DO NOT CITE. SEE RAP 10.4(h).
Court of Appeals Division III
State of Washington
Opinion Information Sheet
Docket Number: 19782-4-III
Title of Case: Wanda Iorio, et al
v.
Dynasty Land Company, Inc., et al
File Date: 02/12/2002
SOURCE OF APPEAL
----------------
Appeal from Superior Court of Yakima County
Docket No: 96-2-01094-3
Judgment or order under review
Date filed: 11/29/2000
Judge signing: Hon. Michael E. Cooper
JUDGES
------
Authored by Frank L. Kurtz
Concurring: Dennis J. Sweeney
Stephen M. Brown
COUNSEL OF RECORD
-----------------
Counsel for Appellant(s)
John S. Moore Jr.
Velikanje Moore & Shore
PO Box 22550
Yakima, WA 98907
Counsel for Plaintiff(s)
John S. Moore Jr.
Velikanje Moore & Shore
PO Box 22550
Yakima, WA 98907
Counsel for Defendant(s)
Robert J. Reynolds
Attorney At Law
222 W. Yakima Avenue
Yakima, WA 98902-3406
Sam B. Franklin
Lee Smart Cook Martin & Patterson
701 Pike St #1800
Seattle, WA 98101
Sam K. Eck
12951 Bel Red Rd Ste 120
Bellevue, WA 98005-2628
Jack G. Orr
Harris Mericle Orr & Bariault
3019 N Narrows Pl
Tacoma, WA 98407
Terry A. Brooks
Brooks Law Office
P.O. Box 110
Yakima, WA 98907-0110
Counsel for Respondent(s)
John A. Maxwell Jr.
Meyer Fluegge & Tenney
P.O. Box 22680
Yakima, WA 98907
Jeffrey M. Kreutz
Meyer Fluegge & Tenney
230 S 2nd St
PO Box 22680
Yakima, WA 98907
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
WANDA IORIO, a single woman, ) No. 19782-4-III
)
Appellant, )
)
GEORGE EVERSON and CAROL )
EVERSON, husband and wife, )
) Division Three
Plaintiffs, ) Panel Eight
)
v. )
)
DYNASTY LAND COMPANY, INC., a ) UNPUBLISHED OPINION
Washington corporation, MERLE )
R. FERGUSON and KAREN G. )
FERGUSON, husband and wife, )
FRED E. THORNE and JANE DOE )
THORNE, husband and wife, )
GORDON GESSLER and JANE DOE )
GESSLER, husband and wife, )
MARGARET CLARKSON, JOHN DOE I, )
II, III and JANE DOE I, II, )
III, and DAVID E. PUGH and JANE )
DOE PUGH, husband and wife, )
)
Defendants, )
)
THOMAS L. CHRISTENSEN and JANE )
DOE CHRISTENSEN, husband and )
wife, )
)
Respondents. ) FILED
KURTZ, C.J. - Wanda Iorio made three loans to Dynasty Land Company
that were secured by property located in the Terrace Heights area of
Yakima, Washington. Ms. Iorio filed this action after Dynasty defaulted on
all three loans. As part of this action, Ms. Iorio alleged that her
decision to make the loans was based on property values contained in
appraisals prepared by Thomas L. Christensen. The court granted summary
judgment and dismissed Ms. Iorio's negligent misrepresentation claim
against Mr. Christensen. The court determined that Mr. Christensen did not
owe a duty of care to Ms. Iorio because (1) Mr. Christensen had no
knowledge that any lenders would rely on his appraisals, (2) Ms. Iorio was
not a member of a group that Mr. Christensen sought to influence with his
appraisals, (3) Mr. Christensen's appraisals were not triggered by any
transaction between Ms. Iorio and Dynasty, and (4) there were no facts
indicating that Mr. Christensen had any special reason to know that some
member of a limited group would rely on the appraisals. Ms. Iorio appeals,
contending that Mr. Christensen owed her a duty of care when preparing the
appraisals. We conclude that Mr. Christensen did not owe a duty of care to
Ms. Iorio and, accordingly, affirm the trial court.
