Appraiser Liability

Rodin Properties-Shore Mall v. Ullman

Court: Supreme Court of New York, Appellate Division, First Department
Index #: (not mentioned)
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.

Submitted: Michelle Maratto Itkowitz, Esq ,

Precis: Faisal Sheikh


Clement v. United Homes, LLC

Court: United States District Court, Eastern District, New York
Index #: No. 10–CV–2122 (RRM)(RLM)
Citation: 914 F. Supp. 2d 362
Plaintiff: Ruthleona Clement
Defendant: United Homes, LLC, United Property Group, LLC, Yaron Herscho, Galit Network, LLC, First United Mortgage Banking Corporation, Albert Benshabat, Maya Benshabat, American Servicing Corporation, Ocwen Loan Servicing, LLC.

Facts: Plaintiff, an African-American woman, is pursuing a suit for monetary and equitable relief, alleging violations of the Fair Housing Act, Civil Rights Act, and Truth in Lending Act as well as various City and State law violations against the parties that were involved in the financing and purchase of her home. The Plaintiff is alleging that the Defendants engaged in a process called reverse redlining, where the property sellers colluded with appraisers, mortgage brokers and lawyers to sell houses at artificially high prices to unwitting minority buyers. Defendants (Benshabats), who provided appraisal services for the Plaintiff's home and whom the Plaintiff accuses of intentionally overstating the value of her home, are moving to dismiss the complaint on the basis of failure to state a claim and expiration of the statute of limitations.

Holding:The Court granted the Defendant's motion in part and dismissed it in part. The Court analyzed applicable statute of limitations related to all of the Plaintiff's claims and found that all these claims were time-barred under the applicable statutes. The Court also dismissed the Plaintiff's complaint upon analysis of the claims under the Discovery Rules of Accrual, finding that the Plaintiff learnt of her injuries within months of moving into her new home, even though she did not know of the legal significance of her injuries at the time. The Court also ruled that the Continuing Violation Theory will not apply, since there were no alleged violations after the purchase of the home. The Court gave notice to the Plaintiff that her complaints were subject to dismissal on the basis of timeliness, unless the Plaintiff can allege plausible facts going to the discovery of her injuries, further conduct by Defendants, or entitlement to tolling of the statute of limitations, with respect to all claims under state law fraud. If Plaintiff successfully amends the complaints, alleging a timely federal cause of action, then the Court will entertain Plaintiff's state law fraud claim under the Court's power to exercise supplemental jurisdiction.

Submitted: Michelle Maratto Itkowitz, Esq ,

Precis: Faisal Sheikh


Luellen Goldstein v. Stern, Keiser & Panken, LLP, et al.

Court: New York County Supreme Court.
Citation: ___ Misc. 3d. ___ , 2014 NY Slip Op. 32666(U) (Sup. Ct., NY Co., 2014)

Facts: Plaintiff, Luellen Goldstein retained Defendants Stern, Keiser & Panken to prepare her will, and to provide estate tax planning advice. Plaintiff wanted to make a gift to her son outside of the estate for $1 million. Plaintiff was advised by an attorney of Defendant that if the gift were $1 million or less, Plaintiff could take advantage of the IRS unified tax credit which would render the gift tax-free. Since Plaintiff did not have enough liquid assets to make the gift, she was advised to gift him with a number of non-voting shares in Plaintiff’s company, which owned a mixed-use, four-story building in Manhattan. The Defendant’s law firm recommended Co-Defendant, JDM Real Estate Company (“JDM”), to conduct an appraisal of the building.

JDM provided the firm with a written appraisal, which valued the building at approximately $2.3 million. However, an IRS appraiser evaluated the building at $6.5 million, which would have greatly increased the value of the son’s shares, but make the gift taxable, since it was in excess of $1 million. As a result, Plaintiff was taxed $188,077 plus interest. Plaintiff claimed the law firm and/or the appraiser were liable for the tax consequences.

The law firm moved to dismiss, claiming the advice they gave was sound and that if anyone was liable, it was the appraiser for the gross errors in his written report. JDM also moved to dismiss the complaint, claiming Plaintiff’s claims were time-barred under the statute of limitations. Plaintiff claimed the firm was negligent in failing to verify the accuracy of the report, and since the law firm continuously represented Plaintiff, the tolling provisions of the statute of limitations apply to the appraiser.

Holding:The Court granted the Defendants’ respective Motions and dismissed Plaintiff’s Complaint. Since the law firm only recommended the appraiser and Plaintiff paid them directly, they were under no legal duty to supervise or verify their work. When a party retains an independent contractor, they are not liable for the contractor’s negligent acts.

