05-001235PL Department Of Business And Professional Regulation, Division Of Real Estate vs. William Rutan Status: Closed Recommended Order on Wednesday, August 31, 2005.

Summary: Petitioner proved that Respondent failed to carry out responsibilities of a supervising appraiser, to inspect property, to research prior sales and comparables sales data; and he was subject to prior disciplinary action. Recommend certificate be revoked.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DIVISION OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 05 - 1235PL

)

WILLIAM RUTAN, )

)

Respondent. )

_________________________________)

RECOMMENDED OR DER

Pursuant to notice, a formal hearing was held in this case

on June 23, 2005, by video teleconference, with the parties

appearing in Miami, Florida, before Patricia M. Hart, a duly -

designated Administrative Law Judge of the Division of

Administrative H earings, who presided in Tallahassee, Florida.

APPEARANCES

For Petitioner: Alfonso Santana, Esquire

Department of Business and

Professional Regulation,

Division of Real Estate

400 W. Robinson Street, Suite 801

Orlando, Florida 32801

For Respondent: Steven W. Johnson, Esquire

100 South Bumby Avenue, Suite B

Orlando, Florida 32803

STATEM ENT OF THE ISSUE

Whether the Respondent committed the violations alleged in

the Administrative Complaint dated March 3, 2004, and, if so,

the penalty that should be imposed.

PRELIMINARY STATEMENT

In an Administrative Complaint dated March 3, 2004, the

Dep artment of Business and Professional Regulation, Division of

Real Estate ("Division") charged William Rutan with six

statutory violations arising out of his conduct in June 1999 as

the supervising appraiser on a parcel of property known as 9690

Northwest 3 5th Street, Coral Springs, Florida. In Counts I

through IV, the Division charged that Mr. Rutan violated

Section 475.624(14), Florida Statutes (1999), 1 on the grounds

that he "violated a standard for the development or

communication of a real estate appra isal or other provision of

the Uniform Standards of Professional Appraisal Practice,"

specifically Rules 1 - 1(a), (b), (c); 1 - 5(a), (b)(i), and (c);

and 2 - 2(b)(xii) of the Uniform Standards of Professional

Appraisal Practice ("USPAP"). In Count V of the Ad ministrative

Complaint, the Division charged that Mr. Rutan failed to

exercise reasonable diligence in developing an appraisal report,

in violation of Section 475.624(15), Florida Statutes. In Count

VI of the Administrative Complaint, the Division charged that

Mr. Rutan should be disciplined pursuant to Section 475.624(10),

Florida Statutes, for being found guilty for a second time of

misconduct that warrants disciplinary action. Mr. Rutan timely

filed a request for a formal hearing, and the Division

tran smitted the matter to the Division of Administrative

Hearings for assignment of an administrative law judge.

Pursuant to notice, the final hearing was held on June 23, 2005.

At the hearing, the Division presented the testimony of

Dennis Thresher, Larry Fe derman, and Michael Cibene;

Petitioner's Exhibits 1, 4, 8 through 11, 14, 15, 17, 19, and 22

through 25 were offered and received into evidence. Mr. Rutan

testified in his own behalf and presented the testimony of

Manuel Villate and Henry Cusido; Responde nt's Exhibits 1 and 2

were offered and received into evidence. At the Division's

request, official recognition was taken of Chapters 475 and 542,

Florida Statutes; Rule 61J1, Florida Administrative Code; and

the 1999 edition of the USPAP promulgated by th e Appraisal

Standards Board of the Appraisal Foundation.

The one - volume transcript of the proceeding was filed with

the Division of Administrative Hearings on July 15, 2005. The

parties filed a Joint Motion to Request an Extension of Time to

File the Prop osed Recommended Order, and the time for filing the

proposed recommended orders was extended to August 1, 2005, in

an Order entered July 22, 2005. The Petitioner timely filed its

Proposed Recommended Order; the Respondent filed his Proposed

Recommended Or der on August 4, 2005. Both submittals have been

considered in preparing this Recommended Order.

