Posted by Cochise on May 26, 2008 at 10:44:52:
Paul D. Iverson, MAI
Paul D. Iverson & Assoc., Inc.
President
2373 N.W. 185th, #435
Hillsboro OR 97124
(503) 645-0884
Fax: (503) 629-8853
Accepts Fee Assignments (more info)
KURTZ, J. - Olympic Coast Investment, Inc., and individual investors
(OCI) challenge the trial court's decision granting summary judgment and
dismissing OCI's fraud and negligent misrepresentation claims against Louis
and Lori Gadini (Mr. Gadini). For the purposes of the summary judgment
motion, Mr. Gadini conceded that he made misrepresentations concerning the
value of his business to an independent appraiser hired by OCI. Based on
this appraisal, OCI loaned money to the purchaser of the business, who
later defaulted on the loan. On appeal, OCI contends it was entitled to
rely on the information provided by Mr. Gadini to the appraiser. OCI also
maintains that the trial court erred by concluding that the appraiser's
negligence was a superseding cause of the claimed losses and by applying
the theory of superseding cause to both the negligent misrepresentation
claim and the fraud claim. OCI further contends that the negligence of the
appraiser should be imputed to OCI or that Mr. Gadini should be held
responsible for the misrepresentations he made to the appraiser, who
operated as OCI's agent. Finally, OCI contends the court erred by failing
to consider affidavits submitted by OCI after the court's oral ruling but
before the entry of the written order. We reverse the order of the
superior court and remand for trial.
FACTS
Louis Gadini and his business associate, Gary Krohn, owned and operated the
Toppenish Texaco Food Mart (TTFM) from September 1997 through May 1998. In
March 1998, Majer S. Nagra made an offer to purchase TTFM. The purchase
price was for $625,000, with a down payment of $100,000. Under the terms
of the agreement, Mr. Gadini agreed to 'arrange financing' for the
purchasers of his business.1 Clerk's Papers (CP) at 973.
In a preliminary attempt to secure financing, Mr. Gadini met with the
buyer's agent and gave him a series of monthly sales reports for the
gasoline and convenience store sales at TTFM for each month from November
1997 through March 1998. These reports also included a report showing
gross revenues and gross profits for the four-month period from September
1997 through December 1997. Mr. Gadini signed these reports at the time he
gave them to the buyer's agent.
When Mr. Gadini's first attempt to obtain financing was unsuccessful, he
contacted Eric Thorsen, an account representative at OCI. Mr. Thorsen
informed Mr. Gadini that OCI would need an appraisal of the property. Mr.
Thorsen arranged for Mr. Gadini to meet with OCI's appraiser, Paul Iverson, MAI.
Mr. Gadini met with Mr. Iverson, MAI at which time he gave Mr. Iverson the TTFM
reports. In his deposition, Mr. Iverson presented notes that 'more than
likely' would have been based on information provided by Mr. Gadini. CP at
449. However, while Mr. Iverson, MAI testified as to the contents of the notes,
copies of these notes are not included in the record here or on summary
judgment. Mr. Iverson , MAI testified that Mr. Gadini made representations
concerning TTFM's financial performance. According to Mr. Iverson's
testimony, these notes suggest that Mr. Gadini told Mr. Iverson that TTFM
generated $20,000 a month in revenue through the convenience store and
either 53,000 gallons or $53,000 of revenue each month from gasoline sales.
In addition to this initial meeting with Mr. Gadini, Mr. Iverson visited
TTFM in May 1998. Then, Mr. Gadini showed Mr. Iverson, MAI the gasoline pumps
and explained how the system installed in the pumps recorded the amount of
gasoline sold and pumped by shift and by the hour, day, month, month-to-
date, and year-to-date. In the convenience store, Mr. Gadini showed Mr.
Iverson the ''Point-of-Sale'' registers that recorded all transactions,
including gasoline sales. CP at 522. These registers also allowed
examination by day, shift, week, month, and business total to date. TTFM's
financial and business books and records were maintained at Mr. Krohn's
residence in Seattle. These records were available for inspection on
request.
Mr. Iverson, MAI did not review any records kept at TTFM and did not obtain any
information from the point-of-sale register system. He did not examine the
pumps or their meters and he did not contact TTFM's fuel distributor to
obtain information. Mr. Iverson, MAI did obtain comparable market data shortly
before preparing his appraisal. Mr. Iverson, MAI stated that he took the signed
copies of the TTFM reports at 'face value' because they had been provided
by the owner of the property. CP at 477.
Using the 'Income Approach,' Mr. Iverson, MAI valued the business at $800,000
and prepared a 'Limited Appraisal.' CP at 773-74. He then drafted a
'Summary Appraisal Report' for OCI that explained the basis for his
calculation, repeating Mr. Gadini's representations. CP at 773-79. The
appraisal was also based in part on Mr. Iverson's , MAI projection that future
convenience store sales would increase by approximately 12 to 13 percent.
Based on Mr. Iverson's, MAI appraisal, OCI loaned Mr. Nagra $490,000 and sold
the loan to the investors. Prior to purchasing an interest in the loan,
the investors were each given a copy of Mr. Iverson's, MAI Summary Appraisal
Report. In addition to the $490,000 loan that OCI sold to its investors,
OCI paid Mr. Gadini another $60,000 to purchase his remaining interest in
the property.
Mr. Nagra defaulted on the loan in December 1998; OCI accepted a deed in
lieu of forfeiture and took possession of TTFM. OCI began to operate TTFM
and soon found that convenience store sales and gasoline sales were lower
than anticipated. When OCI questioned the fuel distributor about the
discrepancy, OCI learned that there had been no decline because TTFM had
pumped only 20,000 to 30,000 gallons per month in the past. In his
affidavit, Mr. Iverson states that if he had been given the Krohns'
information, he would have valued the business at $360,000.
In his motion for summary judgment, Mr. Gadini conceded, arguendo, that he
negligently misrepresented the sales and expenses set forth in the TTFM
reports, that he delivered these reports to Mr. Iverson, and that Mr.
Iverson relied on these reports when preparing his appraisal. Mr. Gadini
submitted the affidavit of J. L. Haney, a certified general real estate
appraiser. In Mr. Haney's opinion, Mr. Iverson breached his duty of care
to his clients by violating the USPAP standards2 governing the preparation
of the appraisal. Based on Mr. Haney's affidavit, Mr. Gadini argued that
Mr. Iverson's negligence and misrepresentations constituted superseding
causes that broke the causal connections between Mr. Gadini and the OCI
investors. OCI failed to submit any evidence in response to Mr. Haney's
affidavit. The court granted Mr. Gadini's motion for summary judgment and
denied OCI's motion
Paul D. Iverson, MAI
Paul D. Iverson & Assoc., Inc.
President
2373 N.W. 185th, #435
Hillsboro OR 97124
(503) 645-0884
Fax: (503) 629-8853
Accepts Fee Assignments (more info)
http://caselaw.lp.findlaw.com/scr1pts/getcase.pl?court=wa&vol=2005_app/220834maj&invol=3