Also, since JDM’s Report was issued in 2009, and the action was not commenced until 2012, the three-year statute of limitations precluded any claim for negligence against the real property appraiser.

Editor's Note:It’s too bad that the Court never reached the merits of the claim against the appraiser. Would the appraiser have been liable for the tax deficiencies?

Prevailing Attorney: Lisa Strewsberry, Esq.

Precis: Joel Grossbarth


Chen v. Daly

Court: New York State Supreme Court, New York County
Citation: ___Misc 3d. ___, 2016 Slip Op. 30093 (Sup. Ct., N.Y. Co., 2016).

Facts: Plaintiff is the owner of his cooperative apartment located at 2 Tudor City Place, Apartment 15A-N, New York, New York (hereinafter “the Unit"). In or around 2014, Plaintiff exercised an option in his divorce settlement, which concluded that same year, to purchase a fifty percent ownership interest in the Unit from his ex-wife, giving him full one hundred percent ownership of the Unit, which had been the marital home and primary marital asset. Pursuant to the court-ordered divorce stipulation (hereinafter the "Stipulation"), in order to settle the dollar value of a fifty percent equity share in the Unit, the parties were to engage separate "independent" state-licensed real estate appraisers to conduct their respective appraisals and then take a mean average of the two resulting determinations of value from each.

Thereafter, both Plaintiff and his ex-wife retained separate real estate appraisers. Plaintiff's appraiser, Rohit Sarin of A&S Appraisals, set a value of $900,000 in his report dated March 24, 2014. Plaintiff's ex-wife's appraiser, Defendant Daly of Defendant Reis, set a value of $1,215,000 in his report dated June 27, 2014, which was thirty-five percent higher than the valuation determined by Sarin and would have represented a record highest price sale for a one-bedroom apartment unit in the entire building of more than three hundred total apartment units. The court in the divorce proceeding, despite Plaintiff's objections, used Daly's appraisal report as one of the "independent" professional real estate appraisals in order to calculate the final settlement of the Unit. However, Plaintiff asserts that the appraisal was not performed correctly and that as a result, he overpaid by more than $78,000.

After the final disposition of his divorce, Plaintiff filed a formal disciplinary complaint against Daly with the New York State Department of State ("DOS") that led it to investigate Daly's appraisal. DOS' Division of Licensing Services instituted an administrative disciplinary proceeding against Daly and a complaint in or around February 2015, reflecting the findings of DOS' investigation. The complaint states that the DOS referred the matter to a "Regional Appraisal Advisor" for an independent review of Daly's appraisal and that its evaluation identified issues and concerns with the appraisal that included accuracy of the stated square footage of the Unit and the correct number of bedrooms therein. The review also concluded that the comparable units that the appraisal cited were an "inappropriate" reflection of the value of the Unit, including one that was a superior penthouse apartment and another that was inapplicable because it had a second bedroom. The review concluded that "the appraiser's estimate of market value is not supported." Defendant Daly contested the complaint offering a written statement "affirming that his work product was done properly, and the value correct." After two adjournments of the disciplinary hearing, on or about May 15, 2015, Daly opted to settle and entered into a consent order with the DOS in which he admitted negligence and wrongdoing rather than contest the allegations at a hearing, and agreed to pay a fine of $1,000 and take an additional seven credit hours of continuing education within thirty days. Thereafter, the DOS discontinued its complaint against Daly with prejudice.

Plaintiff then commenced the instant action against Daly and Reis, asserting causes of action for negligence and fraud and seeking damages in the sum of $78,750 plus costs, attorneys’ fees and punitive damages. Defendants now move to dismiss Plaintiff's complaint and Plaintiff cross-moves for partial summary judgment.

Holding:The court granted Defendants' motion to dismiss the complaint on the ground that Plaintiff's action is barred by the doctrine of judicial immunity. It is well-settled that individuals serving in judicial capacities along with those who are delegated judicial or "quasi-judicial" functions are immune from civil lawsuits based on any actions taken in their official capacities. Judicial immunity privilege is regularly applied to expert witnesses when such witnesses are appointed by the court. The common law provides absolute immunity from subsequent damages liability for all persons — governmental or otherwise — who are integral parts of the judicial process.

Accordingly, the Court dismissed Plaintiff’s claims against the Defendants in their entirety.

Prevailing Attorney: Winget Spadafora & Schwartzberg, LLP

Precis: Joel Grossbarth