ALJDEC decisions subject to certification as final

12F-A0024-BOA · Board of Appraisal · 2012-06-05

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 17, 2012, at 8:00 a.m. APPEARANCES: The Arizona State Board of Appraisal was represented by Jeanne Galvin, Esq., Assistant Attorney General; Respondent Appraiser Loft, L.L.C. did not appear. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT The Arizona State Board of Appraisal (“the Board”) is the state agency authorized pursuant to A.R.S. §§ 32-3601 through 36-3680, to regulate appraisal management companies (“AMCs”) in the State of Arizona. On or about September 22, 2011, the Board issued Registration No. 40020 to Appraiser Loft, L.L.C. (“Respondent”) that allows it to operate as an AMC in the State of Arizona. Registration No. 40020 will expire on July 29, 2013. The Board received the complaints at issue from licensed or certified independent appraisers with whom Respondent had contracted for the performance of real property appraisals. All of the complaints involved Respondent’s failure to pay the independent appraisers within forty-five days after the appraisal reports were transmitted to Respondent, contrary to the requirements of A.R.S. § 32-3675.[1] The Board referred the complaints to the Office of Administrative Hearings (“the OAH”), an independent agency, for an evidentiary hearing. On March 30, 2012, the Board issued a Complaint and Notice of Public Hearing, setting a hearing on May 17, 2012, at 8:00 a.m. to determine whether Respondent had violated any applicable statutory provision regulating AMCs. The Board sent via regular and certified mail copies of the Complaint and Notice of Public Hearing to Respondent at its address of record and to its agent for service of process. A hearing was held on May 17, 2012. The Board submitted twenty-four exhibits and presented the testimony of its Executive Director, Dan Pietropaulo. Mr. Pietropaulo testified that Respondent’s business headquarters was in San Diego, California, and that it was registered as an AMC in other states. Mr. Pietropaulo testified that he understood that Respondent was no longer in business. Respondent did not request to appear telephonically at the hearing and did not request that the hearing be continued. Although the start of the duly noticed hearing was delayed thirty minutes to allow Respondent additional travel time, Respondent did not appear, through an authorized member, employee, or attorney, and did not contact the OAH to request that the start of the hearing be further delayed. Consequently, Respondent did not present any evidence to defend its AMC registration. Case Nos. 12F-A0014-BOA, 12F-A0016-BOA, and 12F-0020-BOA On or about October 3, 2011, Respondent and the Board voluntarily entered into a Consent Agreement for Decree of Censure and Order of Probation (“Agreement”) as a means of resolving Case Nos. A0014, A0016, and A0020. The Agreement placed Respondent’s registration on probation and required Respondent to comply with the Board’s statutes governing AMCs, to demonstrate to the Board that it had resolved past problems with delinquent payments, and to file monthly logs to the Board that listed every Arizona appraisal fee that was delinquent beyond the statutorily mandated 45 days set forth in A.R.S. § 32-3675. Mr. Pietropaulo testified that Respondent did not comply with the Agreement because it committed additional violations of A.R.S. § 32-3675 and failed to file any monthly logs of those delinquent payments. Case No. 12F-A0024-BOA On or about July 27, 2011, Ken Harlow[2] filed a complaint to the Board about Respondent’s failure to pay for eight appraisal reports of real properties in Arizona that he had transmitted to Respondent between April 10, 2011, and May 10, 2011. The Board designated Dr. Harlow’s complaint as Case No. A0024. On August 2, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0024. Respondent’s Chief Operating Officer, Harpreet K. Makkar, sent a letter to the Board dated August 24, 2011, notifying it that on August 12, 2011, Respondent had paid $2,950.00 to Dr. Harlow to resolve his complaint. Case No. 12F-A0026-BOA On or about July 30, 2011, George A. Easton, on behalf of Advantage Appraisal, L.L.C., filed a complaint to the Board about Respondent’s failure to pay $75.00 for an appraisal report of real property in Arizona that he had transmitted to Respondent before May 14, 2011.