ALJDEC decisions subject to certification as final

2020A-05417-ROC · Registrar of Contractors · 2021-03-31

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

Arizona Registrar of Contractors,

COMPLAINANT

Robert Alan Netolicky and Jason Earl Hogan,

DBA: H&N Development,,

RESPONDENT

No. 2020A-05417-CPA-ROC

No. 2020A-05489-CPA-ROC

ADMINISTRATIVE LAW JUDGE

DECISION

HEARING: March 12, 2021

APPEARANCES: Robert Alan Netolicky on his own behalf; Jason Earl Hogan on his own behalf; John Tellier, Esq. for the Registrar of Contractors

ADMINISTRATIVE LAW JUDGE: Thomas Shedden

FINDINGS OF FACT

On February 17, 2021, the Registrar of Contractors (“ROC”) issued an Expedited Notice of Consolidated Unlicensed Hearing setting the above-captioned matter for hearing on March 12, 2021 at the Office of Administrative Hearings in Phoenix, Arizona.

ROC’s Notice shows that the hearing was to be held on the charges in the Citation issued to the Respondent and on the assessment of a civil penalty against the Respondent.

On December 21, 2020, ROC issued a Cease and Desist Order and Civil Citation to Jason Earl Hogan in Case no. 2020-05417 and it issued a Cease and Desist Order and Civil Citation to Robert Alan Netolicky in Case no. 2020-05489.

ROC alleged that each man committed the same two violations:

1. On or about November 07, 2019, Respondent violated A.R.S. 32-1151, Contracting without a License, by performing contracting/building a new home and offering the property for sale dba: H & N Development, an unlicensed entity, at 16119 W. Cinnabar Ct. Waddell, AZ. 85355. For this violation, the Registrar assesses a civil penalty of $2,500.00 against the Respondent.

2. On or about August 30, 2019, Respondent violated A.R.S. 32-1151, Contracting without a License, by performing Contracting without a License, by performing contracting work and selling the home dba: H & N Development LLC, an unlicensed entity, at 16119 W. Cinnabar Ct. Waddell, AZ. 85355. For this violation, the Registrar assesses a civil penalty of $2,500.00 against the Respondent.

Mr. Hogan and Mr. Netolicky each appeared and testified on their own behalf. ROC presented the testimony of Investigator Daniel Rhodes.

Messrs. Hogan and Netolicky were members of H & N Development LLC that was never licensed by ROC. H & N Development was organized in June 2017, with Articles of Termination submitted in March 2020.

Messrs. Hogan and Netolicky were also members of HNH Construction LLC that was issued license number 319358 in April 2018. That license was suspended for nonrenewal on April 16, 2020. Keller Hogan was also a member of HNH Construction.

ROC received a complaint against HNH Construction alleging HNH had performed poor work on a home that Jeffrey Newbill and Stephanie Clark purchased from H & N Development LLC. The complaint shows that the close of escrow was on August 30, 2019. See Exhibit 5.

At a hearing that was conducted on October 1, 2020, Mr. Hogan appeared and testified to the effect that HNH Construction had no involvement with the home at issue and that H & N Development had built the home as an owner/builder.

ROC adopted the Administrative Law Judge Decision finding that HNH Construction had not violated the applicable statues because it had not been proven that HNH acted as a contractor on the home at issue. See Exhibit 4.

On November 18, 2020, ROC opened an investigation to determine whether Messrs. Hogan and Netolicky d.b.a. H & N Development had been contracting without a license. Mr. Rhodes was the investigator.

Mr. Rhodes’s Investigation Report shows that he intended to cite Messrs. Hogan and Netolicky for violations on August 30, 2019, which ROC did, and November 7, 2018, and not November 7, 2019, which is what is shown in the Citations.

Mr. Rhodes interviewed Mr. Netolicky on November 23, 2020, at which time Mr. Netolicky confirmed that he had collaborated on building the project and that he had received proceeds from the sale of the house.

Mr. Rhodes interviewed Mr. Hogan on November 23, 2020, at which time Mr. Hogan confirmed his involvement in the project, and that he had obtained the permit as an owner/builder.

Exhibit 14 is a County Planning and Development Department Building Activity Application dated October 23, 2017, showing Jason Hogan as the property owner and giving H & N Development as the name of the contractor with Messrs. Hogan and Netolicky as the contacts.

Exhibit 13 is the County Building Permit issued on March 28, 2018 showing the Owner/Responsible Party as H & N Development LLC.

Mr. Rhodes found advertisements on Realestate.com and estately.com showing the house was for sale on November 7, 2018 and was sold on August 30, 2019. See Exhibits 10 and 11.

Exhibit 7 is the Seller’s Property Disclosure Statement showing that the house was new construction and appears to have been signed by Jason Hogan on April 24, 2019.

Exhibit 6 is a Purchase Contract showing H & N Development as the seller, with Messrs. Hogan and Netolicky signing as the sellers on July 23, 2019.

Exhibit 16 is a Warranty Deed showing H & N Development LLC as Grantor of the property with Messrs. Hogan and Netolicky signing as Members of the LLC on August 1, 2019 (acknowledged on August 30, 2019).

Exhibit 15 is a County Department of Transportation Application for Construction in Right-of-Way showing the project as new home construction, with Jason Hogan the applicant and owner/builder.

