GUEST POST: Peter Christensen is an attorney who advises professionals and businesses about legal and regulatory issues concerning valuation and insurance. He serves as general counsel to LIA Administrators & Insurance Services. He can be reached at peter@liability.com.
I am biased in favor of defendant appraisers. I always root for the defense, even if it's one appraiser suing another appraiser (as in one case below). Defense is our business. Here, are seven cases where the defendant appraisers won based on a statute of limitations defense. That means even if there was something wrong with the appraisal at issue, the defense counsel still won the case. So, you have to give the credit to the defense counsel. That's not to say there really was a problem with the appraisal in each case below -- it just didn't matter if there was.
READI members can find more cases like these, including cases where the appraisers lost, here on www.readimember.org.
Here are the seven cases:
Arkansas
Varner v. Peterson Farms, 371 F.3d 1011 (2004). Applying Arkansas law, a federal appeals court upheld dismissal of fraud, unjust enrichment and conspiracy claims against an appraiser, and explained that the "statute of limitations begins to run-in the absence of concealment of the wrong-when the negligence occurs, not when the negligence is discovered."
California
Bartha v. Deutsch, Cal. Ct. of Appeal, Unpub. Dec., No. F058669 (2010). In an action by an appraiser against a review appraiser for defamation, the California appellate court ruled in an unpublished decision that the 1-year defamation limitations period applied, not the 2-year limitations period for negligence. The appellate court upheld the trial court’s dismissal of the defamation claim against the review appraiser.
Indiana
Farmers & Merchants Bank v. Putnam, Indiana Court of Appeals (2009). Applying Indiana law, a U.S. District Court dismissed negligence claims by lender against appraiser based on 2-year limitations period for negligence. The court found the bank had or should have discovered the alleged appraisal negligence more than 2 years before filing the lawsuit against the appraiser because it had earlier alleged in a suit against the borrower that the borrower lied to the bank about the value of the property. The court ruled that the bank’s fraud claim, however, would not be dismissed based on the longer 6-year period applicable to fraud claims under Indiana law.
Ohio
Flagstar Bank v. Airline Union's Mortgage Co., 128 Ohio St.3d 529 (2011). Ohio does not follow a "discovery rule" for negligence claims against appraisers. Accordingly, the Ohio Supreme Court upheld dismissal of Flagstar’s negligence claims against appraisers because Ohio's 4-year limitations period begins at time appraiser performs appraisal. In the primary claim at issue in the case, Flagstar sued a residential appraiser about three appraisals performed in 2001 and 2002 for three different loans which defaulted in 2003 and 2005. Flagstar blamed the appraiser for its financial losses on the loans but did not file a lawsuit until 2008 – seven years after the first appraisal. On appeal, Flagstar tried to argue to the Ohio Supreme Court that the statute of limitations should not begin to run until it discovers the full extent of the alleged damage it has allegedly incurred as the result of negligence in an appraisal. The Ohio Supreme Court ruled in favor of the appraiser. It confirmed that the period in Ohio begins to run when the appraisal is delivered, and it affirmed the dismissal of Flagstar’s claim because Flagstar filed its lawsuit years after that period had expired with respect to each claim.
Michigan
Capital Bankcorp Ltd. v. Landheer Appraisal Service, et al., Michigan Court of Appeals, No. 291966 (2010) (unpublished decision). A Michigan appellate court upheld dismissal of lender's claim against appraiser based on statute of limitations because lender should have discovered appraisal faults with reasonable diligence. The court concluded that the statute of limitations began running from the time that the lender should have discovered the faults if it had acted diligently. In particular, the lender alleged in its complaint that the appraisal was defective because the appraiser was only licensed, not certified, and that the appraisal was inflated. The court concluded that these alleged issues would have been discovered by the lender if it had acted with reasonable diligence. Among other things supporting that conclusion was the fact that the lender possessed an earlier appraisal with different information than contained in the appraisal by the appraiser it sued.
New York
LSF6 Mercury REO Investments v. Midrome, Inc., et al., New York Supreme Court, New York County (2012). New York does not follow a "discovery rule" for negligence claims against appraisers and has a 3-year limitations period under New York CPLR 214 (6). Thus, the trial court dismissed two consolidated cases filed by a private equity fund LSF6 Mercury REO Investments against appraisers and appraisal firms because the appraisals were performed more than 3 years before LSF6 filed its legal actions. (For more information about LSF6 and its voluminous litigation against appraisers, see this article Who Has Been Suing the Most Appraisers? Two Names You Know. Two Names You've Probably Never Heard.)
Early v. Rossback, 262 A.D.2d 601 (1999). In this older case, a New York appellate court upheld dismissal of an alleged malpractice claim against appraiser filed more than 3 years after appraisal and held that the 3-year limitations period under New York CPLR 214 (6) applies to appraiser malpractice claims whether those claims are alleged in tort as a negligence claim or as a breach of contract. Again, New York does not follow a "discovery rule" for negligence claims against appraisers.
Click here for the full article: Seven Cases the Defendant Appraisers Won Based on Expiration of the Statute of Limitations
AUTHOR: Peter Christensen is an attorney who advises professionals and businesses about legal and regulatory issues concerning valuation and insurance. He serves as general counsel to LIA Administrators & Insurance Services. He can be reached at peter@liability.com.
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