vs.
Respondent.
) Case No. 05-1222PL
Administrative Law Judge (ALJ) Daniel Manry conducted the formal hearing in this proceeding on August 16, 2005, in New Port Richey, Florida, on behalf of the Division of Administrative Hearings (DOAH).
For Petitioner: Stacy N. Robinson Pierce, Esquire
The issues presented are whether Respondent reviewed the appraisal report of an assistant appraiser in a manner that departed from the standards of care in Subsections 475.624(14),
and (15), Florida Statutes (2001); and, if so, what penalty should be imposed against Respondent's professional license.
On November 3, 2004, Petitioner filed an Administrative Complaint, alleging Respondent's review of an appraisal report violated Subsections 475.624(2), (14), and (15), Florida Statutes (2001). Respondent requested a formal hearing, and Petitioner referred the matter to DOAH to conduct the hearing.
At the hearing, Petitioner presented the testimony of two witnesses and submitted 10 exhibits for admission into evidence. Respondent presented the testimony of three witnesses and submitted no exhibits.
The identity of the witnesses and exhibits and the rulings regarding each are reported in the two-volume Transcript of the hearing filed with DOAH on November 3, 2005. Pursuant to an order extending the time for filing proposed recommended orders (PROs), the parties timely filed their PROs on January 6, 2005.
Petitioner's PRO concedes the evidence is insufficient to prove the charge of misrepresentation or culpable negligence in Subsection 475.624(2), Florida Statutes (2001). The remaining charges are that Respondent departed from the standards of care in Subsections 475.624(14) and (15), Florida Statutes (2001).
Petitioner is the state agency authorized to regulate certified general real estate appraisers (appraisers) and assistant appraisers pursuant to Chapter 475, Part II, Florida Statutes (2001). Respondent and Ms. Deborah Hall are certified appraisers pursuant to certificate numbers RZ-1589 and RD-4615.
On April 5, 2002, Respondent operated an appraisal business located at 1727 Coachman Plaza Drive, Clearwater, Florida. Respondent supervised approximately 14 assistant appraisers, including Ms. Hall.1 Ms. Hall was certified as an assistant appraiser pursuant to certification number RI-5557.2
Ms. Hall developed a written appraisal report for residential real estate located at 7415 Flounder Drive, Hudson, Florida. Respondent reviewed the appraisal report and cosigned it with Ms. Hall before she communicated it to the client.
The appraisal report complied with all applicable standards of practice except one. The appraisal report included incorrect values for three comparable properties.
The correct closing prices of the three comparables were $73,000, $74,000, and $82,000. The appraisal report included erroneous closing prices of $110,000, $116,000, and
$110,000; and inadvertently inflated the appraised value.
Omission of the comparable values from the appraisal report was a substantial error. The error significantly
affected the appraisal according to statutorily adopted Uniform Standards of Professional Appraisal Practice, Appraisal Standards Board, The Appraisal Foundation, 2002 ed. (USPAP), Standards Rule 1-1(b), at page 15. (The terms USPAP and "appraisal standards" are used synonymously and the abbreviation "SR" refers to a specific Standards Rule, such as SR 1-1(b)).3
The "workfile" developed by Ms. Hall contained the correct closing price for each comparable. The term "workfile" is defined in USPAP, Definitions, at page 5. A workfile consists of the "documentation necessary to support an appraiser's analysis, opinions, and conclusions."4
The omission of the correct comparable values from the appraisal report could not be discovered without reviewing the "workfile" developed by Ms. Hall. It is undisputed that Respondent did not include the workfile in his review of the appraisal report; and that the workfile was located in the appraisal office and was readily accessible.
Petitioner alleges the omission of the workfile from Respondent's review of the appraisal report violated statutorily adopted appraisal standards as well as the statutory requirement to exercise reasonable diligence in Subsections 475.624(14) and (15), Florida Statutes (2001) (the relevant statutes). The parties agree no express requirement existed for Respondent to review the workfile.
