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Small Victories

Even small wins are celebrated!

Story quick jump:
Introduction | Sometimes the Judge Understands What the Appraisal and is Not | Rules are made to be followed |Sometimes Judges Take the Time to Read the Papers | Immunity Shields an Appraiser from a Sore Loser


When a lawsuit is filed, one of the first questions asked is how long the case will be pending before it gets resolved. That is not often a question that can be answered with any degree of certainty.

Although it is rare, some lawsuits are resolved in trial. Other matters are concluded if the parties agree to a settlement. Both of those resolutions could take years.

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Earlier in the life of a lawsuit, counsel for the appraiser insured might have a chance to file a motion asking the Judge to dismiss the case. This would be an option if the facts, and the law, are clear. The motion explains to the Judge that no matter how the lawsuit might develop, those key facts, and the applicable law, could not be changed. Rather than waste the time of the parties, and of the court, it would be appropriate to simply end the case.

Unfortunately, these motions are often ignored. Judges want to give the parties (most often the plaintiffs) a chance to develop the case, even when it seems unlikely, they could manipulate the facts in their favor.

Some Judges don’t want to take the time to read the papers and to consider the arguments. They don’t want to make the “hard” call to end a case in its very early stages. We will hear Judges say they think the case should be decided by a jury, even though every Judge knows the odds of a case lasting that long are pretty slim.

Despite the odds not being in our favor, we never stop trying. Once in a while the right facts, good law, our hard-working defense counsel, and a strong Judge come together and one of our motions will be granted and the case gets dismissed. We call these our “small” victories and are case by case. It doesn’t make “new law” that can be used as a basis for argument in other lawsuits. There are no published opinions, but it’s still a win if the decision ends a lawsuit.

Everyone likes a good story, especially when it has a happy ending. No insured wants to be sued and the stress of a lawsuit can be difficult. Every “small” victory is a big relief for the appraiser involved in the case.

Sometimes the Judge Understands What the Appraisal and is Not

In this case with our insured appraiser, the plaintiffs were first time home buyers and were shopping in a market where inventory was low and where prices were high. Plaintiffs had missed out on a few homes they liked because they made low offers or because their offers had too many contingencies attached.

The subject property was about 80 years old with numerous interior updates. Plaintiffs liked the charm of the home, but appreciated the “newer” kitchen and bathrooms. The property had been on the market for several months and had been under contract but that escrow was not completed.

When the property was relisted, it was being sold “as is”. The listing agent said the first set of prospective buyers presented too many demands to the sellers and they were, eventually, released from the contract. The sellers did not want to go through that again, so they wanted the home to be sold “as is”.

Plaintiffs really wanted the house. They wrote a personal letter to the sellers that they wanted their agent to deliver. They also decided to remove some of the contingencies from their offer.

Plaintiffs had to make the offer contingent on financing but they decided to remove inspection contingencies. Both plaintiffs had relatives in the construction industry and they knew several tradesmen. They were confident that they would find any “issues” with the home and that repairs could be done by friends and relatives for a fair price. Plaintiffs made a full price offer and it was accepted.

The insured appraiser prepared his report for the AMC and the lender. The report stated, clearly, that it was not a home inspection report and that it was not to be relied upon to disclose the condition of the property. The report also stated that the only intended user was the client and that the borrowers were not intended users and were not entitled to rely upon the report for any purpose.

A few months after submitting the appraisal, the insured was served with a complaint filed by counsel for the plaintiffs. After taking possession of their “dream” home, they learned they had purchased a nightmare. The house had faulty electrical wiring throughout, along with serious plumbing issues. The sellers’ prior escrow had fallen through when the buyers in that deal got a home inspection report that disclosed some of the home’s serious problems.

The plaintiffs claimed the sellers and the listing agent had fraudulently concealed the various costly problems with the home. It was alleged that the plaintiffs’ agent was negligent for allowing the plaintiffs to buy the house without a home inspection.

Plaintiffs claimed that the appraiser was negligent for not disclosing the various defects that should have been “readily apparent” during his inspection. It was pointed out that photos attached to the report depicted “rings” in the sinks and toilets that were evidence of plumbing problems. It was also suggested that an uncovered electrical outlet in the garage displayed visible sparks that would have been seen during even a cursory inspection.

The complaint alleged two causes of action against the insured. The claim for negligent misrepresentation alleged that the plaintiffs relied on misrepresentations in the appraisal that stated the property was in good condition. The claim for breach of contract alleged the insured breached his contract with the plaintiffs when he prepared a deficient report.

A significant percentage of lawsuits filed against appraisers are filed by borrowers alleging the appraiser failed to disclose defects. While defense counsel will often file an early motion seeking dismissal, those motions are rarely granted. Judges want to allow the plaintiffs an opportunity to pursue discovery to see if they can uncover facts that might support their case.

