05-001258PL Department Of Business And Professional Regulation, Division Of Real Estate vs. Franky Otero Status: Closed Recommended Order on Thursday, August 18, 2005.

Summary: Petitioner failed to introduce the last edition of the Uniform Standards of Professional Appraisal Practice, so the pleadings fail for this reason and the lack of proof.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 05 - 1258PL

)

FRANKY OTERO, )

)

Respondent. )

_______________ _______________)

RECOMMENDED ORDER

Robert E. Meale, Administrative Law Judge of the Division

of Administrative Hearings, conducted the final hearing in

Miami, Florida, on July 29, 2005.

APPEARANCES

For Petitioner: Alfonso Santana, Senior Attorney

Department of Business and

Professional Regulation

Division of Real Estate

400 West Robinson Street, Suite N801

Orlando, Florida 32802

For Respon dent: Donald S. Rose, Attorney

622 Courthouse Tower Building

44 West Flagler Street

Miami, Florida 33130

STATEMENT OF THE ISSUE

The issue is whether Respondent had failed to maintain

rec ords for at least five years, committed culpable negligence

in the preparation of an appraisal report, or failed to exercise

reasonable diligence in the preparation of an appraisal report.

PRELIMINARY STATEMENT

By Administrative Complaint dated January 28 , 2003,

Petitioner alleged that Respondent is a certified residential

real estate appraiser, holding license RD3106. The

Administrative Complaint alleges that Respondent prepared and

issued an appraisal, on November 20, 2000, for property located

at 614 N orthwest 2d Street, Delray Beach. The Administrative

Complaint alleges that Respondent refused to produce his work

file to Petitioner's investigator upon request.

Count I of the Administrative Complaint alleges that

Respondent has violated "a standard" o f the Uniform Standards of

Professional Appraisal Practice, in violation of Section

475.624(14), Florida Statutes.

Count II alleges that Respondent is guilty of failing to

retain appraisal records for at least five years, in violation

of Sections 475.629 and 475.624(4), Florida Statutes.

The Administrative Complaint alleges that Respondent issued

an appraisal report showing that a house had 13 rooms, including

seven bedrooms and three bathrooms. However, Respondent's

sketch of the floor plan revealed 17 rooms, and his description

of the property identified 17 rooms by name. The Administrative

Complaint alleges that the report omits any mention that a

comparable property abuts a canal and is within a gated

community. The Administrative Complaint alleges that the report

states that another comparable is one mile from the subject

property, but it actually is more than two miles.

Count III of the Administrative Complaint alleges that

Respondent is guilty of culpable negligence, in violation of

Section 475.6 24(2), Florida Statutes.

Count IV alleges that Respondent has violated "a standard"

of the Uniform Standards of Professional Appraisal Practice, in

violation of Section 475.624(14), Florida Statutes.

Count V alleges that Respondent failed to exercise

r easonable diligence in preparing an appraisal report, in

violation of Section 476.624(14), Florida Statutes.

At the start of the hearing, the Administrative Law Judge

requested Petitioner to specify upon which provisions of the

Uniform Standards of Profes sional Appraisal Practice that it

relied in attempting to discipline Respondent's license.

Referring to the Uniform Standards of Professional Appraisal

Practice, 2000 Edition, Petitioner stated that it relied on

Standards 1 - 1 (b) and (c), 1 - 5(a) and (b), 2 - 1(a), 2 - 2(b)(x),

and 3.2(e). Petitioner failed to cite any standard of the

Uniform Standards of Professional Appraisal Practice in the

Administrative Complaint, although it did allege acts or

omissions that violated certain of these standards. On the

b asis of this distinction, the Administrative Law Judge ruled

that Petitioner could not rely on any violation of Standards

1 - 5(a) and (b), 2 - 2(b)(x), and 3 - 2(e) as, per se , a ground for

discipline, although the Administrative Law Judge allowed

Petitioner t o incorporate the contents of these standards in its

counts of culpable negligence and failure to exercise due

diligence.

At the hearing, Petitioner called three witnesses and

offered into evidence five exhibits: Petitioner Exhibits 1, 5,

7, 9, and 11. Respondent called one witness and offered into

evidence no exhibits. All exhibits were admitted except that

Petitioner Exhibit 7 was admitted only to prove the contents of

the work file and not for the truth of the contents of each

document within the wor k file.

