This opinion will be unpublished and
                         may not be cited except as provided by
                         Minn. Stat. § 480A.08, subd. 3 (2012).

                              STATE OF MINNESOTA
                              IN COURT OF APPEALS
                                    A13-2243

                          In the Matter of the Licensing Order
                           Issued to Avalon Homes, Inc., and
                           Mitchell Ammerman, individually.

                               Filed September 15, 2014
                                       Affirmed
                                   Halbrooks, Judge


                           Department of Labor and Industry
                              OAH No. 65-1902-23106

Timothy J. Hassett, Jon L. Farnsworth, Felhaber Larson, St. Paul, Minnesota (for relators
Avalon Homes, Inc. and Mitchell Ammerman)

Lori Swanson, Attorney General, Christopher M. Kaisershot, Assistant Attorney General,
St. Paul, Minnesota (for respondent Minnesota Department of Labor and Industry)

      Considered and decided by Halbrooks, Presiding Judge; Chutich, Judge; and

Klaphake, Judge.

                        UNPUBLISHED OPINION

HALBROOKS, Judge

      In this certiorari appeal from the decision of the Minnesota Department of Labor

and Industry (DLI), relators argue that (1) the commissioner erred by determining that the

doctrine of equitable estoppel does not prohibit DLI from sanctioning relator; (2) DLI



 Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
waived its right to sanction relator once it renewed relator’s license; (3) the commissioner

erred in its interpretation and application of Minn. Stat. § 326B.84(7) (2012); and (4) the

commissioner erred by naming Mitchell Ammerman individually in its case caption and

by making adverse findings of fact against him. We affirm.

                                         FACTS

       Relator Mitchell Ammerman is the sole owner and chief financial officer (CFO) of

relator Avalon Homes, Inc., a residential construction company. Avalon is required to

hold a residential-building-contractor license with the State of Minnesota.         Avalon

obtained this license through respondent DLI on February 27, 1992.                 Because

Ammerman is registered with DLI as Avalon’s “qualifying person,” he is responsible for

fulfilling any examination and educational requirements for Avalon’s licensure.

       In 2008, Avalon was impacted by the economic recession and faced a financial

crisis. It was unable to pay some of its subcontractors for work they had performed, and

it was unable to pay for various business equipment.         In June 2011, G.E. Capital

Information Technology obtained a $52,623.81 judgment against Avalon for machinery it

had sold to Avalon.      In June 2011, Metro Home, one of Avalon’s subcontractors,

obtained a $151,740.45 judgment against Avalon. Metro Home contacted DLI to notify

it of Avalon’s debt and urged DLI to take licensing action against Avalon. Soon after

Metro Home obtained its judgment, Avalon sent a letter to DLI to report that these

judgments had been issued and that it intended to “cease operations” after it completed

construction of its current projects.




                                             2
      In early 2012, Avalon applied to renew its license with DLI. Near this same time,

Avalon settled a lawsuit filed by Mellas Electric, Inc. for unpaid debts. Mellas worked as

an electrical subcontractor for Avalon for more than two decades.         As part of the

settlement, Avalon agreed to pay Mellas $65,000. On March 27, 2012, Avalon reported

to DLI that it had signed a confession of judgment in favor of Mellas and claimed that the

judgment was a “step that Avalon ha[d] taken to make satisfactory arrangements with

creditors to wind down its operations.” On April 1, 2012, DLI renewed Avalon’s license.

      In August 2012, DLI served Avalon with a licensing order. The order revoked

Avalon’s license because Avalon had “demonstrated itself to be untrustworthy,

financially irresponsible or otherwise incompetent or unqualified to act under a license

issued by the commissioner.” The order also imposed a $5,000 civil penalty against

Avalon, and ordered Ammerman, “individually, or doing business as Avalon Homes,

Inc., or any other business name, to cease and desist from acting or holding yourselves

out as residential building contractors . . . in the state of Minnesota.” The monetary

penalty was later reduced to $4,000. Avalon contested the agency’s determination and

requested a hearing on the matter.

      On February 28, 2013, a hearing was held before an administrative law judge

(ALJ). The ALJ issued her report and recommendation, finding that Avalon had violated

various statutory provisions. The ALJ found that Avalon had three judgments entered

against it for failure to make payments to subcontractors and suppliers in violation of

Minn. Stat. § 326B.84(11) (2012). The ALJ found that by failing to satisfy these civil

judgments Avalon had conducted its business in a manner that demonstrated financial


                                            3
irresponsibility in violation of Minn. Stat. §§ 326B.082, subd. 11(b)(9), .84(15) (2012).

