Caruso v. National City Mortgage Co.

Citations: 187 Ohio App. 3d 329; 931 N.E.2d 1167Docket: No. C-090433

Court: Ohio Court of Appeals; April 30, 2010; Ohio; State Appellate Court

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William A. Caruso filed a lawsuit against National City Mortgage Company, Elizabeth Louis Hopf, and Empire Real Estate Solutions due to a failed real estate investment, alleging negligent misrepresentation and claiming third-party beneficiary status in a contract between Empire and National City. The trial court granted summary judgment in favor of the defendants on all claims, prompting Caruso to appeal.

Caruso, an experienced real estate agent and investor, purchased a home in the Ross Estates from Ryan Homes for $441,435, intending to lease it back to the developer as a model home. He relied on his investment strategy, which involved buying homes in newly developed subdivisions at fixed prices. Caruso executed the purchase agreement and applied for financing from National City, where he worked with loan officer Damon Grunenburg. An appraisal conducted by appraiser Hopf estimated the property value at $442,000, but Caruso did not see this appraisal and claims it was negligently performed.

Approximately six months after closing, Ryan Homes withdrew from the community due to market conditions, ceasing its lease on the property. After reviewing comparable sales, Caruso discovered that homes were being sold for less, leading him to sell the property at a significant loss of $326,400. Despite his claims of improper appraisal and misrepresentation, the trial court upheld the defendants' motions for summary judgment.

Caruso presents two assignments of error, claiming the trial court incorrectly granted summary judgment in favor of National City, Empire, and Hopf. He argues that he provided evidence to establish material issues of fact regarding negligent misrepresentation. However, no evidence was presented to show a contractual relationship between Caruso and National City or the other defendants concerning the appraisal. His evidence consisted solely of National City's general appraisal guidelines, which did not establish any contractual privity. To recover damages, Caruso would need to rely on the tort of negligent misrepresentation, which typically requires a contractual relationship under Ohio's economic-loss rule; exceptions exist under Section 552 of the Restatement of Torts, but its applicability in this context is unclear.

Ohio law has not definitively addressed whether tort-based liability applies to appraisers, although some appellate courts have suggested it may apply in cases of inaccurate appraisals without contractual privity. Nonetheless, Caruso failed to demonstrate a genuine issue regarding justifiable reliance, a key element of the tort. The evidence indicated that he did not rely on the appraisal when purchasing the property, having acted quickly due to competitive market conditions and agreeing to a price he deemed fair before the appraisal was even conducted. Thus, he would struggle to show reliance on the appraisal in this context.

Caruso asserted that he relied on an appraisal for determining the market value of a home he purchased, despite not reviewing it until months after closing. He stated that he depended on the appraisal to avoid making a poor investment. However, he acknowledged that he had deemed the non-negotiable price fair prior to the appraisal's existence. When questioned about whether his purchase was contingent upon the appraisal, Caruso was unsure if such a clause was in the contract, mentioning a financing contingency that would only apply if financing had been denied, which was irrelevant to the home’s value. The court found no material facts in dispute, concluding that reasonable minds would agree that Caruso did not rely on the appraisal when buying the property. Consequently, National City, Empire, and Hopf were entitled to judgment as a matter of law regarding Caruso's claims of negligent misrepresentation, and the trial court correctly granted summary judgment in their favor.

Additionally, Caruso claimed to be a third-party beneficiary of the contract between National City and Empire. However, for such a claim to be valid, the contract must be primarily intended to benefit him, rather than providing merely incidental benefits. The court found no evidence in the contract supporting Caruso's claim, noting that the appraisal was meant for the lender's evaluation in a mortgage transaction rather than for Caruso’s benefit. The court reaffirmed that reasonable minds would conclude that Caruso was not a third-party beneficiary, leading to the same judgment in favor of National City, Empire, and Hopf.

The trial court's decisions to grant summary judgment on all of Caruso's claims were upheld, confirming that the initial judgments were appropriate and affirming the trial court's ruling.