[3] The Board designated Mr. Easton’s complaint as Case No. A0026. On August 16, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0026. Ms. Makkar sent a letter to the Board dated August 29, 2011, notifying it that on August 1, 2011, Respondent had paid $75.00 to Mr. Easton. Case No. 12F-A0029-BOA On or about August 17, 2011, Walter W. Reed filed a complaint to the Board about Respondent’s failure to pay $300.00 for an appraisal report of a real property in Arizona that he had transmitted to Respondent on June 22, 2011. Mr. Reed also notified the Board that he was concerned about whether Respondent would pay him $600.00 for two additional appraisal reports that he had transmitted less than 45 days earlier. The Board designated Mr. Reed’s complaint as Case No. A0029. On August 23, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting that it respond in writing to the complaint in Case No. A0029. Ms. Makkar sent a letter dated August 30, 2011, to the Board, notifying it that on the next day, Respondent would deliver a check to Mr. Reed in the amount of $900.00. Case No. 12F-A0033-BOA On or about October 4, 2011, Kelli McDowell, on behalf of Venture Appraisal, Inc., filed a complaint to the Board about Respondent’s failure to pay for appraisal reports of real properties in Arizona. According to Ms. McDowell’s complaint, Respondent had failed to pay $5,182.00 for invoices that were 60 days past due and $1,237.00 for invoices that were 45 days past due.[4] The Board designated Ms. McDowell’s complaint as Case No. A0033. On October 14, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0033. Respondent did not respond. Case No. 12F-A0034-BOA On or about October 2, 2011, Christine MacDonald filed a complaint to the Board about Respondent’s failure to pay a total of $1,650.00 for six appraisal reports of real properties in Arizona that had been transmitted between August 15, 2011, and September 16, 2011. The Board designated Ms. MacDonald’s complaint as Case No. A0034. On October 14, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0034. Respondent did not respond. The Board submitted Ms. MacDonald’s sworn affidavit that between August 2011, and September 2011, she had performed appraisal services in the amount of $1,650.00 and that as of May 1, 2012, Respondent had not paid her for the services. Case No. 12F-A0035-BOA On or about October 11, 2011, Jim Clevenger, on behalf of Atlas Appraisals, Inc., filed a complaint to the Board about Respondent’s failure to pay a total of $3,075.00 for ten appraisal reports of real properties in Arizona that had been transmitted between July 5, 2011, and September 27, 2011. The Board designated Mr. Clevenger’s complaint as Case No. A0035. On October 14, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0035. Respondent did not respond. Case No. 12F-A0036-BOA On or about October 10, 2011, Nick Lundbech filed a complaint to the Board about Respondent’s failure to pay a total of $11,605.00 for 41 appraisal reports of real properties in Arizona that had been transmitted between July 28, 2011, and October 1, 2011. The Board designated Mr. Lundbech’s complaint as Case No. A0036. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0036. Respondent did not respond. The Board submitted Mr. Lundbech’s sworn affidavit that before the end of September 2011, he had performed appraisal services in the amount of $11,605.00 and that as of May 10, 2012, Respondent had not paid him for the services. Case No. 12F-A0038-BOA On or about October 14, 2011, John Kosir, on behalf of Valley View Appraisal, L.L.C., filed a complaint to the Board about Respondent’s failure to pay a total of $785.00 for three appraisal reports of real properties in Arizona that had been transmitted between September 28, 2011, and October 3, 2011. The Board designated Mr. Kosir’s complaint as Case No. A0038. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0038. Respondent did not respond. The Board submitted Mr. Kosir’s sworn affidavit that between September 19, 2011, and October 3, 2011, he had performed appraisal services in the amount of $785.00 and that as of May 10, 2012, Respondent had not paid him for the services. Case No. 12F-A0039-BOA On or about October 14, 2011, Daniel L. Duvall, on behalf of NightOwl Appraisal Service, filed a complaint to the Board about Respondent’s failure to pay a total of $855.00 for five appraisal reports of real properties in Arizona that had been transmitted between September 15, 2011, and October 3, 2011. The Board designated Mr. Duvall’s complaint as Case No. A0039. