Arkansas Appraiser Licensing and Certification Bd. v. Fletcher

ARKANSAS APPRAISER LICENSING AND
CERTIFICATION BOARD v. W.F. FLETCHER

96-660                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered November 18, 1996


1.   Administrative law & procedure -- ex parte communication
     forbidden. -- Under Ark. Code Ann.  25-15-209 (Repl. 1996)
     and subject to certain exceptions, members or employees of an
     agency assigned to render a decision or to make proposed
     findings of fact or conclusions of law in any adjudication are
     forbidden to communicate with any person or party in
     connection with any issue of fact, or with any party or his
     representative in connection with any issue of law.

2.   Administrative law & procedure -- proof of ex parte
     communication required. -- Violations of Ark. Code Ann.  25-
     15-209(a) must be established by proof of the existence and
     content of the alleged ex parte communication.

3.   Administrative law & procedure -- no evidence of ex parte
     communication -- communications between agency members not
     prohibited. -- The supreme court concluded that, based on the
     record, the trial court's finding that a business relationship
     between two members of appellant Arkansas Appraiser Licensing
     and Certification Board violated Ark. Code Ann.  25-15-209(a)
     was clearly erroneous; there was simply no evidence of the
     existence or content of an ex parte communication from which
     the trial court could have found a violation of Ark. Code Ann.
      25-15-209(a); moreover, communications between agency
     members are not prohibited  pursuant to Ark. Code Ann.  25-
     15-209(b).

4.   Administrative law & procedure -- review of agency decisions -
     - substantial evidence supported appellant board's decision
     that appellee's appraisal report violated statute. -- The
     supreme court reviews agency decisions to determine if there
     is substantial evidence to support them; the court concluded
     that there was substantial evidence to support appellant
     board's decision that appellee's appraisal report violated the
     disciplinary provisions of Ark. Code Ann.  17-14-206 (Repl.
     1995).

5.   Appeal & error -- record cannot be supplemented by statements
     made in brief. -- The record cannot be contradicted or
     supplemented by statements made in the brief.

6.   Administrative law & procedure -- courts can take judicial
     notice of published state agency regulations -- judicial
     notice of private foundation's standards not allowed. --
     Courts can take judicial notice of state agency regulations
     that are duly published; because an appraisal foundation was
     not a state agency, the supreme court could not take judicial
     notice of its standards; the court's review was impeded by the
     failure to include a summary of the relevant standards in the
     abstract.

7.   Administrative law & procedure -- suspension or revocation of
     real-estate appraiser's license. -- Under Ark. Code Ann.  17-
     14-206(4), the Arkansas Appraiser Licensing and Certification
     Board may, upon its own motion and after notice and hearing,
     suspend or revoke a license and impose a fine for any actions
     demonstrating untrustworthiness, incompetence, dishonesty,
     gross negligence, material misrepresentation, fraud, or
     unethical conduct in any dealings governed by the relevant
     statutes or regulations.

8.   Administrative law & procedure -- substantial evidence
     supported appellant board's decision fining appellee and
     suspending appraiser's license -- order reinstated. -- Where
     testimony revealed that appellee's actions demonstrated
     untrustworthiness, dishonesty, material misrepresentation, and
     unethical conduct when preparing his appraisal report, the
     supreme court concluded that there was substantial evidence to
     support appellant board's decision that Ark. Code Ann.  17-
     14-206 had been violated; the supreme court reinstated the
     board's order fining appellee and suspending his appraiser's
     license.


     Appeal from Mississippi Circuit Court, Osceola District; David
Burnett, Judge; reversed.
     Winston Bryant, Att'y Gen., by:  Virginia H. Castleberry,
Asst. Att'y Gen., for appellant.
     Mike Bearden Law Firm, by: Mike Bearden, for appellee.

