09-003946PL Department Of Business And Professional Regulation, Division Of Real Estate vs. Michael Anthony Facendo Status: Closed Recommended Order on Thursday, March 4, 2010.

Summary: Petitioner failed to prove breach of trust, culpable negligence or misrepresentation in preparation of appraisal report and also failed to prove violation of USPAP 1991; the evidence related only to USPAP 2006. All charges should be dismissed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF REAL ESTATE, )

)

Petitioner, )

)

vs. ) Case No. 09-3946PL

)

MICHEAL ANTHONY FACENDO, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

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

on October 22, 2009, by video teleconference, with the parties

appearing in Fort Lauderdale, Florida, before Patricia M. Hart,

a duly-designated Administrative Law Judge of the Division of

Administrative Hearings, who presided in Tallahassee, Florida.

APPEARANCES

For Petitioner: Robert Minarcin, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite N801

Orlando, Florida 32801-1757

For Respondent: Norman Malinski, Esquire

Law Offices of Norman Malinski, P.A.

2875 Northeast 191st Street, Suite 508

Aventura, Florida 33180

STATEMENT OF THE ISSUE

Whether the Respondent committed the violations stated in

the Amended Administrative Complaint filed September 30, 2009,

and, if so, the penalty that should be imposed.

PRELIMINARY STATEMENT

In an eight-count Administrative Complaint dated March 2,

2009, the Department of Business and Professional Regulation,

Division of Real Estate ("Department"), charged Michael Anthony

Facendo with having violated Sections 475.623; 475.624(1), (2),

(4) and (14); and 475.6221(1), Florida Statutes, and the Uniform

Standards of Professional Appraisal Practice ("USPAP") (2006)

Record Keeping Section of the Ethics Rule; and USPAP Standards

Rules 1-1(c); 1-4(a) and (b); 2-1(a); and 2-2(b)(vi). The

charges related to an original and a corrected Uniform

Residential Appraisal Report ("Appraisal Report"), which

contained signature and effective dates of August 22, 2007. On

September 30, 2009, the Department filed a Motion to Amend

Administrative Complaint, in which it sought to correct a

scrivener's error and substitute reference to USPAP Standards

Rule 2-2(b)(viii) for USPAP Standards Rule 2-2(b)(vi) in

Count Eight of the Administrative Complaint. The motion was

granted in an order entered October 9, 2009, and the case

proceeded under the Amended Administrative Complaint dated

September 30, 2009.

The Department alleged the following facts in the Amended

Administrative Complaint to support the violations charged:

4. On or about August 22, 2007, Michael

Facendo . . . developed and communicated an

appraisal report (Report 1) for property

commonly known as 901 SW Worchester Lane,

Port St. Lucie, Florida 34953 (Subject

Property), and estimated its value as

$305,000.00[.] Report 1 was the report

received by the client and used in the

review appraisal. . . .

5. Respondent made the following errors and

omissions on Report 1:

A) Misstatement of the Subject

Property's zoning classification in the Site

section of Report 1;

B) Incorrect location of the Subject

Property in the map included in Report 1;

C) Incorrect legal description of the

Subject Property in the Subject section of

Report 1: and

D) Failure to verify the correct Room

Count for comparable sale 1 when there is a

discrepancy in the workfile documents.

6. On or about October 8, 2007, a review

appraisal (Review Appraisal) was conducted

on Report 1. . . .

7. Pursuant to the investigation,

Respondent provided a copy of his workfile

to the Department regarding the Subject

Property. . . .

8. The workfile contained a copy of

the appraisal report for the Subject

Property (Report 2), that differs from

Report 1. . . .

9. Report 2, which has a signature date

and effective date of July 22, 2007, [sic]

the same dates as Report 1, has the correct

zoning classifications for the Subject

Property.

10. Respondent made the following errors

and omissions on Report 2:

A) Incorrect location of the Subject

Property in the map included in Report 1;

B) Incorrect legal description of the

Subject Property in the Subject section of

Report 1: and

C) Failure to verify the correct Room

Count for comparable sale 1 when there is a

discrepancy in the workfile documents.

11. The workfile [prepared by Mr. Facendo]

lacks a true and complete copy of Report 1.

12. There is no documentation in the

workfile to support the FEMA information in

the Site section of Report 1 or Report 2.

13. There is no documentation in the

workfile to support the One-Unit Housing

data in the Neighborhood section of Report 1

or Report 2.

14. There is no documentation in the

workfile to support the Present Land Use

% data in the Neighborhood section of

Report 1 or Report 2.

15. There is no documentation in the

workfile to support the 88 comparable

properties currently offered for sale in the

subject neighborhood as listed in the Sales

Comparison section of Report 1 or Report 2.

16. There is no documentation in the

workfile to support the 72 comparable sales

in the subject neighborhood for the past

twelve months as listed in the Sales

Comparison section of Report 1 or Report 2.

17. There is no documentation in the

workfile to support the $3,000 Room Count

adjustment made to comparable sale 2 and

comparable sale 3 in the Sales Comparison

section of Report 1 or Report 2.

18. There is no documentation in the

workfile to support the $5,000 Garage

adjustment to comparable sale 2 in the Sales

Comparison section of Report 1 or Report 2.

19. There is no documentation in the

workfile to support the $30,000 Pool

adjustment to comparable sale 2 in the Sales

Comparison section of Report 1 or Report 2.

20. There is no documentation in the

workfile to support the $60,000 Opinion of

Site Value in the Cost Approach section of

Report 1 or Report 2.

