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Appraiser Liable in Both Contract and Tort Because Appraiser Knew a Third Party Would Rely on Appraisal

Michelle Maratto Itkowitz was happy to have submitted some cases on appraiser liability to our friends at Real Estate Solutions for their excellent "Cases of Interest" section in Spring 2015.  Here is one such case that was featured.

Rodin Properties-Shore Mall v. Ullman
Court: Supreme Court of New York, Appellate Division, First Department
Citation: 1999 N.Y. Slip Op. 07250
Plaintiff: Rodin Properties-Shore Mall N.V.
Defendant: Leo Ullman et al., Cushman & Wakefield of Pennsylvania, Inc. et al.

Facts: Plaintiff is appealing the lower court's decision in granting the Defendant summary judgement on Plaintiff's complaint alleging fraud, negligence, negligent misrepresentation and gross negligence claim. Plaintiff, a consortium of investors, loaned $449,125,000.00 to Shore Mall Associates, L.P. (SMA) to refinance a New Jersey shopping center conditioned on Shore Mall to be appraised at least at $60,000,000.00. SMA then retained the Defendant to appraise the property. The Defendant submitted the appraisal which the Plaintiff alleged was grossly inflated, incorrectly stated competition and substantially exaggerated SMA's cash flow. The lower court, finding that the same facts were asserted for both the contract and tort claims, granted the Defendant's motion for summary judgment, dismissing the tort claims on the ground that they were duplicative of the contract claims. Plaintiff appeals.

Holding: The Appellate Court, in reversing the lower court's decision, stated that the Plaintiff's complaints were properly pleaded. The Appellate Court stated that the Defendant owed a fiduciary duty to the Plaintiff independent of any contractual obligations, even though the same facts serve as the basis for both the tort and contract claims. Since the Defendant had a specific awareness that a third party will rely on his or her advice or opinion, tort liability will ensue if the professional report or opinion is negligently or fraudulently prepared. Even though the legal duty of tort liability must spring from facts extraneous to and not constituting elements of the contract, it may be connected with and dependent upon the contract.

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