Law Updates - Torts Real Estate Appraiser Duty to Third Persons

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Law Updates-Torts-Real Estate Appraiser Duty to Third Persons

Belen Loan Investors v. Bradley, 650 Ariz. Adv. Rep. 8 (App. Div. II, December 21, 2012) (J. Espinoza)

APPRAISER HAS DUTY TO THIRD PERSONS IT INTENDS RECEIVE APPRAISAL OR KNOWS WILL RECEIVE IT UNLESS THE SOLE IDENTITY OF THE INITIAL RECEPIENT IS "IMPORTANT AND MATERIAL" TO APPPRAISER

Plaintiff Belen Loan Investors [BLI] loaned borrowers $2.6 and $2.95 million respectively to develop real estate in New Mexico. Borrowers defaulted. BLI foreclosed on its security interest and allegedly discovered the borrowers, in cahoots with defendant real estate appraiser Bradley, significantly exaggerated the value of the property to secure excessive loans from BLI. BLI sued the defendant alleging he "conspired to commit tortious conduct with others" and negligently misrepresented the value of the property. The trial court dismissed both counts finding the appraiser owed no duty to BLI. The Arizona Court of Appeals reversed.

The scope of a real estate appraiser's tort liability to third persons for negligent misrepresentation is found in Restatement ยง552(2)(a)-If an appraiser intends his appraisal be supplied to the third person or knows it will be supplied to the third person, or a limited class of persons of whom the third person is a member, the appraiser owes that third person a duty. However, if the appraiser regards the recipient's identity as "important and material" to the point she understood her liability to be restricted to solely that recipient, then there is no duty.

Here the defendant appraiser moved to dismiss the complaint for failure to state a claim under Rule 12 (b)(6) of the Arizona Rules of Civil Procedure. Though various documents extraneous to the motion were submitted and "reviewed" by the court none of these documents were relevant to the trial court's dismissal of the action based solely upon a finding of no duty. Hence the court of appeals was permitted to disregard the extraneous documents and look only to the pleadings in deciding the issue. Because BLI plead that defendant knew and intended the appraisal be supplied to BLI, that BLI would rely upon it and that BLI did rely upon it, a proper claim was stated under rule 12 (b)(6).

The dismissal of the claim for conspiring to commit a tort was affirmed due to deficiencies in the appellant's brief.

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