STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF PROFESSIONAL )

REGULATION, )

)

Petitioner, )

)

vs. ) CASE NO. 89-3543

)

VINCENT A. RIGIO, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above-styled matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Daniel M. Kilbride, on December 15, 1989 in Orlando, Florida. The following appearances were entered:

APPEARANCES

For Petitioner: Steven W. Johnson, Esquire

Department of Professional Regulation-Division of Real Estate

400 West Robinson Street Orlando, Florida

For Respondent: Robert L. Taylor, Esquire

225 East Robinson Street Suite 445

Orlando, Florida STATEMENT OF THE ISSUES

Whether the Respondent was culpably negligent and/or was guilty of breach of trust in the preparation of the appraisal, dated September 7, 1986, in violation of Section 475.25(1)(b), Florida Statutes.

PRELIMINARY STATEMENT

By Administrative Complaint, dated May 22, 1989, Respondent was charged with culpable negligence and breach of trust in a business transaction in violation of Subsection 475.25(1)(b), Florida Statutes. Respondent disputed the allegations and requested a formal hearing. The formal hearing was held on December 15, 1989.

George Jeknavorian, Jean Williams, Floyd Bush, Chris Olson, and Doug Cutts testified on behalf of the Petitioner. Dan Dalgar and the Respondent testified for the Respondent. Three exhibits were admitted into evidence on behalf of Petitioner and one on behalf of Respondent. No transcript was ordered.

Petitioner filed its proposed recommended order on December 26, 1989 and Respondent filed his on January 11, 1990. Each party's proposals have been carefully considered. Specific rulings on each party's proposed findings of fact are addressed in the Appendix.

Based upon all of the evidence, the following findings of fact are determined:

FINDINGS OF FACT

1. Vincent A. Riggio was at all times material hereto a licensed real estate salesperson in the State of Florida, having been issued license number 0206262, effective in 1978, and as such was authorized to prepare real estate appraisals.

   
   

2. Respondent completed basic real estate appraisal classes and attended seminars relating to property appraisal.

   
   

3. Respondent was an associate with Grover H. Vass & Associates, Inc.,

   414 West Colonial Drive, Orlando, Florida from July 11, 1986 to December 21, 1988.

   
   

4. Respondent's appraisal services were retained by United Mortgage Company on an ongoing basis for the purpose of granting second mortgage loans.

   
   

5. In September, 1986, Respondent was requested by United Mortgage Company to prepare the subject appraisal for property located in Lake County, Florida, that was owned by Floyd Bush and his wife. The subject property consisted of land, a single family residential structure, and plant nursery structures and equipment.

   
   

6. Pursuant to the request of United Mortgage Company, Respondent undertook the subject appraisal and performed reasonable and necessary investigations and reviews to prepare the same. Respondent had appraised the subject property once before and was aware of the property's unique character. Respondent visited and viewed the property. He observed the nursery business in operation at the time of the inspection. He also attempted to obtain comparable sales and market data but found that , due to the location and uniqueness of the property, he would be required to use, in part, an appraisal method based on the cost approach. Respondent determined the current market value of the property to be $136,800 and prepared his written appraisal report accordingly. The report was transmitted to United Mortgage Company as directed by and with the limitations imposed by them.

   
   

7. Respondent had no financial interest in the real estate being appraised nor in any other aspect of the subject transaction.

   
   

8. George Jeknavorian loaned $23,500 to Mr. and Mrs. Floyd Bush. The loan was secured by a second mortgage on the subject property, which was processed through United Mortgage Company in September, 1986. At the time of the loan, George Jeknavorian had neither seen the subject appraisal report nor the subject real estate. He relied on persons other than Respondent for his information relating to this loan transaction.

   
   

9. The property was apparently encumbered by a first mortgage in the approximate amount of $64,800 at the time of the second mortgage which made a total debt on the property of approximately $88, 300.

10. After two payments had been made subsequent to the closing of the second mortgage loan transaction, the Bushs defaulted on the required payments. Thereafter, Jeknavorian opted to accept a deed in lieu of foreclosure instead of proceeding forward with the foreclosure. Jeknavorian became the owner of the subject property in March of 1988.

    
    

11. Jeknavorian listed the property for sale with Ms. Jean Williams, a licensed real estate salesperson. She determined the value of the property to be between $100,000 and $110,000, and with the concurrence of the new owner, she listed it for sale at $110,000. When she inspected the property in 1988, before listing it, Williams observed it to be in serious disrepair. The property as listed consisted of a house, land and plant nursery with all equipment, but with no inventory and no warranty as to the equipment.

    
    

12. The price was reduced, but the property did not sell. In late 1988, the holder of the first mortgage took back the property. At that time, Jaknavorian had invested or was owed a total of $33,000. His losses consisted of the amounts due and owing on the second mortgage, payments to the holder of the first mortgage after he became the owner of the subject property and the costs of trash removal after he became the owner of the property in March, 1988.

