Daily Development for Tuesday, October 30, 2007
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

APPRAISERS; DUTY OF CARE:       In the context of a divorce proceeding, one party's appraisal expert does not owe a duty of care to the opposing party. 

Marlar v. Daniel, No. 06-386, 2007 WL 114150 (Ark. Jan. 18, 2007). 

John and Brad Marlar (the Marlars) brought outrage and negligence claims against William Dennis Daniel, an appraiser whom John Marlar's estranged wife had hired to prepare an appraisal report for certain properties in relation to the couple's divorce proceeding.  The Marlars claimed that Daniel had been negligent in preparing the report and that consequently his testimony during the divorce proceeding had proximately harmed them.  They based their outrage claim on the allegation that Daniel intentionally had issued a false appraisal report to retaliate against John Marlar.  Daniel filed a motion to dismiss, which the circuit court granted in the form of summary judgment. 

On appeal, the Arkansas Supreme Court easily affirmed the dismissal of the outrage claim, succinctly concluding that there is nothing in the record before us to indicate any evidence of conduct on the part of Daniel that could be construed to rise to the level required to establish the tort of outrage.   As to the negligence claim, the court was more considerate, but ultimately found in favor of Daniel on this count, as well.  The notion of duty lay at the crux of the court's opinion. 
The Marlars argued that appraisers should be bound by a broad conception of duty and that any third party who is injured as a consequence of not complying with the standards should be allowed to bring suit, if, in fact, the lack of adhering to the standards rises to the level of proximately causing damages.   To support their argument, the Marlars cited sections 4-86-101, 16-114-303 and 16-22-310 from the Arkansas Code Annotated, as well as Suneson v. Holloway Construction Co., 992 S.W.2d 79 (1999), for the proposition that privity of contract is not generally required to bring a negligence action.  The court, however, distinguished the statutes on the basis that they dealt solely with attorneys or manufacturers and sellers of goods, and it distinguished Swenson on the basis that its relevance was limited to the abolition of the accepted-work doctrine. 

The court determined that because Daniel was hired by John Marlar's wife in connection with the couple's divorce proceeding and was thus the opposing party's expert, it would not be foreseeable for the Marlars to rely on Daniel's report.  Moreover, John Marlar had the opportunity to challenge Daniel's report and subsequent testimony through discovery and cross examination, and any duty to the public at large that Daniel could have breached was vindicated by a fine and reprimand that the Arkansas Appraiser Licensing and Certification Board issued to him following a complaint to the Board from Marlar. 

Comment: This decision is consistent with the majority of cases that have ruled that an appraiser who provides an appraisal to a mortgage lender has no duty of care to the borrower. 

But are these decisions right?  Is appraisal an advocacy function?  The editor thinks not.  And if the appraiser is aware that various parties will be relying on the appraiser's work in connection with important business decisions (not necessarily the situation in the instant case), shouldn't the appraiser have a duty of care to those foreseeably relying? 

The editor has no doubt that this kind of argument will set off alarm bells in the minds of his many title insurer DIRTers, who fear the weight of potential liability for negligent title inspections to foreseeable plaintiffs who are not their insureds.  Maybe they should be concerned.  But in fact appraisal represents a different situation, because here we are talking about a learned profession that is licensed and regulated and holds itself out as able to provide an educated conclusion upon which parties often will rely.  Doesn't some responsibility go along with that kind of position? 

The editor understands that appraisal is not a science, but more of an art.  But there are standards, and here, he notes the appraiser apparently fell below those standards because he was reprimanded and fined by the state licensing agency.  Where a serious injury has been suffered as a consequence of clearly negligent conduct - an injury that almost certainly will not be covered by insurance or any other third party protection - and appraisers can themselves get insurance against their negligence - what is the argument against extending liability here?

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