Rebecca Chandler v. Arkansas Appraiser Licensing and Certification Board

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Judge Karen R. Baker  DIVISION I  CA07­193  December 12, 2007  REBECCA CHANDLER  APPELLANT  v.  AN APPEAL FROM PULASKI COUNTY  CIRCUIT COURT  [No. CV 2003­5908]  ARKANSAS APPRAISER LICENSING HONORABLE JAY MOODY,  AND CERTIFICATION  BOARD  CIRCUIT JUDGE  APPELLEE  AFFIRMED  Appellant Rebecca Chandler, a certified residential appraiser, appeals from an order  of  the  Pulaski  County  Circuit  Court  affirming  an  order  by  appellee  Arkansas  Appraiser  Licensing & Certification Board. The Board suspended Chandler’s license for six months,  to be followed by a six­month probationary period. The Board also ordered Chandler to pay  1  a civil penalty of $2,000 and complete two remedial courses and examinations.  Chandler  raises three points for reversal. We affirm.  Background 1  We remanded Chandler’s first appeal to the Board to make sufficient findings to  allow  proper  review  of  its  actions.  Chandler  v.  Arkansas  Appraisers  Licensing  and  Certification Bd., 92 Ark. App. 423, 214 S.W.3d 861 (2005).  The Board received a March 28, 2001, letter from the Arkansas Securities Department  requesting review of several appraisals that Chandler prepared for Guaranty Lending, Inc.,  resulting from the Securities Department’s investigation into Guaranty, together with a letter  to the Securities Department from another appraiser, Tom Ferstl. The Board also received  a referral from Fannie Mae concerning one of Chandler’s appraisals.  On May 31, 2002, the Board served an order and notice  of hearing on Chandler,  alleging  that  Chandler  had  violated  certain  provisions  of  the  Uniform  Standards  of  Professional  Appraisal  Practice  (Standards).  Arkansas  Code  Annotated  section  2  17­14­305(a)(1) (Repl. 2001) requires that appraisers comply with the Standards.  Among  other  things,  the  Standards  require  that  the  appraiser  not  commit  a  substantial  error  of  omission or commission that significantly affects an appraisal; 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 affect  the credibility of those results; analyze any current listing of the property, if available to the  appraiser  in  the  normal  course  of  business;  and  analyze  any  sales  within  one  year  for  residential  property.  In  addition,  an  appraiser  must  clearly  and  accurately  set  forth  the  appraisal  in  a  manner  that  will  not  be  misleading  and  contains  sufficient  information  to  enable the intended user to understand the report properly. The Board conducted a hearing  on May 20, 2003.  The Evidence 2  The Board has also adopted the Standards as part of its rules by reference.  2  Jim Martin, the Board’s executive director, testified that the Board’s investigation was  prompted by the letter from the Securities Department and another letter from Ferstl. He said  that  the  normal  procedure  was  to  notify  an  appraiser  within  a  reasonable  time  that  a  complaint had been filed. He admitted that Chandler was not promptly notified because the  Securities Department indicated that they would not proceed until the FBI completed its  investigation into Guaranty. Martin stated that the Board did likewise and did not notify  Chandler,  despite  a  “mandate”  that  the  Board  should  not  allow  complaints  to  remain  unresolved for more than one year. He said that he considered the FBI’s involvement to be  an unusual circumstance. After a meeting with two FBI agents in May 2002, Martin said that  the Board was allowed to proceed with its investigation of Chandler. Martin stated that, after  a preliminary investigation and a response from Chandler’s attorney, two Board members  found probable cause to employ investigators to review Chandler’s appraisals at issue. This  review was completed in February 2003, and Martin said that the  decision was made to  proceed with a hearing before the full Board.  Jay Hall, a licensed appraiser engaged by the Board to review three of Chandler’s  appraisals,  testified  that  he  conducted  his  review  in  accordance  with  the  Standards.  Regarding the appraisal of 1023 South Madison, he stated that Chandler failed to note a  garage in her appraisal, failed to notice settlement problems, and misstated that the windows  were  wooden  when  they  were  aluminum.  In  his  opinion,  this  resulted  in  Chandler’s  committing a substantial omission that significantly affected her appraisal. He also stated that  Chandler further violated the Standards by failing to disclose to Fannie Mae sales data on the 3  comparables used in the appraisal. Hall stated that, because of the comparables Chandler  used, her valuation was higher that it should have been and, thus, misleading. On cross­  examination, he admitted  that his review contained mistakes, such as his noting that the  central heat and air did not work when only the central air was inoperable. He also noted that  Chandler’s report listed a gravel driveway while his report listed a concrete driveway when,  in reality, it is a concrete driveway covered with gravel.  