21. The workfile lacks local builder's data

for the time frame that the Reports were

completed to justify the dwelling square

footage price in the Cost Approach section

of Report 1 or Report 2.

22. The workfile lacks dated Marshall and

Swift pages for the time frame that the

Reports was completed to justify the

dwelling square footage price in the Cost

approach section of the Report.

23. During the investigation it was learned

that Respondent failed to register his

business name with the Department.

24. During the investigation it was learned

that Respondent failed to ensure that his

trainee had the same business address as

Respondent. . . .

25. Respondent's business address is 13790

NW 4 Street, #101, Sunrise, Florida. The

appraisal was completed on a property

located in Port St. Lucie, Florida, which is

approximately 85 miles away.

Mr. Facendo timely disputed the material facts stated in

the Administrative Complaint and requested an administrative

hearing. The Department transmitted the matter to the Division

of Administrative Hearings for assignment of an administrative

law judge, and, pursuant to notice, the final hearing was held

on October 22, 2009.

At the hearing, the Department presented the testimony of

Dawn Luchik and Francois K. Gregoire; Petitioner's Exhibits 1

and 4 through 6 were offered and received into evidence.

Mr. Facendo testified in his own behalf, and Respondent's

Exhibits 1 and 2 were offered and received into evidence. At

the Department's request, official recognition was granted to

Chapter 475, Part II (2007) 1 and to Florida Administrative Code

Rule Chapter 61J1 (2007).

The one-volume transcript of the proceedings was filed with

the Division of Administrative Hearings on November 5, 2009.

The Department timely filed its proposed findings of fact and

conclusions of law. Mr. Facendo failed to file his proposed

findings of fact and conclusions of law timely. On December 18,

2009, Mr. Facendo filed a Motion for Extension of Time to File

Respondent's Proposed Recommended Order, in which he stated that

he did not obtain a copy of the transcript of the proceedings

until December 10, 2009. Mr. Facendo requested an extension

until December 22, 2009, for filing his proposed findings of

fact and conclusions of law. The Department filed a response in

opposition to the request. Having considered the grounds for

the motion and the arguments stated in the response in

opposition to the motion, the Motion for Extension of Time to

File Respondent's Proposed Recommended Order is granted, and

Mr. Facendo's Proposed Recommended Order, filed December 21,

2009, is accepted. The proposed findings of fact and

conclusions of law of both parties have, therefore, been

considered in the preparation of 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 findings of fact are made:

1. The Florida Real Estate Appraisal Board ("Board") is

the entity responsible for licensing, regulating, and imposing

discipline upon real estate appraisers operating in Florida.

See §§ 475.613(2) and .624, Fla. Stat. (2007).

2. The Department is the state agency responsible for

investigating complaints and, upon a finding of probable cause

by the Board, issuing administrative complaints and prosecuting

disciplinary actions involving real estate appraisers in

Florida. See § 455.225(1)(a), (4), and (6), Fla. Stat.

3. At all times pertinent to these proceedings,

Mr. Facendo was a state-certified real estate appraiser, having

been issued license number RD-2598, and his business office was

located in Plantation, Florida.

4. In August 2007, Mr. Facendo's office received a request

from University Capital Funding, a mortgage broker, for an

appraisal on property known as 901 Southwest Worchester Lane,

Port St. Lucie, Florida 34953 ("Worchester Lane property").

5. After receiving the request, Mr. Facendo consulted the

Multiple Listing Service with respect to the Worchester Lane

property and the neighborhood. Mr. Facendo then went to the

Worchester Lane property, measured the property, inspected the

interior and exterior of the property, and looked at the homes

that were comparable to the Worchester Lane property.

6. Mr. Facendo returned to his office and analyzed the

data he had collected during the site visit. He used print

sources and online services available in his office to verify

the flood zones, neighborhood composition, land sales, and other

information necessary to complete the appraisal. Mr. Facendo

prepared the Appraisal Report for the Worchester Lane property

and provided it to University Capital Funding. Mr. Facendo also

compiled a workfile containing documentation he used to develop

the Appraisal Report.

7. The Appraisal Report contained three errors: 2

Mr. Facendo included the incorrect zoning classification for the

Worchester Lane property, identifying it as RM-143, residential

multi-family, rather than the correct RS-2, residential; he

identified the wrong location for the Worchester Lane property

on the map included with the Appraisal Report, 3 and he failed to

include the lot number in the legal description of the property.

8. Mr. Facendo stated in the Appraisal Report that the

property was not in a FEMA (Federal Emergency Management

Association) special flood hazard area, and he referenced FEMA

Map # 12111C0290F, dated August 19, 1991. He did not include a

copy of the map in the workfile he compiled when preparing the

Appraisal Report.

9. Mr. Facendo included in the Appraisal Report

information regarding neighborhood characteristics, one-unit

housing trends, one-unit housing, and present land use

percentage. He indicated that the neighborhood was over

75 percent built-up and stable; that one-unit housing trends

showed that the supply and demand for housing in the

neighborhood were in balance, with marketing conditions

partially stable to declining, and time exposure typically

between three-to-six months; that the one-unit housing prices

ranged from a low of $188,000.00 for new housing to a high of

$450,000.00 for housing six years old, with a median of

$305,000.00 for housing three years old; and that the present

land use consisted of 80 percent one-unit housing and 20 percent

commercial. Mr. Facendo did not include in his workfile

documentation to support this information.

