Appraisal Malpractice as State Court Action — Albright Case 561 So 2d 1326 5th DCA

Appraisal negligence and/or fraud is overlooked by many. Appraisers are usually licensed and insured. Filing a complaint with the licensing board as well as sending a demand letter to them to forward to their carrier could produce some substantial results. And remember that the originating “LENDER” supposedly has a committee or person verifying the appraisal independently — which is what any half decent bank would do if they were really the lender and were at risk of loss of the loan was not paid.

FIRST ST. SAV. v. ALBRIGHT & ASSOC., 561 So.2d 1326 (Fla.App. 5 Dist. 1990)
FIRST STATE SAVINGS BANK, ETC., APPELLANT/CROSS-APPELLEE, v. ALBRIGHT &
ASSOCIATES OF OCALA, INC., ETC., ET AL., APPELLEES/CROSS-APPELLANTS.
Nos. 88-2445 and 89-341.
District Court of Appeal of Florida, Fifth District.
May 31, 1990.

Appeal from the Circuit Court, Marion County, Wallace E.
Sturgis, Jr., J.
Page 1327

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.

DANIEL, Chief Judge.

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,[fn1] 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
Page 1328
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 essentially four lines
of authority with regard to the question of an accountant’s
liability: 1) except in cases of fraud, an accountant is only
liable to one with whom he is in privity or near privity; 2) an
accountant is liable to third parties in the absence of privity
under the circumstances described in section 552 of the
Restatement (Second) of Torts (1976); 3) an accountant
Page 1329
is liable to all persons who might reasonably be foreseen as
relying upon his work product; and 4) an accountant’s liability
to third persons shall be determined by balancing various
factors, including the foreseeability of harm, the closeness of
the connection between the defendant’s conduct and the injuries
suffered, and the policy of preventing future harm.

Because of the heavy reliance upon audited financial statements
in the financial world, the court believed that permitting
recovery only from those in privity or near privity was unduly
restrictive. On the other hand, the court believed that liability
should be limited to those persons or classes of persons whom an
accountant “knows” will rely on his opinion rather than those he
“should have known” because of the fact that an accountant
controls neither his client’s accounting records nor the
distribution of his reports. In light of these considerations,
the court adopted the rationale of section 552 of the
Restatement (Second) of Torts (1976), as setting forth the
circumstances under which an accountant may be held liable in
negligence to persons who are not in contractual privity. Section
552 provides as follows:

§ 552. Information Negligently Supplied for the
Guidance of Others

(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 on the information, if he fails to exercise
reasonable care or competence in obtaining or
communicating the information.

(2) Except as stated in Subsection (3), the
liability stated in Subsection (1) is limited to loss
suffered

(a) by the person or one of a limited group of
persons for whose benefit and guidance he intends to
supply the information or knows that the recipient
intends to supply it; and

(b) through reliance upon it in a transaction that
he intends the information to influence or knows that
the recipient so intends or in a substantially
similar transaction.

Applying section 552 to the facts, the court noted that
Mitchell had negotiated the loan and personally delivered the
financial statements to the bank with the knowledge that the bank
would rely upon them in considering whether to approve the loan.
In these circumstances, the court held that Mitchell had vouched
for the integrity of the audits and that his conduct in dealing
with the bank sufficed to meet the requirements of the rule which
it had adopted.

In the present case, the trial court directed a verdict in
favor of Albright on the ground that the bank did not have a
cause of action for negligence. We find no appreciable difference
between the accountant in First Florida Bank and the appraiser
in this case. Accordingly, we adopt section 552 as setting forth
the circumstances under which an appraiser may be held liable for
his negligence to third parties in the absence of privity. See
Security First Federal Savings and Loan Association v. Broom,
560 So.2d 304 (Fla. 1st DCA 1990).

