ALJDEC - Licensing
24A-006-FIN · Department of Insurance and Financial Institutions - Financial · 2024-05-28
IN THE OFFICE OF ADMINISTRATIVE HEARINGS
In the Matter of the Appraiser License of:
PETER M. MANNING
Certified General Real Estate Appraiser
License No. 31054
Respondent.
No. 24A-006-FIN
ADMINISTRATIVE LAW JUDGE DECISION
HEARING: May 09, 2024 at 9:0 0AM.
APPEARANCES: Assistant Attorney General Zachary Howard, Esq. appeared on behalf of the Arizona Department of Insurance and Financial Institutions (“Department”) with Jeffery Rahn as a witness. No appearance(s) by or on behalf of Peter M. Manning (“Respondent”).
ADMINISTRATIVE LAW JUDGE: Jenna Clark.
EXHIBITS ADMITTED INTO EVIDENCE: The Notice of Hearing and Department Exhibits 1-4 were admitted into the evidentiary record.
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Having heard the evidence and testimony and having considered the record in this matter, the undersigned Administrative Law Judge hereby makes the following Findings of Fact and Conclusions of Law and issues the following Recommended Order to the Director of the Department.
FINDINGS OF FACT
Background and Procedure
The Department was created and enabled by the State of Arizona to administer enumerated State laws by protecting the public interest through licensure and regulation of the consumer lender profession.
On April 17, 2001, the Department issued Certified General Appraiser No. 31054 to Respondent. Respondent’s license was last renewed on August 15, 2023, and is set to expire on April 30, 2025.
Hearing Evidence
The Department called Jeffery Rahn as a witness. The substantive evidence of record is as follows:
On or about April 25, 2021, Financial Asset Services, Inc. hired Respondent to perform an appraisal on residential property located at 2145 S. Hogan Ln. Cottonwood, Arizona 86326 (“Hogan Property”), for Federal Housing Administration (“FHA”) financing.
On or about April 29, 2021, Respondent performed an appraisal on the Hogan Property.
On August 05, 2021, a complainant against Respondent’s license was received regarding the Hogan Property appraisal (“Complaint No. 2021-DFI-0517”). Specifically, Complaint No. 2021-DFI-0517 alleged that on June 22, 2021, Respondent was sent correspondence regarding deficiencies in the Hogan Property report, and warned that said deficiencies were in violation of Uniform Standards of Professional Appraisal Practice (“USPAP”) and FHA pamphlet, section 4000.1, but that Respondent only replied "Cancel this order and remove my name from approved list," instead of attempting to correct the identified deficiencies or return payment for his service(s). As a result, the Department opened an investigation into the confirmable facts of Complaint No. 2021-DFI-0517 and to review Respondent’s related workfile.
On December 08, 2022, Department investigator Jeffery Rahn (“Invesigator Rahn”) issued an investigatory report that included the following determinations, in pertinent parts:
Respondent failed to provide the Department with a true copy of the Hogan Property report. The Department had to obtain a copy from the complainant.
Respondent failed to provide the Department with a complete workfile. A complete copy of the final signed appraisal report was missing, as was a plat map and the dimensions of the subject property’s lot.
The Hogan Property report lacked an accurate zoning determination and was erroneously classified as “Single Family Resid,” when county recording documents classified it as R1-35.
The Hogan Property report lacked an active listing and pending sale.
No original photographs of comparables were included in Respondent’s workfile. Multiple Listing Service (“MLS”) photographs were used instead.
No legal description was attached to the Hogan Property report. No clear assumption was stated regarding any physical deficiencies or adverse conditions related to the property. The report failed to provide reconciliations of the available sales to assist the reader on how the value conclusion was derived. Non-market transaction was used in developing the report and did not disclose closing document numbers for sales, and failed to provide discussion or calculations to indicate how size adjustments were determined when the subject property was located on an acreage and the comparisons used were located on smaller residential lots.
On December 09, 2022, the Department issued a Letter of Disciplinary Action to Respondent.
On December 19, 2022, Respondent requested an Informal Settlement Conference (“ISC”). Although the parties came to an agreement and Respondent complied in part by paying assessed fine(s), Respondent failed to uphold several educational terms. By the date the Notice of Hearing was issued on March 27, 2024, Respondent had not supplied the Department with sufficient proof that he had completed any of the educational terms he had originally agreed to during the ISC.
Additional Evidence
USPAP Standards of Professional Practice: Ethics Rule – Conduct provides, in pertinent part, that an appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests. An appraiser must not communicate assignment results with the intent to mislead or to defraud; and must not use or communicate a report or assignment results known by the appraiser to be misleading or fraudulent.
USPAP Scope of Work Rule provides, in pertinent part, that for each appraisal an appraiser must identify the problem to be solved; determine and perform the scope of work necessary to develop credible assignment results; and disclose the scope of work in the report. Scope of Work includes, but is not limited to the extent to which the property is identified; the extent to which tangible property is inspected; the type and extent of data researched; and the type and extent of analyses applied to arrive at opinions or conclusions.
