Recent Cases Affecting Licensed Real Estate Appraisers and Lessons Learned Therefrom

99 Pages·2015·0.94 MB·English

Recent Cases Affecting
Licensed Real Estate
Appraisers and Lessons
Learned Therefrom

ITKOWITZ PLLC
www.itkowitz.com
Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)
Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of
Real Estate Appraisers - Recent Cases Affecting Licensed Real Estate Appraisers and
Lessons Learned Therefrom - January 2015

By Michelle Maratto Itkowitz
Itkowitz PLLC
26 Broadway
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21 Floor
New York, New York 10004
[phone]
www.itkowitz.com
[email protected]
twitter = @m_maratto

*****

Copyright 2015 by Michelle Maratto Itkowitz

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While every precaution has been taken in the preparation of this book, the author and publisher
assume no responsibility for damages resulting from the use of the information herein. Receipt of
this book by any person or entity does not create an attorney and client relationship between the
recipient and the author or her firm.

*****

And, yes, this is legal advertising. (And we hope it works!)

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Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)
Contents(cid:3)
I.(cid:3) Introduction (10 Minutes)(cid:3).....................................................................................................................(cid:3)3(cid:3)
II.(cid:3) Kosterich v. Ciotta, 63298/2012, NYLJ 1202675952250 at 1 (Supreme Court, Westchester County,
August 8, 2014) (13 Minutes)(cid:3)........................................................................................................................(cid:3)6(cid:3)
III.(cid:3) Sutton v. Hafner Valuation Group Inc., 2004 N.Y. Slip. Op. 01492 (App. Div. 3rd Dept. 2014) (13
Minutes)(cid:3)........................................................................................................................................................(cid:3)7(cid:3)
IV.(cid:3) Knobel v. Perales, 2014 Slip. Op. 50202(U) (Supreme Court, NY County 2014) (13 minutes)(cid:3).......(cid:3)9(cid:3)
V.(cid:3) People of the State of New York v. First American Corp., 18 N.Y.3d 173 (Court of Appeals, 2011)
(13 minutes)(cid:3)...................................................................................................................................................(cid:3)9(cid:3)
VI.(cid:3) FDIC v. Hoyle, 2012 WL 4049808 (United States District Court for the Eastern District of New
York, 2012) (13 Minutes)(cid:3)............................................................................................................................(cid:3)13(cid:3)
VII.(cid:3) Jones v. Bank of Am. Nat. Ass’n, 97 A.D.3d 639 (2nd Dept. 2012) (13 Minutes)(cid:3)............................(cid:3)16(cid:3)
VIII.(cid:3) Rodin Properties-Shore Mall, N.V. v. Ullman, 264 A.D.2d 367, (1st dept. 1999) (13 Minutes)(cid:3).....(cid:3)18(cid:3)
IX.(cid:3) Flandera v. AFA Am., Inc., 78 A.D.3d 1639, 913 (4th Dept. 2010) (13 Minutes)(cid:3)............................(cid:3)19(cid:3)
X.(cid:3) Allstate v. Credit Suisse, 42 Misc.3d 1220(A), (Supreme Court, NY Cty, 2014) (13 Minutes)(cid:3)........(cid:3)20(cid:3)
XI.(cid:3) Clement v. United Homes LLC, 914 F. Supp. 2d 362 (United States District Court for the Eastern
District of New York 2012) (13 Minutes)(cid:3)....................................................................................................(cid:3)22(cid:3)
XII.(cid:3) Estrada v. Metropolitan Prop. Group, Inc., 110 AD3d 497 (Appellate Division, 1st Dept. 2013) (13
Minutes)(cid:3)......................................................................................................................................................(cid:3)24(cid:3)
XIII.(cid:3) Ramapo v. 1236 Rogers Avenue LLC, 46 Misc.3d 1201(A) (Supreme Court, Kings Cty.) (13
Minutes)(cid:3)24(cid:3)
XIV.(cid:3) Board of Managers of French Oaks v. Town of Amhearst, 989 NY2d 642 (Court of Appeals,
2014) (13 Minutes)(cid:3)......................................................................................................................................(cid:3)27(cid:3)
XV.(cid:3) Bonus Material – The “Accidental Defendant” By Peter Christiansen (12 Minutes)(cid:3).......................(cid:3)29(cid:3)
XVI.(cid:3) Conclusion (5 Minutes)(cid:3)...............................................................................................................(cid:3)29(cid:3)
(cid:3)

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Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)
Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of
Real Estate Appraisers - Recent Cases Affecting Licensed Real Estate Appraisers and
Lessons Learned Therefrom - January 2015

I. Introduction (10 Minutes)

A. This is a survey of recent cases affecting real estate appraisers.

During this evening’s presentation, I could stand up in front of the room and recite
rules and laws to you. That would be boring for me, and more boring for you.

