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Sage v. Blagg Appraisal (CA1 4/30/09)

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Another day, another new duty. Last week, in Ritchie v. Krasner (CA 1 4/21/09), Division One held that an IME doctor owed a duty of care to non-patient he’d seen for litigation purposes two years before. This week its the appraisers’ turn.

Sage was buying house in Scottsdale. She asked her lender to have Blagg appraise the home; a special clause in her purchase contract allowed her to kill the deal if the property didn’t appraise for at least the purchase price. The lender did hire Blagg, who (the evidence seems to be) didn’t know that he was doing something other than a routine appraisal for the lender’s use. His appraisal came back in excess of the purchase price. A year and a half later, Sage found out that the house was smaller than Blagg thought it was. She sued, arguing that if Blagg had calculated the square footage properly his appraisal would have been below the sales price and she would not have made the purchase. The trial court granted Blagg summary judgment.

The Restatement (Second) of Torts section 552 covers liability for supplying “false information to others in their business transactions.” Arizona courts had twice used this section to deny claims against appraisers. In one case, the appraiser didn’t know that the appraisal would be used in a business transaction; in the other, the buyers were already contractually committed to the transaction. The cases might have been distinguished on that basis but the second case had gone on to say that there was no duty because the appraisal had been for the lender’s purposes, not for the buyers’ use.

Blagg’s appraisal was for the buyer’s use but Blagg apparently didn’t know that. Many cases around the country have held that section 552 imposes liability to a third party only if the professional knows that the recipient of his information intends to supply it to that third party. Those courts have said that because that’s what the Restatement says. A few courts, though, have held that its enough if the professional should have known, or perhaps even that he could have known.

Division One decided to join the latter camp, for three reasons: the “public policy evinced by Restatement section 552” (a public policy most other courts haven’t seen, which you can’t really blame them for since the Restatement seems to say the opposite), “the realities of the loan purchase transaction (which apparently means that sometimes some buyers do look at the lender’s appraisal), and “emerging industry guidelines” (viz., Fannie and Freddie changed the appraisal form – after Bragg did this appraisal – to have the appraiser acknowledge that borrowers “may rely on the report”; a good point, although the fairness of applying it retroactively to a man who knew no such thing isn’t entirely clear).

The court therefore reversed and remanded for further proceedings.

The further proceedings should be lively, if only because one of the issues will be damages. Sage claimed that at the time of the sale her house was worth less than she paid for it. She paid $605,200. Eighteen months later the house was worth – according to appraisers who knew its true size — $700,000. A footnote in the opinion – the need for which is obscure – suggests that her argument is that this second appraisal “was performed during a period of rapidly rising home prices.”

Actually, though, the footnote doesn’t present that as an argument; it states it as a fact, citing as its authority an old article in the Republic.

The court no doubt had in mind Justice McGregor’s January order about finding ways to save money. Now that newspaper articles qualify for judicial notice, we can all dispense with witnesses and just sign up with one of those clipping services that sends you all the articles there are from any newspaper anywhere about whatever subject you want. It is also helpful for an appellate court, on remanding, to find facts that the trier of fact may not have found, or that the parties may be wasting money by arguing about.

Queiroz v. Harvey (4/28/09)

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This is a reasonably interesting contract/equitable relief case; it also raises (actually, the Court of Appeals opinion raises, and we didn’t have a chance to complain about it then because it came out long before AAB was born) a practice question that we wish people would look at.

Queiroz contracted to buy land from Harvey but failed to deposit the earnest money by the contract deadline. Harvey’s agent called Queiroz’ agent a few times to ask about the earnest money and, on a Friday,  to cancel the contract because of it. Bright and early Monday morning, before he or the escrow agent had received the written cancellation notice required by the contract, Queiroz’ agent scrambled over to another branch of the escrow office and made the deposit using his own money. Queiroz then sued Harvey for specific performance. (Real estate agents are such good friends to lawyers; they’re forever doing fascinating things like calling a guy to chat about the cancellation notice he’s about to get.)

