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Court Holds Lender’s Appraiser Not Liable for Alleged Misrepresentation to a Land Purchaser

In Willemsen v. Mitrosilis, a California appellate court recently held a lender’s appraiser not liable to a land purchaser for an alleged failure to supply information, which would have influenced plaintiff’s decision to purchase the land. In Willemsen, plaintiff offered to purchase a lot. Plaintiff applied for financing through a bank. The bank retained defendant, an appraiser, to determine the value of the land. The purchase agreement between the buyer and seller contained numerous contingencies to allow plaintiff to determine whether the property was suitable for his purposes. The purchase agreement did not include an appraisal contingency. After close of escrow, plaintiff discovered that earthquake fault lines crossed the property and that the city in which the property was located, intended to run roads through it. Plaintiff sued numerous parties including the appraiser for negligent misrepresentation. Plaintiff alleged that the appraiser knew that plaintiff intended to rely upon the appraisal in determining the value of the property and in obtaining financing from the bank. Plaintiff further alleged that the appraised property value exceeded the true value, but that the appraiser did not account for the fault lines or the planned road. Plaintiff alleged his reliance on the appraisal was a substantial factor in causing him damages.

The appraiser moved for summary judgment contending that plaintiff was not the intended beneficiary of the appraisal and he could not show he justifiably relied on the appraisal. The trial court granted the motion, finding that the appraisal was prepared for the bank’s underwriting purposes and that Willemsen was only an incidental beneficiary. Plaintiff appealed. The court of appeals affirmed, holding that plaintiff did not show that the appraiser intended to provide him with information justifying his decision.

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