Dubinsky v. Citicorp Mortgage, Inc.

Citations: 48 Conn. App. 52; 708 A.2d 226; 1998 Conn. App. LEXIS 101Docket: AC 16790

Court: Connecticut Appellate Court; March 10, 1998; Connecticut; State Appellate Court

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David Dubinsky appeals the trial court's summary judgment favoring Citicorp Mortgage, Inc., concerning a breach of contract claim related to an allegedly inaccurate real estate appraisal connected to a mortgage loan application. The core issue is whether Citicorp had a duty to provide Dubinsky with an accurate appraisal. The trial court found no genuine issue of material fact, agreeing with Citicorp that it was under no obligation, either under Connecticut law or the agreement with Dubinsky, to supply an accurate appraisal. 

Dubinsky applied for a $168,750 mortgage loan on September 2, 1988, for a property in East Hartford. Citicorp obtained an appraisal on September 9, 1988, and later issued a mortgage commitment, informing Dubinsky of his right to a copy of the appraisal under Public Act 87-6. The appraisal was provided to Dubinsky in October 1988, accompanied by a disclaimer stating that while the information was believed to be reliable, Citicorp assumed no responsibility for its accuracy. Dubinsky claimed reliance on this inaccurate appraisal led him to overpay for the property and secure a larger mortgage than necessary. The trial court concluded that no duty existed for Citicorp to provide an accurate appraisal, thus affirming the summary judgment. Summary judgment is appropriate when there are no genuine factual disputes and the moving party is entitled to judgment as a matter of law. The court's role is to assess whether any genuine issues of material fact exist, not to resolve such issues.

Once the moving party submits evidence for summary judgment, the opposing party must present evidence indicating a disputed factual issue. In this case, the trial court ruled in favor of the defendant, and the appellate review assesses whether this ruling is legally and logically sound based on the record. It is undisputed that the appraisal by the defendant did not influence the plaintiff’s loan application, which was submitted prior to the appraisal being ordered. The plaintiff was also allowed to obtain an appraisal at his own cost.

The plaintiff contends that the defendant breached their contract by failing to conduct an accurate appraisal. He argues that the mortgage loan commitment form required the defendant to provide a skilled appraisal of the property securing the loan. Generally, contract interpretation is a factual question based on the parties’ intent, but if the contract language is clear, it becomes a legal question. A contract must be understood according to its explicit language, and courts cannot alter its meaning based on perceived intent.

In this case, the contract language clearly states the plaintiff's right to receive a copy of the appraisal conducted for the defendant's benefit in evaluating the loan application. This provision does not impose an obligation on the defendant to perform an accurate appraisal for the plaintiff's advantage. The defendant satisfied the contract terms by providing the appraisal copy, and thus had no obligation to ensure its accuracy for the plaintiff's benefit.

The plaintiff alleges that the defendant's failure to provide an accurate appraisal breached the implied covenant of good faith and fair dealing, despite not violating the express terms of the contract. The plaintiff asserts that a common-law duty to perform the appraisal with reasonable care exists within the contract due to this implied covenant. However, the court disagrees, stating that a duty to exercise care is contingent on whether a reasonable person would foresee harm resulting from the defendant's actions. The court emphasizes that foreseeability alone does not establish a legal duty; rather, it requires a broader policy consideration. The determination of duty is a legal question, and if a duty is established, the fact-finder assesses whether it was violated. In this case, no relationship exists between the defendant, as a potential lender, and the plaintiff, as a loan applicant, to justify a duty of care in providing an accurate appraisal. The appraisal was explicitly intended for the defendant's use in evaluating collateral for a loan, and a disclaimer in the accompanying letter negated the defendant's liability for its contents. Therefore, it was not foreseeable that the plaintiff would rely on the appraisal for their property investment. The court concludes that the defendant had no statutory, contractual, or common-law duty to perform an accurate appraisal for the plaintiff, affirming the trial court's judgment for the defendant.

Public Acts 1987, No. 87-6, codified at General Statutes 36a-755, mandates that financial institutions imposing appraisal fees on mortgage applicants must provide a copy of the appraisal report at no charge upon receiving a written request from the applicant, within ninety days of notifying the applicant of action on their application or upon withdrawal of the application. Additionally, institutions must inform applicants of the availability of the appraisal report within ten days of receiving it or provide the report by the date of the property sale. Furthermore, the law states that appraisal preparers are not liable for statements or omissions in the report unless they result from intentional misrepresentation. In the current case, the defendant paid for the appraisal, and since the plaintiff was not charged, the requirements of § 36a-755 did not apply. The plaintiff's argument, citing Magnan v. Anaconda Industries, was rejected, as it did not support the claim that a common-law duty to act in good faith extends to the contract in question. No Connecticut appellate decision has specifically addressed a lender's duty of care regarding collateral appraisals for loan security.