In his review of Chandler’s appraisals of 1602 Welch and 2909 John Barrow Road,  Hall  stated  that  Chandler’s  appraisals  were  rendered  in  a  careless  or  negligent  manner  because she made a series of errors that, when considered in the aggregate, would affect the  credibility of the appraisal. He stated that Chandler’s effective age of each home was too low  and that the comparables used were not representative of the subject properties. He admitted  that he was not able to inspect the interiors of either subject property. Hall pointed out other  problems with the comparables. He admitted that the passage of time between the appraisal  and  the  review  is  a  factor  in  the  accuracy  of  the  review.  Hall  also  stated  that  Chandler  violated the Standards by listing, but failing to analyze, the $58,000 sales price on the Welch  Street property.  Susan Benson, the other appraiser engaged by the Board, testified that she reviewed  Chandler’s appraisals of 1305 Booker, 5008 West 31st Street, and 5120 West 31st Street in  accordance  with  the  Standards  after  obtaining  data  from  the  relevant  time  period.  She  concluded that Chandler did not analyze all of the sales contracts concerning the Booker  property.  She  also  noted  that  Chandler  used  comparables  that  were  in  superior 4  neighborhoods to the subject property and that this would significantly affect the appraisal.  Concerning Chandler’s  appraisals  of  the  West  31st  Street  properties,  Benson  stated  that  Chandler again used comparables from superior neighborhoods. She noted that it was a “high  crime  area,”  which  reduces  property  value.  She  noted  that  Chandler  failed  to  report  a  fireplace on one comparable or a basement on another but stated that these omissions would  not affect the credibility of Chandler’s reports. She also stated that Chandler’s effective age  for  the  homes  was  too  low  and  that  she  failed  to  properly  analyze  neighborhood  characteristics.  Although she testified that she was familiar with the Fannie Mae guidelines, Benson  stated  that  she  did  not  consider  them  applicable  in  conducting  her  reviews.  She  also  described the neighborhoods as “high crime” even though Fannie Mae guidelines prohibit  the use of terms that could be considered racial stereotypes. She admitted that she did not  inspect the interiors of the homes. In her opinion, Chandler’s comparables from superior  neighborhoods resulted in a higher value being shown and were thus misleading.  During  her  testimony,  Chandler  stated  that  she  believed  that  her  rights  had  been  violated and that she was not given the opportunity to informally discuss the matter prior to  proceeding to a hearing. She stated that, during the time covered by the investigation, she  was under pressure because of family and professional obligations but that she conducted  approximately 750 appraisals in 2000. She was able to complete such a large number of  appraisals with the assistance of five appraisers whom she was mentoring and training. She  stated that she personally inspected five of the six properties under scrutiny, the Welch Street 5  property being inspected by one of her trainees. She also described her usual practice in  obtaining data for an appraisal. She stated that she has changed some of her methods as a  result of the investigation. Chandler stated that she was familiar with the Standards and the  Fannie  Mae  guidelines  and  that  she  tries  not  to  use  comparables  that  do  not  meet  those  guidelines.  She  denied  that  Guaranty  put  pressure  on  her  that  her  appraisals  be  for  a  minimum amount.  Chandler stated that she believed her appraisals to be credible but admitted to making  mistakes by not including all relevant sales history. She also stated that the review appraisers  also made mistakes in their reports, including violation of federal law. As an example, she  admitted to not analyzing the sales contracts on the subject properties, which she said is an  obvious violation of the standards. Other examples of mistakes she made included a mistake  in the cost approach to the appraisal on 5120 West 31st Street and by not reporting all sales  history  as  required  by  the  Standards.  She  also  conceded  that  pictures  of  some  of  the  comparables showed that they appeared to be in better condition than the subject properties.  The Board found Chandler guilty of violating the Standards and imposed punishment.  Following this court’s remand, the Board held another hearing on February 14, 2006, and  adopted more specific findings of fact. Those findings explained in great detail the problems  revealed with each of Chandler’s appraisals at issue. The final finding was that Chandler had  provided  her  client  with  appraisals  containing  misleading  statements,  omissions,  and  inconsistencies. The findings were prepared by Jim Martin from the notice sent to Chandler  in May 2002. The Board also adopted the same punishment it had previously imposed — 6  suspension of Chandler’s license for six months, to be followed by a six­month probationary  period, payment of a civil penalty of $2,000, and completion of two remedial courses and  examinations. Chandler again sought judicial review. The circuit court affirmed the Board,  and this appeal followed.  