SR 2-3 discusses the standard of care applicable to the supervision of assistant appraisers. In relevant part, the standard states:
When a signing appraiser(s) has relied on work done by others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work.
The signing appraiser(s) is required to have a reasonable basis for believing that those individuals performing the work are competent and that their work is credible.
SR 2-3, USPAP at 30-31.
Respondent did not rely on work done by an assistant appraiser who did not sign the appraisal report. Ms. Hall signed the appraisal report as the "Appraiser." Respondent signed the appraisal report as the "Supervisory Appraiser."
On April 5, 2002, Respondent had a reasonable basis, within the meaning of SR 2-3, to believe that Ms. Hall was competent and that her work was credible. Ms. Hall had sufficient experience and demonstrated proficiency to develop and communicate the appraisal report without the need for Respondent to review her workfile.
Ms. Hall began appraising real estate in 1979 and had been a certified appraiser in several states. On April 5, 2002, she was certified in Florida and New York, had worked for Respondent for approximately three years, and had completed over
100 appraisals for Respondent. Ms. Hall was a Senior Resident Appraiser in the Society of Real Estate Appraisers. Other than enforcement action ancillary to this proceeding, Ms. Hall has no disciplinary history against her professional license.
Respondent had sufficient experience and demonstrated proficiency to continually evaluate the competence of Ms. Hall. Respondent was first licensed as an appraiser in Kentucky in 1965 and became a licensed appraiser in Indiana in 1967 where he also taught appraisal courses.
Respondent moved to Florida in 1977 and continued his career as an appraiser and appraiser instructor. In accordance with statutory requirements enacted in 1990, Respondent became certified in Florida as a General Real Estate Appraiser and is authorized to appraise commercial, industrial, and residential real estate. Respondent has developed and reviewed thousands of real estate appraisals in Florida and has no disciplinary history against his professional license.
A footnote to SR 2-3 references Advisory Opinion AO-5 on page 132 of USPAP. Advisory Opinion AO-5 does not establish new appraisal standards or interpret existing standards. Rather, the Opinion illustrates the applicability of appraisal standards in specific situations and offers advice for the resolution of appraisal issues and problems.
In the terms of Advisory Opinion A-05, Respondent was a principal on April 5, 2002, and Ms. Hall was an assistant. The extent of assistance that can be provided in the appraisal process is directly related to the competence of the assistant. As experience and demonstrated proficiency increase, it is appropriate for the principal to place greater reliance on the work performed by the assistant.
It is appropriate for a principal to allow an experienced assistant with demonstrated proficiency to develop and communicate an appraisal. Such an assistant is competent to inspect the property, take pictures, draft the final appraisal report, and cosign the appraisal report with the principal.
Advisory Opinion AO-5, at page 134, lines 112-114, lists only two minimum standards for the supervision of an experienced assistant. The principal should inspect both the exterior of the property and the photographs.
Respondent's review of the appraisal report exceeded the express minimum standards for supervision of an assistant. Respondent personally inspected the property and the photographs and examined the appraisal report to verify that the distances of the comparables from the property were appropriate. Respondent ensured that adjustments in the report between comparables and the property were accurate and not excessive and also validated the calculation of adjustments in the appraisal
report. Respondent reviewed maps of the area and verified dates and legal descriptions in the appraisal report.
The omission of the workfile from Respondent's review of the appraisal report did not violate the standard of practice in the community in which Respondent and Ms. Hall practice. Two certified real estate appraisers with significant experience testified as peers in the community. Their testimony confirms the practice followed by Respondent and Ms. Hall.5
The community standard does not require a principal to review the workfile of an experienced appraiser unless the appraisal report is complex. The appraisal report that Respondent reviewed was not complex.
Ms. Hall appraised a manufactured home in an area zoned for condominiums with no existing condominiums. A variation between actual and zoned use does not make an appraisal complex. As one peer explained in her testimony, "That wouldn't have made it complex to me. Zoning is a simple thing to me."