10. Mr. Facendo concluded that the value of the Worchester

Lane property was $305,000.00 when calculated under the Sales

Comparison Approach method. In the Appraisal Report,

Mr. Facendo identified 88 comparable properties currently for

sale in the neighborhood, ranging in price from $175,000.00 to

$360,000.00, and 72 comparable sales in the neighborhood within

the previous 12 months, ranging in price from $188,000.00 to

$450,000.00. Mr. Facendo did not include in his workfile

documentation to support the number of properties currently for

sale or the number of properties sold within the past 12 months.

11. Mr. Facendo concluded that the value of the Worchester

Lane property was $296,990.00 when calculated under the Cost

Approach to Value method. Mr. Facendo placed a value of

$60,000.00 on the property's home site. He calculated the

square footage replacement cost new using the cost estimator in

his online copy of the Marshall & Swift Residential Cost

Handbook and noted in the Appraisal Report that this was the

source of his cost data. Mr. Facendo also noted as a comment on

the cost approach that he used the Marshall & Swift Residential

Cost Handbook "& local builders [estimates]" as the sources of

the cost figures he used to estimate the value of the Worchester

Lane property using the cost approach. Finally, Mr. Facendo

also consulted the South Florida 2007 Blue Book Construction and

the 2007 National Building Cost Manual for cost data, but he did

not mention these sources in the Appraisal Report.

12. Mr. Facendo did not include in the workfile he

compiled for the Appraisal Report documentation to support his

opinion of site value, copies of the Marshall & Swift online

calculations of the replacement cost new, copies of the local

and national builder's data he used in his calculations, or

copies of the Marshall & Swift data to support the square

footage prices he used to calculate the value of the Worchester

Lane property.

13. Mr. Facendo signed the Appraisal Report on August 22,

2007, and noted on the Appraisal Report that it was effective

August 22, 2007.

14. In October 2007, JP Morgan Chase Bank, N.A., 4 ordered a

review of Mr. Facendo's August 22, 2007, Appraisal Report of the

Worchester Lane property. The review appraiser, John Nickerson,

prepared a One-Unit Residential Appraisal Field Review Report

("Review Appraisal"), which he signed and dated October 8, 2007.

In the review report, Mr. Nickerson opined that there were a

number of errors in Mr. Facendo's Appraisal Report, including

the zoning classification, the legal description, and the

location of the property. Mr. Nickerson also criticized the

comparable properties used by Mr. Facendo in the Sales

Comparison section of the Appraisal Report and the site value

assigned by Mr. Facendo in the Cost Approach section of the

Appraisal Report.

15. At some point, Mr. Facendo was advised by Chase Home

Lending of the results of Mr. Nickerson's Review Appraisal, and

he was provided with a copy of the report. 5 In a letter to Chase

Home Lending dated August 25, 2008, Mr. Facendo responded to the

concerns raised by Mr. Nickerson in the Review Appraisal about

Mr. Facendo's Appraisal Report. Mr. Facendo explained the basis

for his choice of comparable properties and for the value he

placed on the building site, and he discussed his reasons for

believing that the conclusions regarding comparable properties

and site valuation reached by Mr. Nickerson were flawed.

16. As directed by an employee of Chase Home Lending,

Mr. Facendo modified his August 22, 2007, Appraisal Report to

include the correct zoning classification of RS-2, residential.

Mr. Facendo was expressly directed by the employee of Chase Home

Lending not to change anything on the face of the original

Appraisal Report except for the zoning classification.

Mr. Facendo followed this direction, and he did not revisit the

Worchester Lane property or change any other information in the

original Appraisal Report. The corrected Appraisal Report was,

therefore, not a new appraisal report based on new information

gathered in August 2008 regarding the Worchester Lane property.

The corrected Appraisal Report was not effective in August 2008,

and did not supersede the original Appraisal Report of

August 22, 2007, except for the zoning classification

correction. 6

17. Mr. Facendo submitted the corrected Appraisal Report

on the Worchester Lane property to Chase Home Lending on or

about August 25, 2008, but he did not alter the original

signature date or effective date of August 22, 2007.

Mr. Facendo did not, however, include a copy of the original

Appraisal Report in the workfile that he transmitted to the

Department during the course of its investigation; the workfile

contained a copy of only the corrected Appraisal Report.

18. In signing the Appraisal Report, Mr. Facendo certified

and agreed that he had complied with the USPAP that were

effective when the report was prepared in August 2007.

19. The Ethics Rule of the USPAP (2006) provides in

pertinent part as follows:

Record Keeping

An appraiser must prepare a workfile for

each appraisal, appraisal review, or

appraisal consulting assignment. The

workfile must include:

• the name of the client and the

identity, by name or type, or 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; and

• all other data, 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.

20. USPAP (2006) Standards Rule 1-1(c) provides:

In developing a real property appraisal, an

appraiser must:

* * *

(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 affects the credibility of those

results.

21. USPAP (2006) Standards Rule 1-4(a) and (b) provides:

In developing a real property appraisal, an

appraiser must collect, verify, and analyze

all information necessary for credible

assignment results.

(a) When a sales comparison approach is

necessary for credible assignment results,

an appraiser must analyze such comparable

sales data as are available to indicate a

value conclusion.

(b) When a cost approach is necessary for

credible assignment results, an appraiser

must:

(i) develop an opinion of site value

by an appropriate appraisal method or

technique;

(ii) analyze such comparable cost data

as are available to estimate the cost new of

the improvements (if any); and

(iii) analyze such comparable data as

are available to estimate the difference

between the cost new and the present worth

of the improvements (accrued depreciation).