FACTS
In the fall of 1994, Merle 'Sonny' Ferguson, a principal in Dynasty Land
Company, Inc., contacted Mr. Christensen, and asked him to travel from
Seattle to Yakima in order to evaluate some property owned by Dynasty. Mr.
Christensen, a licensed real estate associate broker, was employed as the
Puyallup branch manager for MacPherson's Real Estate. Previously, Mr.
Christensen had performed an appraisal for Mr. Ferguson on property in
Benton County and a market analysis of property in Pierce County. Mr.
Christensen did not charge Mr. Ferguson for any of the appraisals,
including those later prepared in reference to the Yakima property. Mr.
Christensen prepared these appraisals because he hoped to establish a
relationship that would enable him to earn commissions selling parcels of
the property once they were developed.
In Yakima, Mr. Ferguson showed Mr. Christensen some property in Terrace
Heights. Mr. Ferguson asked Mr. Christensen to put his opinion regarding
value in appraisal form. Mr. Christensen responded that he really did not
perform appraisals because he was not an appraiser. Mr. Ferguson told Mr.
Christensen that this was not a problem, but that the opinion regarding
value needed to be in appraisal form so that a copy could be given to
attorney Fred Thorne to help him 'coordinate' the real estate activities
and 'understand' what Dynasty was doing. Clerk's Papers (CP) 62 at 39.
On January 23, 1995, Mr. Christensen provided Mr. Ferguson with an
appraisal of Terrace Heights, located in Yakima. The cover of the report
indicates that the appraisal was prepared 'FOR MR. SONNY FERGUSON{,}
DYNASTY LAND COMPANY.'
CP at 144. The cover letter stated that 'This report has not been based on
a requested minimum valuation, or approval of a loan.' CP at 145. The
letter also stated that 'Employment of this appraiser was not conditioned
upon the opinion producing a specific value or a value within a given
range.' CP at 145.
In explaining the purpose of the appraisal, Mr. Christensen testified about
his conversation with Mr. Ferguson the day that they viewed the property in
Yakima. At that time, Mr. Christensen was shown a large expanse of land
covered by sage brush in the Terrace Heights area. Mr. Christensen was
informed that Mr. Ferguson had recently acquired the property and wanted an
idea of what the land was worth. Mr. Ferguson did not disclose to Mr.
Christensen what he had paid for the land. According to Mr. Christensen,
Mr. Ferguson said he 'wanted some parameters so he could develop it, wanted
to know what he could pay up to for the dirt, what the dirt would be done
{sic} once he finished it.' CP 58 at 19.
Mr. Christensen's cover letter with the appraisal states that 'The purpose
of this report is to estimate the market value of the subject property in
its as is condition and estimate a value of the segregate finished lots.
Market Value is defined as the price at which a willing seller would sell
and a willing buyer would buy, neither being under abnormal pressure.' CP
at 145 (emphasis added). However, Mr. Christensen testified that the
market values were based on the assumption that the land was developed. In
effect, the 'as is' bare land value given by Mr. Christensen represented a
market value for a developer--that is, what a developer could afford to pay
for the property. Mr. Christensen testified that while he did not include
this information in the letter, the report was prepared for a developer who
would understand the potential of the property.
Although Mr. Christensen knew that the appraisal was being sent to Mr.
Thorne, he had no idea what Mr. Thorne was going to do with the appraisal.
According to Mr. Christensen, Mr. Ferguson told him that this project would
be financed with out-of-pocket funds.
In May 1995, Mr. Christensen was asked to do a second appraisal of the
Terrence Heights property. At some point, Mr. Thorne inquired about the
second appraisal, indicating that he needed it to show to some people. Mr.
Christensen understood this to mean that Mr. Thorne was showing the
appraisal to investors--using it to obtain financing. Mr. Christensen told
Mr. Thorne that the appraisal was not for investors, but was for the
developer. When Mr. Thorne asked if the figures were accurate, Mr.