The community standard of peers is an acceptable measure of competence in the appraisal standards adopted by statute. SR 1-2(f), USPAP at page 17, states that the scope of work necessary to complete an assignment is acceptable when it is consistent with the actions that peers would take in performing the same assignment or a similar assignment.
A requirement for a principal to review the workfile of an experienced appraiser would be problematic in the community. Many experienced appraisers work from home and do not provide their principal with the workfile until after the appraisal report is communicated to the client.
Even when a workfile is readily accessible, most principals do not have time to personally review the workfile. A principal must rely on administrative staff to perform that task. Only larger appraisal companies with extra staff have the luxury of reviewing workfiles.
One peer who testified at the hearing had previously operated an appraisal company with sufficient staff to review workfiles. The staff routinely reviewed only the workfiles of assistants in training. Staff did not review the workfiles of experienced assistants.6
Respondent's signature on the appraisal report appears under a "Supervisory Appraiser's Certification." In relevant part, Respondent certified that he agreed to be bound by Appraiser Certification numbers 4-7 in the appraisal report.
Appraiser Certification numbers 4-6 are neither relevant nor material to the matter at issue. The certifications address racial and other types of bias, an interest in the property, and a predetermined appraised value.
Appraiser Certification number 7 certifies that
Ms. Hall performed the appraisal in compliance with applicable appraisal standards. Similarly, the Supervisory Appraiser's Certification states that Respondent takes "full responsibility for the appraisal and the appraisal report."
Petitioner interprets the quoted terms and similar terms elsewhere in the appraisal standards to mean that Respondent certifies to Petitioner that Ms. Hall performed the appraisal correctly and that Respondent is responsible to Petitioner for her errors. Petitioner interprets the certification of the "appraisal" to include the workfile.
The agency's interpretation of statutory terms conflicts with the weight of the evidence. The term "responsibility" is reasonably construed as acknowledging responsibility to the client, rather than Petitioner, for the acts or omissions of an assistant.
If Respondent were to evade his responsibility to the client, Respondent arguably may be responsible to Petitioner for the evasion. However, there is no evidence that Respondent attempted to evade his responsibility to the client. The precipitating complaint for this proceeding did not originate from the client, and there is no evidence of harm to the client.
Ms. Hall does not know how the correct sales price information was omitted from the appraisal report. There is no evidence of intent or culpable knowledge by Ms. Hall.
The closing price of a comparable is not the type of information that an appraiser would knowingly alter in an appraisal report. The correct closing prices at issue were matters of public record at the time and were so basic and fundamental that their omission from the appraisal report is patently inadvertent in the absence of contrary evidence.
Ms. Hall followed the normal appraisal procedure she has used consistently over time. She utilized what is identified in the record as a clone appraisal. Ms. Hall modified an appraisal she had previously completed with data pertinent to the property being appraised. Either the computer program did not accept the correct closing prices for the comparables or Ms. Hall inadvertently failed to "input" them. Respondent did not have constructive knowledge of facts unknown to Ms. Hall at the time she drafted the appraisal report.
SR 1-1(c), USPAP at page 15, does not define competency as perfection. Perfection is impossible to attain. Rather, competency requires only that Respondent use due diligence and due care in reviewing the appraisal report.
CONCLUSIONS OF LAW
DOAH has jurisdiction over the subject matter and the parties in this proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2005). DOAH provided the parties with adequate notice of the formal hearing.
Petitioner bears the burden of proof. Petitioner must show by clear and convincing evidence that Respondent's review of an appraisal report departed from the standard of care in each relevant statute and the reasonableness of the proposed penalty. Department of Banking and Finance, Division of
Securities and Investor Protection v. Osborne Stern and Company, 670 So. 2d 932, 935 (Fla. 1996); Ferris v. Turlington, 510 So.
2d 292 (Fla. 1987); State ex rel. Vining v. Florida Real Estate Commission, 281 So. 2d 487 (Fla. 1973).