22. USPAP (2006) Standards Rule 2-1(a) provides:

Each written or oral real property appraisal

report must:

(a) clearly and accurately set forth the

appraisal in a manner that will not be

misleading[.]

23. USPAP (2006) Standards Rule 2-2(b)(viii) 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.[footnote

omitted.]

* * *

(b) The content of a Summary Appraisal

Report must be consistent with the intended

use of the appraisal and, at a minimum:

* * *

(viii) summarize the information analyzed,

the appraisal methods and techniques

employed, and the reasoning that supports

the analyses, opinions, and conclusions;

exclusion of the sales comparison approach,

cost approach, or income approach must be

explained.

CONCLUSIONS OF LAW

24. The Division of Administrative Hearings has

jurisdiction over the subject matter of this proceeding and of

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

Florida Statutes (2009).

25. In the Amended Administrative Complaint, the

Department seeks to suspend or revoke Mr. Facendo's appraiser's

certificate and to impose an administrative fine. Accordingly,

the Department must prove the charges against Mr. Facendo by

clear and convincing evidence. Department of Banking & Finance,

Div. of Securities & Investor Protection v. Osborne Stern & Co. ,

670 So. 2d 932, 933-34 (Fla. 1996)(citing Ferris v. Turlington ,

510 So. 2d 292, 294-95 (Fla. 1987)); Nair v. Department of

Business & Prof'l Regulation , 654 So. 2d 205, 207 (Fla. 1st DCA

1995).

26. In Slomowitz v. Walker , 429 So. 2d 797, 800 (Fla.

4th DCA 1983), the court defined clear and convincing evidence

as follows:

clear and convincing evidence requires that

the evidence must be found to be credible;

the facts to which the witnesses 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 belief or

conviction, without hesitancy, as to the

truth of the allegations sought to be

established.

Id. The Florida Supreme Court adopted the description of the

clear and convincing evidence standard of proof set forth in

Slomowitz in Inquiry Concerning a Judge No. 93-62 , 645 So. 2d

398, 404 (Fla. 1994), and the court in Westinghouse Electric

Corp., Inc. v. Shuler Bros., Inc. , 590 So. 2d 986, 988 (Fla.

1st DCA 1991), rev . denied , 599 So. 2d 1279 (1992)(citation

omitted), followed the Slomowitz test, adding the interpretive

comment that "[a]lthough this standard of proof may be met where

the evidence is in conflict, . . . it seems to preclude evidence

that is ambiguous."

27. In Counts One, Four, Five, Six, Seven, and Eight of

the Amended Administrative Complaint, the Department charged

Mr. Facendo with having violated Section 475.624(2) and (14),

Florida Statutes, 7 which provides in pertinent part:

The board may deny an application for

registration, licensure, or certification;

may investigate the actions of any appraiser

registered, licensed, or certified under

this part; may reprimand or impose an

administrative fine not to exceed $5,000 for

each count or separate offense against any

such appraiser; and may revoke or suspend,

for a period not to exceed 10 years, the

registration, license, or certification of

any such appraiser, or place any such

appraiser on probation, if it finds that the

registered trainee, licensee, or

certificateholder:

* * *

(2) Has been guilty of fraud,

misrepresentation, concealment, false

promises, false pretenses, dishonest

conduct, culpable negligence, or breach of

trust in any business transaction in this

state or any other state, nation, or

territory; has violated a duty imposed upon

her or him by law or by the terms of a

contract, whether written, oral, express, or

implied, in an appraisal assignment; has

aided, assisted, or conspired with any other

person engaged in any such misconduct and in

furtherance thereof; or has formed an

intent, design, or scheme to engage in such

misconduct and committed an overt act in

furtherance of such intent, design, or

scheme. It is immaterial to the guilt of

the registered trainee, licensee, or

certificateholder that the victim or

intended victim of the misconduct has

sustained no damage or loss; that the damage

or loss has been settled and paid after

discovery of the misconduct; or that such

victim or intended victim was a customer or

a person in confidential relation with the

registered trainee, licensee, or

certificateholder, or was an identified

member of the general public.

* * *

(14) Has violated any standard for the

development or communication of a real

estate appraisal or other provision of the

Uniform Standards of Professional Appraisal

Practice.

28. As a disciplinary statute, Section 475.624, Florida

Statutes, "must be construed strictly, in favor of the one

against whom the penalty would be imposed." Munch v. Department

of Prof'l Regulation, Div. of Real Estate , 592 So. 2d 1136, 1143

(Fla. 1st DCA 1992).

I. Violation of Section 475.624(2), Florida Statutes.

29. In Count One of its Amended Administrative Complaint,

the Department alleged: "Based upon the foregoing, Respondent

is guilty of fraud, misrepresentation, concealment, false

promises, false pretenses, dishonest conduct, culpable

negligence or breach of trust in any business transaction in

violation of Section 475.624(2), Florida Statutes." The

"foregoing" apparently was intended to encompass all of the

factual allegations in the Amended Administrative Complaint,

and, even though the violations charged in Count One were stated

in the disjunctive, the Department did not identify in the

Amended Administrative Complaint which of the prohibited actions

and/or conduct was at issue. In its Proposed Recommended Order,

however, the Department elected to pursue the charges of

culpable negligence, misrepresentation, and breach of trust in a

business transaction against Mr. Facendo. 8

A. Breach of trust

30. In the first sentence in paragraph 39 of its Proposed

Recommended Order, the Department asserts that Mr. Facendo

breached the trust of his client by, among other things,

misrepresenting the zoning classification of the Worchester Lane

property in the original Appraisal Report and misrepresenting

the location of the Worchester Lane property on the location map

in the original and corrected Appraisal Report. 9 Based on the

findings of fact herein, the Department has proven by clear and

convincing evidence that Mr. Facendo included the incorrect

zoning classification in the original Appraisal Report and

placed the Worchester Lane property in the wrong location on the

location map included with original and corrected Appraisal

Report. 10 These errors are not, however, sufficient to

establish, by clear and convincing evidence, that Mr. Facendo

violated Section 475.624(2) by committing a breach of trust in

his appraisal of the Worchester Lane property.

