First Nat. Bank of Sikeston v. Goodnight

• Decision Date: 29 October 1986
• Docket Number: No. 14171,14171
• Citation: 721 S.W.2d 122
• Parties: FIRST NATIONAL BANK OF SIKESTON, Plaintiff-Appellant, v. Dick GOODNIGHT, Defendant-Respondent.
• Court: Missouri Court of Appeals

Page 122

721 S.W.2d 122

FIRST NATIONAL BANK OF SIKESTON, Plaintiff-Appellant, v. Dick GOODNIGHT, Defendant-Respondent.

No. 14171.

Missouri Court of Appeals,

Southern District,

Division Two.

Oct. 29, 1986.

Motion for Rehearing or Transfer

Denied Dec. 5, 1986.

Application to Transfer Denied Jan. 13, 1987.

Wm. Clayton Vandivort, Vandivort and Polivick, Sikeston, for plaintiff-appellant.

James E. Spain, Hyde, Purcell, Wilhoit, Spain, Edmundson and Merrell, Poplar Bluff, for defendant-respondent.

HOGAN, Presiding Judge.

In this court-tried case based on negligent misrepresentation, plaintiff First National Bank of Sikeston appeals from an adverse ruling. The trial court based its judgment on several conclusions, one of which was that plaintiff made no submissible case. This conclusion is embodied in the trial court's finding No. 12, which we shall note. The plaintiff is an aggrieved party; two of its three assignments of error are directed essentially to finding No. 12 and we regard the submissibility issue as determinative on the merits. We believe--since the issue was directly raised by the plaintiff--that we are not precluded from resolving the appeal on its merits on that issue, Hills v. Ozark Border Electric Cooperative, 710 S.W.2d 338, 340 (Mo.App.1986); Cantrell v. Bank of Poplar Bluff 702 S.W.2d 935, 942, n. 1 (Mo.App.1985), even though, as we read Grippe v. Momtazee, 696 S.W.2d 797 (Mo. banc 1985), we may no longer regard submissibility as inherent on the appeal and decide the appeal sua sponte on the theory that trial error is immaterial if no submissible case was made.

The trial court made extensive findings of fact and conclusions of law. Bearing in mind that in a case tried to the bench, the trial judge functions as the trier of fact who resolves conflicts in the evidence and determines the credibility of witnesses, and that he may accept or reject their testimony in part or as a whole, Novak v. Akers, 669 S.W.2d 644, 647 (Mo.App.1984), and bearing further in mind that the trial court, functioning as a fact-finder, can draw all reasonable inferences from the evidence presented to it and base its ultimate conclusions upon such reasonable inferences, Wills v. Alcorn, 636 S.W.2d 142, 145 (Mo.App.1982), and having examined the record for ourselves, we conclude the trial court's findings fairly state the operative facts as it might have found them to be. In pertinent part, those findings are:

"1. Plaintiff is a banking institution at Sikeston, Missouri and Defendant is licensed as a real estate agent and broker and maintains an office at Malden, Missouri, approximately 40 miles from Sikeston. Pat Lea is the President ... of [the] plaintiff bank, and personally handled all transactions relating to the subject matter of this lawsuit.

2. Phillip Shelton, a resident of Malden, applied to the bank for a loan to purchase a house and lot in Malden ... for speculation. Shelton represented that the house and lot was worth more than ... $27,500.00 and offered a deed of trust upon said house and lot as security.

3. Pat Lea was personally acquainted with Shelton and ... had both a social and business relationship with him for more than ten years. He believed Shelton to be an honorable person, and placed great trust and confidence in him. Lea directed Shelton to obtain an appraisal of [the] property....

4. Shelton selected defendant Goodnight to appraise [the] property and Shelton furnished Goodnight with a printed appraisal form. Goodnight knew that the appraisal was to be used in connection with the loan application with plaintiff bank and [the] bank did rely upon [the] appraisal in making the loan to Shelton. The form provided to Goodnight had a street description of 107 Park Street, but had no legal description and had a blank space for a legal description.

5. Shelton showed Goodnight a house and lot located at 107 Park Street, Malden, Missouri. Goodnight appraised the house and lot and the fairness of that appraisal is not questioned. He appraised the property at $35,600.00, signed the appraisal form, and delivered it to Shelton.

6. At a later date, Shelton inserted the description of 'Lot 9, Block 3, Hester Addition to the City of Malden.' This description was not the legal description for the property at 107 Park Street, but was a vacant lot owned by Shelton. Shelton delivered the appraisal to plaintiff bank and following title examination of an abstract furnished by Shelton, the loan was made. At no time prior to making the loan did plaintiff bank examine the property at 107 Park Street or at Lot 9, Block 3, Hester Addition to the City of Malden. The vacant lot was not property just purchased by Shelton, but property he owned at the time he applied for the loan.