Here the appraisal prepared by Albright specifically stated
that its objective was to estimate the fair market value of the
Golden Ocala project for mortgage financing. An update of the
appraisal prepared by Albright was addressed directly to the
president of the bank. The appraisal was part of the information
supplied to the bank for its consideration of Golden Ocala’s loan
request and there was evidence that the bank did rely on this
information to its detriment. There was also evidence that
Albright had grossly misrepresented the value of the project,
that the appraisal failed to comply with federal guidelines, and
that the appraisal was negligently prepared. A directed verdict
is proper only when the record conclusively shows an absence of
facts or inferences from facts to
Page 1330
support a jury verdict. Holmes v. Don Mealey Chevrolet, Inc.,
468 So.2d 552 (Fla. 5th DCA 1985); Ferber v. Orange Blossom
Center, Inc., 388 So.2d 1074 (Fla. 5th DCA 1980). Because there
was evidence which would have supported a verdict for the bank,
the trial court erred in directing a verdict in favor of
Albright.

On cross-appeal, Albright argues that, as a member of the
American Institute of Real Estate Appraisers (MAI), he should be
deemed a professional for purposes of the two-year statute of
limitations for professional malpractice. Section 95.11(4)(a),
Florida Statutes (1987), provides that an action for professional
malpractice, other than medical malpractice, must be commenced
within two years from the discovery of the malpractice. For
purposes of this statute of limitation, a “profession” is a
calling requiring, as a minimum for licensing under the laws of
Florida, specialized knowledge and academic preparation amounting
to at least a four-year university level degree in the field of
study specifically related to that calling. “In other words, if,
under the laws and administrative rules of this state, a person
can only be licensed to practice an occupation upon completion of
a four-year college degree in that field, then that occupation is
a profession.” Pierce v. AAll Insurance, Inc., 531 So.2d 84, 87
(Fla. 1988).

According to Albright, a MAI designation requires membership in
the National Association of Realtors, an undergraduate college
degree or its equivalent from an approved school, five years
experience as an appraiser, and attendance at required courses
and successful examinations. However, according to an affidavit
submitted by the bank from the Director of the Division of Real
Estate, Florida does not require a four-year baccalaureate degree
in the field of real estate appraising as a requirement for real
estate appraisers. Albright himself admits that there is no
Florida statute which defines qualifications or sets forth
requirements for a person to be a real estate appraiser or a MAI
real estate appraiser. We agree with the first district that
although the requirements for MAI designation are rigorous, they
fail to meet the requirement under Pierce that a four-year
degree be in a field related to their profession. See Security
First Federal Savings and Loan Association v. Broom, 560 So.2d
at 307-308. Accordingly, Albright was not a professional for
purposes of the professional malpractice statute of limitations.

REVERSED and REMANDED for a new trial.

COBB and COWART, JJ., concur.

[fn1] The Golden Ocala project was designed to be an exclusive
community of single and multifamily dwellings surrounding two
golf courses in Ocala, Florida.

 

Cases Citing Albright:

Florida Case Law
No. 5D07-754.
February 22, 2008.
… [fn6] Vesta argues that our decision on this point is controlled by First State Savings Bank v. Albright & Associates of Ocala, Inc., 561 So.2d 1326 (Fla. 5th DCA 1990), disapproved in part, Garden v. Frier, 602 So.2d 1273 (Fla. 1992). However, Albright was not a contractual privity case. In Albright, a potential borrower had contracted with Albright and Associates, an appraisal firm, to produce a real estate appraisal for submission to First State Savings Bank in connection with the client …

 

 



,title:CleanText(‘COOPER v. BRAKORA & ASSOC., 838 So.2d 679 (Fla.App. 2 Dist. 2003)’)
Florida Case Law
Case No. 2D01-4685.
Opinion filed March 5, 2003.
… To support his claim, Cooper relies on First State Savings Bank v. Albright & Associates of Ocala, Inc., 561 So.2d 1326 (Fla. 5th DCA 1990), disapproved on other grounds, Garden v. Frier, 602 So.2d 1273 (Fla. 1992). In Albright, an appraiser was retained by the purchasers of a real estate development project to provide an accurate appraisal of the project. The appraisal specifically stated that its objective was to estimate the fair market value of the project for mortgage financing. It was …