31. In Munch v. Department of Professional Regulation , 592

So. 2d 1136, 1143-44 (Fla. 1973), the court was concerned with a

disciplinary action against a real estate broker who was charged

with having violated Section 475.25(1)(b), Florida Statutes

(1989) by committing "fraud, misrepresentation, concealment,

false promises, false pretenses, dishonest dealing by trick,

scheme or device, culpable negligence or breach of trust in a

business transaction," language that is virtually identical to

that of Section 475.624(2), Florida Statutes. The court in

Munch stated:

It is clear that Section 475.25(1)(b) is

penal in nature. As such, it must be

construed strictly, in favor of the one

against whom the penalty would be imposed.

Holmberg v. Department of Natural Resources ,

503 So.2d 944 (Fla. 1st DCA 1987). Reading

the first clause of Section 475.25(1)(b)

(the portion of the statute which appellant

was charged with having violated in Count I

of the complaint), and applying to the words

used their usual and natural meaning, it is

apparent that it is contemplated that an

intentional act be proved before a violation

may be found. See Rivard v. McCoy , 212

So.2d 672 (Fla. 1st DCA), cert. denied, 219

So.2d 703 (Fla. 1968).

(Emphasis in original.) Therefore, to sustain the charge that

Mr. Facendo violated Section 475.624(2), Florida Statutes, by

committing a breach of trust, the Department must prove as an

element of the charge that Mr. Facendo had the intent to commit

the acts giving rise to the prohibited conduct.

32. Within the scope of the allegations in the Amended

Administrative Complaint, the Department has proven that

Mr. Facendo included the incorrect zoning classification in the

original Appraisal Report and identified the location of the

Worchester Lane property incorrectly on the location map

attached to the original and corrected Appraisal Report. The

Department did not present any evidence to establish that these

errors were material to the purpose of the Appraisal Report; the

Department's expert witness did not disagree with the valuation

of $305,000.000 that Mr. Facendo put on the Worchester Lane

property; and the Department did not present any evidence from

which it could be reasonably inferred that Mr. Facendo

intentionally included the two items of erroneous information in

the Appraisal Report.

33. The court in Munch , when considering disciplinary

action taken by the Florida Real Estate Commission against a

real estate broker for violation of those provisions of

Section 475.25(1)(b), Florida Statutes, pertinent to this

proceeding, stated:

Chapter 475 vests in the Florida Real Estate

Commission a broad discretionary power and

authority to supervise the privileged

business of real estate broker and to deal

firmly with those engaged in it, even to the

point of taking away their means of

livelihood by revocation or suspension of

license. But such potent administrative

weapons must always be reasonably and

cautiously, and even sparingly, utilized.

The administrative processes of the

Commission should be aimed at the dishonest

and unscrupulous operator, one who cheats,

swindles, or defrauds the general public in

handling real estate transactions. Accord

Pauline v. Borer , 274 So.2d 1 (Fla. 1973).

592 So. 2d at 1144-45. Similarly, the business of real estate

appraiser is a privileged business, and a real estate appraiser

owes a duty of care to both his clients and to the general

public. In this case, where the Department proved two minor

errors in Mr. Facendo Appraisal Report, neither of which was

shown to have affected the client's interests or to have

affected the validity of the appraised value of the property, it

must be concluded that the Department failed to prove by clear

and convincing evidence that Mr. Facendo is guilty of breach of

trust in a business transaction.

B. Culpable negligence and misrepresentation

34. In paragraph 39 of its Proposed Recommended Order, the

Department also asserts that Mr. Facendo committed culpable

negligence and misrepresentation

by failing to maintain the required

documentation in the work file; by stating

inconsistent quality of construction for the

Subject Property, in the use of good at

certain points and average at others in the

Reports; and by providing the client a copy

of Report 2 that was purported to be

developed, communicated and signed in August

of 2007, when the Respondent, in his

testimony at the hearing, stated that this

report was not signed, nor corrected until

August of 2008.

35. Based on the findings of fact herein, the Department

proved by clear and convincing evidence that Mr. Facendo failed

to include documentation required by the USPAP (2006) in his

workfile. This failure does not, however, constitute culpable

negligence in the preparation of the Appraisal Report or

misrepresentation of the information contained in that report.

36. The act of culpable negligence incorporates the notion

of wrongdoing in the sense that, to commit culpable negligence,

a person must act with reckless disregard of the interests of

another. See Department of Bus. & Prof's Regulation v. Cartaya ,

DOAH Case Nos. 04-1148PL and 04-1680PL, paragraphs 52-53

(Recommended Order Nov. 24, 2004)( citing Carrin v. State , 875

So. 2d 719, 721 (Fla. 1st DCA 2004). 11 Likewise, the act of

misrepresentation incorporates the notion of wrongdoing in that

it requires a person to make a false statement for the purpose

of inducing action or inaction on the part of another. See

Rocky Creek Retirement Properties v. Estate of Fox , 19 So. 3d

1105, 1110 (Fla. 2d DCA 2009)(Negligent misrepresentation

requires, among other elements, a false statement of material

fact made with the intent that another rely on the false

statement.). The proof offered by the Department falls far

short of showing that the omission from Mr. Facendo's workfile

of some of the documentation supporting his opinions and

conclusions in the Appraisal Report demonstrates either a

reckless disregard for the interests of his client, as required

to establish culpable negligence, or constitutes a false

statement, as required to establish misrepresentation. The

Department has, therefore, failed to prove that Mr. Facendo

committed culpable negligence or misrepresentation because of

this omission.