Defense counsel in this matter filed a well written motion and we were pleasantly surprised when it was granted. The Judge ruled that plaintiffs could not have relied upon the appraisal report because they had agreed to buy the home almost a month before the appraisal was prepared.

The Judge also found that the plaintiffs had no contract with the appraiser. He noted language in the report that stated only the lender was the intended user. Even though the plaintiffs might have, indirectly, paid for the appraisal, the Judge ruled that did not establish a contractual relationship with the appraiser.

Defense counsel had prepared the insured for the fact that the lawsuit might take a few years to be resolved. He mentioned that the insured should gather together his work file documents and that he would likely be deposed by counsel for all the parties.

It is an understatement to say the insured was both thrilled, and relieved, when he found out the case was over barely a month after he had been served. ◈

Rules are made to be followed

In some states there are statutes which require that any complaint filed against a professional alleging negligence be accompanied by a certificate of merit. In other words, the plaintiff must find another professional to review the case to state that the defendant’s professional services fell below the standard of care.

The idea behind the certificate is to weed out those lawsuits that have no merit. Sadly, most of the time it is not difficult to find one professional who is willing to criticize the work of another.

In those states where such a certificate is required, the Judge is supposed to dismiss any lawsuit filed without the required document. However, in our experience, Judges rarely follow this rule. In the vast majority of cases, the Judge will allow the plaintiff extra time to find their “expert” even though the statutes require that this search be done before the lawsuit is filed.

Sometimes we hesitate asking defense counsel to file motions to dismiss. In most instances, the expense of filing the motion seems to be a waste, but we keep trying in the hope that a Judge will take this rule seriously, and sometimes that actually happens.

In one case the appraiser insured was retained to prepare two appraisals for the same lender/client involving the same borrower. The borrower was purchasing one property with the intent to flip it after doing some rehab work. The insured was asked to prepare a “subject to completion” report after being provided with a budget for the anticipated rehab work.

The second assignment was a cash out refinance assignment. The borrower was seeking to pull cash out of her personal residence. The cash would be used to complete the rehab work on the flip property, if needed.

Both reports were completed and neither the client, nor the borrower, raised any issues with respect to either report.

About a year later, the insured was served with a lawsuit filed by the borrower. Also named as defendants were the seller of the flip property, the home inspector, and the contractor hired to do the rehab work. The borrower alleged that the flip property had serious structural and moisture intrusion issues that were concealed by the sellers. It was further alleged that the home inspector and the appraiser were negligent for not discovering the severity of the problems.

The contractor continued to demand more money to remedy problems with the home and the borrower went through all of the loan money, including the cash from the refinance of the loan on her personal residence. Once all needed repairs were done, it was still projected that the house would sell for a loss, so she defaulted on the flip property loan and was facing foreclosure proceedings.

The borrower claimed the insured overstated value of her personal residence when he completed the refinance appraisal. Had it not been for this negligence, the borrower would not have had enough cash to proceed with the flip. It was implied that the insured was to blame for all the borrower’s damages since the refinance loan set everything else in motion.

We did not think that the appraiser was in any way responsible for the borrower’s flip gone wrong, but it looked like this would be an expensive lawsuit to defend. It turned out that the borrower had not filed the required certificate of merit with her complaint.

Defense counsel filed a motion to dismiss the lawsuit due to the absence of the certificate. No one expected the motion would be granted; rather, it was filed to “preserve the objection”. We were pleased (and a bit shocked) when the Judge granted the motion and issued an order that did not give the plaintiff a “second chance”.

The Judge said the certificate requirement was to keep claims like this one out of the courts. He thought the borrower’s allegations against the appraiser were “remote at best” and the failure to file a certificate likely indicated no appraiser was willing to point fingers at the insured based upon such weak allegations.

This was the first time in over 5 years that a Judge granted one of these motions in a case against one of our insureds. While we cannot wave this ruling in front of any other Judges, it was a welcome victory for this insured and brought about a quick end to a lawsuit that could have dragged on for years.

These might be “small” victories that impact only one case, but the carrier, defense counsel, and the insured appraiser view every good result as a “big” win. ◈

Sometimes Judges Take the Time to Read the Papers

In recent years, sellers have been frequent filers of licensing board complaints against appraisers. The reason for the complaint is that the appraisal, done for the lender working with a prospective buyer, did not value the home equal to or above the contract price. In some cases, the seller has to negotiate their contract price downward. In other cases, the deal falls through and the property must be relisted. Last year an insured appraiser was sued by the seller after the prospective buyer’s appraisal came in at about $35,000 below the negotiated contract price. These lawsuits are rare.