FINDINGS OF FACT

Based on the oral and documentary evidence presented at the

final hearing and on the entire record of this proceeding, the

following finding s of fact are made:

1. The Division is the state agency responsible for

investigating complaints filed against registered, licensed, or

certified real estate appraisers and for prosecuting

disciplinary actions against such persons. § 455.225, Fla.

Stat. (2005). The Florida Real Estate Appraisal Board ("Board")

is the state agency charged with regulating, licensing, and

disciplining real estate appraisers registered, licensed, or

certified in Florida. § 475.613(2), Fla. Stat. (2005).

2. At the times mat erial to this proceeding, Mr. Rutan was

a certified residential real estate appraiser in Florida, having

been issued a license numbered RD 2791. Mr. Rutan had been a

certified residential real estate appraiser in Florida for

approximately 10 years. At th e time of the events giving rise

to this action, Mr. Rutan was employed by Excel Appraisal.

3. Mr. Rutan interviewed and hired Frank Delgado, Juan

Carlos Suarez, and Ricardo Tundador to work at Excel Appraisal

as state - registered assistant real estate app raisers. At all

times material to this proceeding, Mr. Rutan was Mr. Suarez’s

supervisor and was responsible for Mr. Suarez’s appraisals.

4. On or about June 16, 1999, Mr. Suarez prepared an

appraisal for property located at 9690 Northwest 35th Street,

C oral Springs, Florida, in which he valued the property at

$325,000. The property is a multi - family, four - plex property.

5. Mr. Rutan signed Mr. Suarez's appraisal as the

supervisory appraiser and certified on the appraisal that he had

inspected the prope rty by placing an “X” in the "Inspect

Property" box. The appraisal form signed by Mr. Rutan contains

a "Supervisory Appraiser's Certification" that provides:

If a supervisory appraiser signed the

appraisal report, her or she certifies and

agrees that: I directly supervise the

appraiser who prepared the appraisal report,

have reviewed the appraisal report, agree

with the statements and conclusions of the

appraiser, agree to be bound by the

appraiser's certifications numbered 4

through 7 above, and am takin g full

responsibility for the appraisal and the

appraisal report.

6. It is the custom in the industry that a supervisory

appraiser who certifies that he or she has inspected the

property in question must inspect the property inside as well as

outside bef ore he or she can sign the appraisal. Mr. Rutan

inspected the property the day after he signed the appraisal and

only inspected the property from the outside.

7. The appraisal report on the property at issue herein

listed a prior sale of the property fro m Rodney Way to Doyle

Aaron for $325,000 on April 28, 1999. The appraisal failed to

list the sale of the property on the same day from Julius Ohren

to Rodney Way for $230,000. Mr. Rutan did not investigate the

relevant sales history of the property and w as unaware,

therefore, that the property had been “flipped” and was

considerably overvalued in the appraisal report. 2 Mr. Rutan

admitted that he did not investigate prior sales and that the

property was substantially overvalued.

8. Mr. Suarez listed in t he appraisal report three

"comparable sales," that is, sales of properties similar in type

and location to the property being appraised, to support the

valuation of $350,000. The first comparable property used in

the appraisal was property located at 4102 Riverside Drive,

Coral Springs, which was listed in the appraisal report as being

previously sold for $315,000. Earlier on the day that the

Riverside Drive property was sold for $315,000, however, it had

been sold for $185,000. Mr. Rutan failed to resea rch and review

the sales of the comparable properties that were included in

Mr. Suarez's appraisal report, and the "comparable sale" of

property on Riverside Drive was not properly used to value the

property that was the subject of the appraisal report at issue

herein.

9. Mr. Suarez failed to make the proper adjustments in

value on the Riverside Drive property based on the features of

that property that were superior to the features of the subject

property. The Riverside Drive property was located on a ca nal

and should have had a negative adjustment with respect to the

subject property, which was not on a canal. Mr. Suarez included

a positive adjustment in the comparable sales data for the

Riverside Drive property. Mr. Rutan failed to review the

comparab le property adjustments submitted by Juan Carlos Suarez

for the appraisal of the subject property.