The requirement for clear and convincing evidence imposes an intermediate level of proof on Petitioner. Petitioner must prove material factual allegations by more than a preponderance of the evidence, but the proof need not be beyond and to the exclusion of a reasonable doubt. Inquiry Concerning a Judge No. 93-62, 645 So. 2d 398, 404 (Fla. 1994); Lee County v. Sunbelt Equities, II, Limited Partnership, 619 So. 2d 996, 1006 n. 13 (Fla. 2d DCA 1993).
In order to satisfy the requirement for clear and convincing evidence, inculpatory evidence must be credible,
material facts must be "distinctly remembered," and testimony must be "precise" and "explicit." Inquiry Concerning a Judge, 645 So. 2d at 404. The judicial definition of clear and convincing evidence has been adopted by each District Court of Appeal in the state. E.F. v. State, 889 So. 2d 135, 139 (Fla. 3d DCA 2004); K-Mart Corporation v. Collins, 707 So. 2d 753, 757
n.3 (Fla. 2d DCA 1998); McKesson Drug Co. v. Williams, 706 So.
2d 352, 353 (Fla. 1st DCA 1998); Kingsley v. Kingsley, 623 So.
2d 780, 786-787 (Fla. 5th DCA 1993); Slomowitz v. Walker, 429
So. 2d 797, 800 (Fla. 4th DCA 1983).
In determining whether the inculpatory evidence of record was clear and convincing, the fact-finder resolved any conflicts in the evidence and decided the issue one way or the other. Dunham v. Highlands County School Board, 652 So. 2d 894, 896 (Fla. 2d DCA 1995); Heifetz v. Department of Business Regulation, Division of Alcoholic Beverages & Tobacco, 475 So. 2d 1277, 1281 (Fla. 1st DCA 1985); Department of Professional Regulation v. Wagner, 405 So. 2d 471, 473 (Fla. 1st DCA 1981). In resolving evidential conflicts, the fact-finder assessed the credibility of witnesses and weighed the evidence. Bejarano v. State, Department of Education, Division of Vocational Rehabilitation, 901 So. 2d 891, 892 (Fla. 4th DCA 2005); Hoover,
M.D. v. Agency for Health Care Administration, 676 So. 2d 1380,
1384 (Fla. 3d DCA 1996); Goss v. District School Board of St. Johns County, 601 So. 2d 1232, 1234 (Fla. 5th DCA 1992).
The sum total of evidence submitted by Petitioner is less than clear and convincing. The evidence is not of sufficient weight to produce in the mind of the trier of fact a firm conviction that Respondent departed from the standard of care in either relevant statute.
Appraisal standards adopted by statute are statutory terms, as is the statutory term "reasonable diligence." Statutory terms that form the basis of proposed disciplinary action must be construed strictly in favor of the licensee and against the imposition of discipline. State ex. rel. Jordan v. Pattishall, 99 Fla. 296, 126 So. 147 (1930); Ocampo v. Department of Health, 806 So. 2d 633 (1st DCA Fla. 2002); Equity
Corp. Holdings, Inc. v. Department of Banking and Finance, Division of Finance, 772 So. 2d 588, 590 (Fla. 1st DCA 2000); Jonas v. Florida Department of Business and Professional Regulation, 746 So. 2d 1261 (Fla. 3d DCA 2000); Loeffler v.
Florida Department of Business and Professional Regulation, 739 So. 2d 150 (Fla. 1st DCA 1999); Haggerty v. Florida Department of Business and Professional Regulation, 716 So. 2d 873 (Fla.
1st DCA 1998); Elmariah v. Department of Professional
Regulation, Board of Medicine, 574 So. 2d 164 (Fla. 1st DCA 1990); Rush v. Department of Professional Regulation, 448
So. 2d 26 (Fla. 1st DCA 1984); Ferdego Discount Center v. Department of Professional Regulation, 452 So. 2d 1063 (Fla. 3d DCA 1984); Bowling v. Department of Insurance, 394 So. 2d 165 (Fla. 1st DCA 1981); Lester v. Dept. of Professional and Occupational Regulations, 348 So. 2d 923 (Fla. 1st DCA 1977).