The ALJ further found that Avalon failed to use various sale proceeds to pay its

subcontractor Mellas, violating Minn. Stat. § 326B.84(7). Due to these violations, the

ALJ recommended the revocation of Avalon’s license and imposition of a $4,000 fine.

With respect to Ammerman, the ALJ determined that the commissioner lacked statutory

authority to issue a licensing order and a cease-and-desist order against him individually.

The ALJ recommended that Ammerman be removed as a party from both orders.

       After the ALJ released her report and recommendation, Avalon filed exceptions

contesting some of the findings and the recommendation. In its briefing, Avalon raised

the defenses of equitable estoppel and waiver for the first time. After Avalon filed its

brief, the record closed, and the matter was submitted to DLI’s deputy commissioner.

       On November 8, 2013, the commissioner issued the agency’s final order. The

commissioner rejected Avalon’s arguments relating to equitable estoppel and waiver,

concluding that both arguments were meritless. The commissioner agreed with the ALJ’s

determination that Avalon had violated Minn. Stat. § 326B.84(7), (11), and (15). The

commissioner ordered revocation of Avalon’s license and imposition of a $4,000 fine.

The commissioner agreed that DLI does not have authority to issue a licensing order or

cease-and-desist order against Ammerman individually. The commissioner therefore

ordered that the licensing order be amended to remove Ammerman’s name. This appeal

follows.




                                            4
                                     DECISION

       An appellate court may reverse, remand, or modify an agency decision if it

determines that the substantial rights of a petitioner have been prejudiced because the

administrative finding, inferences, conclusion, or decision are:

                      (a) in violation of constitutional provisions; or
                      (b) in excess of the statutory authority or jurisdiction
              of the agency; or
                      (c) made upon unlawful procedure; or
                      (d) affected by other error of law; or
                      (e) unsupported by substantial evidence in view of the
              entire record as submitted; or
                      (f) arbitrary or capricious.

 (2012). When reviewing an agency decision, appellate courts will

“adhere to the fundamental concept that decisions of administrative agencies enjoy a

presumption of correctness, and deference should be shown by courts to the agencies’

expertise and their special knowledge in the field of their technical training, education,

and experience.” Reserve Mining Co. v. Herbst, 

 (Minn. 1977).

I.     Equitable Estoppel

       Avalon argues that DLI “should be estopped from sanctioning Avalon.” When the

facts of a case permit more than one conclusion, we review an agency’s denial of

equitable estoppel as a fact question. In re Westling Mfg., Inc., 

, 331

(Minn. App. 1989). We review factual determinations made within the scope of the

agency’s statutory authority under the substantial-evidence standard. In re Application of

Minn. Power, 

 (Minn. 2013). A reviewing court must not substitute

its judgment for that of the administrative body when its findings are properly supported



                                             5
by evidence. In re Denial of Eller Media Co.’s Applications for Outdoor Device Advert.

Permits, 

 (Minn. 2003).

      A party asserting equitable estoppel against a governmental entity has a “heavy

burden of proof” and must satisfy four elements. Ridgewood Dev. Co. v. State, 

 (Minn. 1980). First, the party must show that the government

agency engaged in “wrongful conduct.” City of N. Oaks v. Sarpal, 

(Minn. 2011). Second, the party must establish that it reasonably relied on the wrongful

conduct. 

 Third, the party must incur a “unique expenditure” in reliance on the

government’s wrongful conduct. 

 And fourth, a balancing of the equities must favor

estoppel. 

      We begin our analysis by examining the threshold question—whether the

government’s act or omission that induced reliance was “wrongful.” 

 An equitable-

estoppel defense against a government agency generally requires affirmative misconduct

by the agency whose action is sought to be estopped. Westling, 442 N.W.2d at 332. This

element has also been interpreted as requiring some degree of malfeasance. Kmart Corp.

v. Cnty. of Stearns, 

 (Minn. 2006). But importantly, an agency does

not engage in “wrongful conduct” when its conduct is “simple inadvertence, mistake, or

imperfect conduct.” Sarpal, 

 (quotation omitted).

      Avalon argues that DLI engaged in “wrongful conduct” because it renewed

Avalon’s license, knowing that civil judgments had been entered against it, and later

sanctioned Avalon for these unpaid judgments. In Sarpal, the supreme court rejected a

similar argument. In Sarpal, the city approved building permits allowing a landowner to


                                           6
construct a shed on his property. 

. A year after the shed was constructed, the

city determined that the shed encroached upon a trail easement. 

. Attempting to

enforce its zoning ordinances, the city ordered the landowner to remove the shed from the

trail easement. 