Exhibit 8 is a street view Google Maps photo of the house with the HNH Construction sign out front. At the workmanship hearing, Mr. Hogan acknowledged that there was a sign in front of the house showing HNH Construction’s name, license number, and telephone number, but he testified that the sign was only there for advertising purposes, not because HNH Construction was involved in the project.

Exhibit 17 is invoices from subcontractors that worked on the house, the last of which is dated September 14, 2019. Although some of the subcontractors were licensed, Mr. Rhodes was not able to find license numbers for others.

Mr. Netolicky and Mr. Hogan were friends who had a falling out while the project progressed.

At the hearing, Mr. Netolicky testified to the effect that this project was to be a learning experience as his background was in commercial construction, not residential, and that he felt as though he had been cut out of the process as the work progressed. He also testified to the effect that he was at a loss as to why they formed HNH Construction if not to use it.

In the October 2020 hearing, Mr. Hogan testified to the effect that Mr. Netolicky had abandoned the project and at the hearing in this matter he sought to prove that Mr. Netolicky had done very little work on the project.

Mr. Hogan acknowledged that H & N Development had not hired a general contractor to construct the house.

CONCLUSIONS OF LAW

ROC bears the burden persuasion. Ariz. Rev. Stat. § 41-1092.07(G)(3).

The party asserting a claim, right, or entitlement has the burden of proof; a party asserting an affirmative defense has the burden of establishing the affirmative defense. Ariz. Admin. Code § R2-19-119(B).

The standard of proof on all issues in this matter is that of a preponderance of the evidence. Ariz. Admin. Code § R2-19-119(A).

A preponderance of the evidence is:

The greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.

Black’s Law Dictionary 1373 (10th ed. 2014).

Statutes should be interpreted to provide a fair and sensible result. Gutierrez v. Industrial Commission of Arizona, 226 Ariz. 395, 249 P.3d 1095 (2011)(citation omitted); State v. McFall, 103 Ariz. 234, 238, 439 P.2d 805, 809 (1968) ("Courts will not place an absurd and unreasonable construction on statutes.").

“Statutes shall be liberally construed to effect their objects and to promote justice.” Ariz. Rev. Stat. § 1-211(B).

The purpose of the Registrar’s licensing statutes is to protect the public from unscrupulous, unqualified, and financially irresponsible contractors. See Aesthetic Property Maintenance v. Capital Indem. Corp., 183 Ariz. 74, 900 P. 2d 1210 (1995).

As pertinent to this matter, “Contractor”:

[I]s synonymous with the term "builder" and means any person, firm, partnership, corporation, association or other organization, or a combination of any of them, that, for compensation, undertakes to or offers to undertake to, purports to have the capacity to undertake to, submits a bid or responds to a request for qualification or a request for proposals for construction services to, does himself or by or through others, or directly or indirectly supervises others to:

(a) Construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, project, development or improvement, or to do any part thereof, including the erection of scaffolding or any other structure or work in connection with the construction.

Ariz. Rev. Stat. § 32-1101(3).

It is unlawful for a person to act in the capacity of a contractor without being licensed. Ariz. Rev. Stat. § 32-1151.

An owner of property who improves that property is not subject to the requirements of Ariz. Rev. Stat. Title 32, Chapter 10, provided that the structure or improvements are not intended for sale or rent. Ariz. Rev. Stat. § 32-1121(A)(5).

“Owners of property who are acting as developers and who build structures or appurtenances to structures on their property for the purpose of sale or rent and who contract for such a project with a general contractor licensed pursuant to this chapter” are not subject to the requirements of Ariz. Rev. Stat. Title 32, Chapter 10. Ariz. Rev. Stat. § 32-1121(A)(6).

Because H & N Development intended to sell the house and it did not hire a general contractor, the exceptions in Ariz. Rev. Stat. sections 32-1121(A)(5) and (A)(6) do not apply.

The preponderance of the evidence shows that Messrs. Hogan and Netolicky each repeatedly violated Ariz. Rev. Stat. section 32-1151 over the course of about two years, from October 2017 when H & N Development submitted to the County the Building Activity Application, until September 2019, when the last invoice in evidence is dated. Although the Citations show that the violations occurred on or about August 30, 2018 and on or about November 7, 2019, rather than November 7, 2018 as Mr. Rhodes intended, neither Mr. Hogan nor Mr. Netolicky raised this issue at hearing.

ROC can order a person who is not exempt from licensure and who engages in contracting without a license to cease and desist such activity and may impose a civil penalty of between $200.00 and $2,500.00 for each violation. Ariz. Rev. Stat. § 32-1166.

ROC has met its burden to show that Messrs. Hogan and Netolicky each committed two violations of Ariz. Rev. Stat. section 32-1151.

Considering, the facts and circumstances of this matter, ROC’s proposed civil penalties should be affirmed.

ORDER

IT IS ORDERED that on or before thirty days after the effective date of the final order in this matter Jason Earl Hogan must pay to the Registrar of Contractors $5000.00 in certified funds;

IT IS FURTHER ORDERED that on or before thirty days after the effective date of the final order in this matter Robert Alan Netolicky must pay to the Registrar of Contractors $5000.00 in certified funds.

In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order is forty days after the date of that certification.

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-137160-45720000Done this day, March 31, 2021.

/s/ Thomas Shedden

Thomas Shedden

Administrative Law Judge

Transmitted electronically to:

Jeffrey Fleetham, Director

Registrar of Contractors

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-137160-45720000