7. Goodnight had known Shelton for several years. Shelton was the paid executive director of the Bootheel Regional Planning Commission located at Malden, Missouri, and at all times relevant hereto had a good reputation in the community and Goodnight believed him to be an honest person and trusted him.

8. Approximately three years later Shelton elected to file a petition in bankruptcy and went by the bank in Sikeston and advised Pat Lea that the bank did not have a deed of trust on [the] house and lot but only on a vacant lot and that he had inserted the description after the appraisal was made by Goodnight.

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11. It is not uncommon in the Malden community for appraisers to appraise property based upon street address without the legal description being furnished.

12. The fraudulent act of Shelton in falsifying the address of the appraised property was the cause of harm to plaintiff and defendant Goodnight did not at the time of delivering the appraisal to Shelton realize or [have] any cause to realize the likelihood that Shelton would falsify the address. Because of Defendants [sic] experience with Shelton and the reputation Shelton had in the community, defendant could not have reasonably foreseen the fraudulent act of Shelton. The fraudulent act was the superceding and intervening cause of plaintiffs [sic] injury for which the defendant is not legally responsible...."

The court entered judgment for the defendant based on these findings.

A brief statement concerning the nature of the plaintiff's cause of action is appropriate. Most of us associate the tort of negligent misrepresentation with Glanzer v. Shepard, 233 N.Y. 236, 135 N.E. 275, 23 A.L.R. 1425 (1922), where buyers, in reliance upon a negligently made weight certificate, were permitted to recover against a weightmaster, and Ultramares Corporation v. Touche, 255 N.Y. 170, 174 N.E. 441, 74 A.L.R. 1139 (1931), a leading case on the entire subject. The basis of liability lies in negligent representation. J. Louis Crum Corp. v. Alfred Lindgren, Inc., 564 S.W.2d 544, 551 (Mo.App.1978). The action is to be distinguished from negligent interference with contract, discussed in Frank Horton & Co., Inc. v. Diggs, 544 S.W.2d 313 (Mo.App.1976), and intentionally tortious interference with contract, as discussed in such cases as Community Title Co. v. Roosevelt Federal Savings & Loan Association, 670 S.W.2d 895, 904-905 (Mo.App.1984). Negligent representation as an actionable tort has been recognized in this jurisdiction in Westerhold v. Carroll, 419 S.W.2d 73 (Mo.1967), and Aluma Kraft Manufacturing Co. v. Elmer Fox & Co., 493 S.W.2d 378 (Mo.App.1973). At least one Missouri court has extended liability for negligent misrepresentation to professional appraisers, holding that they are required to exercise reasonable care in preparing their reports. Breckenridge Hotels Corp. v. Real Estate Research, 452 F.Supp. 529, 532 (E.D.Mo.1978). Although that case was vacated upon stipulation of the parties, Breckenridge Hotels Corp. v. Real Estate Research, 452 F.Supp. 385 (E.D.Mo.1978), there is some general authority that commercial real estate appraisers may be held liable for negligent misrepresentation. Annot., 21 A.L.R.4th 867 (1983).

The basis of liability for negligent misrepresentation is stated by the American Law Institute in § 552, Restatement (Second) or Torts (1977), thus:

"(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...." ¹ Here, the plaintiff's allegations of negligence were: "... in particular, Defendant negligently failed:

(a) To view the property which was to be appraised;

(b) To check the written appraisal submitted to Plaintiff for accuracy in so far as the legal description ... contained on it is concerned (c) To adequately investigate the information furnished to him by Mr. and Mrs. Shelton and upon which he was relying in preparing and submitting said appraisal."

As noted, two of the plaintiff's three assignments of error are directed to Finding No. 12. Essentially, the two assignments present different sides of the same coin. Assignment II, slightly paraphrased, is that the trial court's finding that Shelton's actions were a superseding and intervening cause of the bank's loss is not supported by substantial evidence and is a misapplication of the law because the defendant created a condition which he knew, or should have known, would give Shelton occasion to commit an intentional harm to the bank and Shelton's negligence was a substantial factor in bringing about the plaintiff's damage. Assignment III, again slightly paraphrased, is that the plaintiff's damages were caused by defendant's negligence, and the trial court erred in holding that defendant's negligence did not cause plaintiff's damages because defendant, as an appraiser, owed a duty to furnish correct...