 The district court in that case determined that the city provided the

landowner with inaccurate documentation, failed to competently review a building-permit

application, failed to place the landowner on notice of the error, and ultimately approved

an application to construct a shed when it should not have. 

. But the supreme

court noted that the district court “did not find, and the record does not suggest, that any

of these actions by the City constitutes anything other than a simple mistake.” 

Therefore, the supreme court concluded that the landowner failed to establish the first

element of his equitable-estoppel defense. 

       We similarly conclude that DLI’s conduct does not rise to the level of malfeasance

required to satisfy the wrongful-conduct element. At the time that DLI renewed Avalon’s

license it had begun investigating complaints made against Avalon. But the investigation

was not finished. A DLI representative testified as to the process and volume of DLI

investigations, noting that at any given time the department has approximately 800

ongoing investigations relating to residential building contractors. That representative

also testified that DLI would revoke a contractor’s license if its investigation uncovered

that a contractor had unsatisfied judgments against it that were not “resolved in some

fashion.” These judgments could be resolved by full payment, a payment agreement with

the judgment creditor, or a discharge in bankruptcy. Although Avalon notified DLI of




                                             7
the judgments entered against it, there is no evidence indicating that, at the time Avalon’s

license was renewed, DLI knew that these judgments would not be resolved.

       And in contrast to the facts in Sarpal, Avalon has not demonstrated that DLI

provided it with inaccurate information, failed to competently follow its procedures, or

approved Avalon’s license when it should not have. But even if Avalon had shown that

these actions occurred, based on the supreme court’s reasoning in Sarpal, DLI may have

committed a simple mistake rather than wrongful conduct.           See 

   We therefore

conclude that the commissioner properly determined that Avalon failed to prove that DLI

engaged in “wrongful conduct” by renewing Avalon’s license.

       Avalon next argues that DLI engaged in wrongful conduct because DLI breached

the parties’ agreement to allow Avalon to wind down its business without sanction.

Avalon contends that Ammerman’s undisputed testimony proves that the parties entered

into this agreement. The testimony that Avalon relies on occurred at the administrative

hearing, and included the following exchange:

              Q: What work has Avalon done since seeking the renewal of
              its license?
              A: [Ammerman] I thought, through our attorney, that we had
              an agreement with [DLI] that we would wind—only work on
              Avalon properties, wind down operations. And if we’re not
              able to make creditors content, that we’d surrender our
              license. I thought we had that agreement to move forward
              and do that.

       This testimony, which is unresponsive to the question asked, is the only evidence

in the record suggesting that an agreement between Avalon and DLI existed. Avalon

submitted no written documentation that an agreement was in place, nor did it elicit



                                             8
testimony from the department’s representatives that DLI agreed to withhold sanction

while Avalon wound down its business.           Ammerman’s testimony about what he

“thought” had occurred, based on conversations through the parties’ attorneys, does not

establish the existence of an enforceable agreement. After the hearing concluded and

Avalon submitted its exceptions, the record closed. See 

, subd. 2

(2012) (stating that the “record must close upon the filing of any exceptions to the

[ALJ’s] report and presentation of argument”). The facts in this record do not satisfy

Avalon’s “heavy burden” of proving that an agreement existed or that an agreement was

breached.

       Because we conclude that the first element of equitable estoppel has not been

satisfied, we need not address the remaining elements. See Sarpal, 

.

The facts found by the ALJ and the commissioner are supported by substantial evidence

and do not support a conclusion that DLI should be equitably estopped from sanctioning

Avalon.     Therefore, the commissioner properly rejected Avalon’s equitable-estoppel

defense.

II.    Waiver

       Avalon argues that DLI waived its right to sanction Avalon when, knowing that

Avalon was in violation of Minn. Stat. § 326B.84(11), it renewed Avalon’s license.

“Waiver is the intentional relinquishment of a known right.” Valspar Refinish, Inc. v.

Gaylord’s Inc., 

 (Minn. 2009). It requires both (1) knowledge and

(2) intent. Ill. Farmers Ins. Co. v. Glass Serv. Co., 

 (Minn. 2004).

“Waiver in general is ordinarily a question of fact, and intent to relinquish a known right


                                            9
is rarely to be inferred as a matter of law.” Fedie v. Mid-Century Ins. Co., 

 (Minn. App. 2001) (quotation omitted), review denied (Minn. Oct. 16, 2001).

