## Facts

- Yolanda Hernandez sought to buy an investment duplex in Wilmington, North Carolina.
- She saw an advertisement reflecting MLS information stating the property had two rental units, each rented for $750 per month, and that both units were occupied.
- Hernandez contracted to buy the property from Elliot and Susan Tindal for $205,000, with an appraisal contingency allowing termination if the property did not appraise at or above the price.
- Scott E. Avent, a licensed appraiser, prepared an appraisal for the lender in connection with the mortgage.
- The appraisal identified the lender as the client, limited its intended use to the lender’s mortgage-lending purposes, and contained inaccuracies about the property.
- Hernandez never met or communicated with Avent and did not see the appraisal report at the time of purchase.
- Hernandez closed after the lender approved the loan based on the appraisal, later defaulted, and the lender foreclosed.
- Hernandez sued Coldwell Banker (broker), the Tindals (sellers), Avent (appraiser), and the lender/successor (Countrywide/Bank of America), alleging negligence and negligent misrepresentation (broker and appraiser), breach of the covenant against encumbrances (sellers), and negligence (lender).

## Issues

1. Whether a lender-retained appraiser owes a duty to a purchaser/borrower for negligence or negligent misrepresentation when the purchaser is not the client and did not see or directly rely on the appraisal.
2. Whether the purchaser produced evidence creating a genuine issue of material fact that the broker negligently misrepresented rental income and occupancy information in MLS/advertising materials or otherwise acted negligently.
3. Whether the purchaser produced evidence sufficient to survive summary judgment on claims against the sellers for breach of the covenant against encumbrances and against the lender for negligence.

## Decision

- The North Carolina Court of Appeals affirmed summary judgment for all defendants.
- As to the appraiser, the court held Hernandez could not establish duty or justifiable reliance because the appraisal was prepared for the lender’s limited use and Hernandez neither saw nor relied on it.
- The court rejected “derivative reliance” based on the lender’s reliance on the appraisal as insufficient for negligent misrepresentation.
- As to the broker, the court held Hernandez failed to forecast evidence showing materially false statements, lack of reasonable care, and justifiable reliance sufficient to create a triable issue.
- As to the sellers and lender, the court held the record showed no genuine issue of material fact and defendants were entitled to judgment as a matter of law.

## Legal Principles

- Negligent misrepresentation requires, among other elements, false information supplied for the guidance of others, failure to exercise reasonable care, and the plaintiff’s justifiable reliance as an intended (or known) recipient within a limited class.
- Liability for negligent misrepresentation is limited to a specific, limited group for whose benefit and guidance the information is supplied, not all foreseeable users.
- A borrower’s claim against an appraiser generally fails absent evidence the appraiser intended the borrower to rely on the appraisal and absent the borrower’s actual, direct reliance on the appraisal’s contents.
- A buyer alleging misrepresentations in real-estate marketing materials must forecast competent evidence of material falsity and justifiable reliance, considering the buyer’s opportunity to investigate and the nature of statements about rents and occupancy.

## Conclusion

The court affirmed summary judgment because the appraiser’s duty ran to the lender identified as the appraisal’s client and Hernandez neither saw nor directly relied on the appraisal, and because Hernandez failed to produce evidence creating a genuine factual dispute on alleged broker misrepresentations and on her remaining claims against the sellers and lender.


Hernandez v. Coldwell Banker Sea Coast Realty, 735 S.E.2d 605 (N.C. Ct. App. 2012)