Opinion ID: 1833843
Heading Depth: 1
Heading Rank: 2

Heading: Fisher's Claims Against Pugh

Text: Fisher alleged that Pugh had negligently or wantonly misrepresented and suppressed facts. We need to consider only Fisher's claims of negligent or wanton misrepresentation. [1] The threshold question we must consider appears to be one of first impression: When and under what circumstances can a real-estate appraiser be held liable to a third party for a negligent misrepresentation in an appraisal? Insofar as we can tell, that precise issue has not been addressed by Alabama courts, although this Court has held that accountants may be liable to third parties under a theory of negligent misrepresentation if certain circumstances exist. See Boykin v. Arthur Andersen & Co., 639 So.2d 504 (Ala.1994); see also Colonial Bank of Alabama v. Ridley & Schweigert, 551 So.2d 390 (Ala.1989). In Boykin v. Arthur Andersen & Co ., this Court adopted Restatement (Second) of Torts § 552 (1977) as the law of this State in cases involving negligent misrepresentations relied upon by third parties, or parties who were not in privity of contract with the person making the misrepresentation. Boykin, 639 So.2d at 509-10. Restatement § 552 reads as follows: (1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information. (2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered (a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and (b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction. (3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect them. Restatement (Second) of Torts § 552 (1977). While we have applied this rule only to accountants, nothing in our prior cases should be understood as restricting our application of the Restatement approach to that one class of professionals. The rule of § 552 may be applied to anyone who in the course of his business, profession or employment engages in an activity that meets the requirements set forth in Subsection (1). Comment c to § 552 states that this rule subjects to liability only such persons as make it a part of their business or profession to supply information for the guidance of others in their business transactions. Section 552 would clearly, by its terms, govern real-estate appraisers, who, as an integral part of their business, facilitate real-estate transactions by issuing opinions regarding the value of real property. [2] These opinions usually influence the decisions of persons or entities to whom they are furnished. These persons or entities include banks considering whether to lend money to finance a real-estate purchase and buyers and sellers trying to determine an accurate price for real-estate. We therefore hold that real-estate appraisers are subject to liability for negligent or wanton misrepresentation, on the same basis that accountants are. We now consider whether, based on the facts suggested by the record, Pugh owed Fisher a duty the breach of which would be actionable. We noted that the Restatement 's definition of duty in negligent-misrepresentation cases limits the defendant's liability to specifically foreseen and limited groups of third parties for whose benefit and guidance the [defendant] supplied the financial information and who used it as the [defendant] intended it to be used. Boykin, 639 So.2d at 510. Under the Restatement rule, as applied to the facts of this case, Fisher would have the burden of showing that Pugh, the appraiser, foresaw, or should have foreseen, that his appraisal would be relied upon by a limited class that included Fisher. The Restatement rule, if applied to appraisers generally, would impose on an appraiser a duty to third parties that the appraiser intended to influence, as well as any party that the appraiser knew his client intended to influence by means of the appraisal. See First Nat'l Bank of Commerce v. Monco Agency, Inc., 911 F.2d 1053, 1059 (5th Cir.1990) (quoted by Boykin, 639 So.2d at 510). The Restatement rule, however, does not require, for the imposition of a duty, that one making a representation through a report or appraisal contemplate the specific identity of the person who may rely on the representation. Fisher argues that Pugh should have known that Locators would distribute the appraisal to prospective purchasers of Comer Plantation, given Pugh's extensive experience in the real-estate industry. Fisher also argues that an affidavit made by Charles Arrington, a professional Alabama real-estate broker with 25 years' experience, should not have been stricken as inadmissible but should have been considered by the trial court as evidence indicating that Pugh owed Fisher a duty. These arguments, however, ignore the undisputed fact that the appraisal report was issued for the benefit of Thomas in his individual capacity rather than as a representative of his real-estate firm. Given that fact, we must conclude that Fisher's argument would impose on Pugh a duty that goes beyond that established by the Restatement rule and the cases interpreting it, and that Fisher failed to present evidence sufficient to support an inference that Pugh foresaw, or should have foreseen, that his appraisal would be used by prospective purchasers. Pugh's report contains a statement, entitled Assumptions and Limiting Conditions, that describes the intended use of the document. It expressly provides that the report may not be used for any purpose other than its intended use without the permission of the appraiser. Intended use has several meanings, depending on the context in which the report is provided, but based on the facts of this case, we cannot accept Fisher's argument that these facts satisfy the Restatement rule for the imposition of a duty to him. Suffice it to say that in this case, no evidence suggests Pugh knew, or should have known, that Thomas, in his capacity as an owner of Comer Plantation, was going to distribute the appraisal report to prospective purchasers. The evidence presented by Fisher, including Arrington's stricken affidavit, is irrelevant. Pugh stated in his deposition that he prepared the appraisal report solely for Thomas as a partial owner of Comer Plantation. Fisher presented no evidence to the contrary. Without evidence showing that Pugh knew, or should have known, that Thomas, as an owner and potential seller, was going to use the report as a selling tool, we cannot conclude that Pugh could be held liable for breach of a duty to Fisher. We must conclude that the evidence does not create a genuine issue of material fact as to whether Pugh owed Fisher a duty. [B]ecause liability for negligence and wantonness is predicated upon the existence of a duty, Colonial Bank of Alabama, 551 So.2d at 395 (citing Lynn Strickland Sales & Service, Inc. v. Aero-Lane Fabricators, Inc., 510 So.2d 142 (Ala.1987)), the trial court correctly granted Pugh's motion for summary judgment. Therefore, we need not address the question whether the appraisal contained a misrepresentation or, if it did, whether Fisher relied on it. The summary judgment is affirmed as to the claims against Pugh.