32-2188

32-2188. Statute of limitations; service of
summons; application for payment; insufficient monies;
definition

A. An action for a judgment that subsequently results in an order for payment from
the real estate recovery fund shall not be started later than five years from the accrual
of the cause of action.

B. If an aggrieved person commences an action for a judgment that may result in an
order for payment from the real estate recovery fund, and the defendant licensee cannot
be served process personally in this state, the summons may be served by the alternative
methods of service provided for by the Arizona rules of civil procedure, including
service by publication. A judgment that complies with the provisions of this section and
that was obtained after service by publication only applies to and is enforceable against
the real estate recovery fund. The department may intervene in and defend any such
action.

C. An aggrieved person may apply to the department for payment from the real estate
recovery fund after the aggrieved person obtains a judgment against a real estate or
cemetery broker or salesperson based on the licensee's act, representation, transaction
or conduct in violation of this chapter or the rules adopted pursuant to this chapter.
The claimant must file the original application, including appendices, within two years
after the termination of all proceedings, reviews and appeals connected with the
judgment. The commissioner, in the commissioner's sole discretion, may waive the two-year
application deadline if the commissioner determines that the waiver best serves the
public interest. Delivery of the application must be by personal service or by certified
mail, return receipt requested.

D. The application must be within the limitations prescribed in section 32-2186 for
the amount unpaid on the judgment that represents the claimant's actual and direct loss
on the transaction.

E. The department shall prescribe and supply an application form that includes
detailed instructions with respect to documentary evidence, pleadings, court rulings, the
products of discovery in the underlying litigation and notice requirements to the
judgment debtor under section 32-2188.01. The claimant must submit the claim on an
application form supplied by the department. The application must include:

1. The claimant's name and address.

2. If the claimant is represented by an attorney, the attorney's name, business
address and telephone number.

3. The judgment debtor's name and address or, if unknown, the names and addresses
of persons who may know the judgment debtor's present location.

4. A detailed narrative statement of the facts explaining the allegations of the
complaint on which the underlying judgment is based, with a copy of the contracts,
receipts and other documents from the transaction, the last amended complaint, all
existing recorded judgments, documentation of actual and direct out-of-pocket losses and
any offsetting payment received and all collection efforts attempted.

5. The identification of the judgment, the amount of the claim and an explanation
of its computation, including an itemized list of actual and compensatory damages awarded
and claimed.

6. For the purpose of an application that is not based on a criminal restitution
order, a statement by the claimant, signed under penalty of perjury, that the complaint
on which the underlying judgment is based was prosecuted conscientiously and in good
faith. For the purposes of this paragraph, "conscientiously and in good faith" means that
all of the following apply:

(a) No party that was potentially liable to the claimant in the underlying
transaction was intentionally and without good cause omitted from the complaint.

(b) No party named in the complaint who otherwise reasonably appeared capable of
responding in damages was intentionally and without good cause dismissed from the
complaint.

(c) The claimant employed no other procedural means contrary to the diligent
prosecution of the complaint in order to seek to qualify for the recovery fund.

7. For the purpose of an application that is based on a criminal restitution order,
all of the following statements by the claimant, signed under penalty of perjury:

(a) The claimant has not intentionally and without good cause failed to pursue any
person potentially liable to the claimant in the underlying transaction other than a
defendant who is the subject of a criminal restitution order.

(b) The claimant has not intentionally and without good cause failed to pursue in a
civil action for damages all persons potentially liable to the claimant in the underlying
transaction who otherwise reasonably appeared capable of responding in damages other than
a defendant who is the subject of a criminal restitution order.

(c) The claimant employed no other procedural means contrary to the diligent
prosecution of the complaint in order to seek to qualify for the recovery fund.

8. The following statements, signed under penalty of perjury, and information from
the claimant:

(a) The claimant is not a spouse of the judgment debtor or a personal
representative of the spouse.

(b) The claimant has complied with all of the requirements of this article.

(d) The claimant has recorded a certified copy of the superior court judgment or
transcript of judgment pursuant to sections 33-961 and 33-962 in the county where the
judgment was obtained and in the county where all judgment debtors reside and has
provided a copy of the recorded judgment to the commissioner.

(e) The claimant has caused the judgment debtor to make discovery under oath,
pursuant to section 12-1631, concerning the debtor's property.

(f) The claimant has caused a writ of execution to be issued on the judgment and
the officer executing the writ has made a return showing either:

(i) That no personal or real property of the judgment debtor liable to be levied on
in satisfaction of the judgment could be found, sold or applied.