Christensen explained that the figures were accurate if the property was
developed, i.e., segregated into finished lots.
This conversation made Mr. Christensen 'kind of upset,' but he sent the
second appraisal anyway. CP 67 at 67. Mr. Christensen called Mr. Ferguson
to complain, but Mr. Ferguson told him that Mr. Thorne was working with
investors and knew what he was doing. The second appraisal, dated May 17,
1995, was prepared 'FOR MR. SONNY FERGUSON{,} DYNASTY LAND COMPANY.' CP at
158. With the exception of the date, the cover letter with the second
appraisal is identical to the cover letter with the January appraisal.
Meanwhile, in February 1995, Ms. Iorio received a number of documents from
Mr. Thorne relating to a proposed financial transaction where Ms. Iorio
would loan money to Dynasty Land Company, Inc., and would receive a
promissory note secured by a first deed of trust on land owned by Dynasty.
Mr. Christensen's January appraisal was included with these materials. Ms.
Iorio, a resident of Alaska, relied heavily on Mr. Christensen's January
appraisal when making her decision to loan money to Dynasty. Reading the
appraisal, Ms. Iorio noted that the purpose of the appraisal was 'to
estimate the market value of the subject property in its as is condition
and estimate a value of the segregate finished lots.' CP at 100. She
interpreted this statement to mean that there was an estimated value of
each tract as bare land and an estimated value of the same property as
finished lots. Ms. Iorio also noted that Mr. Christensen certified that he
had 'no present or prospective interest in the property that is with
respect to the parties involved.' CP at 101.
Based on Mr. Christensen's January appraisal, Ms. Iorio concluded that she
would be engaging in a valid and legitimate transaction by lending $100,000
to Dynasty, with a security in land having an 'as is' value of $1,470,000.
Ms. Iorio made the first loan in February 1995. On May 5, 1995, Ms. Iorio
made a second loan to Dynasty. The second loan preceded Mr. Christensen's
second appraisal, which was dated May 17. Ms. Iorio made a third loan to
Dynasty in the fall of 1995, but that loan was secured by a deed of trust
on property that was not described in either of Mr. Christensen's
appraisals.
Dynasty defaulted on each of the three loans. After the default, Ms. Iorio
learned that the property offered to secure her third loan was the same
property offered to secure the first loan. Apparently Dynasty was able to
offer this property as security for two separate loans because Mr.
Christensen had incorrectly described the property in his first appraisal.
After the commencement of litigation, Mr. Christensen filed a motion for
summary judgment seeking dismissal of Ms. Iorio's claim against him. Mr.
Christensen requested a ruling that there was no issue of fact but that Mr.
Christensen owed no duty of care to Ms. Iorio. The court granted summary
judgment in favor of Mr. Christensen. The court determined that Mr.
Christensen did not owe a duty of care to Ms. Iorio because (1) Mr.
Christensen had no knowledge that any lenders would rely on his appraisal,
(2) Ms. Iorio was not a member of a group that Mr. Christensen sought to
influence with his appraisal, (3) Mr. Christensen's appraisal was not
triggered by any transaction between Ms. Iorio and Dynasty, and (4) there
were no facts indicating that Mr. Christensen had any special reason to
know that some member of a limited group would rely on the appraisal.
Ms. Iorio appeals contending Mr. Christensen owed her a duty of care when
preparing the appraisals.
STANDARD OF REVIEW. When reviewing an order granting summary judgment,
this court engages in the same inquiry as the trial court, considering all
facts and reasonable inferences in the light most favorable to the
nonmoving party. Kahn v. Salerno, 90 Wn. App. 110, 117, 951 P.2d 321
(1998). This court may affirm on any basis supported in the record and the
moving party bears the burden of showing the absence of a material issue of
fact. Redding v. Virginia Mason Med. Ctr., 75 Wn. App. 424, 426, 878 P.2d
483 (1994). Once the moving party has established that there is no dispute
as to any issue of material fact, the burden shifts to the nonmoving party
to establish the existence of an element material to its case. Kahn, 90
Wn. App. at 117. Bare assertions that a genuine material issue exists will
not defeat a summary judgment motion in the absence of actual evidence.