     Donald L. Corbin, Justice.
     Appellant, Arkansas Appraiser Licensing and Certification
Board, appeals the order of the Mississippi County Circuit Court
reversing the Board's decision to suspend the license of Appellee,
W.F. Fletcher.  The circuit court's decision was based on an
alleged ex parte communication between two Board members. 
Resolution of this appeal requires an interpretation of Ark. Code
Ann.  25-15-209 (Repl. 1996); our jurisdiction is pursuant to Ark.
Sup. Ct. R. 1-2(a)(17)(vi) (as amended by per curiam order July 15,
1996).  We find merit to the first of the Board's three arguments
and therefore reverse.
     Appellee is a licensed real-estate appraiser who prepared an
appraisal report of certain duplex apartments located in Osceola,
Arkansas, for Tommy Neal to use in obtaining a loan on the subject
real estate.  The Board held an administrative hearing and then
entered an order in which it found that Appellee's appraisal report
failed to comply with Uniform Standards of Professional Appraisal
Practice 1-4(b) and 2-1(a).  The Board concluded that such failure
to comply with those standards resulted in violations of Ark. Code
Ann.  17-14-206(1), (4) (Repl. 1995), Ark. Code Ann.  17-14-
305(a) (Repl. 1995), and Board Regulation I(O).  The Board fined
Appellee $250.00 and suspended his license for nine months to be
followed by a probationary period of six months.  The Board also
required Appellee to complete a course in the Uniform Standards of
Professional Appraisal Practice (USPAP) before the end of his
probationary period.
     Appellee sought judicial review of the Board's decision in
circuit court pursuant to Ark. Code Ann.  25-15-212 (Repl. 1996)
and Ark. Code Ann.  17-14-205 (Repl. 1995).  The circuit court
conducted a hearing and entered an order reversing the Board's
decision because there had been an ex parte communication between
Board members in violation of section 25-15-209 that created an
appearance of impropriety, if not actual impropriety, and because
the Board's decision was not supported by substantial evidence, but
was arbitrary, capricious, and an abuse of discretion.  This appeal
followed.
     The Board's first point on appeal is a challenge to the trial
court's finding that section 25-15-209(a) was violated.  The Board
contends there was no evidence of an ex parte communication in the
record and, therefore, the trial court had no evidence from which
to conclude that section 25-15-209(a) had been violated.  We agree
that the record is void of any evidence that section 25-15-209 was
violated.  
     Section 25-15-209 provides that members or employees of an
agency assigned to render a decision or to make proposed findings
of fact or conclusions of law in any adjudication shall not
communicate with any person or party in connection with any issue
of fact, or with any party or his representative in connection with
any issue of law.  There is absolutely no evidence in this record
whatsoever to support the trial court's finding that section 25-15-
209 was violated.  For the sake of clarity in understanding our
decision, we recite the circuit court's findings in their entirety:
          1.  This Court has jurisdiction over the parties and
     the subject matter, and this appeal is properly before
     the Court.

          2.  The complaint made against the Petitioner
     [Appellee] was originated by another appraiser from
     Blytheville, Arkansas, who was not a party to the
     appraisal in question, to Mike Pyron, a member of the
     Board.  That based on the complaint made to Mike Pyron,
     an investigation was initiated by the Board on its own
     motion, and another Board member, namely, Larry Clark,
     was chosen to review the appraisal in question and act as
     a witness at the Board hearing.  That Respondent
     [Appellant] has admitted in its Brief that Mr. Pyron and
     Mr. Clark, at the time of the investigation and hearing,
     had a business relationship, although Mr. Pyron worked in
     Little Rock, and Mr. Clark worked in Jonesboro.

          3.  The Court finds that the communications between
     the Board members mentioned above is a violation of the
     Administrative Procedure Act and constitutes ex parte
     communications, in violation of ACA  25-15-209.

          4.  The ex parte communications between the Board
     members named hereinabove tainted the entire proceeding
     against the Petitioner [Appellee], and there is an
     appearance of impropriety, if not actual impropriety, as
     a result of said ex parte communications.

          5.  The actions of the Board members as set forth
     hereinabove constitutes an abuse of discretion, and the
     decision made by the Board was not supported by
     substantial evidence of record, and was arbitrary and
     capricious.

          6.  The decision by the Arkansas Appraiser Licensing
     and Certification Board, which was entered on July 21,
     1994, should be reversed, and the Complaint filed against
     the Petitioner [Appellee] should be dismissed with
     prejudice, in that the substantial rights of Petitioner
     [Appellee] were prejudiced because the administrative
     findings, inferences, conclusions, and decisions are not
     supported by substantial evidence of record, and,
     further, are arbitrary, capricious, and characterized by
     an abuse of discretion.

          7.  The Petitioner [Appellee] should be awarded his
     costs in filing this action.  

          IT IS SO ORDERED.