 

 


No. 1:00CV80 MMP.
November 8, 2000 [EDITORS’ NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]
… See Russell v. Sherwin-Williams Co., 767 So.2d 592 (Fla. 4th DCA 2000) (citing Bay Garden Manor Condaminium Ass’n v. Marks Associates, 576 So.2d 744 (1991); First State Savings Bank v. Albright & Assoc., of Ocala, 561 So.2d 1326 (Fla. 5th DCA), review denied, 576 So.2d 284 (Fla. 1990)). Thus, a claim of negligence is not necessarily barred by the Florida economic loss rule. However, Plaintiffs should amend their complaint to properiy allege a cause of action for negligence. …

 

 


Case No. 4D97-3338
Opinion filed September 13, 2000 July Term 2000
… (Fla. 3d DCA 1991) (engineers hired to inspect buildings and prepare inspection reports that would guide others in making business decisions could be sued in negligence under section 552); First State Sav. Bank v. Albright & Assocs. of Ocala, Inc., 561 So.2d 1326 (Fla. 5th DCA), review denied, 576 So.2d 284 (Fla. 1990) (appraiser may be held liable to third party for negligence under section 552). …

 

 


No. CIV.A. AW-97-2498.
March 14, 2000.
… 1324, 1326 (1992) (imposing a duty on appraisers under Section 552 of the Restatement of Torts when the party suing was expected to rely on the representation of the appraiser); First State Savings Bank v. Albright & Associates of Ocala, Inc., 561 So.2d 1326, 1329 (Fla.App. 1990) (“[W]e adopt section 552 as setting forth the circumstances under which an appraiser may be held liable for his negligence to third parties in the absence of privity.”); Costa v. Neimon, 123 Wis.2d 410, 366 N.W.2d 896, 89 …

 

 


No. 97-3338.
Opinion filed March 17, 1999.
… (Fla. 3d DCA 1991) (engineers hired to inspect buildings and prepare inspection reports that would guide other in making business decisions could be sued in negligence under section 552); First State Sav. Bank v. Albright & Assocs. of Ocala, Inc., 561 So.2d 1326 (Fla. 5th DCA), review denied, 576 So.2d 284 (Fla. 1990) (appraiser may be held liable to third party for negligence under section 552). …

 

 


No. 97-2752
August 19, 1998
… Inspection Servs., Inc. v. Arnold Corp., 660 So.2d 730 (Fla. 3d DCA 1995); Bay Garden Manor Condominium Ass’n, Inc. v. James D. Marks Assocs., Inc., 576 So.2d 744 (Fla. 3d DCA 1991); First State Sav. Bank v. Albright & Assocs. of Ocala, Inc., 561 So.2d 1326 (Fla. 5th DCA), review denied, 576 So.2d 284 (Fla. 1990). …

 

 


No. 91-106.
July 26, 1995. Rehearing Denied October 11, 1995.
… Title Serv. Co. of the Fla. Keys Inc., 457 So.2d 467 (Fla. 1984) (abstracter); Bay Garden Manor Condominium Ass’n, Inc. v. James D. Marks Assocs., Inc., 576 So.2d at 744 (engineer); First State Sav. Bank v. Albright & Assoc. of Ocala, Inc., 561 So.2d 1326 (Fla. 5th DCA) (appraiser), review denied, 576 So.2d 284 (Fla. 1990). …

 

 


United States 11th Circuit Court of Appeals Reports
No. 93-2314.
Filed July 18, 1995. Rehearing Denied August 30, 1995.
… Garden Manor Condominium Ass’n v. James D. Marks Assocs., 576 So.2d 744 (Fla. 3d Dist.Ct.App. 1991) (applying § 552 to allow a negligence action by a condominium association against an engineering firm); First State Sav. Bank v. Albright & Assocs., 561 So.2d 1326 (Fla. 5th Dist.Ct.App.) (adopting § 552 as the standard for appraiser liability), review denied, 576 So.2d 284 (Fla. 1990). After the supreme court’s decision in Casa Clara, however, courts have been reluctant to extend the applicati …

 

 


No. 92-2529.
March 15, 1995. Rehearing Denied May 10, 1995.