The court reporter filed the transcript on July 27, 2005.

Petitioner filed a proposed recommended order on August 12,

2005.

FINDINGS OF FACT

1. Respondent has been a certified residential real estate

appraiser since 1998. He holds license RD - 3106 , and his license

has not previously been disciplined. He has worked in the real

estate appraisal business since high school and full - time for

the past 12 years.

2. In November 2000, Respondent was employed by Southeast

Property Appraisers as an independen t contractor. Customers of

Southeast Property Appraisers would contact the company and

request a residential real estate appraisal. With a secretary

often making the assignment, Southeast Property Appraisers would

then subcontract the work to an independ ent contractor, such as

Respondent. Upon completion of the appraisal report, Southeast

Property Appraisers would split the fee with the independent

contractor, pursuant to their contractual arrangement.

3. In November 2000, Countryside Mortgage contacted

S outheast Property Appraisers and requested a residential

appraisal for a residence located in Delray Beach. The

secretary assigned the file to Respondent, who undertook the

responsibility of preparing the necessary appraisal report.

4. Respondent researche d the subject property, but found

it a difficult assignment in one respect: the 3407 square - foot,

one - story, single - family residence comprises seven bedrooms.

Single - family residences with seven bedrooms are not present in

great numbers in the vicinity o f the subject property.

5. On November 20, 2000, Respondent issued the appraisal

report, under his own name. The appraisal report estimates the

value of the subject property as $188,000, based primarily on

the sales comparison approach. The report states that it did

not use the income approach because of insufficient sales/rental

data.

6. The appraisal report identifies the name of the

borrower and lists the sales price of $188,000, although the

report cautions that the appraiser did not receive a copy of t he

sales contract. The report lists, under a table on the form, 18

rooms by type, including seven bedrooms and three bathrooms.

Immediately beneath this table, the report states that the

subject property consists of 13 rooms: seven bedrooms and three

ba throoms. Both the table and the information beneath the table

agree that the total area of the house is 3407 square feet.

7. The appraisal report analyzes three comparables.

According to the report, Comparable 1 is eight blocks northwest,

Comparable 2 is eight blocks southeast, and Comparable 3 is one

mile northeast.

8. Petitioner's problems with the appraisal report concern

two matters. First, the report omits any mention that

Comparable 1 abuts a canal and is within a gated community.

However, Responden t observed the canal, which is a narrow

waterway leading into a nearby, small lake. Respondent

reasonably determined that the canal did not warrant mention

because it did not affect the sales price of the comparable.

Respondent underwent a similar proces s with the gate, which the

community association no longer manned or operated, at least

during the daylight hours. Therefore, this omission from the

report was also reasonable.

9. Second, Comparable 3 is about one mile from the subject

property, not more t han two miles as alleged. Driving distance

is 1.6 miles, and, as the crow flies, the distance is almost

exactly one mile. According to Petitioner's expert witness, the

proper way to measure the distance between comparables is as the

crow flies.

10. Peti tioner's witnesses claimed several other

deficiencies with the work papers: no copy of the assignment

sheet from the customer indicating the scope of the appraisal,

no copy of the purchase contract, no notes of conversations with

parties to the documents, no copy of the signed, finished

appraisal report, and no documentation of the search for

comparables. Respondent's work files in fact lacked these

documents.

11. Petitioner's remaining issue with Respondent is that

he did not retain his work file after he left Southeast Property

Appraisal, which was shortly after the completion of the subject

appraisal report. However, Respondent contacted Southeast

Property Appraisal and cooperated with Petitioner's investigator

in obtaining these materials within a re asonable period of time.

CONCLUSIONS OF LAW

12. The Division of Administrative Hearings has

jurisdiction over the subject matter. §§ 120.569 and 120.57(1),

Fla. Stat. (2005).

13. Section 475.624(2) and (4), Florida Statutes,

authorizes the Florida Re al Estate Appraisal Board to impose

discipline if a certificateholder, among other things, is guilty

of "culpable negligence" or a violation of any rule or order of

the Florida Real Estate Appraisal Board.