10. Mr. Suarez overstated the rental income of the subject

property in his appraisal report. Mr. Rutan failed to research

and review the rental figures Mr. Suarez submitted.

11. When Mr. Rutan was notified by Brokers Funding, a

company that purchased the loans on the subject property, that

there were problems with the appraisal done by Mr. Suarez,

Mr. Rutan checked additional comparable sales and interviewe d

the tenants in the building. He also hired another appraiser to

conduct an appraisal of the subject property. Based on his

investigation and Mr. Salimino’s appraisal, Mr. Rutan discovered

the problems in Mr. Suarez's appraisal and report of the subject

property. Mr. Salimino’s appraisal for the subject property was

$290,000, but Mr. Rutan estimated that his appraisal would have

been approximately $250,000.

12. Mr. Rutan fired Mr. Suarez, as well as Frank Delgado,

and Ricardo Tundador, all three of who m were subsequently

indicted on federal charges relating to real - estate - appraisal

scams.

13. In a Final Order entered on April 22, 2002, Mr. Rutan

was found guilty by the Board of violating Sections 475.624(14)

and 475.624(15), Florida Statutes, and was o rdered to pay an

administrative fine of $1,000.

14. Mr. Rutan trusted Mr. Suarez to do an honest and

competent appraisal and was rushed by Mr. Suarez to approve the

appraisal on the subject property.

15. The evidence presented by the Division is sufficie nt

to establish with the requisite degree of certainty that

Mr. Rutan failed to carry out his responsibilities as

Mr. Suarez's supervisory appraiser, failed to review Juan Carlos

Suarez’s appraisal for accuracy, and failed to inspect the

inside of the subj ect property, which caused or contributed to

the substantially over - stated valuation of the subject property.

CONCLUSIONS OF LAW

16. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

the parties th ereto pursuant to Sections 120.569 and 120.57(1),

Florida Statutes (2005).

17. In the Administrative Complaint, the Division seeks,

among other penalties, the revocation of Mr. Rutan’s real estate

appraisal certification. Therefore, the Division has the burden

of proving the allegations in the Administrative Complaint by

clear and convincing evidence. See Department of Banking and

Finance, Division of Securities and Investor Protection v.

Osborne Stern and Co. , 670 So. 2d 932 (Fla. 1996); Ferris v.

Turli ngton , 510 So. 2d 292 (Fla. 1987); and McKinney v. Castor ,

667 So. 2d 387 (Fla. 1st DCA 1995).

18. Clear and convincing evidence has been defined as

evidence which:

“[r]equires that the evidence must be found

to be credible; the facts to which the

witness es testify must be distinctly

remembered; the testimony must be precise

and explicit and the witnesses must be

lacking in confusion as to the facts in

issue. The evidence must be of such weight

that it produces in the mind of the trier of

fact a firm beli ef or conviction, without

hesitancy, as to the truth of the

allegations sought to be established.”

Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla. 4th DCA 1983).

19. Section 475.624, Florida Statutes, is a penal statute

and, as such, must be strictly co nstrued in favor of Mr. Rutan.

See Munch v. Department of Professional Regulation, Division of

Real Estate , 592 So. 2d 1136, 1138 (Fla. 1st DCA 1992.)

20. Section 475.624, Florida Statutes, provides that the

Board may, among other things, revoke or suspe nd the

certification of a real estate appraiser or reprimand, fine, or

put a certified appraiser on probation if the appraiser has

committed any one of several acts enumerated in the statute.

21. Section 475.628, Florida Statutes, provides:

Each appraiser registered, licensed, or

certified under this part shall comply with

the Uniform Standards of Professional

Appraisal Practice. Statements on appraisal

standards which may be issued for the

purpose of clarification, interpretation,

explanation or elaborat ion through the

Appraisal Foundation shall also be binding

on any appraiser registered, licensed, or

certified under this part.