The trial court denied specific performance because of Queiroz’ agent’s shenanigans. Division One reversed, concluding that the agent’s acts would not prevent specific performance if the principal didn’t know about them.

The Supreme Court affirmed the trial court. It decided that since the principal is bound by the agent’s acts, if the agent’s hands aren’t clean then neither are the principal’s. The wording of the opinion suggests that there may be exceptions to this rule but it does not specify them.

Now for the practice question, revealed by quotations in Division One’s opinion from the trial court’s findings and conclusions: Doesn’t anyone know how to make findings of fact any more?

The findings contained things like this: “Mr. Harrison said no one called him . . .   Ms. Walters says she called and left messages several times.” Once upon a time, people knew that that is precisely the wrong way to do it.

A court makes findings of ultimate fact, not of evidentiary fact. The record contains the evidence; the findings contain the truth. The finding is not “Mr. X said the light was red but Mr. Y said it was green and on the whole I tend to believe Mr. Y”; the finding is “The light was green.”

And findings of fact belong in the Findings of Fact section; they shouldn’t be hiding among the Conclusions of Law. If you think, and if it is important to note separately, that a witness lied to you (as this trial court did), you list that as a fact rather than (as apparently happened in this case) save it for the middle of a conclusion of law.

It may be that, as often happens, the parties filed proposed findings and conclusions and the trial judge just tinkered a bit with the winner’s proposals. (Remember that under Rule 52 you have to ask for them before trial; most trial judges don’t want to bother with them and will eagerly use that excuse to avoid them.) And the opinion quotes only snatches of the findings and conclusions, which may not be representative of the rest (though, lets face it, they probably are). But everybody would be better off doing them the right way, since that’s easier than doing them the wrong way.

Jones v. Weston (CA2 4/22/09)

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BY ORDER OF THE SUPREME COURT, THIS OPINION HAS BEEN REDESIGNATED A MEMORANDUM

This case will tell you a little about renewal of judgments and a lot about how grateful you are that there are insurance companies in the world.

The members of a partnership sued each other.  Judgment was entered on July 18, 2001.

After its entry, the judgment debtors moved to amend the judgment to delete one cause of action. The court granted their motion and on January 16, 2002 entered a new judgment, still against the debtors but eliminating the one cause of action. In May 2002 the debtors filed Chapter 7; the Bankruptcy Court ruled the debt non-dischargeable. The creditor then (by this time it was 2004) garnished. The debtors responded with a Rule 60(c) motion arguing that they should be severally, not jointly, liable. The trial court granted the motion, vacated the judgment, and entered a new one. The creditor appealed. The debtors filed Chapter 13 to stay the appeal. Eventually, the Bankruptcy Court dismissed it. The Court of Appeals  (now it was 2007) ruled in the creditor’s favor, reinstating the joint-liability judgment.

In May 2008 the creditor again filed writs of garnishment. The debtors moved to quash them, arguing that the 2001 judgment had never been renewed. Their motion was granted, resulting in this appeal.

The creditor made three arguments – that the bankruptcy proceedings extended the time for renewal, that garnishment was an “action on the judgment” effecting renewal, and that  the fact that the judgment was vacated extended the time for renewal.

The Court of Appeals made short work of the first two. Well, actually, not-short-enough work. Rather labored work, really. The prose that appears over this judge’s name is often wise but rarely graceful.

As to the last argument, the court pointed out – or, rather, chugged to a conclusion about – a couple of things. First, the January 2002 judgment was just as much a judgment as the July 2001 judgment, so the renewal period is calculated from the latter. Second, when that judgment came up for renewal it couldn’t be renewed because it had been vacated. The court ruled that vacating the judgment and then reinstating it extended the period for its renewal by the number of days it had been vacated.

So, the creditor won and can continue the quest to collect money awarded almost eight years ago.