Barnes v. Cornerstone Investments, Inc.
| Decision Date | 12 June 1989 |
| Docket Number | No. 21971-5-I,21971-5-I |
| Citation | 54 Wn.App. 474,773 P.2d 884 |
| Parties | Wayne P. BARNES, and Suzanne Barnes, Arthur W. Beech and Avis Beech, Appellants, v. CORNERSTONE INVESTMENTS, INC., Frank Seekins, Daniel Scalf, Daniel Nielsen, R.H. Pehnert, Park Place Realty, Inc., Dennis Baum and Mary Baum, Defendants, and Lamb Hanson Lamb Appraisal Associates, Inc. and R. Scott Adams, Respondents. |
| Court | Washington Court of Appeals |
Stephen G. Smith, Kirkland, for Wayne P. and Suzanne Barnes.
Larry Ransom, B. Jeffrey Carl, Karr Tuttle, Seattle, for Cornerstone Investments, Inc.
Wayne and Suzanne Barnes and Arthur and Avis Beech appeal the trial court's summary judgment dismissing all claims against defendants Lamb Hanson Lamb Appraisal Associates, Inc. and R. Scott Adams (hereinaftercollectively referred to as "LHL"). Appellants contend that (1) LHL owed them a duty of due care when it prepared a Letter of Opinion regarding the value of some real property for Cornerstone Investments, Inc. (Cornerstone); and (2) they were justified in relying on the Letter of Opinion when they decided to accept a deed of trust on Cornerstone's real property to secure the purchase of a separate piece of property owned by appellants. We affirm.
The facts are not in dispute. Wayne and Suzanne Barnes wanted to buy some property and build a house. Suzanne's parents, Arthur and Avis Beech, agreed to quit claim an interest in their property to Wayne and Suzanne so that all four became owners of the Beech residence. They then refinanced, borrowing $50,000 against the substantial equity in the Beech residence, to purchase a lot and begin construction of a house for Wayne and Suzanne.
Before the house was complete, appellants decided to sell the lot and the partially constructed house. After putting the property on the market, a realtor from Park Place Realty brought a purchase and sales agreement to the Barneses showing Cornerstone as the prospective purchaser.
Pursuant to the agreement, which the Barneses signed, Cornerstone agreed to purchase the Barneses' property. To secure the deed of trust and promissory note executed by Cornerstone in favor of the Barneses, the Barneses could choose to take a junior position in any one of several properties owned by Cornerstone.
Several weeks later, Cornerstone's agent contacted the Barneses and told them he "had an appraisal on a piece of commercial property [in Burien] that Cornerstone wished to use as the collateral for the note." The Barneses then went to the offices of Park Place Realty. According to Wayne Barnes, Cornerstone's agent explained to them that:
the building was vacant at the time but that it was going to be rehabilitated shortly and rented out, that there was $275,000 of debt on the building at the present time, and that with our loan or note on there, the total indebtedness would be 317,000 against the value according to the appraisal as-is of 465,000. He said this would be a safe deal because of the difference in the indebtedness versus the value.
The agent showed them a Letter of Opinion which had been prepared by LHL at the request of Cornerstone and was dated September 1982, some 9 months earlier. He told them:
Here's an MAI appraisal. The building is worth $465,000 with about $275,000 of debt so there's plenty of equity to protect you.
The Barneses took the Letter of Opinion home with them and read it. Although the Barneses were aware that the appraised value of the Burien property assumed completion of the remodeling as specified in the Letter of Opinion, neither of them looked at the property, contacted LHL, or asked anyone about the property or the appraisal. Ultimately, the Barneses decided to accept a deed of trust on the Burien property, knowing that they would be in third position in the chain of title.
Cornerstone failed to make payments on the loan. Appellants were unsuccessful in their attempts to purchase the first lien position in order to sell the Burien property. The Appellants then sued Cornerstone, Park Place Realty, and LHL. LHL moved for summary judgment, seeking a dismissal of appellants' claims against it. The trial court granted LHL's motion, and appellants filed this appeal.
Appellants contend that the trial court erred in granting LHL's motion for summary judgment because the evidence raised a genuine issue of fact about whether LHL owed them a duty of due care in preparing its Letter of Opinion. Appellants rely on the affidavits of two experts which state that LHL should have known that the Letter of Opinion would be shown to third parties. LHL responds that it owed no duty to the Barneses and, in any event, the Barneses could not justifiably rely on the alleged misrepresentation in LHL's Letter of Opinion. 1
This court reviews the trial court's order granting summary judgment de novo. Hartley v. State, 103 Wash.2d 768, 774, 698 P.2d 77 (1985). An order granting summary judgment will be reversed if a genuine issue of material fact exists or if, as a matter of law, the moving party was not entitled to prevail. Hartley, 103 Wash.2d at 774, 698 P.2d 77.
No Washington case has yet defined to what extent appraisers owe third parties a duty of due care in the preparation and communication of their appraisals. However, in determining whether a plaintiff has stated a claim for negligent misrepresentation, Washington courts follow Restatement (Second) of Torts § 552 (1977). Hoffer v. State, 110 Wash.2d 415, 427-28, 755 P.2d 781 (1988); Haberman v. WPPSS, 109 Wash.2d 107, 161-62, 744 P.2d 1032 (1987), 750 P.2d 254 (1988), appeal dismissed, --- U.S. ----, 109 S.Ct. 35, 102 L.Ed.2d 15 (1988); Transamerica Title Ins. Co. v. Johnson, 103 Wash.2d 409, 415-16, 693 P.2d 697 (1985). Section 552 provides:
(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 ... the liability stated in Subsection (1) is limited to loss suffered
(a) by the person or one of the limited group of persons for whose benefit and guidance he intends to supply the information or knows that the...
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