ALJDEC decisions subject to certification as final

19F-BD006-BNK · Arizona Department of Financial Institutions · 2019-05-22

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: May 8, 2019, at 1:00 p.m. APPEARANCES: The Arizona Department of Financial Institutions (“the Department”) was represented by Eric Schwarz, Esq., Assistant Attorney General; Coestervms.com, Inc. (“Respondent”) failed to appear. ADMINISTRATIVE LAW JUDGE: Diane Mihalsky _____________________________________________________________________

FINDINGS OF FACT Background and Procedure 1. Respondent is a corporation authorized to transact business in Arizona as an appraisal management company, License Number 40122. 2. The Department referred to the Office of Administrative Hearings (“OAH”), an independent state agency, for an evidentiary hearing on eleven complaints that the Department had received from appraisers whom Respondent had retained to perform appraisals but failed to pay for after the appraisals were performed and an email from Respondent’s surety company that it had cancelled Respondent’s surety bond.. 3. On March 13, the Department issued a Notice of Hearing and Complaint for Revocation of Registration, setting a hearing on May 8, 2019. The notice set forth the eleven complaints that the Department had received, described the 50 appraisals that Respondent had failed to pay for, and summarized the notice that the Department had received from Respondent’s surety company. The Department mailed the notice via certified mail and email to Respondent’s addresses of record. 4. A hearing was held on May 8, 2019. The Department submitted fifteen exhibits and presented the testimony of Kelly Leteijn, the Staff Investigator who was assigned to investigate the complaints. 5. Respondent did not request to appear telephonically and did not request that the hearing be continued. Respondent did not appear, through an authorized officer, employee, or attorney. Consequently, Respondent did not present any evidence to defend its license. Hearing Evidence 6. Ms. Leteijn testified that Respondent has been licensed by the Department as a Registered Appraisal Management Company since November 19, 2010, and that its license will expire on November 19, 2019.[1] 7. Ms. Leteijn testified that an appraisal management company is an entity that takes in appraisal orders from lenders and passes the orders on to independent appraisers. An appraisal management company must be licensed to do business in Arizona. 8. Ms. Leteijn testified that, in late September or early October, 2018, the Department started receiving complaints against Respondent from appraisers who had not been paid. The appraisers provided invoices and communications from Respondent regarding the appraisal engagements. Ms. Leteijn reached out to Respondent and received a delayed response, stating that Respondent was not in a position to respond directly to the complaint allegations, but that was insolvent and not accepting new orders for appraisals.[2] Ms. Leteijn testified that Respondent never denied owing money to the appraisers who had filed complaints with the Department. 9. Ms. Leteijn testified that she had prepared a summary of the complaints that the Department received from the eleven appraisers, setting forth each invoice, the amount of each invoice, and the date that the invoice had been transmitted to Respondent from each complaining appraiser.[3] 10. The Board submitted the complaints, invoices, and other documents that it had received from the eleven appraisers.[4] 11. Ms. Leteijn testified that Respondent had failed to pay a total of 50 invoices that had all been transmitted to Respondent more than 45 days before the Deparmtnet issued the Complaint for Revocation of Registration. Ms. Leteijn testified that Respondent never claimed that any of the appraisals for which it failed to pay were substandard or not prepared according to Respondent’s contract with the appraiser. 12. On January 22, 2019, the Department was received notification from International Fidelity Insurance Company (“International”) that, on November 15, 2018, it had cancelled Respondent’s $20,000.00 surety bond.[5] Ms. Leteijn testified that she contacted International and confirmed that the bond had not been reinstated. CONCLUSIONS OF LAW 1. The Superintendent of the Department is vested with the authority to regulate entities engaged in business as an appraisal management company and has the duty to enforce statutes and rules relating to appraisal management companies.[6] 2. The Notice of Hearing that the Department mailed to Respondent at its address of record was reasonable and it is deemed to have received notice of the hearing.[7] 3. The Department bears the burden of proof to establish that cause to sanction Respondent’s license by a preponderance of the evidence.[8] “A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.”[9] 4. The Department established that Respondent violated A.R.S. § 32- 3275[10] fifty times by failing to pay fifty invoices issued by eleven appraisers pursuant to their contracts with Respondent. 5. The Department established that Respondent failed to maintain a surety bond as required by A.R.S. § 32-3267(B).[11] 6. By failing to make any attempt to remedy the complaints or to attend the hearing, Respondent has shown that it cannot be regulated. 7. The Department has established grounds to revoke and impose a civil penalty against Respondent’s appraisal management company license under A.R.S. § 32-3678(1).[12] ORDER Based on the foregoing, on the effective date of the final order in this matter, IT IS ORDERED revoking License No. 40122 previously issued to Respondent Coestervms.com, Inc. IT IS FURTHER ORDERED imposing a civil penalty in the amount of $25,000.00 against Respondent Coestervms.com, Inc. 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, May 22, 2019.

/s/ Diane Mihalsky Administrative Law Judge

Transmitted electronically to:

Keith A. Schraad, Interim Director Arizona Department of Financial Institutions ----------------------- [1] See Exhibit 1. [2] See Exhibit 15. [3] See Exhibit 2. [4] See Exhibits 3 through 13. [5] See Exhibit 14. [6] See A.R.S. § 36-3601 et seq. [7] See A.R.S. §§ 41-1092.04; 41-1092.05(D). [8] See A.R.S. § 41-1092.07(G)(2); A.A.C. R2-19-119; see also Vazanno v. Superior Court, 74 Ariz. 369, 372, 249 P.2d 837 (1952). [9] Morris K. Udall, Arizona Law of Evidence § 5 (1960). [10] A.R.S. § 32-3675 provides that, “[e]xcept 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.” [11] A.R.S. § 32-3267(B) provides that “[t]he appraisal management company shall show proof of a surety bond of at least twenty thousand dollars but not more than fifty thousand dollars.” [12] A.R.S. § 32-3678(1) provides as follows: The superintendent may censure an appraisal management company, conditionally or unconditionally suspend or revoke any registration issued under this article or impose civil penalties not to exceed fifteen thousand dollars per violation if, in the opinion of the superintendent, an appraisal management company is attempting to perform, has performed or has attempted to perform any of the following acts: 1. Committing any act in violation of this article.

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Office of Administrative Hearings 1740 West Adams Street, Lower Level Phoenix, Arizona 85007 (602) 542-9826