(ii) That the amount realized on the sale of the property, or as much of the
property that was found, under the execution was insufficient to satisfy the judgment.

(g) The claimant has caused a writ of garnishment to be issued to each known
employer of the judgment debtor ascertained by the claimant, that each
garnishee-defendant has complied with the respective writ and any judgment or order
resulting from the writ and that the amount realized from all judgments against the
garnishee-defendants was insufficient to satisfy the balance due on the judgment.

(h) The claimant has deducted the following amounts from the actual or compensatory
damages awarded by the court:

(i) Any amount recovered or anticipated from the judgment debtor or debtors.

(ii) Any amount recovered through collection efforts undertaken pursuant to
subdivisions (d) through (g) of this paragraph and including an itemized valuation of the
assets discovered and amounts applied.

(iii) Any amount recovered or anticipated from bonding, insurance or title
companies, including recovery of punitive damages.

(iv) Any amount recovered or anticipated from in-court or out-of-court settlements.

(v) Any amount of tax benefits accrued or taken as deductions on federal, state or
local income tax returns.

F. If the claim is based on a judgment against a salesperson or broker and the
claimant has not obtained a judgment against the salesperson's or broker's employing
broker, if any, or has not diligently pursued the assets of the employing broker, the
department shall deny the claim for failure to diligently pursue the assets of all other
persons liable to the claimant in the transaction unless the claimant demonstrates, by
clear and convincing evidence, that either:

1. The salesperson or broker was not employed by a broker at the time of the
transaction.

2. The salesperson's or broker's employing broker would not have been liable to the
claimant because the salesperson or broker acted outside the scope of employment in the
transaction.

G. The commissioner, at the commissioner's sole discretion, may waive compliance
with one or more of the requirements enumerated in subsection E, paragraph 8 or
subsection F of this section if the claim is based on an award pursuant to a criminal
restitution order or if the commissioner is satisfied that the claimant has taken all
reasonable steps to collect the amount of the judgment or the unsatisfied part of the
judgment from all judgment debtors but has been unable to collect.

H. If the commissioner finds it is likely that the total remaining liability of the
recovery fund is insufficient to pay in full the valid claims of all aggrieved persons
who may have claims against any one licensee, the commissioner may petition the court to
initiate a proration proceeding. The court shall grant the petition and order a hearing
to distribute the total remaining liability of the fund among the applicants in the ratio
that their respective claims bear to the aggregate of the valid claims or in such other
manner as the court deems equitable. The commissioner or any party may file a proposed
plan for equitable distribution of the available monies. The distribution of monies
shall be among the persons entitled to share them, without regard to the order of
priority in which their respective judgments may have been obtained or their respective
applications may have been filed. The court may require all applicants and prospective
applicants against one licensee to be joined in one action, to the end that the
respective rights of all the applicants to the recovery fund may be equitably adjudicated
and settled. The court shall not include in the claims for proration the claim of any
person who has not, within ninety days after the court has entered the order for
proration, filed a complaint with the court, served the licensee and provided written
notice of the claim to the commissioner. The liability of the fund on any application
affected by a proration proceeding is based on the limits in effect on the date when the
last application for payment is filed. The court may refuse to consider or award prorated
recovery to any person who fails to expeditiously prosecute a claim against the licensee
or promptly file an application for payment and submit supporting documentation as
required by this article.

I. If the commissioner pays from the real estate recovery fund any amount in
settlement of an applicant's claim or toward satisfaction of a judgment against a
licensed broker, designated broker for a corporation or salesperson, the license of the
broker, designated broker for a corporation or salesperson shall be automatically
terminated upon the issuance of an order authorizing payment from the real estate
recovery fund. A broker, designated broker for a corporation or salesperson is not
eligible to receive a new license until the licensee has repaid in full, plus interest at
the rate provided by section 44-1201, subsection A, the amount paid from the real estate
recovery fund on the licensee's account and has provided evidence to the commissioner
that the judgment has been fully satisfied.

J. If, at any time, the money deposited in the real estate recovery fund is
insufficient to satisfy any duly authorized claim or portion of a claim, the commissioner
shall, when sufficient money has been deposited in the real estate recovery fund, satisfy
the unpaid claims or portions of claims, in the order that the claims or portions of
claims were originally filed, plus accumulated interest at the rate of four per cent a
year.

K. For the purposes of this section, "complaint" means the facts of the transaction
on which the judgment is based.