Standard of Review  It is not this court’s role to conduct a de novo review of the circuit court proceeding;  rather, our review is directed at the decision of the administrative agency. Arkansas Dep’t  of  Human  Servs.  v.  Thompson,  331  Ark.  181,  959  S.W.2d  46  (1998).  When  reviewing  administrative  decisions,  we  review  the  entire  record  to  determine  whether  there  is  any  substantial  evidence  to  support  the  administrative  agency’s  decision,  whether  there  is  arbitrary and capricious action, or whether the action is characterized by abuse of discretion.  Arkansas Dep’t of Human Servs. v. Schroder, 353 Ark. 885, 122 S.W.3d 10 (2003).  To determine whether a decision is supported by substantial evidence, we review the  whole record to ascertain if it is supported by relevant evidence that a reasonable mind might  accept  as  adequate  to  support  a  conclusion.  Id.  To  establish  an  absence  of  substantial  evidence to support the decision, the party challenging the decision must demonstrate that  the  proof  before  the  administrative  tribunal  was  so  nearly  undisputed  that  fair­minded  persons  could  not  reach  its  conclusions.  Id.  Substantial  evidence  is  valid,  legal,  and  persuasive evidence. Id. To set aside an agency decision as arbitrary and capricious, the party  challenging the action must prove that it was willful and unreasoned, without consideration 7  and with a disregard of the facts and circumstances of the case. See Partlow v. Arkansas  State Police Comm’n, 271 Ark. 351, 609 S.W.2d 23 (1980).  Arguments of Appeal  Chandler first argues that the Board’s decision was based on unlawful procedure that  prejudiced  her  rights.  During  her  testimony,  Chandler  asserted  that  her  rights  had  been  violated but did not specify how the violations occurred. She now asserts several procedural  violations that allegedly occurred, such as the Board’s failure  to follow its own rules in  failing to properly and timely notify her of the complaint made by the Securities Department  and the Board’s using stale evidence in the form of appraisals made by investigators for the  Board approximately two years after she performed the appraisals under scrutiny.  According to Chandler, the Board violated its own rules by considering the letter from  the Arkansas Securities Department to be a “complaint” to be investigated because the letter  did not state the issues of the complaint and the dates on which the events leading to the  complaint occurred, as required by the Board’s rules. Where the agency’s failure to follow  its own procedural rules is urged on appeal, the applicable question on review is “whether  the [Board’s] decision is based upon unlawful procedure.” Stueart v. Arkansas State Police  Comm’n, 329 Ark. 46, 50­51, 945 S.W.2d 377, 379 (1997). The Board’s investigation of  Chandler was proper because Ark. Code Ann. § 17­14­206 (Repl. 2001) allows the Board,  after notice and a hearing, to take disciplinary action against an appraiser on its own motion,  with or without a “proper” complaint. It is undisputed that the Board sent Chandler an order  and notice of hearing  identifying the date of the hearing and the allegations against her. 8  Further,  the  Board  did  receive  a  proper  complaint  from  Fannie  Mae  concerning  one  of  Chandler’s appraisals.  For the next part of this point, Chandler argues that the Board failed to timely inform  her of the “complaint” from the Securities Department and that this prejudiced her rights. As  noted above, the Board sent Chandler a proper order and notice of hearing setting forth the  charges against her. Jim Martin testified that the Board attempts to follow a guideline that  complaints  not  be  allowed  to  remain  unresolved  for  more  than  one  year.  However,  the  guideline or “mandate” is not part of the governing statutes or the Board’s own rules. The  only statutory authority imposing a time limit on the Board’s investigations of appraisers is  Ark. Code Ann. § 17­14­206(b) (Supp. 2007), which was enacted in 2005 and places a three­  year  limitation  on  investigations.  Chandler  makes  no  argument  concerning  this  statute.  Further, Martin stated that the request by the Securities Department and the FBI that the  investigation be delayed while the FBI proceeded with its investigation constituted unusual  circumstances warranting the delay.  As a further part of this point, Chandler argues that Hall and Benson made errors in  their reviews of her appraisals and that these errors render the Board’s acceptance of their  testimony arbitrary and capricious. Chandler, as the party challenging the Board’s decision,  has the burden of proving an absence of substantial evidence. Williams v. Arkansas State Bd.  of Physical Therapy, 353 Ark. 778, 120 S.W.3d 581 (2003). To establish an absence of  substantial evidence to support the decision, the challenging party must demonstrate that the 9  proof before the administrative tribunal was so nearly undisputed that fair­minded persons  could not reach its conclusion. Id.  