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John L. Scott, Minnie L. Scott v. Lts Builders LLC

October 22, 2012


The opinion of the court was delivered by: William W. Caldwell United States District Judge


I. Introduction

This is a diversity action controlled by Pennsylvania law. Plaintiffs, John L. Scott and Minnie L. Scott, sued multiple defendants following Plaintiffs' purchase of real property in the Pocono Mountains area of Pennsylvania, with the intent of constructing their retirement residence there. Plaintiffs charge all defendants with participation in a scheme to defraud them. Their major allegation is that the defendants knowingly concealed from them the existence of an electrical utility easement on the property. The easement was allegedly so extensive it rendered the lot useless for the house Defendants supposedly led Plaintiffs to believe could be built there.

We are considering the motion for summary judgment of the "Read defendants": Albert C. Read, III, doing business as A.C. Read Appraisal Service; and Alicia N. Johnson, who worked for Read. These defendants provided the appraisal of the property that facilitated the real-estate transaction, and Plaintiffs allege the appraisal was fraudulent. In moving for summary judgment, the defendants argue the record shows Plaintiffs never saw the appraisal before they completed the transaction so they cannot establish reliance, an essential element of the three claims against the Read Defendants: common-law fraud, a statutory consumer-protection claim, and negligent misrepresentation.

Upon review of the parties' briefs, we conclude that the moving defendants are entitled to judgment in their favor on these claims because Plaintiffs have failed to show justifiable reliance on the appraisal. Nonetheless, the moving defendants will remain in the case because Plaintiffs still have a claim against them for aiding and abetting the common-law fraud claim and statutory-violation claim against the other defendants.

II. Standard of Review

Under Fed. R. Civ. P. 56, summary judgment should be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In pertinent part, parties moving for, or opposing, summary judgment must support their position by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for the purposes of the motion only), admissions, interrogatory answers, or other materials." Fed. R. Civ. P. 56(c)(1)(A). "An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed. R. Civ. P. 56(c)(4). In deciding a motion for summary judgment, "[t]he court need consider only the cited materials, but it may consider other materials in the record." Fed. R. Civ. P. 56(c)(3). "'The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.'" Meditz v. City of Newark, 658 F.3d 364, 369 (3d Cir. 2011)(quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986)).

With this standard in mind, we set forth the summary-judgment record the parties have established for the purposes of the Read Defendants' motion. We supplement that record with allegations from the second amended complaint which the moving defendants in making their motion do not contest.

III. Background

On March 15, 2008, plaintiff, John L. Scott, entered into a real estate sales agreement with defendant, LTS Realty Company, to purchase an unimproved lot and also entered into a construction agreement with defendant, LTS Builders LLC, to construct a house on the site.*fn1 (Defs.' Statement of Undisputed Material Facts (DSMF) ¶ 1; Second Am. Compl. ¶¶ 34 and 40, and Exs. A and B to the second amended complaint).

The LTS defendants handled the arrangements for obtaining a loan from HSBC Mortgage Corporation, an abstract of title, a title policy, a survey endorsement, and for closing on the purchase. (Second Am. Compl. ¶ 41). LTS arranged for defendants Read and Johnson "to prepare a deceptive, misleading and fraudulent appraisal." (Id. ¶ 45).

The Appraisal Report is dated April 18, 2008, and was signed on April 21, 2008, by Johnson as the appraiser and Read as the supervisory appraiser. (Doc. 90-1, Ex. A, Appraisal Report, ECF pp. 1, 10). On May 9, 2008, a little over two weeks later, Plaintiffs closed on the property. (Doc. 90, DSMF ¶ 4).

The Appraisal Report contained the following information. John Scott is identified as the "Borrower" or "Borrower/Client," (Doc. 90-1, Appraisal Report, ECF pp. 1, 3), and HSBC Mortgage is identified as the "Lender." (Doc. 90-1, Appraisal Report, ECF pp. 3, 22). In response to a question on that portion of the report entitled, "Uniform Residential Appraisal Report," about "any adverse site conditions or external factors" such as "easements," the report stated: "No adverse easements . . . were observed." (Id., ECF p. 5). In the appraiser's certification section, paragraph 21 permits "the lender/client" to give the appraisal report to "the borrower," and paragraph 23 allows "the borrower" to rely on the report "as part of any mortgage finance transaction." (Id., ECF pp. 9 and 10).

In the "scope of work" section, the appraiser represents that: "Site and utility easements typical of the neighborhood likely exist but were not researched as part of the scope of work. The scope of work does not include any attempt to research the subject's title or legal documents." (Id., ECF p. 19). That section also includes the following representation: "THE BORROWER IS SPECIFICALLY ADVISED NOT TO RELY ON THIS APPRAISAL REPORT TO DETERMINE CONDITIONS OF THE PROPERTY . . . ." (Id.). In that section, the appraiser also states that she "does not guarantee the lot will conform to all setbacks and other township requirements in order to build. . . . I invite the client to employ the services of other professionals such as surveyors, ...

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