate civil action.
BY THE CHAIRPERSON: It looks to me like when they’re not paid that’s the
first place they ought to go, not here. They ought to just go to court.
After the Board’s discussion, the Board finally decided to revoke Hobbs’s COR. Hobbs
requested reconsideration, and, about one year after the conflict was initially filed, the Board
refused to reinstate the COR. Hobbs sought relief in the Harrison County Chancery Court.
¶42. The chancery court reversed the Board’s order. The court was at a loss to evaluate the
legal basis for the Board’s decision. Neither the statutes nor the Board’s rules and regulations
address what the Board should consider when determining irresponsibility. The chancellor
looked for guidance in Mississippi Code Section 31–3–13(h), which provides eleven factors
that must be considered when determining the opposite, i.e., responsibility, for an initial grant
7
Parker Berry, Esq., represented the Board at the hearing and on appeal.
25
of a COR or renewal.8 The chancellor found in the record produced that the Board failed to
address all of those considerations. Additionally, the chancellor found that the dispute
between Hobbs and Pyramid was outside the Board’s authority to regulate under Mississippi
Code Section 31–3–2. Applying the deferential standard of review accorded administrative
agencies and boards,9 the chancellor found that the Board’s decision was not supported by
substantial evidence, was arbitrary and capricious, was beyond the Board’s power to make,
and violated Hobbs’s statutory and constitutional rights.
¶43. Examining the record before us, I agree with the chancellor that the Board’s decision
should be reversed. It is clear that the Board allowed itself to become involved in a private
dispute in derogation of the Board’s statutory duty to the public. The purpose of the Board
is “to protect the health, safety and general welfare of all persons dealing with those who are
8
The board, in determining the qualifications of any applicant for
an original certificate of responsibility or any renewal thereof,
shall, among other things, take into consideration the following:
(i) experience and ability; (ii) character, (iii) the manner of
performance of previous contracts, (iv) financial condition, (v)
equipment, (vi) personnel, (vii) work completed, (viii) work on
hand, (ix) ability to perform satisfactorily work under contract
at the time of an application for a certificate of responsibility or
a renewal thereof, (x) default in complying with provisions of
this law, or any other law of the state, and (xi) the results of
objective, standardized examinations.
Miss. Code. Ann. § 31–3–13(h) (Supp. 2019).
9
“[T]he Court reviews the decision of an administrative agency to determine whether
the decision was supported by substantial evidence, was arbitrary or capricious, was beyond
the agency’s power to adopt, or was violative of a constitutional or statutory provision.”
Mem’l Hosp. at Gulfport, 250 So. 3d at 400 (internal quotation marks omitted) (quoting
King, 245 So. 3d at 407).
26
engaged in the vocation of contracting and to afford such persons an effective and practical
protection against incompetent, inexperienced, unlawful and fraudulent acts of contractors.”
Miss. Code Ann. § 31–3–2 (Rev. 2010). The Board’s role is not that of a debt collector, nor
should it act as a quasi-judicial civil claims tribunal. It is meant to function as a guardian of
the public good. Further, the Board’s own rules are silent regarding the circumstances
required for revocation or suspension and the factors to consider when assessing such a
punishment. The Board ostensibly realized this and in error chose to utilize its rules
concerning assessment of monetary fines to determine if a COR should be revoked.10
¶44. A treatise cautioning licensing boards offers sage advice that boards would do well
to heed:
In some cases, a party to a construction dispute will attempt to leverage its case
by seeking to invoke the applicable licensing board in the controversy.
Complaints by parties involved in contractual disputes require careful
examination, particularly if the complaint focuses on the quality or cost of the
10
In determining the amount of a monetary penalty, the Board
shall consider at a minimum the following:
(1) The willfulness of the violation;
(2) Any cost of restoration and abatement;
(3) Any economic benefit to the violator(s) as a result of
noncompliance;
(4) The seriousness of the violation, including any harm to the
environment and any harm to the health and safety of the
public; and
(5) Any prior violation by such violator(s).