In response to this complaint, local defense counsel filed a motion to dismiss arguing the appraiser hired by a lender working with a prospective buyer owes no duty to the seller. The motion referred to language in the appraisal about the intended use and intended user.

Plaintiff filed an opposition citing one old case from another state that held the borrower could rely on the appraisal. He then took the leap and tried to convince the Judge that if the appraiser owes a duty to the borrower then it is reasonable to ask the court to assume the appraiser also owes a duty to the seller. Plaintiff’s counsel said since there was no case law on point in the state where the action was filed, it was appropriate for the Judge to look for guidance in case law from other states.

Typically, a Judge will only look at case law from the state where the case is pending. Since plaintiff’s counsel opened this door, we worked with defense counsel and sent him cases from numerous other states that hold there is no duty owed to the borrower by the appraiser hired by the lender. In addition, we sent counsel copies of the only cases we know that specifically ruled the appraiser retained by a buyer’s lender owes no duty to a seller.

To assist the Judge, counsel copied seven cases from other states and attached more than 50 pages to the reply to plaintiff’s opposition. The goal was to make it as easy as possible for the Judge.

Most Judges would have never taken the time to read the additional materials. It would have been very easy to say that he had to rule in favor of the plaintiff because there was no case law on point in that state. To our surprise the Judge in our case did the opposite. He did read all the cases and he ruled in favor of the insured.

The Judge said, despite the lack of case law in his state, he could not ignore the fact that a number of Judges facing this question ruled an appraiser owed no duty to a borrower. If that was the case, then it was only reasonable to find there was no duty owed to the seller. He granted the defense motion and dismissed the case.

Counsel for the seller at first said he would appeal but then he decided not to do so. We presume he read the cases also and decided it would be an uphill battle to make contrary law.

Trial court Judges have busy calendars and they have to rule on numerous motions every court day. It is sometimes obvious from comments and questions that the Judge didn’t read what was filed. It is pretty uncommon for a Judge to take the time to read through not only the motion papers but also more than 50 pages of additional materials. Based on prior experience, the insured was told that his chances of a dismissal were low. No one was more pleased when the motion was granted.

The steps taken by this Judge were unique to this case and to this motion. His ruling cannot be used to persuade other Judges. This was another small victory but it was very rewarding and it reinforced our collective resolve to keep fighting for each and every victory, no matter how small it might be. ◈

Immunity Shields an Appraiser from a Sore Loser

A hard-fought lawsuit had been pending, for over a year, between a property owner and their tenant. The tenant had exercised an option to purchase contained in the lease agreement. To determine a purchase price, the parties were first supposed to mutually agree upon the retention of an appraiser. It quickly became apparent there would be no agreement.

In the absence of an agreement, both parties were to retain their own appraiser to determine value. The tenant secured an appraisal for $550K. The property owner secured an appraisal for $700K. Despite the appraisal, the property owner claimed he had received an all-cash offer for $750K from a neighbor who was most anxious to purchase the property. The owner maintained he would sell for no less than $750K.

After a few attempts at negotiation, the tenant filed a lawsuit asking the court to order the owner to sell the property for $550K.

The lease provided that if the parties could not reach an agreement, even after securing two appraisals, then the court would appoint an appraiser to determine value. After the tenant lawsuit was filed, the Judge hired the insured to prepare an appraisal of the subject property. That appraisal estimated value to be $560K. The Judge then ordered that the property be sold to the tenant for that amount.

The property owner did not appeal the Judge’s decision. The property was sold for $560K. Almost two years later, the property owner filed a lawsuit against the insured appraiser, alleging his appraisal caused damages of $190K. He was forced to sell the property for $560K. He believed it was worth $750K.

We thought this lawsuit was ridiculous and without merit. Local defense counsel was hired and he filed a motion seeking to dismiss the case. It was argued that the insured appraiser was hired directly by the Judge in the landlord/tenant lawsuit. As a result, the appraiser had immunity. The appraiser only owed a duty to the Judge that retained him. He owed no duty, whatsoever, to this disgruntled property owner. Further, it was the Judge’s order that the property be sold for $560,000 that caused the owner’s “loss.” If the owner did not agree with that decision, he should have filed a timely appeal.

We were pleased when the motion was granted and the lawsuit was dismissed. The Judge who granted the motion wrote a strong decision that chastised the plaintiff/ property owner for filing such a baseless lawsuit. The decision was appreciated as it probably helped convince the plaintiff not to file an appeal.

The case was over about 2 months after it was filed. ◈

Story quick jump:
Introduction | Sometimes Judges Take the Time to Read the Papers | Immunity Shields an Appraiser from a Sore Loser

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