37. With respect to the second factual allegation upon

which the Department bases its charge that Mr. Facendo committed

culpable negligence and misrepresentation, the Amended

Administrative Complaint contains no allegation of an

inconsistency in Mr. Facendo's description of the quality of

construction of the Worchester Lane property. This allegation

appears only in the testimony of Mr. Gregoire, and it cannot,

therefore, be used by the Department as the basis for a

violation of Section 475.624(2), Florida Statutes, in this case.

See Cottrill , 685 So. 2d at 1372.

38. With respect to the third factual allegation upon

which the Department bases its charge that Mr. Facendo committed

culpable negligence and misrepresentation, the Department,

first, did not offer any proof that Mr. Facendo signed the

corrected Appraisal Report in August 2008. Although the

Department did prove by clear and convincing evidence that

Mr. Facendo submitted the corrected Appraisal Report to his

client on or about August 25, 2008, the Department did not

present any evidence to establish that Mr. Facendo committed any

wrongdoing in doing so. Based on the findings of fact herein,

Mr. Facendo followed his client's instructions and corrected the

zoning classification on the original Appraisal Report;

addressed other alleged errors in the original Appraisal Report

in the rebuttal letter dated August 25, 2009; and provided the

client with a copy of the original August 2007 Appraisal Report

containing the zoning classification correction. Consequently,

the Department has failed to prove by clear and convincing

evidence that Mr. Facendo's actions in correcting the zoning

classification in the original Appraisal Report and submitting

it to his client constituted culpable negligence or

misrepresentation.

39. Based on the foregoing discussion, the Department has

failed to prove that Mr. Facendo violated Section 475.624(2),

Florida Statutes, by committing culpable negligence,

misrepresentation, or breach of trust, and Count One of the

Amended Administrative Complaint should be dismissed.

II. Violation of Section 475.624(14), Florida Statutes.

40. In Counts Four, Five, Six, Seven, and Eight of the

Amended Administrative Complaint, the Department charged that

Mr. Facendo violated Section 475.624(14), Florida Statutes, by

violating "standard[s] for the development or communication of a

real estate appraisal," specifically, by violating the Record

Keeping Section of the Ethics Rule of the USPAP (2006);

Standards Rule 1-1(c) of the USPAP (2006); Standards Rule 1-4(a)

and (b) of the USPAP (2006); Standards Rule 2-1(a) of the

USPAP (2006); and Standards Rule 2-2(b)(viii) of the

USPAP (2006). As proof of these violations, the Department

presented a copy of the relevant USPAP (2006), which were

effective during the times relevant to these proceedings, and

the testimony of its expert witness, which was based on the

USPAP (2006).

41. Based on the findings of fact herein, the Department

proved by clear and convincing evidence that Mr. Facendo

violated the Record Keeping Section of the Ethics Rule of the

USPAP (2006) by failing to include in his workfile all of the

"data, information, and documentation necessary to support [his]

opinions and conclusions."

42. Based on the findings of fact herein, the Department

failed to prove by clear and convincing evidence that

Mr. Facendo violated Standards Rule 1-1(c) of the USPAP (2006)

by rendering appraisal services in a careless or negligent

manner because Mr. Facendo's including the incorrect zoning

classification, identifying the incorrect location of the

Worchester Lane property on the location map, and omitting the

lot number from legal description of the property did not

constitute a series of errors so serious that they undermined

credibility of the results of Mr. Facendo's appraisal.

43. Based on the findings of fact herein, the Department

failed to prove by clear and convincing evidence that

Mr. Facendo violated Standards Rule 1-4(a) of the USPAP (2006)

because, although the proof is sufficient to establish that

Mr. Facendo did not include a complete list of the comparable

sales data in the appraisal workfile, there was no evidence

except the conclusory and unsupported testimony of the

Department's expert witness that Mr. Facendo failed to analyze

properly the available comparable sales data to reach a

conclusion on value. In addition, although he criticized the

method by which Mr. Facendo reached his conclusion that the

Worchester Lane property was valued at $305,000.00 on

August 2007, the Department's expert witness did not disagree

with Mr. Facendo's valuation.

44. Based on the findings of fact herein, the Department

failed to prove by clear and convincing evidence that

Mr. Facendo violated Standards Rule 1-4(b) of the USPAP (2006)

because, although the proof is sufficient to establish that

Mr. Facendo did not include a copy of the source of his cost

data in the appraisal workfile, there was no evidence except the

conclusory and unsupported testimony of the Department's expert

witness that Mr. Facendo failed to develop the $60,000.00 site

value based on the appropriate appraisal method or technique.

The Department's proof that Mr. Facendo did not include in his

workfile documentation to support his conclusions, calculations,

and opinions is not sufficient to prove that Mr. Facendo failed

to perform the analyses required by this standard.