White v. State, 131 Wn.2d 1, 9, 929 P.2d 396 (1997).
ANALYSIS
In Washington, a third party may bring a claim for negligent
misrepresentation against a real estate appraiser pursuant to Restatement
(Second) of Torts sec. 552. Schaaf v. Highfield, 127 Wn.2d 17, 27, 896
P.2d 665 (1995). Generally, an appraiser's liability extends only to those
involved in the transaction that triggered the appraisal report, including,
but not limited to, the buyer and the seller. Id. Lack of privity is no
defense to a claim of negligent misrepresentation under sec. 552. Id. at
26. Liability for negligent misrepresentation is proper where: (1) the
defendant has knowledge of the specific injured party's reliance, (2) the
plaintiff is a member of a group the defendant seeks to influence, or (3)
the defendant has special reason to know that some member of a limited
group will rely on the information. Id. at 23-24 (citing Haberman v.
Washington Pub. Power Supply Sys., 109 Wn.2d 107, 162-63, 744 P.2d 1032,
750 P.2d 254 (1987), appeal dismissed sub nom. Wood Dawson Smith & Hellman
v. Haberman, 488 U.S. 805, 109 S. Ct. 35, 102 L. Ed. 2d 15 (1988)). In
short, only third parties in a limited class may advance claims for
negligent misrepresentation against a real estate appraiser.
The documents produced by Mr. Christensen are entitled 'APPRAISAL OF
TERRACE HEIGHTS.' CP at 144; CP at 158. Both parties base their arguments
on the case law related to claims for negligent misrepresentation against a
real estate appraiser. For purposes of this decision, this court, like the
trial court, will treat Mr. Christensen as a real estate appraiser.
Transaction triggering the appraisal. Ms. Iorio first suggests that
summary judgment was improper because there is a question of fact as to
whether she was a part of the transaction that triggered the appraisal
report. She asserts that Mr. Christensen owed a duty to her based on his
decision to reduce his appraisal to writing and send it to Mr. Thorne
without including a limitation as to its use. Ms. Iorio concedes that Mr.
Christensen understood that Mr. Thorne was 'coordinating' activities for
Dynasty and that Mr. Christensen had no idea what use Mr. Thorne would make
of the appraisal. According to Ms. Iorio, Mr. Christensen should have or
could have learned the intended purpose of the appraisals had he inquired.
As the trial court properly concluded, there is no question of fact
concerning Mr. Christensen's understanding of the transaction triggering
his appraisals. Mr. Christensen was asked to prepare an appraisal to help
Mr. Ferguson decide on a value for the property if it was developed. The
January appraisal was prepared 'FOR MR. SONNY FERGUSON{,} DYNASTY LAND
COMPANY.' CP at 144. The cover letter stated that 'The purpose of this
report is to estimate the market value of the subject property in its as is
condition and estimate a value of the segregate finished lots.' CP at 145
(emphasis added). The letter also stated that 'This report has not been
based on a requested minimum valuation, or approval of a loan.' CP at 145.
Mr. Christensen was aware that the appraisal would be forwarded to Mr.
Thorne, but Mr. Christensen was not informed that Mr. Thorne would forward
the appraisal to potential investors. When Mr. Christensen learned that
the appraisal was being sent to investors, he objected to both Mr. Thorne
and Mr. Ferguson.
Ms. Iorio suggests that Mr. Christensen did not understand the transaction
triggering the appraisal and that Mr. Christensen had a duty to make
inquiries so that he might better understand the transaction, including any
future use of the January appraisal. Assuming this duty exists, Ms. Iorio
presents no facts indicating that Mr. Christensen misunderstood the purpose
of the transaction triggering the January appraisal. Mr. Christensen was
told that Mr. Ferguson had purchased the property with out-of-pocket funds
and that he needed an appraisal to obtain the value of the property, if
developed. The appraisal is directed to Sonny Ferguson and Dynasty.