    
    

13. The most credible testimony indicates that the appraisal had several technical defects, but, as a whole, was acceptable to the requirements of United Mortgage Company for which it was prepared.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding, and the parties thereto, pursuant to subsection 120.57(1), Florida Statutes.

    
    

15. The Department of Professional Regulation-Division of Real Estate is empowered to prosecute alleged violations of Chapter 475, Florida Statutes, in accordance with the authority set forth in Sections 475.021 and 475.225, Florida Statutes(1987).

    
    

16. Section 475.25, Florida Statutes provides that the Florida Real Estate Commission may revoke, suspend a license for a period not exceeding ten (10) years, impose an administrative fine not to exceed $1,000, or issue a reprimand if it finds that the licensee has been guilty of, inter alia, culpable negligence, or breach of trust in a business transaction in this state. It is immaterial to the guilt of the licensee that the victim of the misconduct has sustained no damage or loss. Section 475.25(1) (b), Florida Statutes (1987).

    
    

17. Revocation of license proceedings are penal in nature and therefore, the burden of proof is on the Petitioner who has the obligation to support relevant and material findings of fact by clear and convincing evidence. State ex rel Vining v. Florida Real Estate Commission, 281 So.2d 487 (Fla. 1973); Balino v. Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA 1977); Hel Heifetz, d/b/a Key Wester Inn v. Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, 475 So.2d 1277 (Fla. 1st DCA 1985).

    
    

18. `Culpable negligence' has been defined as the omission of a act which a reasonable person would do or the commission of an act which a person

    would not do. . .To prove culpable negligence a showing of a reckless indifference or grossly careless disregard of the safety of others is necessary." Department of Professional Regulation, Florida Real Estate Commission v. Baruch, 5 FALR 262-A, at 264-A (1982).

    
    

19. The facts as established at the hearing do not demonstrate that the Respondent acted in a culpably negligent manner in preparing the appraisal, nor that he committed a breach of trust in a business relationship. At all times relevant, Respondent, as a licensed real estate salesman, was authorized to prepare an appraisal report. No evidence was presented to show that Respondent violated accepted standards for the development of appraisal reports. Such standards were not adopted into law until the passage of chapter 88-20, Laws of Florida (1988), now incorporated at Section 475.501, Florida Statutes (1989). Petitioner's expert, Doug Cutts, testified that the appraisal contained numerous serious inadequacies which, in his opinion, made the appraisal worthless. However, the Petitioner did not explicate a minimum standard to which Respondent can be held to have violated under the law in effect at the time of the appraisal.

    
    

20. In addition, none of Petitioner's witnesses, except the former owner, Floyd Bush, could testify on the condition of the property at the time of the preparation of the appraisal. Cutt's opinion was based on the assumption that the property was in a run down condition in September, 1986. He never personally viewed the property, but relied on information supplied by the Petitioner and a review of the report. The evidence was clear that after the Bushs received the proceeds of the second mortgage, the condition of the property, especially the nursery, was allowed to deteriorate rapidly. All other witnesses had to assume what the condition of the property was at the time of the inspection of the property by Respondent. This is not clear and convincing evidence of wrongdoing. Therefore, Petitioner has failed to meet it burden of proof and cannot prevail.

    
    

21. Respondent has argued that the case should be dismissed since Jeknavorian did not in fact suffer a loss as a result of the appraisal report. While the lack of damage or loss may mitigate a penalty, it is not recognized defense to a violation of Section 475.25(1)(b), Florida Statutes.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Administrative Complaint against Respondent be

DISMISSED.

DONE AND ENTERED this 31st day of January, 1990, in Tallahassee, Leon County, Florida.

DANIEL M. KILBRIDE

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904)488-9675

Filed with the Clerk of the Division of Administrative Hearings this 31st day of January, 1990.

APPENDIX

The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on findings of fact submitted by the parties.

Petitioner's Proposed Findings of Fact:

Accepted: paragraphs 1,2 (in substance),3,4(in part),6 and 7(in substance)

Rejected: paragraphs 5 and 4 (that portion of paragraph 4 which proposes that the complaining witness relied upon the appraisal to his detriment and also that the property was worth no more than $95,000 at the time of the appraisal) as unsupported by the weight of the evidence.

Respondent's Proposed Findings of Fact:

Accepted: paragraphs 1,2 (in part) ,3,4 (in substance) ,5,7 (sentence 1), 8, 10, 11(in substance), 13(in substance), 14(in substance)

Rejected: paragraphs 6(witness not credible),7(several sentences not relevant), 9 (argument).

COPIES FURNISHED:

Steven W. Johnson, Esquire Division of Real Estate

400 W. Robinson Street Post Office Box 1900 Orlando, FL 32802

Robert L. Taylor, Esquire

225 E. Robinson Street Suite 445

Orlando, FL 32801

Darlene F. Keller Division Director

400 W. Robinson Street Post Office Box 1900 Orlando, FL 32801

Kenneth E. Easley General Counsel

Department of Professional Regulation

Northwood Centre

1940 North Monroe Street Suite 60

Tallahassee, FL 32399-0792

Docket for Case No: 89-003543

Orders for Case No: 89-003543