USPAP Record Keeping Rule provides, in pertinent part, that an appraiser must prepare a workfile for each appraisal. A workfile must be in existence prior to the issuance of any report or other communication of assignment results. A written summary of an oral report must be added to the workfile within a reasonable time after the issuance of the oral report. The workfile must include the name of the client and the identity, by name or type, of any other intended users; true copies of all written reports, documented on any type of media; summaries of all oral reports or 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 USPAP. A workfile must be made available by the appraiser when required by a state appraiser regulatory agency or due process of law. An appraiser who willfully or knowingly fails to comply with the obligations of [this rule] is also in violation of the Ethics Rule.
Standards Rule 1-1 provides that in developing a real property appraisal, an appraiser must (a) be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal, (b) not commit a substantial error of omission or commission that significantly affects an appraisal, and (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.
Standards Rule 1-2 provides that in developing a real property appraisal, an appraiser must (e) identify, from sources that the appraiser reasonable believes to be reliable, the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal, including (i) its location and physical, legal, and economic characteristics; (ii) the real property interest to be valued; (iii) any personal property, trade fixtures, or intangible assets that are not real property but are included in the appraisal; (iv) any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of a similar nature; and (v) whether the subject property is a fractional interest, physical segment, or partial holding.
Standards Rule 1-2 provides that in developing a real property appraisal, an appraiser must (f) identify any extraordinary assumptions necessary in the assignment. An extraordinary assumption may be used in an assignment only if (i) the extraordinary assumption is required to properly develop credible opinions and conclusions.
Standards Rule 1-4 provides that 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.
Standards Rule 1-6 provides that in developing a real property appraisal, an appraiser must (a) reconcile the quality and quantity of data available and analyzed within the approaches used.
Standards Rule 2-1 provides that 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, (b) contain sufficient information to enable the intended user(s) of the appraisal to understand the report properly; and (c) clearly and accurately disclose all assumptions, extraordinary assumptions, hypothetical conditions, and limiting conditions used in the assignment.
Standards Rule 2-2 provides that (a) the contents of an Appraisal Report must be appropriate for the intended use of the appraisal and, at a minimum (iv) contain information, documents, and/or exhibits sufficient to identify the real estate involved in the appraisal, including the physical, legal, and economic property characteristics relevant to the assignment; and (x)(1) provide sufficient information to indicate that the appraiser compiled with the requirements of Standard 1 by summarizing the appraisal methods and techniques employed.
Closing Arguments
In closing, the Department argued that it had sustained its burden of proof and established that Respondent’s Hogan Property report failed to comply with several appraiser rules and regulations and Arizona law. As such, the Department beseeched the Tribunal to issue an Order suspending Certified General Real Estate Appraiser License No. 31054 until Respondent provides sufficient evidence of the following:
Fifteen (15) hours of corrective education courses within six (6) months of the Final Order issued in this matter; specifically, (1) a four (4) hour course for USPAP compliance, (2) a five (5) hour course for Data Verification, and (3) a six (6) hour Business Practices and Ethics course to be provided to the Department within three (3) weeks of completion of each course.
CONCLUSIONS OF LAW
The Department was created and enabled to administer certain laws of the State of Arizona by protecting the public interest through the regulation of financial institutions and enterprises.
The Director of the Department is vested with the authority to regulate all persons engaged in real estate appraisal and has the duty to enforce statutes and rules relating to these activities. The matter was properly brought before OAH for adjudication.
The Notice of Hearing the Department mailed to Respondent’s address of record is sufficient, and Respondent is deemed to have received notice of the hearing in this matter. Because the Department mailed all correspondence to Respondent in the same manner and failed to receive any mail returned as undeliverable, Respondent is deemed to have received all correspondence regarding this matter from the Department as well.
The Department bears the burden of proof to establish that cause to sanction Respondent’s license by a preponderance of the evidence. Respondent bears the burden to establish factors in mitigation of the penalty and affirmative defenses by the same evidentiary standard.
“A preponderance of the evidence is such proof as convinces the trier of fact that the contention is more probably true than not.” A preponderance of the evidence is “[t]he greater weight of the evidence, not necessarily established by the greater number of witnesses testifying to a fact but by evidence that has the most convincing force; superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other.”
Ariz. Rev. Stat. § 32-3610 adopts USPAP as the standards for appraisal practice in the State of Arizona.
Ariz. Rev. Stat. § 32-3631(A)(7) provides, in pertinent part, that the rights of a state-certified appraiser may be revoked or suspended for being negligent or incompetent in developing an appraisal, in preparing an appraisal report, or in communicating an appraisal.
Ariz. Rev. Stat. § 32-3632(B)(1) provides that the Department may recoup reasonable attorney fees, costs, and expenses associated with a formal administrative hearing from an appraiser if it sustains its burden of proof and prevails on the merits of the case.