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0039. Respondent did not respond. / / / / / / / / Case No. 12F-A0040-BOA On or about October 15, 2011, Jennifer Miller, on behalf of Solar State Appraisals, filed a complaint to the Board about Respondent’s failure to pay a total of $1,575.00 for seven appraisal reports of real properties in Arizona that had been transmitted between August 17, 2011, and September 30, 2011. The Board designated Ms. Miller’s complaint as Case No. A0040. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0040. Respondent did not respond. The Board submitted Ms. Miller’s sworn affidavit that she had performed appraisal services in the amount of $1,575.00 and that as of May 2, 2012, Respondent had not paid her for the services. Case No. 12F-A0041-BOA On or about October 14, 2011, Robert Swart filed a complaint to the Board about Respondent’s failure to pay a total of $3,897.00 for seventeen appraisal reports of real properties in Arizona that had been transmitted between December 18, 2010, and September 28, 2011. The Board designated Mr. Swart’s complaint as Case No. A0041. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0041. Respondent did not respond. Case No. 12F-A0042-BOA On or about October 17, 2011, Cathy King, on behalf of Deluxe Appraisal Services, filed a complaint to the Board about Respondent’s failure to pay a total of $1,650.00 for six appraisal reports of real properties in Arizona that had been transmitted between August 15, 2011, and September 21, 2011. The Board designated Ms. Miller’s complaint as Case No. A0042. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0042. Respondent did not respond. The Board submitted Ms. King’s sworn affidavit that she had performed appraisal services in the amount of $1,650.00 and that as of May 7, 2012, Respondent had not paid her for the services. Case No. 12F-A0043-BOA On or about October 19, 2011, Rachel Hammett, the office manager of Sun Point Appraisals, Inc., filed a complaint to the Board about Respondent’s failure to pay a total of $1,790.00 for six appraisal reports of real properties in Arizona that had been transmitted between July 8, 2011, and September 19, 2011. The Board designated Ms. Hammett’s complaint as Case No. A0043. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0043. Respondent did not respond. The Board submitted the sworn affidavit of Paul Johnson, a licensed/certified appraiser at Sun Point Appraisals, Inc., that he had performed appraisal services in the amount of $1,790.00 and that as of May 2, 2012, Respondent had not paid him for the services. Case No. 12F-A0044-BOA On or about October 20, 2011, Clinton Caffrey, on behalf of Gallatin Inspections, filed a complaint to the Board about Respondent’s failure to pay $450.00 for an appraisal report of a real property in Arizona that had been transmitted on August 4, 2011. The Board designated Mr. Caffrey’s complaint as Case No. A0044. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0044. Respondent did not respond. The Board submitted Mr. Caffrey’s sworn affidavit that he had performed appraisal services in the amount of $450.00 and that as of May 1, 2012, Respondent had not paid him for the services. / / / / / / / / Case No. 12F-A0045-BOA On or about October 11, 2011, Trish Bevilacqua, on behalf of GSB Appraisal Service, filed a complaint to the Board about Respondent’s failure to pay a total of $4,854.00 for sixteen appraisal reports of real properties in Arizona that had been transmitted between July 15, 2011, and October 3, 2011. The Board designated Ms. Bevilacqua’s complaint as Case No. A0045. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0045. Respondent did not respond. The Board submitted the sworn affidavit of Glenn S. Bevilacqua, a licensed/certified appraiser at GSB Appraisal Service, that between January 31, 2011, and October 3, 2011, he had performed appraisal services in the amount of $5,054.00[5] and that as of May 3, 2012, Respondent had not paid him for the services. Case No. 12F-A0046-BOA On or about October 18, 2011, Japheth Wentzel, on behalf of TDI Appraisal Services, L.L.C., filed a complaint to the Board about Respondent’s failure to pay $5,895.00 for 24 appraisal reports of real properties in Arizona that had been transmitted between July 8, 2011, and September 19, 2011. The Board designated Mr. Wentzel’s complaint as Case No. A0046. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0046. Respondent did not respond. The Board submitted Mr. Wentzel’s sworn affidavit that he had performed appraisal services in the amount of $5,745.00 and that as of May 1, 2012, Respondent had not paid him for the services.