Davis v. McGuigan - 325 S.W.3d 149 (Tenn. 2010)

Rule:

An opinion of value may provide the basis for a fraudulent misrepresentation claim.

Facts:

Plaintiff homeowners brought an action against defendant, their lender's real estate appraiser, alleging fraudulent misrepresentation and violation of the Tennessee Consumer Protection Act. The plaintiffs alleged that the appraiser, who was hired by the bank financing their home construction, recklessly overestimated the value of their proposed construction and that they reasonably relied on the appraisal value to their detriment in proceeding with the construction. The total cost was $ 730,894 for the lot and construction. The appraiser appraised the property's value as $ 731,000 using a cost approach and $ 735,000 using the sales comparison approach. A year later, a second appraisal gave the home's value as $ 510,000. The plaintiffs later sold the home for $ 660,000. The trial court granted summary judgment to the appraiser. The Court of Appeals (Tennessee) affirmed the trial court's ruling, holding that an appraisal was an opinion that cannot form the basis for a fraudulent misrepresentation claim. The plaintiffs appealed.

Issue:

Could an appraisal form the basis for a fraudulent misrepresentation claim?

Answer:

Yes.

Conclusion:

The Court overruled the Court of Appeals' holding that an opinion could not provide a basis for an action for misrepresentation. According to the Court, there was evidence that the appraiser failed to conform to the industry standards by failing to include properties from the owners' subdivision for comparison, and that the appraisal was rushed and completed in one business day. The Court held that a reasonable person could reach different conclusions as to whether the owners could have reasonably relied on the appraisal report as a statement of a disinterested expert, despite a disclaimer in the report.