22. Standards Rule 2 - 5 of the USPAP provides that "[a]n

appraiser who signs a real property appraisal report prepared by

anoth er in any capacity accepts full responsibility for the

appraisal and the contents of the appraisal report."

23. The Division alleged in Counts I through IV of the

Administrative Complaint that Mr. Rutan violated Section

475.624(14), Florida Statutes, whic h provides that disciplinary

action may be taken against an appraiser who "[h]as violated any

standard for the development or communication of a real estate

appraisal or other provision of the Uniform Standards of

Professional Appraisal Practice."

24. In Count I, the Division alleged that Mr. Rutan

violated Section 475.624(14) by violating the standards set

forth in the USPAP Standards Rules 1 - 1(a),(b), and (c). USPAP

Rule 1 - 1 provides:

"In developing a real property appraisal, an

appraiser must:

(a) be aware of, understand, and correctly

employ those recognized methods and

techniques that are necessary to produce a

credible appraisal.

* * *

(b) not commit a substantial error of

omission or commission that significantly

affects an appraisal.

* * *

( c) not render appraisal services in a

careless or negligent manner, such as by

making a series of errors that, although

individually might not significantly affect

the results of an appraisal, in the

aggregate affect the credibility of those

results.

Bas ed on the findings of fact herein, the Division has met its

burden of proving by clear and convincing evidence that

Mr. Rutan, through his lack of oversight as Mr. Suarez's

supervising appraiser, violated the USPAP Standards Rule 1 - 1(a),

(b), and (c) and, therefore, violated Section 475.624(14),

Florida Statutes. Mr. Rutan, as Mr. Suarez's supervising

appraiser, did not employ the recognized methods and techniques

as established in the USPAP, he committed a substantial error of

omission or commission that significantly affected the

appraisal, and he committed careless errors that affected the

credibility of the appraisal report by signing an appraisal

report with an inflated value of $325,000 without having

conducted an inspection of the property and withou t having

independently reviewed the sales history of the property, the

history of the comparable sales included in the appraisal, or

the rental income on the property.

25. In Count II of the Administrative Complaint, the

Division alleged that Mr. Rutan vi olated the USPAP Standards

Rules 1 - 5(a),(b)(i), and (c). The USPAP Standards Rule 1 - 5

provides in pertinent part:

In developing a real property appraisal, an

appraiser must:

(a) analyze any current Agreement of Sale,

option, or listing of the property, if such

information is available to the appraiser in

the normal course of business.

(b) analyze any prior sales of the property

that occurred within the following minimum

time periods:

(i) one year for one - to - four - family

residential property

* * *

(c ) reconcile the quality and quantity of

data available and analyzed within the

approaches used and the applicability or

suitability of the approaches used.

Because it did not present any evidence with respect to the

USPAP Standards Rule 1 - 5(a), the Divis ion failed to meet its

burden of proving by clear and convincing evidence that

Mr. Rutan violated this Standards Rule. Based on the findings

of fact herein and for the reasons stated in paragraph 23 above,

the Division met its burden of proving by clear a nd convincing

evidence that Mr. Rutan, through his lack of oversight as

Mr. Suarez's supervising appraiser, violated the USPAP Standards

Rules 1 - 5(b)(i) and (c) and, therefore, violated

Section 475.624(14), Florida Statutes.

26. In Count III of the Admini strative Complaint, the

Division alleged that Mr. Rutan violated the USPAP Standards

Rule 2 - 2(b)(xii), which provides:

Each written real property appraisal report

must be prepared under one of the following

three options and prominently state which

option is used: Self - Contained Appraisal

Report, Summary Appraisal Report, or

Restricted Use Appraisal Report.

* * *

(b) the content of a Summary Appraisal

Report must be consistent with the intended

use of the appraisal and, at a minimum:

* * *

(xii) incl ude a signed certification in

accordance with Standards Rule 2 - 3."

