Date of conduct determines statute of limitations in
professional negligence causes of action.
Subject:
Banking industry
(Laws, regulations and rules)
Real estate appraisers
(Laws, regulations and rules)
Negligence
(Laws, regulations and rules)
Pub Date:
09/22/2011
Publication:
Name: Appraisal Journal Publisher: The Appraisal Institute Audience: Trade Format: Magazine/Journal Subject: Business; Real estate industry Copyright: COPYRIGHT 2011 The Appraisal Institute ISSN:0003-7087
Event Code: 930 Government regulation; 940 Government regulation (cont); 980 Legal issues & crime Advertising Code: 94 Legal/Government Regulation Computer Subject: Banking industry; Government regulation
Product:
Product Code: 6531200 Real Estate Appraisers NAICS Code: 53132 Offices of Real Estate Appraisers SIC Code: 6021 National commercial banks; 6022 State commercial banks; 6029 Commercial banks, not elsewhere classified; 6531 Real estate agents and managers
Organization:
Company Name: Flagstar Bank F.S.B.
Geographic:
Geographic Scope: United States; Ohio Geographic Code: 1U3OH Ohio
Accession Number:
276517905
Full Text:
According to the Supreme Court of Ohio, an action for negligence
against an appraiser accrues when the act is committed and does not
reset for each subsequent purchase of a mortgage loan.
In 2001 and 2002, an appraiser performed appraisals on three
separate properties that served as collateral for three separate
mortgage loans made by Airline Union's Mortgage Company (AUM).
Flagstar Bank purchased the loans from AUM after reviewing the
appraisals. Flagstar later sold two of the loans. The owners of the two
properties defaulted on their loans and the properties were foreclosed.
This left deficiency balances, which Flagstar paid. The property that
was security for the third loan burned down, and the owner defaulted.
The insurance proceeds left a deficiency balance on this loan.
In April 2008, Flagstar filed a complaint against AUM and the
appraiser. They alleged that the appraisals were materially inaccurate,
and the actual fair market value was significantly less than the
appraised value. The appraiser filed a motion for summary judgment and
claimed that the statute of limitations barred Flagstar's claims
because the complaint was filed more than four years after the
appraisals were performed. Flagstar argued that the statute of
limitations did not begin to run until the bank sustained a compensable
injury. The bank claimed the injury did not occur until the two
properties were sold at foreclosure, which left a deficiency balance,
and the insurance proceeds were insufficient to cover the balance on the
loan on the third property.
The Supreme Court of Ohio determined that a cause of action for
professional negligence accrues when the act is committed, subjecting
appraisers to potential negligence suits for four years from the date
the appraisal was performed. The court declined to reset the statute of
limitations for each purchase of a mortgage loan simply because the
purchaser's damages may be delayed until some point in the future.
The court believed that this would, in effect, produce an unending
statute of limitations and, given the volatile nature of the housing
market, be inconsistent with the purposes of statutes of limitations.
Flagstar Bank, F.S.B. v. Airline Union's Mortgage Company
Supreme Court of Ohio
April 27, 2011
947 N.E.2d 672 (Ohio)
Gale Copyright:
Copyright 2011 Gale, Cengage Learning. All rights
reserved.