Instead, I am going to discuss with you various legal cases having to do with
appraisers and appraisals. I am going to tell you the story of each case – the facts,
the players. I am going to describe the dispute that arose. I will tell you each side’s
legal argument, what the court’s decision was, and why. Finally, we will discuss
what the “take away” is for real estate appraisers in New York today. In some cases
I include a little extra information that I think you might like to have.

In this way, you can see the law in action, and how it applies to what you do every
day.

Tonight’s class needs to be interactive and collaborative. I am NOT an appraiser. I
work with appraisers and appraisals in my capacity as a real estate litigator. I know
many appraisers. I read cases and laws on appraisers and appraisals. BUT YOU
ARE ON THE FRONT LINES. You in the audience should raise your hands
and make whatever comments you have.

The Columbia Society of Real Estate Appraisers is at the forefront of appraiser
education, and it recognizes that one of its best resources is its membership.
Therefore, your comments about real life appraisal situations is of tremendous value
to the group.

If you ask me a question and I am not able to answer it, I will take note of it,
research it after the class, consult with Mr. Neglia, and email you the answer and/or
post it somewhere on the Columbia site.
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Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)

Tonight’s presentation is being video recorded so that it can, hopefully, become a
resource for use at some other time. If you make a comment or ask a question the
camera is not going to turn on to you.

B. A brief word on the New York State Court System.

The lowest court in New York State is the Supreme Court, the court of original
jurisdiction, the place where a case would first be brought. There is one in each
county. The name of the court sometimes confuses people because on the Federal
level the “Supreme” Court is the highest court, not the lowest.

If a party in a Supreme Court case does not like the outcome of that case, it would
appeal to the Appellate Division of the Supreme Court. There are four of those.
The First Department covers Manhattan. The Second Department covers
Brooklyn and Long Island. The Third and Fourth Departments are upstate.

You are not allowed to appeal every decision from the Appellate Division. But if
you have the right to appeal, you appeal to the highest court in the State – the
Court of Appeals in Albany.

Here is a chart:

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Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)

Tonight, I will be pointing out which court a case comes from. In general, the
higher the court, the more “persuasive” its rulings are. Cases from the Court of
Appeals are the most important cases. All the other courts have to follow what the
Court of Appeals decides, unless the legislature makes a law that says otherwise.

C. A Brief word on USPAP, because it comes up a lot.

Uniform Standards of Professional Appraisal Practice (“USPAP”) is a set of quality
control standards applicable for real property, personal property, intangibles, and
business valuation appraisal analysis and reports. USPAP was first developed in the
1980s by a joint committee representing the major U.S. and Canadian appraisal
organizations after the big savings and loan crisis. The Appraisal Foundation (TAF),
a non-profit organization established in 1987, administers the USPAP. Since 2006,
USPAP has been updated in two year cycles, which begins on January 1 of even
numbered years. The current version of USPAP is available at
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Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)
www.appraisalfoundation.org and has an effective date of January 1, 2014. New
York has also incorporated USPAP rules into state law (see 19 NYCRR 1106.1).

II. Kosterich v. Ciotta, 63298/2012, NYLJ 1202675952250 at 1 (Supreme Court,
Westchester County, August 8, 2014) (13 Minutes)

Facts:

Appraisal performed by homeowners who were trying to refinance their home. Before the
bank would make the loan, the bank required the homeowner to get an appraisal from
Defendant-Appraisers.

In determining the value of the property, Appraisers used three sales of comparable
properties which took place within the last six months to a year that were located within a
half mile of the premises.

Homeowner alleged Defendant-Appraisers were negligent in their appraisal of the premises
and committed professional malpractice. Homeowner alleged:

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That Appraisers breached duty to Homeowner by failing to exercise reasonable
care, skill, and diligence in performing their appraisal report as an ordinarily
prudent appraiser and appraisal company would use under similar
circumstances.

(cid:120)
That Appraisers did not use appropriate or accurate comparables in valuing the
premises and failed to provide support for their final valuation of the premises.