14. Section 475.624(14), Florida Statutes, prov ides for

discipline if a certificateholder "[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." Section 475.628 adds:

Each appraiser r egistered, 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 elaborati on through the

Appraisal Foundation shall also be binding

on any appraiser registered, licensed, or

certified under this part.

15. Two pleading problems limit the issues in this case.

First, as noted above, the Administrative Complaint failed to

apprise Respondent of the nature of several charges against him.

Allegations that an appraiser has violated the Uniform Standards

of Professional Appraisal Practice (USPAP) do not notify a

certificateholder of the nature of the charges against him.

This documen t is almost 200 pages long and contains numerous

standards and other provisions governing the practice of

appraising.

16. In Trevasani v. Department of Health , __ So. 2d __

(Fla. 1st DCA 2005), the Department of Health alleged that a

physician faile d to create medical records, but did not allege

that he failed to maintain possession of these records.

However, the Department of Health alleged the violation of a

statute that requires the creation and maintenance of medical

records. The evidence showe d that the physician had created the

records, but had failed to maintain possession of them.

Reversing the Board of Medicine's final order finding the

physician guilty of failing to maintain the records, the court

held that the Board could not find the li censee guilty of an act

not mentioned in the complaint.

17. In this case, the Administrative Law Judge struck at

the start of the hearing those allegations that did not

reasonably inform Respondent of the charges against him.

18. The remaining USPAP prov isions at issue after the

Administrative Law Judge struck the other provisions are:

Preamble. Ethics Rule. Record Keeping.

An appraiser must prepare a workfile for

each assignment. The workfile must include

the name of the client and the identity, by

n ame or type, of any other intended users;

true copies of any written reports,

documented on any type of media; summaries

of any oral reports or testimony, or a

transcript of testimony, including the

appraiser's signed and dated certification;

all other dat a, information, and

documentation necessary to support the

appraiser's opinions and conclusions and to

show compliance with this rule and all other

applicable Standards, or references to the

location(s) of such other documentation.

An appraiser must retai n the workfile for a

period of at least five (5) years after

preparation or at least two (2) years after

final disposition of any judicial proceeding

in which testimony was given, which period

expires last, and have custody of his or her

workfile, or make appropriate workfile

retention, access, and retrieval

arrangements with the party having custody

of the workfile.

Standards Rule 1 - 1.

In developing a real property appraisal, an

appraiser must:

* * *

(b) not commit a subs tantial 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 resu lts of an appraisal, in the

aggregate affect the credibility of those

results.

* * *

Standards Rule 2 - 1.

Each written or oral real property appraisal

report must:

(a) clearly and accurately set forth the

appraisal in a ma nner that will not be

misleading;

* * *

19. Another problem with the pleadings requires the

further restriction of the issues. All USPAP allegations must

be stricken because Petitioner has failed to prove up the USPAP

provis ions and standards in effect as of the most recent

enactment of them by the Legislature. In this case, Petitioner

has relied upon the USPAP, 2000 Edition, for the above - cited

provisions and standards that Respondent has allegedly violated.

20. However, t he Legislature has never incorporated the

USPAP, 2000 Edition, into the disciplinary statutes governing

the appraisal practice in Florida. The Legislature adopted

Section 475.624(14), Florida Statutes, effective May 24, 1991,

in Laws of Florida Chapter 91 - 89, Section 8, and has not re -

adopted this subsection of Section 475.624. This subsection

imposes USPAP standards and provisions upon appraisers

practicing in Florida. The Legislature last amended Section

475.628, Florida Statutes, effective May 27, 199 8, in Laws of

Florida Chapter 98 - 250, Section 35. This section imposes USPAP

standards upon appraisers practicing in Florida.

21. The Florida Supreme Court has repeatedly held that the

Legislature may not delegate legislative authority by enacting a

stat ute that purports to incorporate, without further act of the

Legislature, subsequent federal laws or regulations. See , e.g. ,

State v. Rodriguez , 365 So. 2d 157 (Fla. 1978).