The USPAP Standards Rule 2 - 3 states in pertinent part that

“[e]ach written real property appraisal report must contain a

signed certification" that includes certain specified

provisions. Based on the findings of fact herein, the Division

failed to prove that Mr. Rutan violated USPAP Rules 2 - 2(b)(xii)

and 2 - 3. The copy of the appraisal report submitted into

evidence by the Division was signed by Mr. Rutan, and it

includes the certification s required by the USPAP Standards

Rules 2 - 2(b)(xii) and 2 - 3.

27. In Count V of the Administrative Complaint, the

Division alleged that Mr. Rutan violated Section 475.624(15),

Florida Statutes, which provides that disciplinary action may be

taken against a n appraiser who "[h]as failed or refused to

exercise reasonable diligence in developing an appraisal or

preparing an appraisal report." Based on the findings of fact

herein and for the reasons stated in paragraph 23 above, the

Division has met its burden of proving by clear and convincing

evidence that Mr. Rutan violated Section 475.624(15), Florida

Statutes.

28. In Count VI of the Administrative Complaint, the

Division alleged that Mr. Rutan violated Section 475.624(10),

Florida Statutes, which provides that disciplinary action may be

taken against an appraiser who

[h]as been found guilty, for a second time,

of any misconduct that warrants disciplinary

action, or has been found guilty of a course

of conduct or practice which shows that she

or he is incomp etent, negligent, dishonest,

or untruthful to an extent that those with

whom she or he may sustain a confidential

relationship may not safely do so.

Based on the findings of fact herein, the Division has met its

burden of proving by clear and convincing e vidence that

Mr. Rutan is in violation of Section 475.624(10), Florida

Statutes, because he has been previously found guilty of

violating Sections 475.624(14) and 475.624(15), Florida

Statutes, and a fine of $1000 was imposed.

29. The penalties that may b e imposed for violations of

Section 475.624, Florida Statutes, include the revocation or

suspension of a real estate appraiser's certification. Florida

Administrative Code Rule 61J1 - 8.002(3)(q), and (r) provides that

the usual penalty imposed by the Board for a violation of

Section 475.624(14) or (15), Florida Statutes, ranges from

suspension of the certification for five years to revocation of

the certification, together with an administrative fine of

$1000. Florida Administrative Code Rule 61J1 - 8.002(3) (m)

provides that the usual penalty imposed by the Board for a

violation of Section 475.624(10), Florida Statutes, is

revocation of the certification.

30. The evidence presented by Mr. Rutan in mitigation of

the penalty has been considered and found insuf ficient to

justify deviation from the penalties established in Florida

Administrative Code Rule 61J1 - 8.002(3).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Florida Real Estate Appraisal

Board e nter a final order finding that William Rutan is guilty

of violating Section 475.624(10), (14), and (15), Florida

Statutes, as alleged in Counts I through IV of the

Administrative Complaint and revoking Mr. Rutan's Florida

certification as a real estate ap praiser.

DONE AND ENTERED this 31st day of August, 2005, in

Tallahassee, Leon County, Florida.

S

___________________________________

PATRICIA M. HART

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 306 0

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 31st day of August, 2005.

ENDNOTES

1 / Unless otherwise indicated, all references to the Florida

Statutes herein are to the 1999 edition.

2 / The practice of buying a property and selling it for a much

higher price in an extremely short period of time is commonly

r eferred to as a “flip” sale.

COPIES FURNISHED:

Steven W. Johnson, Esquire

Steven W. Johnson, P.A.

100 South Bumby Avenue, Suite B

Orlando, Florida 32803

Alfonso Santana, Es quire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite 801N

Orlando, Florida 32801 - 1757

Leon Biegalski, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tal lahassee, Florida 32399 - 2202

Elizabeth Vieira, Director

Division of Real Estate

Department of Business and

Professional Regulation

400 West Robinson Street, Suite 802, North

Orlando, Florida 32801

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties ha ve the right to submit written exceptions within

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.