… So.2d 744 (Fla.3d DCA 1991) (engineers hired to inspect buildings and prepare inspection reports that would guide others in making business decisions could be sued in negligence under section 552); First State Sav. Bank v. Albright & Assocs., Inc., 561 So.2d 1326 (Fla. 5th DCA) (appraiser may be held liable to third party for negligence under section 552), review denied, 576 So.2d 284 (Fla. 1990).

… (engineers); see also McElvy, Jennewein, Stefany, Howard, Inc. v. Arlington Elec., Inc., 582 So.2d 47, 49-50 (Fla.2d DCA) (architects), cause dismissed, 587 So.2d 1327 (Fla. 1991); First State Savings Bank v. Albright & Assoc’s of Ocala, Inc., 561 So.2d 1326, 1329 (Fla. 5th DCA) (real estate appraiser), review denied, 576 So.2d 284 (Fla. 1990), disapproved in part on other grounds, Garden v. Frier, 602 So.2d 1273, 1277 n. 10 (Fla. 1992).[fn1] …


Nebraska Reports
No. S-92-1107.
Filed July 15, 1994.
… 90 (Iowa 1981); Ryan v. Kanne, 170 N.W.2d 395 (Iowa 1969); Springdale Gardens v. Countryland Dev., Inc., 638 S.W.2d 813 (Mo. App. 1982); Merriman v. Smith, 599 S.W.2d 548 (Tenn. App. 1979); First State Sav. v. Albright & Assoc., 561 So.2d 1326 (Fla. App. 1990), disapproved on other grounds, Garden v. Frier, 602 So.2d 1273 (Fla. 1992); Page 372 Price-Orem Inv. v. Rollins, Brown & Gunnell, 713 P.2d 55 (Utah 1986). …

 

 


No. 91-2067.
December 30, 1992.
… though inartfully drawn, state a cause of action against appellee. See, e.g., Bay Garden Manor Condominium Ass’n, Inc. v. James D. Marks Assoc., Inc., 576 So.2d 744 (Fla. 3d DCA 1991); First State Sav. Bank v. Albright & Assoc. of Ocala, Inc., 561 So.2d 1326 (Fla. 5th DCA), review denied, 576 So.2d 284 (Fla. 1990); First Fla. Bank, N.A. v. Max Mitchell & Co., 558 So.2d 9 (Fla. 1990); State Farm Life Ins. Co. v. Bass, 605 So.2d 908 (Fla. 3d DCA 1992). …

 

 


No. 78156.
July 2, 1992.
… [fn10] We disapprove Cristich v. Allen Engineering, Inc., 458 So.2d 76 (Fla. 5th DCA 1984), to the extent it conflicts with the present opinion. We disapprove First State Savings Bank v. Albright & Associates of Ocala, Inc., 561 So.2d 1326 (Fla. 5th DCA 1990), and Security First Federal Savings & Loan Association v. Broom, Cantrell, Moody & Johnson, 560 So.2d 304 (Fla. 1st DCA 1990), solely to the extent they relied upon the portions of Pierce nullified by this opinion; but the resu …

 

 


No. 89-2576.
February 12, 1991. Rehearing Denied April 16, 1991.
… accounting profession, we do not believe the court intended to exclude other professionals who supply expert information for the purpose of guiding others in business transactions. The fifth district, in First State Sav. Bank v. Albright & Assocs., Inc., 561 So.2d 1326 (Fla. 5th DCA 1990), followed First Florida Bank and adopted section 552 as setting forth the circumstances under which an appraiser may be held liable to a third party for negligence. Factually, this case is within the reach of sec …

Leave a Reply

%d bloggers like this: