Chaffin v. Commissioner of Arizona Dept. of Real Estate

• Decision Date: 05 June 1990
• Docket Number: No. 1,CA-CV,1
• Parties: Patrick R. CHAFFIN and Virginia L. Chaffin, husband and wife, Plaintiffs-Appellees, v. COMMISSIONER OF the ARIZONA DEPARTMENT OF REAL ESTATE, Defendant-Appellant. 89-099.
• Court: Arizona Court of Appeals

Page 1141

793 P.2d 1141

164 Ariz. 474

Patrick R. CHAFFIN and Virginia L. Chaffin, husband and wife, Plaintiffs-Appellees, v. COMMISSIONER OF the ARIZONA DEPARTMENT OF REAL ESTATE, Defendant-Appellant.

No. 1 CA-CV 89-099.

Court of Appeals of Arizona Division 1.

June 5, 1990.

[164 Ariz. 476] Walraven & Roberts by Jerry Carver, Prescott, for plaintiffs-appellees.

Robert K. Corbin, Atty. Gen. by Patrick M. Murphy, Chief Counsel, Financial Fraud Div., Susan B. Lagerman, Asst. Atty. Gen., Phoenix, for appellants Commissioner Joe Sotelo and Arizona State Real Estate Dept.

OPINION

EUBANK, Presiding Judge.

This is an appeal from a judgment ordering the Commissioner of the Arizona State Real Estate Department (Commissioner), as fiduciary of the Real Estate Recovery Fund (Fund), to pay a certain sum of money from the Fund to Patrick Chaffin and Virginia Chaffin.

FACTS

Arizona real estate licensees Kenneth and Bonnie Thompson acted as agents and brokers in the sale of a parcel of real property from George and Delfina Leon to Patrick and Virginia Chaffin in 1978. The Chaffins paid $7,000.00 for the parcel. Kenneth Thompson died in 1980 and a personal representative for his estate was appointed in 1984.

Based upon alleged misrepresentations made by both of the Thompsons or by Kenneth Thompson individually, the Chaffins sued the Thompsons and the Leons in 1982 for rescission and/or damages resulting from the sale. The Chaffins' counsel notified the Commissioner of that lawsuit by letter dated August 30, 1982. Thereafter, the Chaffins stipulated to dismiss the Leons from the action with prejudice. In 1985, the Chaffins, Bonnie Thompson and Kenneth Thompson's personal representative entered into a stipulated judgment dismissing Bonnie Thompson from the action with prejudice and holding the estate of Kenneth Thompson liable to the Chaffins for $7,000.00 plus interest. The judgment was filed on September 27, 1985.

Based upon the stipulated judgment against Kenneth Thompson's estate, in 1988 the Chaffins filed an application with the court for payment from the Fund pursuant to A.R.S. § 32-2188. The Commissioner opposed the application because of the Chaffins' failure to satisfy the requirements of A.R.S. § 32-2188(C), and notified the court of its right to relitigate material issues pursuant to A.R.S. § 32-2188(E). The Chaffins filed a reply with supporting affidavits in an effort to satisfy the prerequisites contained in A.R.S. § 32-2188(C).

Without holding an evidentiary hearing, the trial court granted the Chaffins' application and ordered the Commissioner to pay them $7,000.00 plus interest, and attorney's fees in the amount of $2,716.26 from the Fund. The Commissioner filed a motion to reconsider, which was denied after telephonic oral argument.

The Commissioner argues that the trial court erred in failing to hold an evidentiary hearing on the Chaffins' application for recovery from the Fund. We agree and therefore we reverse.

DISCUSSION

The interpretation of an Arizona statute, such as A.R.S. § 32-2188, involves the resolution of legal rather than factual issues. Arizona State Board of Accountancy v. Keebler, 115 Ariz. 239, 564 P.2d 928 (App.1977); Arnold v. Arizona Department of Health Services, 160 Ariz. 593, 775 P.2d 521 (1989). As such we conduct our review de novo, and we are not bound by the trial court's conclusions of law. Id. See also In re Armstrong, 840 F.2d 651 (9th Cir.1988).

A.R.S. § 32-2188 must be construed liberally, as it was intended by the legislature, to provide a means for the supervision and regulation of the real estate business and is therefore remedial in character. Arizona Real Estate Department v. Arizona Land Title and Trust Co., 9 Ariz.App. 54, 449 P.2d 71 (1968). We must not, however, disregard the explicit provisions of remedial statutes such as A.R.S. § 32-2188 in the interest of liberal construction. In re Armstrong, supra.

APPLICATION OF A.R.S. § 32-2188

A.R.S. § 32-2186 authorizes and directs the Commissioner to establish the Fund, from which persons aggrieved by acts, representations, transactions or conduct of licensed brokers or salesmen which violate Arizona real estate licensure laws or regulations, may recover their actual damages plus reasonable attorneys' fees up to $15,000.00.