     Based on the trial court's order, it is clear that the trial
court thought a business relationship between two Board members
amounted to an ex parte communication prohibited by section 25-15-
209.  There is nothing in that statute that prohibits business
relationships between agency members.  To the contrary, it
prohibits communications about issues of fact or law relating to a
particular adjudication proceeding.  Moreover, section 25-15-209(b)
specifically provides that agency members may communicate with each
other.  Thus, while there is evidence that a business relationship
did indeed exist between Board members Pyron and Clark, there is no
evidence whatsoever that the two members ever discussed issues of
fact or law in Appellee's case with other persons as is required by
section 25-15-209.
     Our review of the record indicates that Board member Larry
Clark testified at the hearing before the Board.  He stated that
the Board asked him to review the appraisal report at issue to see
if it complied with industry standards, and he concluded that it
did not comply with industry standards in numerous respects.  When
asked if he knew how the report came to the Board's attention, he
stated that he did not have direct knowledge, but he understood it
was called to the attention of Board member Mike Pyron by another
appraiser in Northeast Arkansas, Ron Cardwell.  Board member Mike
Pyron did not testify at the Board's hearing, although he was
present in his capacity as a Board member.  Appellee testified at
the Board's hearing, but did not offer anything on the subject of
the business relationship or ex parte communications between Pyron
and Clark.
     Our review of the record indicates further that, at the
hearing in circuit court, Appellee was allowed to present
additional evidence on the alleged ex parte communication.  This
additional evidence consisted of testimony from Appellee and Jim
Martin, Executive Director of the Board.  Appellee testified that
subsequent to the hearing before the Board, he asked Ron Cardwell
why he had complained to the Board, and that Cardwell responded
that if Appellee had not done the appraisal in question, Cardwell
would have been able to do it, and it therefore cost Cardwell money
for Appellee to be in the appraisal business.  Appellee did not,
however, offer any further testimony as to any ex parte
communications between Pryon and Clark.  Executive Director Martin
testified that Clark and Pyron had a business relationship at one
time in the Jonesboro area, but that he had no knowledge of any
discussions between Board members without Appellee being present. 
Martin testified that Cardwell's name did not come to his attention
until the hearing before the Board.  Martin testified further that
this action began when the Board filed its own complaint against
Appellee and sent him notice of the complaint and upcoming hearing. 
Martin stated that the Board's complaint was the result of both
Pyron's letter to him asking for an investigation of the appraisal
report and his own investigation that revealed that the comparable
sales listed in the appraisal did not exist.  Finally, Martin
testified that Clark participated in the Board's hearing as a
witness, but did not take part in the decision-making process.  
     On appeal, appellee relies heavily on Clark's testimony at the
Board's hearing that, although he did not have direct knowledge of
who the appraiser was that called this to the Board's attention, he
understood it to be Cardwell.  Appellee argues that from this
testimony one can infer Pyron and Clark communicated about his
case.  Appellee relies further on the fact that Cardwell's identity
was not made known to Appellee until the Board's hearing.  He uses
this fact to promote the inference that Pyron knew Cardwell's
motivation and adopted that motivation in pursuing the
investigation.
     Appellee's argument is mistaken in two respects.  First,
Arkansas case law clearly contemplates that violations of section
25-15-209(a) be established by proof of the existence and content
of the alleged ex parte communication.  Arkansas Alcoholic Beverage
Control Div. v. Cox, 306 Ark. 82, 811 S.W.2d 305 (1991); Madden v.
U.S. Associates, 40 Ark. App. 143, 844 S.W.2d 374 (1992).  In both
of the cited cases, there was evidence of the existence and content
of ex parte communications.  In Cox, there was testimony by the
agency members themselves as to the existence and content of the ex
parte communications.  See Cox, 306 Ark. at 84, 811 S.W.2d at 306-
07.  In Madden, a transcript of the tape-recorded ex parte
discussion was introduced into the record.  See Madden, 40 Ark.
App. at 145-48, 844 S.W.2d  at 375-77.  Here, there is no evidence
of the existence and content of any ex parte communication, and
Appellee essentially acknowledges as much when he argues that the
existence and content of the alleged ex parte communication can be
inferred from the testimony in this case.  Second, even assuming
without deciding that inferences of communications rather than
evidence of their existence and content are sufficient to establish
violations of section 25-15-209(a), this record is not sufficient
to establish the two inferences Appellee suggests.  Section 25-15-
209(b) expressly allows communications between agency members. 
Thus, even assuming the first inference Appellee asks us to draw is
true, that Clark and Pyron communicated about Cardwell's oral
complaint to Pyron, such a communication is not prohibited by
section 25-15-209(a) because it is a communication between agency
members.  As regards the second inference Appellee asks us to draw,
that Pyron adopted the alleged "eliminate-the-competition"
motivation of Cardwell, Pyron's letter to Martin expressly negates
such an inference.  Pyron stated in his letter to the Board that:
     As a member of our Licensing Board and in the interest of
     protection of the public and our assurance to the
     financial community that licensees recognized by our
