First State Sav. Bank v. Albright & Associates of Ocala, Inc.
| Decision Date | 31 May 1990 |
| Docket Number | Nos. 88-2445 and 89-341,s. 88-2445 and 89-341 |
| Citation | 561 So.2d 1326 |
| Parties | , 15 Fla. L. Weekly D1479 FIRST STATE SAVINGS BANK, etc., Appellant/Cross-Appellee, v. ALBRIGHT & ASSOCIATES OF OCALA, INC., etc., et al., Appellees/Cross-Appellants. |
| Court | Florida District Court of Appeals |
Leslie King O'Neal of Markel, McDonough & O'Neal, Orlando, for appellant/cross-appellee.
W.C. O'Neal of O'Neal & O'Neal, Gainesville, for appellees/cross-appellants.
First State Savings Bank appeals a final judgment in favor of Stephen Albright, a real estate appraiser, and his firm, Albright & Associates of Ocala, Inc. (Albright). The bank contends that the trial court erred in denying its motion to amend the pleadings to conform to the evidence presented at trial and in directing a verdict in favor of Albright. Albright cross-appeals an order finding that he is not a "professional" for purposes of the two-year statute of limitations for professional malpractice. We conclude that the trial court should not have directed a verdict in favor of Albright and accordingly reverse the final judgment. We agree, however, with the trial court that Albright is not a professional for purposes of the malpractice statute of limitations.
In 1986, the bank filed suit against Albright and his firm for damages resulting from an allegedly inaccurate appraisal of property. In its complaint, the bank alleged that Albright undertook, for consideration, to provide an accurate appraisal of a development known as the "Golden Ocala" project, 1 that the appraisal and an update were delivered to the bank in 1984, that Albright knew that the bank would rely on the appraisal in determining whether a loan secured by the property should be made, that the bank loaned $37,000,000 for the Golden Ocala project in reliance on the appraisal showing a value of $57,000,000, that the project had in fact a market value of less than $9,500,000, and that the mortgage on the property is now in default. The bank further alleged that Albright had negligently, unskillfully, and without due care prepared the appraisal and that as a direct and proximate result of the detrimental reliance on the negligent acts of Albright, the bank had been damaged.
In his answer, Albright admitted making the appraisal for his client Golden Ocala but denied that it had been made for the bank. Albright also moved for summary judgment alleging in part that the action was barred by the two-year statute of limitations for professional malpractice. The trial court found that Albright is not a professional within the meaning of the statute of limitations for professional malpractice and denied his motion and renewed motion for summary judgment.
The evidence at trial established that the bank would generally loan about seventy-five percent of the appraisal value to develop raw land. The initial appraisal done by Albright valued the Golden Ocala project at $31,000,000 and the update valued the project at $57,000,000. The update was specifically addressed to the president of the bank. The appraisal, along with the other information concerning the developers, was presented to the board of the bank which approved a loan of $37,000,000 to develop Golden Ocala. The Federal Home Loan Bank Board rejected the appraisal and eventually required the bank to write down the book value of the loan to $13,400,000. The mortgage and the property has been foreclosed and the bank has apparently received no money from Golden Ocala or its developers. Two expert witnesses testified that Albright's appraisal grossly misrepresented the value of the property and did not comply with federal banking regulations.
After the bank rested its case, Albright moved for entry of a directed verdict on the basis that there can be no recovery in tort for purely economic damages, as were sought here. Counsel for the bank argued that he could not sue Albright in contract because of a lack of privity and therefore was required to sue under a negligence theory. The hearing on the motion was continued until the following day. At this time, counsel for the bank argued that its action, although couched in terms of negligence, was also an action for failure to use due care on the contract and arose out of the duties under the contract. Counsel then moved to have the pleadings conform to the evidence. The trial court denied this motion and directed a verdict in favor of Albright.
In First Florida Bank v. Max Mitchell & Company, 558 So.2d 9 (Fla.1990), the Florida Supreme Court recently held that an accountant may be held liable for negligence to parties, despite a lack of privity, where the accountant knows that those parties will rely upon his opinion. In that case, Mitchell, a certified public accountant, went to First Florida Bank for the purpose of negotiating a loan on behalf of his client, C.M. Systems, Inc. Mitchell told the bank vice president that he was a certified public accountant and gave the vice president audited financial statements of C.M. Systems which had been prepared by Mitchell's accounting firm. The financial statements did not show that C.M. Systems owed money to any bank and Mitchell later told the bank vice president that C.M. Systems was not indebted to any bank. The bank later approved a credit line of $500,000 to C.M. Systems. C.M. Systems borrowed the entire amount of the $500,000 credit line which it never repaid.
The bank later discovered that the audit of C.M. Systems had substantially overstated its assets, understated its liabilities, and overstated its net income. Among other things, the financial statement failed to reflect that C.M. Systems owed at least $750,000 to several banks.
The bank filed a three count complaint against Mitchell and his firm. Because of the absence of privity between either Mitchell or his firm and the bank, the trial court granted Mitchell's request for summary judgment on the negligence counts. The district court affirmed but certified a question to the supreme court concerning the scope of an accountant's liability.
The supreme court noted that there were...
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