Ms. Iorio also argues that Mr. Christensen's understanding of the
transaction should have changed when he was asked to send the second
appraisal and learned of the possibility that the appraisals might be
forwarded to potential investors. There are two problems with this
argument. First, Mr. Christensen objected to this use of the appraisals.
Second, Ms. Iorio's second loan preceded the date of the second appraisal
and the third loan is secured by property not described in either
appraisal.
Haberman categories. Ms. Iorio next argues that even
if she were not a part of the transaction that triggered the appraisal, she
falls within one of the three groups set forth in Haberman. Specifically,
she contends she was a member of the special group that Mr. Christensen
sought to influence and, with respect to her second and third loans, Mr.
Christensen had special knowledge that his appraisals might be sent to
potential investors. In other words, Ms. Iorio contends that even though
she was not a part of the transaction that triggered the appraisals, Mr.
Christensen intended, knew, or should have known that his appraisals might
reach an audience that included potential investors.
Based on this record, Ms. Iorio has failed to provide any facts indicating
that she was a member of a group Mr. Christensen intended to influence with
his appraisals or that he had any special knowledge that the appraisals
would be sent to potential investors. There is no evidence indicating that
Mr. Christensen intended for Ms. Iorio or any other third party to have
access or rely on his appraisals. When Mr. Christensen learned of Mr.
Thorne's use of the appraisal, Mr. Christensen immediately objected, and
told Mr. Ferguson and Mr. Thorne that the purpose of the appraisal was to
provide market values for development purposes.
Ms. Iorio appears to suggest that Mr. Christensen should have taken
additional steps to understand and limit the use of the second appraisal,
perhaps by adding explicit disclaimers to the cover letter after his
conversation with Mr. Thorne. The cover letter is vague, but both
appraisals are directed to Mr. Ferguson. Additionally, Haberman suggests a
subjective inquiry and does not appear to assign an affirmative duty to
include disclaimers limiting a document's use.
Preparation of the appraisals and factual 'inconsistencies.' A substantial
portion of Ms. Iorio's argument is devoted to criticism of the manner in
which Mr. Christensen prepared the appraisals. These facts would be
relevant to establish the elements of a negligent misrepresentation claim,
but are irrelevant here where the issue is whether Mr. Christensen owed a
duty to Ms. Iorio. Again, Ms. Iorio may be attempting to argue that Mr.
Christensen is liable because he failed to fulfill a duty to include
explicit disclaimers in his documents. This is an interesting argument,
but Ms. Iorio provides no facts to support this argument.
Along similar lines, Ms. Iorio points to several inconsistencies and argues
that these discrepancies present issues of fact that defeat summary
judgment. But these inconsistencies do not create a question of fact
relevant to the issue here. Additionally, the identification of these
'inconsistencies' is not enough; Ms. Iorio must present facts to support
her position that she was an intended beneficiary of Mr. Christensen's
appraisals. Upon submission by the moving party of sufficient affidavits
or other evidence, the non-moving party must set forth specific facts that
sufficiently rebut the moving party's contention and disclose the existence
of a genuine issue of material fact. Young v. Key Pharmaceuticals, Inc.,
112 Wn.2d 216, 225-26, 770 P.2d 182 (1989) (citing CR 56(e)).
In sum, taking the facts presented here in the light most favorable to Ms.
Iorio, we conclude there is no genuine issue of fact, and, as a matter of
law, Mr. Christensen owed no duty of care to Ms. Iorio. The judgment of
the superior court is affirmed.
The majority of the panel has determined this opinion will not be
printed in the Washington Appellate Reports, but it will be filed for
public record pursuant to
RCW 2.06.040.
Kurtz, C.J.
WE CONCUR:
Sweeney, J.
Brown, J.