30 Miss. Admin. Code Pt. 802, R. 2.2 (adopted Sept. 8, 2011), Westlaw.
27
work. Boards who intervene in civil disputes and effectively require one of the
parties to pay contract damages to the other can quickly find themselves
exceeding their authority.
5 Philip L. Bruner and Patrick J. O’Connor, Jr., Construction Law § 16.26, Westlaw
(database updated Jan. 2020) (emphasis added) (footnote omitted). One state has grappled
with just such a situation.
We are also troubled by the Board’s assumption of what was essentially a
judicial role in the resolution of this dispute. Its suspension of appellant’s
contractor’s license pending payment of Pipes Paving’s claim was tantamount
to the award of contract damages in a contested case. The Board does not have
the authority to impose damages upon parties subject to its licensing authority.
See NRS 624.300(1). The parties’ claims and counterclaims regarding their
contract raised legal issues properly resolvable only by a court of law, if not
by the parties themselves. We trust the Board will be mindful of these
implications in its future decision-making.
Bivins Const. v. State Contractors’ Bd., 809 P.2d 1268, 1270 (Nev. 1991).
¶45. Under the facts of this case, the Mississippi State Board of Contractors exceeded its
powers and violated its own rules. It has allowed aggrieved parties to obtain relief through
a misuse of their power that, while not as serious as, is akin to using criminal processes to
collect civil debts. The Board abdicated control of its own docket, appeasing the wishes of
a complainant to delay action, while delaying its duty to the public. The chancellor
recognized as much and reversed. I agree and would affirm the judgment of the chancery
court.
ISHEE AND GRIFFIS, JJ., JOIN THIS OPINION. KITCHENS, P.J., JOINS
THIS OPINION IN PART.
BEAM, JUSTICE, DISSENTING:
28
¶46. Because I would uphold the Mississippi State Board of Contractors’ decision to
revoke Hobbs Construction’s certificate of responsibility (COR), I respectfully dissent from
this Court’s decision to affirm the chancery court’s reversal of it.
¶47. At the outset, I agree that the Board is not vested with judicial authority to resolve
contractual disputes between contractors and subcontractors. But the Board is tasked with
certain responsibilities by the Legislature in its mandate to protect persons from incompetent
and unethical contractors. Thus, a fine line exists between what may be considered proper
or improper measures taken by the Board in carrying out that mandate.
¶48. That line is not blurred here, though, because the Board’s minutes show that it did not
revoke Hobbs’s COR for the purpose of coercing payment or awarding damages to Pyramid.
Rather, the Board considered Hobbs’s failure to pay Pyramid as evidence that Hobbs was not
responsible and that others should be protected from future misdealings by Hobbs.
¶49. Also, that the Board took into consideration Hobbs’s disciplinary history without
formally notifying Hobbs that it could do so, did not violate Hobbs’s right to due process.
According to the record, the Board provided Hobbs proper notice and an opportunity to be
heard in every prior instance that resulted in Hobbs’s being sanctioned.
¶50. But as in this instance, Hobbs routinely chose not to appear before the Board and
respond to the complaint(s). Having made that choice, those matters constitute uncontested
disciplinary adjudications as far as I am concerned. They are part of Hobbs’s record, which
Mississippi Code Section 31-3-13 requires the Board to maintain and to disseminate to any
interested person. See Miss. Code Ann. § 31-3-13(b), (c), and (d) (Supp. 2019). Thus, it
29
stretches credulity for Hobbs, as a COR holder, to claim unfair surprise by the Board’s
having taken that disciplinary record into consideration for its decision in this case.
¶51. As Presiding Justice Kitchens implicitly lays out, this will be a quick fix for the Board
going forward. Nevertheless, I must dissent from this Court’s decision to affirm the chancery
court’s judgment in this case. Based on my review of the record, the Board’s decision to
revoke Hobbs’s COR is supported by sufficient evidence, is not beyond its authority, and
does not violate Hobbs’s statutory or constitutional rights.
COLEMAN, MAXWELL AND CHAMBERLIN, JJ., JOIN THIS OPINION.
30