A.R.S. § 32-2188, as amended in 1986 ¹, provides the procedure for recovery from the Fund. Specifically, after recovering a judgment against a broker or salesman for acts in violation of the Arizona real estate licensure laws or regulations, the aggrieved party must file a verified claim with the court in which the judgment was obtained, seeking an order directing payment from the Fund. A.R.S. § 32-2188(B). The aggrieved person must provide written notice to the Commissioner as well as to the judgment debtor of the application for payment from the Fund. ² A.R.S. § 32-2188(B).

The Commissioner and the judgment debtor have thirty-five days to file written responses after service of the application. A.R.S. § 32-2188(B). After such time, "[t]he court shall ... set the matter for hearing on petition of the applicant." A.R.S. § 32-2188(B).

According to A.R.S. § 32-2188(C), the court shall proceed on the application in a "summary manner." This phrase has been interpreted by the Arizona courts to mean that the court must proceed on the application without delay or formality and in a short, concise and immediate proceeding. Arizona Real Estate Department v. Arizona Land Title and Trust Co., 9 Ariz.App. 54, 58, 449 P.2d 71, 75 (1968). No diminution of rights is intended by such language, only expedition of the process. Id.

Subsection C of A.R.S. § 32-2188 provides that, "upon the hearing" of the application, the aggrieved person is required to show that he or she:

1. is not the spouse of the judgment debtor or the personal representative of such spouse;

2. has complied with all requirements of A.R.S. § 32-2188 (the notice requirement of subsection A may be waived by the Commissioner);

3. has obtained a judgment against the judgment debtor for acts committed in violation of the laws or regulations governing his/her conduct as a Real Estate Department licensee and that all bonding companies which issued surety bonds to the judgment debtor and all other necessary parties were joined as parties in that action;

4. has obtained an unsatisfied writ of execution;

5. has conducted a judgment debtor examination; and

6. has made all reasonable searches and inquiries in an effort to satisfy the judgment from the judgment debtor's property, to no avail.

The court may waive the requirements regarding efforts to satisfy the judgment from the debtor's property if the aggrieved person satisfies the court that it is not practicable to comply. A.R.S. § 32-2188(D).

Prior to the 1986 amendment of A.R.S. § 32-2188(E), if the Commissioner did not intervene in the underlying action against the licensee, the Commissioner was precluded from questioning the amount and fact of licensee liability in an action for payment from the Fund. Arizona Real Estate Department v. Arizona Title and Trust Co., 9 Ariz.App. 54, 449 P.2d 71 (1968); Real Estate Board v. Dalessandro, 17 Ariz.App. 181, 496 P.2d 607 (1972). An aggrieved party seeking recovery from the Fund was only required to prove a valid judgment against the licensee for certain conduct in violation of Arizona laws and regulations, and was not required to prove the underlying claim in order to recover. Id.

The Commissioner's role in proceedings against the Fund was greatly broadened by the 1986 amendment to A.R.S. § 32-2188(E). The 1986 amendment added the following language to A.R.S. § 32-2188(E):

The commissioner may defend any such action on behalf of the real estate recovery fund and has recourse to all appropriate means of defense and review, including the examination of witnesses and the right to relitigate any material and relevant issues in the proceedings against the real estate recovery fund which were determined in the underlying action on which the judgment in favor of the applicant was based. If the judgment in favor of the applicant was by default, stipulation, or consent, ... the applicant has the burden of proving that the cause of action against the licensee was for a violation of the provisions of this chapter or the rules promulgated pursuant to this chapter.... The commissioner is not bound by any prior compromise stipulation of the judgment debtor.

It is evident from A.R.S. § 32-2188(E), as amended, that it is no longer necessary for the Commissioner to intervene in the underlying lawsuit in order to challenge issues material to recovery from the Fund. The Commissioner now has the right to relitigate any relevant and material issues in order to adequately protect the Fund, regardless of the Commissioner's involvement in the underlying lawsuit. The underlying judgment is still res judicata as between the applicant and the licensee however, as subsection E also specifically provides that relitigation of such issues does not affect the conclusiveness of the judgment against those parties.

The Chaffins contend that their application to the Fund should be governed by Arizona law as it existed prior to the 1986 amendment of A.R.S. § 32-2188. As the Commissioner did not intervene in the underlying action in this case, the Chaffins argue that under prior Arizona law, the Commissioner cannot now challenge the fact of licensee liability or the amount in the Chaffins' action against the Fund. The Chaffins base this argument on the fact that they obtained their judgment against Thompson in September 1985, and A.R.S. § 32-2188 was not amended to broaden the Commissioner's right to defend the Fund until 1986. This argument is in error.

It is true that a statutory amendment cannot be retroactively applied to defeat a vested right. State v. Levasseur, 118 Ariz. 597, 578 P.2d 1026 (App.1978). The Chaffins argue that because their right to recover...