(cid:120)
That the appraisal didn’t comply with Uniform Standards of Professional
Appraisal Practice.

(cid:120)
That due to negligent preparation, the premises was valued 200k lower than
actual value.

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Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)
Legal Arguments:

Appraiser argued that there was no privity with Homeowner and thus Appraisers owed no
duty.

Outcome and Court’s Reasoning:

Court finds there is no privity and that the intended user of the appraisal was the Lender
and not plaintiff.

Extra Info:

Let us explain the concept of “privity of contract”. Black’s Law Dictionary defined
“Privity of Contract” as:

The relationship between the parties to a contract, allowing them to sue
each other but preventing a third party from doing so.

The underlying concept is that a person cannot be made the debtor of another against his
will. Contractual rights and duties only affect the parties to a contract. This principle is the
distinguishing feature between the law of contract and the law of property. True property
rights are ‘binding on the world’ in the lawyer's traditional phrase. Contractual rights, on
the other hand, are only binding on, and enforceable by, the immediate parties to the
contract.

What this Means for Appraisers:

Homeowners trying to refinance that do not like your appraisal cannot sue you.

rd
III. Sutton v. Hafner Valuation Group Inc., 2004 N.Y. Slip. Op. 01492 (App. Div. 3
Dept. 2014) (13 Minutes)

This case is sort of funny and tells us a little something about appraisers as expert witnesses.

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Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)
Facts:

The Plaintiff was a litigant in a partnership and corporate dissolution dispute. The
Defendant was an appraiser who was going to testify on behalf of the litigant in a legal case.

Appraiser had a strong curriculum vitae:

“…certified general real estate appraiser, had received a Juris Doctor degree
in 1981, had “[l]itigation [c]onsultation [d]eveloped” in 15 listed contexts
and was “[q]ualified as [e]xpert [w]itness” in Supreme Court and the Public
Service Commission.”

Shortly before appraiser was to testify as an expert witness at plaintiff's trial, he met with
plaintiff's counsel and, upon questioning, disclosed that he was previously licensed to
practice law but had been disbarred. Plaintiff decided not to utilize defendants' services for
trial, retained another appraiser and requested that defendants refund the money she had
paid them.

Legal Arguments:

Plaintiff sued real estate appraiser for tortious interference, fraud, breach of contract, and
negligence. Lower court granted appraiser’s motion to dismiss/summary judgment.

Outcome and Court’s Reasoning:

Appellate Division held that Plaintiff failed to state cause of action for tortious interference;
appraiser was not liable for fraud; and appraiser did not breach contract. Appraiser did not
breach contract requiring him to appraise property and provide reports that would be ready
for court use in prior proceeding, where appraiser provided the requested reports, his status
as disbarred attorney did not render his reports inadmissible; he could’ve testified.

What this Means for Appraisers:

Be honest with your clients about the things in your background that will come
out on the stand if you have to testify as a witness.
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Itkowitz PLLC Continuing Education Course Prepared for the Columbia Society of Real Estate Appraisers – Recent Cases Affecting Licensed
Appraisers and Lessons Learned Therefrom; January 2015; copyright 2014-2015; Itkowitz.com; [email protected]; 97721.doc.
(cid:3)
IV. Knobel v. Perales, 2014 Slip. Op. 50202(U) (Supreme Court, NY County 2014) (13
minutes)

Facts:

Appraisers appealed an Article 78 hearing where the Department of State ruled to yank
their licenses. A former employee of the Appraisers signed off on appraisals done by other
employees. In 2009, she discovered her name and signature had been placed without her
knowledge and permission on appraisals that she had not seen or approved. She brought a
claim against the Appraisers. Administrative Law Judge revoked the Appraiser’s licenses.

Outcome and Court’s Reasoning:

The Court held that the notice of violation issued against the Appraisers was deficient in
failing to warn the appraisers that their licenses were at risk. Moreover, the Court held that
there was no sufficient proof of an alleged fraud.

Extra Information / Comment:

This was a technical knockout. The Appraisers won on a technicality regarding notice.
The decision was without prejudice to the Attorney General issuing new charges against
the Appraisers. I cannot tell from online what else ever happened with this matter, there is
nothing else reported.

What this Means for Appraisers:

You have procedural rights if your license is being threatened and the Court will
uphold them.

V. People of the State of New York v. First American Corp., 18 N.Y.3d 173 (Court of
Appeals, 2011) (13 minutes)

This is that big eAppraiseIT / WaMu case.

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