Chandler  points  out  that  Hall  and  Benson  admitted  that  they  did  not  inspect  the  interiors of all six homes they reviewed. Further, Hall admitted that he had missed some  items such as one property having a concrete and gravel drive that he had labeled a concrete  drive. He also stated that there were typographical errors in his report. Chandler also argues  that,  because  Benson’s  reviews  used  the  term  “high  crime  area,”  Benson  engaged  in  discriminatory “redlining” that is prohibited by state and federal law and, therefore, her  reviews cannot constitute substantial evidence to support the Board’s decision.  The fact that Hall and Benson made mistakes in their reviews goes to the weight to  be given to their reviews and explanatory testimony; nevertheless, the reviews provided some  evidence from which the Board could conclude that Chandler violated the Standards. Their  testimony and reviews document the errors Chandler made in the six appraisals at issue.  Even if we did not consider Benson’s testimony, it would still leave Hall’s testimony to  support the Board’s action. Further, Chandler admitted to a violation of the Standards in that  she  did  not  analyze  the  sales  contract  on  one  of  the  subject  properties,  as  well  as  her  agreement that pictures of at least one of the comparables appears to support the conclusion  that the comparable was in superior condition to the subject property. It is the Board that  determines  the  weight  to  be  given  to  the  evidence.  McQuay  v.  Arkansas  State  Bd.  of  Architects,  337  Ark.  339,  989  S.W.2d  499  (1999).  In  reviewing the  record,  we  give  the  evidence its strongest probative force in favor of the agency’s ruling. Arkansas Contractors 10  Licensing  Bd.  v.  Pegasus  Renovation  Co.,  347  Ark.  320,  64  S.W.3d  241  (2001).  We  conclude that there is substantial evidence to support the Board’s decision.  For her second point, Chandler argues that the Board violated Ark. Code Ann. § 25­  15­210(a) (Repl. 2002) when it adopted the revised findings of fact without first reviewing  3  the transcript of the proceedings before voting in this case.  This issue is not preserved for  our  review.  At  the  remand  hearing,  Chandler  presented  a  document  containing  several  objections to what she perceived to be violations of her rights. Nowhere mentioned in those  objections is an objection to the Board members’ not having reviewed the earlier proceedings  prior to adopting the revised findings. Our supreme court has held that the failure to object  because the members of an administrative body had not reviewed the  transcript prior to  voting on the matter precludes judicial review of the issue. Ford Motor Co. v. Arkansas  Motor Vehicle Comm’n, 357 Ark. 125, 161 S.W.3d 788 (2004).  Chandler’s third and final point challenges several of the Board’s revised findings as  not specific enough, not supported by the record, not constituting violations of the Standards,  not affecting valuation, or misleading. Chandler focuses on each sentence in the Board’s 3  Section 25­15­210(a) provides as follows:  When, in a case of adjudication, a majority of the officials of the agency who  are to render the decision have not heard the case or read the record, the decision, if  adverse  to  a  party  other  than  the  agency,  shall  not  be  made  until  a  proposal  for  decision  is  served  upon  the  parties  and  an  opportunity  is  afforded  to  each  party  adversely  affected  to  file  exceptions  and  present  briefs  and  oral  argument  to  the  officials who are to render the decision. The proposal for decision shall contain a  statement of the reasons therefor and of each issue of fact or law necessary thereto,  prepared by the person who conducted the hearing.  11  findings; (however, we do not engage in a de novo review of the Board’s actions, and are not  permitted to do so under the Administrative Procedures Act. Arkansas State Police Comm’n  v. Smith, 338 Ark. 354, 994 S.W.2d 456 (1999). Chandler argues that, at most, the evidence  proves that she made some mistakes in her appraisals and that it is human to make mistakes.  However, the Board cannot discipline Chandler for merely making  mistakes unless they  demonstrate  incompetence  or  are  violations  of  the  statutes  and  regulations  pertaining  to  appraisers. See Ark. Code Ann. § 17­14­206(a)(4) (Supp. 2007). Instead, the focus should  be on the Board’s conclusion that Chandler violated the Standards or other Board rules and  regulations.  See  Tomerlin  v.  Nickolich,  342  Ark.  325,  27  S.W.3d  746  (2000).  Chandler  admitted that she had violated the Standards in at least one instance by failing to properly  analyze  the  sales  contract  of  one  property  as  well  as  her  agreement  that  some  of  the  comparables she used appear to be superior to the subject properties. Therefore, the Board’s  decision is supported by substantial evidence.  Affirmed.  GLOVER and HEFFLEY, JJ., agree. 12 

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