The agency's interpretation of statutory terms is not infused with policy considerations and is not entitled to deference. The issue of whether Respondent breached the standard of care in each relevant statute is a factual issue susceptible to ordinary methods of proof. Gross v. Department
of Health, 819 So. 2d 997, 1003 (Fla. 5th DCA 2002).
The agency did not articulate in the record underlying technical reasons for deference to agency expertise in the interpretation of statutory terms. Johnston, M.D. v. Department
of Professional Regulation, Board of Medical Examiners, 456 So. 2d 939, 943-944 (Fla. 1st DCA 1984). Rather, the agency's interpretation conflicts with the weight of the evidence.
If underlying reasons for deference to agency expertise were articulated, the agency's interpretation of statutory terms would be entitled to great weight unless it is clearly erroneous. Ameristeel Corporation v. Clark, 691 So. 2d 473, 477 (Fla. 1997); Okeechobee Health Care v. Collins, 726 So. 2d 775, 778 (Fla. 1st DCA 1998); Morris v. Division of
Retirement, 696 So. 2d 380 (Fla. 1st DCA 1997). The agency's interpretation is clearly erroneous for several reasons.
The agency's interpretation of statutorily adopted appraisal standards concerning the review of an appraisal report is clearly erroneous. The scope of work necessary to complete an assignment is acceptable when it is consistent with actions that peers would take in performing the same or a similar assignment. SR 1-2(f), USPAP at 17. Respondent's peers do not include the workfile of an experienced assistant in their review of an appraisal report that is not complex.
The agency's interpretation of statutorily adopted appraisal standards concerning the supervision of an experienced assistant is clearly erroneous. Respondent satisfied the statutorily adopted standard that requires Respondent to have a reasonable basis for believing the assistant was competent and that her work was credible. SR 2-3, USPAP at 30-31; A0-5.
The agency's interpretation of statutorily adopted appraisal standards pertaining to a principal's certification of responsibility is clearly erroneous. The interpretation conflicts with judicial standards for imputing the negligence of an employee to an employer.
The legal standard of simple negligence imputes knowledge or willfulness to a principal if it is shown that the principal failed to properly supervise an employee. However,
the legal standard of simple negligence usually is not applied to discipline a professional license but is limited by the weight of judicial authority to beverage licenses. Compare Bach v. Florida State Board of Dentistry, 378 So. 2d 34, 36-37 (Fla. 1st DCA 1979)(for the stated proposition) with Lash, Inc. v.
State, Department of Business Regulation, 411 So. 2d 276, 278 (Fla. 3d DCA 1982)(revoking beverage license).
If the legal standard of simple negligence were applied herein, it is less than clear and convincing that Ms. Hall was an employee on April 5, 2002, rather than an
independent contractor. If Ms. Hall were an employee, knowledge of the workfile would be imputed to Respondent after repeated and flagrant employee errors. Bach, 378 So. 2d at 36. The record does not evidence repeated and flagrant conduct that would impute notice to Respondent and require him to intercede.
It is less than clear and convincing that Respondent was fully informed of the assistant's omission or otherwise possessed the requisite knowledge and intent to either authorize, acquiesce in, or ratify the conduct. Cf. Frankenmuth Mutual Insurance Company v. Magaha, 769 So. 2d 1012, 1022 (Fla. 2000)(citing Bach for the stated general rule). Respondent was not present when Ms. Hall developed her workfile. See Bach, 378 So. 2d at 35-36 (dentist was not present during unlicensed activity of employee, and there was no evidence dentist ordered
unlicensed activity). The workfile was not within the exclusive control of Respondent. See Prysi, M.D. v. Department of Health, 823 So. 2d 823, 824-825 (Fla. 1st DCA 2002)(standing post- operative prescription orders bearing signatures of nurses, rather than physicians, were documents and procedures not in exclusive control of respondent-physician).