45. Based on the findings of fact herein, the Department

failed to prove by clear and convincing evidence that

Mr. Facendo's appraisal of the Worchester Lane property violated

Standards Rule 2-1(a) of the USPAP (2006) because the only

evidence presented by the Department to establish that the

appraisal was set forth in a misleading manner was the

conclusory and unsupported testimony of the Department's expert

witness.

46. Based on the findings of fact herein, the Department

failed to prove by clear and convincing evidence that

Mr. Facendo violated Standards Rule 2-2(b)(viii) of the

USPAP (2006). The only evidence presented by the Department to

establish that Mr. Facendo's Appraisal Report failed to

summarize the information analyzed and to present the reasoning

supporting his analyses, conclusions, and opinions is the

conclusory and unsupported testimony of the Department's expert

witness, who testified, without explication, that Standards

Rule 2-2(b)(viii) of the USPAP (2006) required Mr. Facendo to

explain in the addendum to the Appraisal Report his "rationale

for no adjustment for date of sale or time."

47. Finally, even though the Department has proven that

Mr. Facendo violated the Record Keeping Section of the Ethics

Rule of the USPAP (2006), this proof is insufficient to

establish that Mr. Facendo violated Section 475.624(14), Florida

Statutes. The 2006 edition of the USPAP was not applicable to

certified real estate appraisers doing business in Florida in

2007 and 2008. As recently concluded by Administrative Law

Judge Susan B. Harrell in Department of Business and

Professional Regulation v. Sigmond , DOAH Case No. 09-3685PL

(Recommended Order Jan. 12, 2010):

44. In Counts Three through Ten of the

Administrative Complaint, the Department

alleges that Mr. Sigmond has violated

Subsection 475.624(14), Florida Statutes, by

violating provisions of the USPAP (2005).

The Department is obligated to present

evidence of both the standard and the breach

of that standard. Purvis v. Department of

Professional Regulation , 461 So. 2d 134

(Fla. 1st DCA 1984). The Department

submitted in evidence the 2005 USPAP

standards.

45. Subsection 475.624(14), Florida

Statutes, does not state which version of

the USPAP standards is applicable. A

statute which incorporates standards such as

the USPAP standards can only be interpreted

to mean that the USPAP standards applicable

are the editions of the standards that are

in effect at the time of the enactment of

the statute. See Abbott Laboratories v.

Mylan Pharmaceuticals , 15 So. 3d 642 (Fla.

1st DCA 2009). Subsection 475.642(14),

Florida Statutes, is construed to refer the

USPAP standards in effect in 1991, the year

of the enactment of Subsection 475.642(14),

Florida Statutes. [ 12 ]

46. The Department has failed to present

evidence of the USPAP standards that were in

effect in 1991. The evidence presented

relates to the USPAP standards for 2005 and

cannot provide a basis for discipline for a

violation of Subsection 475.642(14), Florida

Statutes, because they have not been

incorporated into Section 475.628 and

Subsections 475.611(1)(o) and 475.642(14),

Florida Statutes. Counts Three through Ten

of the Administrative Complaint should be

dismissed.

See also Department of Bus. & Prof'l Regulation v. Lester , DOAH

Case No. 09-0642PL (Recommended Order Nov. 24, 2009); Department

of Bus. & Prof'l Regulation v. Otero , DOAH Case No. 05-1258PL

(Recommended Order Aug. 18, 2005).

48. Accordingly, on the basis of the reasoning in Sigmond ,

Counts Four through Eight of the Amended Administrative

Complaint should be dismissed.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Florida Real Estate Appraisal

Board enter a final order dismissing all counts of the Amended

Administrative Complaint dated September 30, 2009.

DONE AND ENTERED this 4th day of March, 2010, in

Tallahassee, Leon County, Florida.

___________________________________

PATRICIA M. HART

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 4th day of March, 2010.

ENDNOTES

1 / All references herein to the Florida Statutes are to the

2007 edition unless otherwise indicated.

2 / It is noted that no proof was offered with respect to the

allegations in paragraphs 17, 18, and 19 of the Amended

Administrative Complaint; and these allegations are, therefore,

deemed abandoned.

3 / The Department's expert witness, Francois Gregoire, testified

at the final hearing, however, that Mr. Facendo correctly

described the location of the Worchester Lane property in the

Neighborhood Boundary section of the Appraisal Report.

4 / Mr. Facendo testified that he believed the appraisal was, at

some point, forwarded to JP Morgan Chase Bank.

5 / The relationship between Chase Home Lending and JP Morgan

Chase Bank is not disclosed in the record, but it is presumed

that Chase Home Lending is a subsidiary of JP Morgan Chase Bank.

6 / In its Amended Administrative Complaint and its Proposed

Recommended Order, the Department has referred to the original

Appraisal Report and the corrected Appraisal Report as

"Report 1" and "Report 2" and has treated the original Appraisal

Report and the corrected Appraisal Report as two separate

reports for the purposes of the violations alleged. Because the

undersigned has found that the original and corrected Appraisal

Report are not two separate reports, reference is made in this

Recommended Order generally to the "Appraisal Report"; the

reports are referred to as the "original Appraisal Report" and

the "corrected Appraisal Report" when the context requires that

a distinction be made between the Appraisal Report that contains

the incorrect zoning classification and the Appraisal Report

that contains the corrected zoning classification.

7 / In Count Two of the Amended Administrative Complaint, the

Department charged Mr. Facendo with having violated

Sections 475.6221(1) and, therefore, Section 475.624(4), Florida

Statutes; in Count Three of the Amended Administrative

Complaint, the Department charged Mr. Facendo with having

violated Section 475.623 and, therefore, Section 475.624(1),

Florida Statutes. These charges were based on the allegations

in paragraphs 23 and 24 of the Amended Administrative Complaint.

