Costa v. Neimon

• Decision Date: 01 March 1985
• Docket Number: No. 84-455,84-455
• Citation: 123 Wis.2d 410,366 N.W.2d 896
• Parties: Anthony COSTA and Sandra Costa, Plaintiffs-Respondents, v. Robert NEIMON, Defendant-Appellant.
• Court: Wisconsin Court of Appeals

Page 896

366 N.W.2d 896

123 Wis.2d 410

Anthony COSTA and Sandra Costa, Plaintiffs-Respondents, v. Robert NEIMON, Defendant-Appellant.

No. 84-455.

Court of Appeals of Wisconsin.

Submitted on Briefs Feb. 1, 1985.

Opinion Released March 1, 1985.

Opinion Filed March 1, 1985.

O'Connell & O'Connell, Milwaukee, for defendant-appellant; Emmett O'Connell, Milwaukee, of counsel.

Jacobson, Sodos & Krings, S.C., Milwaukee, for plaintiffs-respondents; Alan L. Derzon, Milwaukee, of counsel.

Before WEDEMEYER, P.J., and MOSER and SULLIVAN, JJ.

SULLIVAN, Judge.

Robert Neimon (Neimon) appeals from a judgment awarding $8,500 in damages, plus costs, interest and attorney's fees, to Anthony and Sandra Costa (the Costas) for Neimon's negligent misrepresentation as to the fair market value of certain real property. The principal issue presented for review is whether a real estate appraiser may be held liable to third parties, not in privity, for negligent misrepresentation. We hold that a real estate appraiser may sustain such liability, and we affirm the liability aspect of the judgment. We reverse the award of damages because it is not supported by the evidence.

In April, 1976, the Costas signed an offer to purchase real estate located on South 17th Street in the city of Milwaukee; the seller was a local real estate company. The offer to purchase contained a subject-to-financing clause, which provided that the closing of the transaction was contingent upon the Costas' securing a state Veterans Administration-guaranteed mortgage. The realtor arranged for the Costas to meet with a loan officer from Mortgage Associates. The Costas applied for a loan.

Mortgage Associates retained Neimon's services for an appraisal of the subject property. Neimon appraised the property as having a fair market value of $21,500. The loan was approved, and the sale closed in July, 1976. Later that month, the Costas thought about relocating and sought information about the appraisal done by Mortgage Associates. Both Mortgage Associates and the state Veterans Administration denied access to the appraisal. Thereafter, the Costas hired an independent appraiser to value the property. The Costas' appraiser determined that the fair market value of the property was $13,000. The Costas lost the property in a mortgage foreclosure in 1979 for failure to make the monthly payments.

The Costas filed suit in 1977 against Neimon and Mortgage Associates. Mortgage Associates was dismissed from the action on its motion for summary judgment. A jury trial in October, 1983, culminated in a judgment for the Costas in the total sum of $9,629.74. The trial court affirmed the judgment on motions after verdict. Neimon appeals from the judgment.

Neimon's first argument is that a real estate appraiser who is hired by one other than the purchaser, and not on behalf of the purchaser, owes no duty of care to the purchaser. Neimon contends he owed a duty only to the lender that hired him and to the Veterans Administration, the guarantor of the loan.

Neimon's reliance on the lack of privity between him and the Costas is misplaced. As our supreme court has noted, lack of privity as a defense to a negligence action was substantially destroyed in 1916 with MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (1916). See A.E. Investment Corp. v. Link Builders, Inc., 62 Wis.2d 479, 487, 214 N.W.2d 764, 768 (1974).

While no Wisconsin case specifically holds that a real estate appraiser may be held liable to a third party not in privity of contract, we have no difficulty concluding that such liability may exist under Wisconsin law. In A.E. Investment the supreme court held that an architect may be liable to a third party not in privity. "The lack of privity does not constitute a policy reason for not imposing liability where negligence is shown to be a substantial factor in occasioning the harm." Id. at 488, 214 N.W.2d at 769. Likewise, lack of privity is no longer a barrier to an accountant's liability to a relying third party, see Citizens State Bank v. Timm, Schmidt & Co., 113 Wis.2d 376, 382-85, 335 N.W.2d 361, 364-65 (1983), or to an attorney's liability to a beneficiary of a will negligently drafted by the attorney, see Auric v. Continental Casualty Co., 111 Wis.2d 507, 512-14, 331 N.W.2d 325, 328-29 (1983).

"The duty of any person is the obligation of due care to refrain from any act which will cause foreseeable harm to others even though the nature of that harm and the identity of the harmed person or harmed interest is unknown at the time of the act." A.E. Investment, 62 Wis.2d at 483, 214 N.W.2d at 766. Thus, Neimon breached his duty of care if "it was foreseeable that his act or omission to act may cause harm to someone." Id. at 484, 214 N.W.2d at 766.

It is beyond serious dispute that an appraiser's negligently performed calculation of the value of property is an act or omission which would foreseeably cause some harm to someone. The most obvious "someone" is the party who hired the appraiser--in this case, the lender. Thus, an appraiser's failure to use due care in performing an appraisal is negligence because it is an act or omission in the face of foreseeable harm.

It is not necessary that the appraiser have foreseen the harm to the particular plaintiff, although here, as in A.E. Investment, harm to the plaintiff was foreseeable. Neimon should have foreseen that a prospective buyer of the property being appraised was "within the ambit" of harm which would result from a carelessly done appraisal. See id. at 485-86, 214 N.W.2d at 767.

Thus, under well-settled principles of Wisconsin negligence law, an appraiser may be held liable to a third party for negligence in performing an appraisal. We reject Neimon's argument that he owed no duty of care to the Costas.

Neimon's second argument is that the jury's finding of negligence was not supported by the evidence. The standard of review for a challenge to the sufficiency of the evidence has been frequently stated. In short, an appellate court must sustain the jury's verdict if there is any credible evidence which under any reasonable view fairly admits an inference supporting the jury's findings. Krueger v. Mitchell, 112 Wis.2d 88, 104-05, 332 N.W.2d 733, 741 (1983).

The elements of negligent misrepresentation are (1) that the defendant made the alleged representation of fact, (2) that such representation was untrue, (3) that the defendant was negligent in making the representation, and (4) that the plaintiff believed the representation to be true and relied thereon to his or her damage. See Wis J I--Civil 2403. Our review of the record uncovers ample evidence to support each element.

Neimon made a representation of fact that the real estate in question had a fair market value of $21,500. Neimon contends that this appraisal was an "opinion," not...