The agency interpretation of "reasonable diligence" is clearly erroneous. Respondent's review of the appraisal report and supervision of his assistant is recognized by two reasonably prudent similar appraisers as being acceptable under similar circumstances. Compare Gross, 819 So. 2d at 1004 (physician satisfies standard of care because he practiced with that level of care, skill, and treatment recognized by a reasonably prudent similar physician under similar circumstances).
The agency seeks to enforce a standard not found within the literal terms of the relevant statutes and the adopted appraisal standards. Neither DOAH nor the agency should construe statutory terms in a manner that enlarges or expands either relevant statute. § 120.52(8), Fla. Stat. (2005).
The absence of express statutory standards requiring a principal to review the workfile of an assistant cannot be construed as authority for agency action to fill the statutory void without risking violation of the non-delegation doctrine. Fla. Const., Art. 2, § 3. The non-delegation doctrine requires
the legislature to provide standards and guidelines in each enactment that are ascertainable by reference to the terms of the enactment. Bush v. Shiavo, 885 So. 2d 321 (Fla. 2004); B.H. v. State, 645 So. 2d 987, 992-994 (Fla. 1994); Askew v. Cross
Key Waterways, 372 So. 2d 913, 925 (Fla. 1978).
The absence of express statutory limits should not be construed as authorizing unbridled agency discretion. See, e.g., Von Stephens v. School Board of Sarasota County, 338 So. 2d 890, 894 (Fla. 2d DCA 1976)(avoiding statutory construction that would authorize unbridled agency discretion even though statute included no express limits). DOAH and the agency should avoid an interpretation of statutory terms that exceeds the standards and guidelines enacted in each relevant statute. Spurlin v. School Board of Sarasota County, 520 So. 2d 294,
296-297 (Fla. 2d DCA 1988)
The agency does not cite a promulgated rule as authority for the proposed enforcement action. If the agency were to discover such a rule, the validity of the rule should be preserved by construing the rule no further than the specific powers and duties conferred by each relevant statute.
§ 120.52(8), Fla. Stat. (2005). Similarly, an agency statement of non-rule policy should enforce only the specific standards authorized in each statute. Id.
RECOMMENDED that Petitioner enter a final order finding Respondent not guilty of the violations charged in the Administrative Complaint and imposing no penalty against Respondent's professional license.
DONE AND ENTERED this 3rd day of February, 2006, in Tallahassee, Leon County, Florida.
Filed with the Clerk of the Division of Administrative Hearings this 3rd day of February, 2006.
1/ Each assistant appraiser that Respondent supervised for a period that included April 5, 2002, is identified in Petitioner's Exhibit 5 (P-5).
2/ The parties stipulate that the statutory term "assistant" remained in effect until the 2003 legislature replaced it with the term "trainee."
3/ Effective July 1, 2001, Subsection 475.624(14), Florida Statutes (2001), adopted the 2001 edition of USPAP that was in effect from January 1 through December 31, 2001. Petioner's Exhibit 10 (P-10) is the 2002 edition of USPAP in effect from January 1 through December 31, 2002. The 2002 edition, P-10, could not have been adopted by the legislature on July 1, 2001, because the 2002 edition was not published until January 1, 2002. However, the parties agree there were no material changes to relevant portions of the USPAP between the 2001 and 2002 editions and agreed to rely on P-10 in this proceeding.
4/ The Administrative Complaint uses the term "field file," but the terms "field file" and "workfile" appear in the record interchangeably. The trier of fact uses the term "workfile" to be consistent with the USPAP.
5/ The remaining witnesses were Respondent, Ms. Hall, and Petitioner's investigator.
6/ The definition section of the appraisal standards recognizes that the scope of an appraisal review may include "all or part of an appraisal report, workfile, or a combination of these." USPAP at 1. The definition is instructive rather than controlling because an appraisal review is a formal opinion about the quality of another appraiser's work.
Stacy N. Robinson Pierce, Esquire Department of Business and
Michale E. Murphy, Acting Director Division of Real Estate
15 days from the date of this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the Final Order in this case.