[6] / / / / / / / / Case No. 12F-A0047-BOA On or about October 25, 2011, Michael Batterton, on behalf of Batterton Appraisal & Consulting, filed a complaint to the Board about Respondent’s failure to pay $1,108.00 for four appraisal reports of real properties in Arizona that had been transmitted between August 5, 2011, and August 29, 2011. The Board designated Mr. Batterton’s complaint as Case No. A0047. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0047. Respondent did not respond. Case No. 12F-A0048-BOA On or about October 26, 2011, Chad M. Carter, on behalf of the Carter Appraisal Group, filed a complaint to the Board about Respondent’s failure to pay $210.00 for an appraisal report of a real property in Arizona that had been transmitted on October 6, 2011. The Board designated Mr. Carter’s complaint as Case No. A0048. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0048. Respondent did not respond. The Board submitted the sworn affidavit of Bobbi-Jo Carter, a licensed/ certified appraiser at Carter Appraisal Group, that she had performed appraisal services in the amount of $210.00 and that as of May 10, 2012, Respondent had not paid her for the services. Case No. 12F-A0049-BOA On or about October 26, 2011, David Zeigler, on the behalf of Alternative Appraisals, P.L.L.C., filed a complaint to the Board about Respondent’s failure to pay $785.00 for four appraisal reports of real properties in Arizona that had been transmitted between August 17, 2011, and October 6, 2011. The Board designated Mr. Zeigler’s complaint as Case No. A0049. On October 27, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0049. Respondent did not respond. The Board submitted Mr. Ziegler’s sworn affidavit that he had performed appraisal services in the amount of $785.00 and that as of May 10, 2012, Respondent had not paid him for the services. Case No. 12F-A0050-BOA On or about October 28, 2011, Jeffrey C. Patch, on the behalf of Tucson Real Estate Appraisal, filed a complaint to the Board about Respondent’s failure to pay $3,550.00 for thirteen appraisal reports of real properties in Arizona that had been transmitted between July 18, 2011, and September 16, 2011.[7] The Board designated Mr. Patch’s complaint as Case No. A0050. On November 3, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0050. Respondent did not respond. The Board submitted Mr. Patch’s sworn affidavit that he had performed appraisal services in the amount of $3,550.00 and that as of May 2, 2012, Respondent had not paid him for the services. Case No. 12F-A0051-BOA On or about November 1, 2011, Jason Axtell filed a complaint to the Board about Respondent’s failure to pay $1,265.00 for five appraisal reports of real properties in Arizona that had been transmitted between August 4, 2011, and September 1, 2011. The Board designated Mr. Axtell’s complaint as Case No. A0051. On November 3, 2011, the Board sent via regular and certified mail a letter to Respondent at its address of record, requesting it to respond in writing to the complaint in Case No. A0051. Respondent did not respond. The Board submitted Mr. Axtell’s sworn affidavit that he had performed appraisal services in the amount of $1,265.00 and that as of May 4, 2012, Respondent had not paid him for the services. CONCLUSIONS OF LAW 1. The Board has personal and subject-matter jurisdiction of these consolidated matters under A.R.S. § 32-3661 et seq. A.R.S. § 32-3679 authorizes this hearing. A.R.S. § 32-3678 authorizes the Board to discipline an AMC that has committed any act in violation of the Board’s statutes. 2. The Complaint and Notice of Public Hearing that the Board mailed to Respondent at its address of record was reasonable, and Respondent is deemed to have received the Notice of Hearing.[8] 3. The Board established, as summarized in Finding of Fact Nos. 11 through 68, that Respondent violated A.R.S. § 32-3675 at least 181 times by failing to pay twenty-one different independent appraisers’ invoices for appraisals within 45 days of the date that the appraisals were transmitted to Respondent. 4. The Board established that Respondent willfully violated the October 3, 2011 Agreement, as summarized at Finding of Fact Nos. 8 through 10, by violating A.R.S. § 32-3675 at least 181 times and by failing to submit logs of delinquent payments. The Board has thereby established cause to revoke Respondent’s AMC registration under A.R.S. § 32-3631(A)(8).