The Department did not address these charges or allegations in

its Proposed Recommended Order; and it omitted from its proposed

Recommendation a recommendation that Mr. Facendo be found guilty

of the charges alleged in Counts Two and Three of the Amended

Administrative Complaint. The allegations in paragraphs

23 and 24 are, therefore, deemed abandoned, and Counts Two and

Three of the Amended Administrative Complaint should be

dismissed.

8 / Because the Department did not address any alleged violations

of Section 475.624(2), Florida Statutes, except those of

culpable negligence, misrepresentation, and breach of trust, it

has effectively abandoned the charges of fraud, concealment,

false promises, false pretenses, and dishonest conduct.

Mr. Facendo is, therefore, found not guilty of these prohibited

acts.

9 / The Department included several other purported

misrepresentations in the second sentence of paragraph 39 to

support its proposed conclusion that Mr. Facendo committed

breach of trust with respect to the Appraisal Report. The

Department asserted that Mr. Facendo "[1] misrepresented the

Neighborhood Housing Percentages in both Reports;

[2] misrepresented the Single Family price and age ranges in the

Neighborhood section of both Reports; [3] misrepresented the

Cost data in the Cost Approach section of both Reports; and

[4] misrepresented compliance with the Uniform Standards of

Professional Appraisal Practice in the Certifications of both

Report 1 and Report 2." These purported misrepresentations

cannot, however, support the charge that Mr. Facendo committed a

breach of trust in violation of Section 475.624(2), Florida

Statutes.

First, the only mention in the Amended Administrative

Complaint of items [1], [2], and [3], quoted above, was in the

context of the absence of documentation in Mr. Facendo's

workfile to support the information included in the relevant

sections of the Appraisal Report. There were no allegations in

the Amended Administrative Complaint that the referenced

information was incorrect in the Appraisal Report or that

Mr. Facendo had misrepresented any of this information. In

addition, there was no allegation in the Amended Administrative

Complaint related to item [4] quoted above. As a result, these

four asserted "misrepresentations" cannot, as a matter of law,

be used by the Department as the basis for a violation of

Section 475.624(2), Florida Statutes, in this case. See

Cottrill v. Department of Ins. , 685 So. 2d 1371, 1372 (Fla. 1st

DCA 1996)("Predicating disciplinary action against a licensee on

conduct never alleged in an administrative complaint or some

comparable pleading violates the Administrative Procedure

Act.").

Secondly, there is no persuasive evidence in the record to

establish that the neighborhood housing percentages, the single

family price and age ranges, or the cost data included in the

Appraisal Report are incorrect. The Department's expert

witness, Mr. Gregoire, testified that the information given by

Mr. Facendo for these items in the Appraisal Report was

incorrect, but this testimony was conclusory and not supported

by either testimony or documentary evidence contradicting the

information Mr. Facendo included in the Appraisal Report.

10 / In its Amended Administrative Complaint, the Department

alleged that Mr. Facendo included an incorrect legal description

of the Worchester Lane property. See Amended Administrative

Complaint, paragraphs 5(C) and 10(B). Mr. Facendo admitted in

his testimony at the final hearing that he had omitted the lot

number from the legal description of the property. The

Department did not, however, raise this factual issue in its

Proposed Recommended Order as a basis for its assertion that

Mr. Facendo committed a breach of trust. It will be presumed,

therefore, that the Department has abandoned this factual

allegation as a basis for a violation of Section 475.624(2),

Florida Statutes, and the sufficiency of the omission of the lot

number from the legal description of the Worchester Lane

property to support such a statutory violation will not be

addressed in this Recommended Order.

The Department also alleged in its Amended Administrative

Complaint that Mr. Facendo failed "to verify the correct Room

Count for comparable sale 1 when there is a discrepancy in the

work file documents." See Amended Administrative Complaint,

paragraphs 5(D) and 10(C). The Department did not, however,

present any evidence at the final hearing with respect to this

allegation. It will be presumed, therefore, that the Department

has abandoned this factual allegation as a basis for a violation

of Section 475.624(2), Florida Statutes.

11 / Certain portions of Administrative Law Judge John G. Van

Laningham's Recommended Order in Cartaya were rejected by the

Real Estate Appraisal Board in its Amended Final Order filed

May 22, 2006, but the paragraphs of the Recommended Order cited

were adopted.

12 / Subsection 475.611(1)(o), Florida Statutes, provides that

the definition of USPAP means the most recent standards adopted

by the Appraisal Standards Board of the Appraisal Foundation.

Section 475.628, Florida Statutes, requires that appraisers

comply with the USPAP standards. Based on the Abbott

Laboratories case, these two statutes must also be interpreted

to mean that the most recent standards refer to the standards

that were in effect at the time of the enactment of the

statutes.

COPIES FURNISHED:

Norman Malinski, Esquire

Law Offices of Norman Malinski, P.A.

2875 Northeast 191st Street, Suite 508

Aventura, Florida 33180

Robert Minarcin, Esquire

Department of Business and

Professional Regulation

400 West Robinson Street, Suite N801

Orlando, Florida 32801-1757

Reginald Dixon, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32300-0792

Thomas W. O'Bryant, Jr., Director

Division of Real Estate

400 West Robinson Street

Suite 802 North

Orlando, Florida 32801

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 should be filed with the agency that

will issue the final order in this case.