Ariz. Rev. Stat. § 32-3635(A) provides, in pertinent part, that a state-certified appraiser shall comply with the standards of professional appraisal practice.
Statutes shall be liberally construed to affect their objects and to promote justice. In interpreting a statute, “[w]e first consider the language of the statute and, if it is unclear, turn to other factors, including ‘the statute’s context, subject matter, historical background, effects, consequences, spirit, and purpose.”
Statutes should be interpreted to provide a fair and sensible result. “In applying a statute its words are to be given their ordinary meaning unless the legislature has offered its own definition of the words or it appears from the context that a special meaning was intended.”
The Tribunal is required to apply equitable principles when rendering decisions. The application of equity entails offering a remedy to avoid an unconscionable or unjust result.
The material facts in the case at bar are clear.
It is clear from the record that Respondent violated Ariz. Rev. Stat. § 32-3610; specifically, USPAP Standards of Professional Practice: Ethics Rule – Conduct, Scope of Work Rule, Record Keeping Rule, Standards Rule 1-1(a-c), Standards Rule 1-2(e)(i) and (f)(i), Standards Rule 1-4(a), Standards Rule 1-6(a), Standards Rule 2-1(a-c), and Standards Rule 2-2(a)(iv) and (a)(x)(i), which establish grounds for discipline under Ariz. Rev. Stat. §§ 32-3631(A)(7) and 32-3635(A).
Therefore, the only issue in dispute is whether Respondent raised one or more sufficient justifications or excuses for failing to issue the Hogan Property report to Financial Asset Services, Inc. in compliance with USPAP. This is an affirmative defense that Respondent bears the burden to establish. Here, Respondent did not sustain his burden. There is no evidence in the record that excuses or otherwise justifies Respondent’s conduct and/or lack of performance on the Hogan Property appraisal. Moreover, Respondent’s absence from these police proceedings evince his unwillingness to submit to the Department’s regulatory structure.
Because the Department has established Respondent’s violation(s) of Ariz. Rev. Stat. §§ 32-3610, 32-3632(B)(1), and 32-3635(A), the Department has also established cause to discipline Certified General Appraiser No. 31054 pursuant to Ariz. Rev. Stat. § 32-3631(A)(7).
RECOMMENDED ORDER
Based on the foregoing,
IT IS ORDERED that five days after the effective date of the Final Order in this matter, based on the totality of violations in this matter, Respondent Peter M. Manning, holder of Certified General Real Estate Appraiser License No. 31054, be suspended indefinitely until satisfactory evidence is received by the Department to establish that Respondent has completed fifteen (15) hours of corrective education courses within six (6) months of the Final Order issued in this matter; specifically, (1) a four (4) hour course for USPAP compliance, (2) a five (5) hour course for Data Verification, and (3) a six (6) hour Business Practices and Ethics course. All such evidence shall be provided to the Department within three (3) weeks of completion of each course.
It is further ORDERED that the Department require Respondent to tender reimbursement of reasonable attorney fees and related costs pursuant to Ariz. Rev. Stat. § 32-3632(B)(1).
It is further ORDERED that if Respondent fails to pay the entire amount of fees and costs on or before 180 days following the effective date of the Final Order in this matter, the Department shall revoke Certified General Real Estate Appraiser License No. 31054, effective on such deadline date.
NOTICE
Pursuant to Ariz. Rev. Stat. § 41-1092.08(I), the licensee may accept the Administrative Law Judge Decision by advising the Office of Administrative Hearings in writing not more than ten (10) days after receiving the decision. If the licensee accepts the Administrative Law Judge Decision, the decision shall be certified as the Final Decision by the Office of Administrative Hearings.
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 forty (40) days from the date of that certification.
Pursuant to Ariz. Admin. Code R4-46-306.01 Respondent may submit a written request for rehearing to the Department pursuant to guidelines outlined in Ariz. Rev. Stat. § 41-1092.09, specifying the reason for the request. It is not necessary to request a rehearing prior to filing an appeal to Superior Court.
Done this day, May 28, 2024.
Office of Administrative Hearings
/s/ Jenna Clark
Administrative Law Judge
Transmitted by either mail, e-mail, or facsimile to:
Barbara D. Richardson, Director
c/o Ana Starcevic, Paralegal
Deian Ousounov, Chief Financial Deputy Director
Allena Carraveta Regulatory Legal Affairs Officer
Tammy Seto, Assistant Director
Nancy Inserra Regulatory Compliance Officer
Jefferey Rahn, Staff Investigator – Appraisal Investigations
Arizona Department of Insurance and Financial Institutions, Complainant
100 N. 15th Ave., Ste. 261
Phoenix, AZ 85007-2630
[email redacted]
[email redacted]
Zachary Howard, Esq., Assistant Attorney General
Office of the Attorney General, Counsel Complainant
2005 N. Central Ave.
Phoenix, AZ 85004
[email redacted]
[email redacted]
Peter M. Manning, Respondent
5244 S. Hadron
Mesa, AZ 85212
[email redacted]
By: OAH Staff