[9] 5. A.R.S. § 32-3678(1) authorizes the Board to impose a civil penalty not to exceed $15,000.00 per statutory violation. Factors justifying the civil penalty include Respondent’s failures to respond to or to make any effort to resolve the eighteen complaints that were made after October 1, 2011, as noted in Findings of Fact Nos. 20 through 68, or to appear at the duly noticed hearing to offer any evidence in mitigation of the penalty. The eighteen complaints concerned a total of $51,418.00 that Respondent failed to pay for 171 appraisal reports. A civil penalty in the amount of $5,000.00 is appropriate for each of Respondent’s 171 violations of A.R.S. § 32- 3675 in which it not only failed to pay for an appraisal report within the statutory time frame, but failed to pay any amount whatsoever at any time. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Board’s order, it revoke Appraisal Management Company Registration No. 40020 previously issued to Respondent Appraiser Loft, L.L.C. It is further recommended that the Board require Respondent to pay civil penalties in the total amount of $855,000.00 for the 171 violations of A.R.S. § 32-3675 that Respondent did not dispute and made no attempt to remedy. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification. Done this day, June 6, 2012.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Dan Pietropaulo, Executive Director Board of Appraisal ----------------------- [1] A.R.S. § 32-3675 provides as follows: Except in cases of breach of contract or substandard performance of services, each appraisal management company shall make payment to an independent appraiser for the completion of an appraisal or valuation assignment within forty-five days after the date on which the independent appraiser transmits or otherwise provides the completed appraisal or valuation study to the appraisal management company or its assignee. [2] The return address on the e-mailed complaint was “Dr. Ken Harlow.” The record in this matter does not contain Dr. Harlow’s education or credentials or the reason for the honorific. [3] The record does not reveal the exact date that Mr. Easton transmitted the report to Respondent. According to the e-mails that Mr. Easton provided with his complaint, Respondent assigned the appraisal on March 9, 2011. Mr. Easton’s first e-mail to Respondent to inquire about payment was dated May 14, 2011. [4] Ms. McDowell’s complaint did not set forth the number of appraisal reports that she had performed to generate the invoiced amounts. Since the invoices were due at different times, this recommended decision will assume that Ms. McDowell prepared for and transmitted to Respondent at least two appraisal reports. [5] The total of the invoices that Ms. Bevilacqua attached to her complaint was $4,854.00. The record does not reveal the reason for the different amount in Mr. Bevilacqua’s affidavit. [6] The record does not show why the amount set forth in Mr. Wentzel’s affidavit did not correspond with the amount in his complaint. [7] The text of Mr. Patch’s e-mail complaint referred only to the assignment dates, not to the dates that he transmitted completed reports to Respondent. The latest assignment date was September 9, 2011. Mr. Patch attached to his complaint copies of invoices to Respondent for the completed assignments. The date of the invoice for the completed September 9, 2011 assignment was September 16, 2011. The Administrative Law Judge infers that Mr. Patch transmitted the appraisal reports to Respondent on or shortly before the dates of his invoices. [8] See A.R.S. §§ 41-1092.04; 41-1092.05(D); 32-3679(C); see also A.R.S. §§ 32-3661(B)(9) and 32-3666 (requiring an AMC to execute an irrevocable consent to service of process as a condition of registration). [9] A.R.S. § 32-3631(A)(8) provides as follows: The rights of an applicant or holder under a license or certificate as a state licensed or state certified appraiser may be revoked or suspended or the holder of the license or certificate may otherwise be disciplined in accordance with this chapter on any of the grounds set forth in this section. The board may investigate the actions of a state licensed or state certified appraiser and may revoke or suspend the rights of a license or certificate holder or otherwise discipline a state licensed or state certified appraiser for any of the following acts or omissions: . . . . 8. Wilfully disregarding or violating any of the provisions of this chapter or the rules of the board for the administration and enforcement of this chapter.

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