       Avalon failed to raise the defense of waiver at the administrative hearing. As a

result, the ALJ made no findings of fact related to DLI’s knowledge or intention to waive

its right to sanction Avalon. The commissioner was confronted with this argument after

the record had closed. See 

, subd. 2. The commissioner determined

that “there is absolutely no evidence that [DLI] intentionally relinquished any right to

take disciplinary action against Avalon when it renewed Avalon’s license or at any other

time.” We agree.

       By statute, DLI was authorized to sanction Avalon up to two years after Avalon’s

license was last effective. See Minn. Stat. § 326B.082, subd. 11(d) (2012). The record is

devoid of any indication that DLI knowingly and intentionally waived its legal rights

under Minn. Stat. § 326B.082, subd. 11(d). On this record, the commissioner properly

determined that DLI did not waive its right to sanction Avalon.

III.   Application of Minn. Stat. § 326B.84(7)

       Avalon argues that the commissioner erred in interpreting and applying Minn.

Stat. § 326B.84(7), which provides:

             The commissioner may use any enforcement provision in
             section 326B.082 against an applicant for or holder of a
             license or certificate of exemption, if the applicant, licensee,
             certificate of exemption holder, qualifying person, or owner,
             officer, member, managing employee, or affiliate of the
             applicant, licensee, or certificate of exemption holder:
                     ....
                     (7) has failed to use the proceeds of any payment made
             to the licensee for the construction of, or any improvement to,


                                           10
              residential real estate, as defined in section 326B.802,
              subdivision 13, for the payment of labor, skill, material, and
              machinery contributed to the construction or improvement,
              knowing that the cost of any labor performed, or skill,
              material, or machinery furnished for the improvement
              remains unpaid.

       Avalon argues that the commissioner failed to make any finding that Avalon knew

that Mellas remained unpaid for its labor. On March 27, 2012, Avalon self-reported that

it had signed a confession of judgment in favor of Mellas in the amount of $65,000. This

settlement concluded a lawsuit that Mellas had brought against Avalon for unpaid debts.

Avalon also conceded that at the time of the hearing the $65,000 judgment remained

unpaid. We therefore find this argument unpersuasive.

       Avalon also argues that Minn. Stat. § 326B.84(7) is a “theft” statute that should

apply only to those situations where licensees “improperly stole funds.” Avalon reasons

that because it used sale proceeds to pay other creditors, it did not engage in “theft.” We

disagree. Under the plain language of the statute, the commissioner need only find that

Avalon “failed to use the proceeds of any payment made to [it] for the construction of . . .

residential real estate . . . for the payment of labor, skill, material, and machinery

contributed to the construction.” Id. Mellas worked as an electrical subcontractor,

contributing goods and services to seven homes constructed by Avalon. These homes

were later sold by Avalon. The commissioner found that the proceeds from these sales

were used to pay various creditors, but they were not used to pay Mellas. We conclude

that the evidence in the record substantially supports the commissioner’s finding and that

the commissioner properly interpreted and applied Minn. Stat. § 326B.84(7).



                                            11
IV.   Naming Ammerman Individually

      Ammerman argues that the commissioner and ALJ erred by failing to remove his

name from the agency’s case caption and by referring to him in their findings of fact.

Ammerman also argues that his name must be removed from the case caption of this

appeal.

      The commissioner ordered DLI to remove Ammerman’s name from the licensing

order and cease-and-desist order.     But the commissioner did not address whether

Ammerman’s name should remain in the DLI case caption or the case caption of the

ALJ’s report. We conclude that the commissioner and ALJ did not err by naming

Ammerman in the case caption. Ammerman sought relief from the commissioner and the

form of relief requested was granted—he was removed from DLI’s licensing order and

cease-and-desist order.   We further conclude that the commissioner did not err by

including Ammerman’s name in the findings of fact. Ammerman was the sole owner of

Avalon, he acted as CFO, and he was registered with DLI as Avalon’s “qualifying

person.”   He made financial decisions on behalf of the company, and he sought

affirmative relief from the ALJ and commissioner. It necessarily follows that the ALJ

and commissioner must include his name and arguments in the context of their decisions.

      Finally, Ammerman contends that his name must be removed from the case

caption of this appeal. Under the rules of appellate procedure, “[t]he title of the action

shall not be changed in consequence of the appeal.” Minn. R. Civ. App. P. 143.01.

Because the agency listed Ammerman’s name in its case caption, the same case caption

must be used now.


                                           12
       Because we conclude that Ammerman is properly categorized as a relator and

named in the case caption, we affirm the commissioner’s order that Ammerman be

removed from DLI’s licensing order and cease-and-desist order, but remain individually

named in its case caption and findings of fact.

       Affirmed.




                                            13