     Board are of the highest integrity possible and operate
     in a totally ethical manner.  I feel the concerns
     expressed warrant further investigation. 
     In summary, we conclude that based on this record the trial
court's finding that a business relationship between Clark and
Pyron violated section 25-15-209(a) was clearly erroneous.  There
is simply no evidence of the existence or content of an ex parte
communication from which the trial court could have found a
violation of section 25-15-209(a).  Moreover, communications
between agency members are not prohibited pursuant to section 25-
15-209(b).
     Because we have concluded that no ex parte communication
occurred in this case, and consequently that no violation of
section 25-15-209(a) occurred, we need not address the Board's
second point for reversal concerning whether a violation of section
25-15-209(a) alone requires reversal or whether Appellee is
required to demonstrate prejudice.  
     The Board's third point for reversal is a request to reinstate
its decision because it was supported by substantial evidence.
Appellee does not address this argument in his brief; rather, he
claims it is unnecessary to do so because there is sufficient
evidence of the alleged ex parte communication.
     The Board's order states that Appellee's appraisal report
fails to comply with USPAP 1-4(b) and 2-1(a) and that such failure
to comply constitutes a violation of section 17-14-206(1), (4),
section 17-14-305(a), and Board Regulation I(O).  We review agency
decisions to determine if there is substantial evidence to support
them.  Arkansas Appraiser Licensing and Certification Bd. v. Biles,
320 Ark. 110, 895 S.W.2d 901 (1995).  We conclude there is
substantial evidence to support the Board's decision that
Appellee's appraisal report violated section 17-14-206.   
     We cannot address the issue of whether the USPAP and section
17-14-305, which refers to the USPAP, were violated because of a
deficiency in the abstract.  The abstract does not contain a
summary of USPAP 1-4(b) and 2-1(a), although the abstract does
contain a summary of Regulation I(O), which provides that the Board
adopts by reference the USPAP.  Although the argument portion of
the Board's brief contains the missing Standards, the record cannot
be contradicted or supplemented by statements made in the brief. 
Bice v. Hartford Accident & Indem. Co., 300 Ark. 122, 777 S.W.2d 213 (1989).
     Courts can take judicial notice of state agency regulations
that are duly published.  Grable v. State, 298 Ark. 489, 769 S.W.2d 9 (1989) (citing Seubold v. Fort Smith Special Sch. Dist., 218 Ark.
560, 237 S.W.2d 884 (1951)).  The Board's regulations are duly
published, and as already mentioned, provide in Section I(O) that
"the 'Uniform Standards of Professional Appraisal Practice' (USPAP)
as published and amended by the Appraisal Foundation from time to
time" are adopted by reference.  However, the Board's regulations
as published do not contain the USPAP.  Because the Appraisal
Foundation is not a state agency, we cannot take judicial notice of
those Standards.  Thus, our appellate review is impeded by the
abstract's failure to include a summary of USPAP 1-4(b) and 2-1(a). 
Furthermore, because section 17-14-305 refers to USPAP, we can only
review that part of the Board's order finding that section 17-14-
206 was violated.
     Section 17-14-206(4) provides that the Board may, upon its own
motion and after notice and hearing, suspend or revoke a license
and impose a fine for "[a]ny actions demonstrating
untrustworthiness, incompetence, dishonesty, gross negligence,
material misrepresentation, fraud, or unethical conduct in any
dealings subject to this chapter or these regulations[.]"  The
following testimonies from Board member Clark and Appellee at the
Board's hearing provide substantial evidence to support the Board's
finding that section 17-14-206 was violated.  
     At the hearing before the Board, Board member Clark testified
that he found numerous problems with the subject appraisal:  the
appraisal did not reveal how the land value was determined; the
comparable units had square footages that were smaller than the
appraised property and that there was no statement in the report as
to how Appellee arrived at the square footages; there was no
statement as to how the estimated rent for the appraised unit was
determined; there were post improvements that were not reviewed;
the ownership history of the appraised property was not included;
the purpose of the report was not included; there was no analysis
of why a higher Gross Rent Multiplier was used on the appraised
unit than was used on the comparable units; the client's objective
and function of the report was not included; and the report needed
additional addendums explaining the aforementioned problems.  
Clark stated that one of the most serious violations was that the
report listed comparable sales that were not in fact sales at all.
     At the hearing before the Board, Appellant stipulated that the
three comparable sales listed in the appraisal report were not
sales at all.  Appellee testified and admitted that, based on the
standards adopted in Arkansas, he should not have done this
appraisal the way he did.  In his defense, Appellee stated that his
report was not misleading because he verbally disclosed the
fictitious sales to his client and his client's lender.
     Clark's testimony and Appellee's testimony reveal that
Appellee's actions demonstrated untrustworthiness, dishonesty,
material misrepresentation, and unethical conduct when preparing
his appraisal report.  Accordingly, we conclude there is
substantial evidence to support the Board's decision that section
17-14-206 was violated, and we reinstate the Board's decision
fining Appellee and suspending his appraiser's license, as those
penalties are authorized in section 17-14-206.
     The order of the circuit court is reversed, and the order of
the Board is reinstated.