22. It appears that the Appraisal Standards Board of The

Appraisal Foundation a dopts the USPAP. According to the cover

page of the USPAP, The Appraisal Foundation is "Authorized by

Congress as the Source of Appraisal Standards and Appraiser

Qualifications." The Legislature can no more delegate

legislative authority to this Congress ionally recognized body

than it can to Congress. Any attempt to discipline a licensee

based on USPAP provisions adopted subsequent to 1991 or USPAP

standards subsequent to 1998 would therefore constitute an

unconstitutional delegation of legislative autho rity. Absent

evidence of the USPAP provisions and standards in effect at

these times, Petitioner has failed to prove any USPAP

violations.

23. Petitioner must prove the material allegations by

clear and convincing evidence. Department of Banking and

Fin ance v. Osborne Stern and Company, Inc. , 670 So. 2d 932 (Fla.

1996) and Ferris v. Turlington , 510 So. 2d 292 (Fla. 1987).

24. The only violation expressly contained in the statutes

is culpable negligence; the remaining allegations are based on

USPAP provi sions or standards. No evidence establishes that

Respondent's appraisal report reflects any negligence

whatsoever. In particular, no evidence suggests that the final

market value is in any respect misleading or incorrect or that

any other element of the appraisal report is misleading or

incorrect.

25. Assuming that the USPAP, 2002 Edition, applied to this

case, which it does not, Petitioner has failed to prove a

violation of any of these provisions or standards, as well.

These provisions and standards m ust be construed and applied in

recognition of the fact that disciplinary proceedings are penal

in nature, so that disciplinary statutes are interpreted

strictly in favor of the licensee. See , e.g. , Djokic v.

Department of Business and Professional Regula tion , 875 So. 2d

693, 695 (Fla. 4th DCA 2003).

26. Petitioner failed to prove that Respondent violated

the Record Keeping provision. Petitioner's two contentions are

that Respondent failed to maintain a signed copy of the

appraisal report and he failed to retain custody of the work

file for five years. However, the provision that allows an

appraiser to retain a true copy in any media means that he is

not required to retain a signed copy because electronic media

often fail to maintain the signature. Al so, the last clause of

the Record Keeping provision clearly allows an appraiser to

retain possession under a document - retrieval arrangement, such

as that that Respondent evidently maintained with Southeast

Property Appraisal.

27. As Respondent admitted, his documentation was not very

good. In particular, his failure to document the process by

which he determined which comparables to use is non - existent.

This is a vital part of the appraisal practice. Likewise, some

documentation as to the scope of the appraisal would seem

useful, especially in dealing with client complaints lodged long

after the completion of the appraisal. However, Petitioner

never alleged these deficiencies. Pursuant to the Trevasani

decision, Petitioner may not attach these unmade allegations to

the actual allegation of a failure to maintain records for five

years, even though the same USPAP provision is violated by these

different acts and omissions.

28. Petitioner also failed to prove that Respondent

violated USPAP Standards 1 - 1 (b) or (c). Among other problems

with the proof, from Petitioner's point of view, is the complete

lack of any evidence that any error committed by Respondent

"significantly affect[ed the] appraisal" or that any

carelessness "in the aggregate affect[s] the credibility" of

[the] results."

29. For the same reason, Petitioner has failed to prove

that Respondent violated USPAP Standard 2 - 1(a). No evidence

demonstrates how the subject appraisal report is misleading.

RECOMMENDATION

It is

RECOMMENDED that the Florida Real Estate Appraisal Board

enter a final order dismissing the Administrative Complaint.

DONE AND ENTERED this 18th day of August, 2005, in

Tallahassee, Leon County, Florida.

S

________________ ___________________

ROBERT E. MEALE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(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 18th day of August, 2005.

COPIES FURNISHED:

Jay Small, Chairman

Florida Real Estate Appraisal Board

Department of Busi ness an

Professional Regulation

400 West Robinson Street, Suite 801N

Orlando, Florida 32808 - 1900

Leon Biegalski, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 3239 9 - 2202

Alfonso Santana, Senior Attorney

Department of Business and

Professional Regulation

Division of Real Estate

400 West Robinson Street, Suite N801

Orlando, Florida 32802

Donald S. Rose, Attorney

622 Courthouse Tower Building

44 West Flagler Stree t

Miami, Florida 33130

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this recommended order. Any exceptions

to this recommended order must be filed with the agency that

wil l issue the final order in this case.