                                                                               FILED
                                                                          May 16 2016, 5:37 am

                                                                               CLERK
                                                                           Indiana Supreme Court
                                                                              Court of Appeals
                                                                                and Tax Court




ATTORNEY FOR APPELLANT                                    ATTORNEY FOR APPELLEE
G. Jayson Marksberry                                      Anthony S. Ridolfo
Marksberry Law Office, LLC                                Hackman Hulett LLP
Brownsburg, Indiana                                       Indianapolis, Indiana



                                            IN THE
    COURT OF APPEALS OF INDIANA

BSA Construction LLC,                                     May 16, 2016
Appellant-Plaintiff,                                      Court of Appeals Case No.
                                                          49A02-1506-CT-749
        v.                                                Appeal from the Marion Superior
                                                          Court
Jimmie E. Johnson,                                        The Honorable Heather Welch,
Appellee-Defendant                                        Judge
                                                          Trial Court Cause No.
                                                          49D01-1204-CT-13525



Bailey, Judge.




Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016                       Page 1 of 13
                                           Case Summary
[1]   BSA Construction, LLC (“BSA”) entered into an agreement to sell residential

      real estate to Lilia Lopez (“Lopez”). Lopez obtained financing from Bank of

      America (“the Bank”), pending the Bank’s final approval upon appraisal of the

      property. The Bank contracted with LandSafe, an appraisal agency, which in

      turn retained Jimmie E. Johnson (“Johnson”) to conduct the appraisal. Based

      upon Johnson’s appraisal, the Bank refused to extend financing. BSA sued

      Johnson, alleging negligence, fraud, and slander of title. Johnson sought

      summary judgment on all of BSA’s claims, and the trial court granted the

      motion.


[2]   BSA now appeals. We affirm.



                                                    Issues
[3]   BSA raises several issues for our review. We restate these as whether the trial

      court erred when it entered summary judgment with respect to BSA’s claims

      against Johnson for negligence, fraud, and slander of title.



                             Facts and Procedural History
[4]   BSA is in the business of buying and selling residential real estate. In 2010,

      BSA purchased a particular parcel of residential real estate in Indianapolis and

      made improvements to the property. BSA then sought to sell the property, and




      Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016   Page 2 of 13
      set an asking price of $64,900. In June 2011, BSA accepted Lopez’s offer to

      purchase the real estate for $60,000, with an earnest money deposit of $500.


[5]   Lopez obtained prospective financing for the purchase of the real estate from

      the Bank. Pursuant to the financing agreement with Lopez, and within the

      scope of the sales contract between Lopez and BSA, the Bank retained

      LandSafe to appraise the property, with the understanding that a final financing

      agreement would depend upon suitable appraisal results.


[6]   LandSafe retained Johnson to perform the appraisal of the property. Johnson

      appraised the real estate at a value of $50,000, $10,000 less than the agreed-

      upon sale price. As a result of the appraisal, the Bank declined to extend Lopez

      financing to purchase the property.


[7]   Working with its realtor, BSA appealed the Bank’s decision. The Bank asked

      Johnson to review and, if appropriate, revise the appraisal. Johnson revised the

      appraisal in certain respects, but left in place his prior valuation of the real

      estate. Pursuant to this, the Bank denied BSA’s appeal.


[8]   On September 26, 2011, BSA filed suit against Johnson in Hendricks County,

      articulating theories of relief based in negligence of a professional to a third

      party, fraud, slander of title, and statutory causes of action for deceptive

      practices associated with a home loan transaction. Johnson sought a change of

      venue, and by the parties’ stipulation the case was transferred to Marion

      County on March 14, 2012.



      Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016       Page 3 of 13
[9]    On September 30, 2014, Johnson filed a motion for summary judgment. BSA

       responded to the motion, designating evidentiary materials in support of its

       response. Johnson replied and filed a motion to strike numerous items from

       BSA’s designated materials. After a hearing on April 23, 2015, on May 27,

       2015, the trial court partially granted Johnson’s motion to strike and entered

       summary judgment for Johnson and against BSA.1


[10]   This appeal ensued.



                                  Discussion and Decision
                                          Standard of Review
[11]   BSA appeals the trial court’s entry of summary judgment. On appeal, our

       standard of review is the same as the standard applied by the trial court. Hewitt

       v. Westfield Washington Sch. Corp., 46 N.E.3d 425, 430 (Ind. 2015). A party

       seeking summary judgment “shall designate to the court all parts of pleadings,

       depositions, answers to interrogatories, admissions, matters of judicial notice,

       and any other matters on which it relies for purposes of the motion,” and a

       party in opposition to the motion must do likewise. Ind. Trial Rule 56(C).


[12]   In assessing the evidentiary materials, the court must draw all reasonable

       inferences in favor of the non-moving party. Williams v. Tharp, 914 N.E.2d 756,



       1
        The trial court entered summary judgment for Johnson with respect to several statutory claims advanced by
       BSA. BSA does not challenge these portions of the judgment on appeal, and we accordingly leave them
       undisturbed.

       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016                        Page 4 of 13
       761 (Ind. 2009). “The judgment sought shall be rendered forthwith if the

       designated evidentiary matter shows that there is no genuine issue as to any

       material fact and that the moving party is entitled to a judgment as a matter of

       law.” Id. Further, a trial court’s entry of summary judgment is clothed with a

       presumption of validity upon appeal, and the party challenging the entry of

       summary judgment must bear the burden of proving that the trial court erred in

       its application of the summary judgment standard. Id. We carefully assess the

       trial court’s decision to ensure the appealing party has not been improperly

       denied its day in court. McSwane v. Bloomington Hosp. & Healthcare Sys., 916

       N.E.2d 906, 909-10 (Ind. 2009). “We will reverse if the law has been

       incorrectly applied to the facts. Otherwise, we will affirm a grant of summary

       judgment upon any theory supported by evidence in the record.” Woodruff v.

       Ind. Family & Social Servs. Admin., 964 N.E.2d 784, 790 (Ind. 2012).


                                                 Negligence
[13]   BSA’s first contention on appeal is that the trial court erroneously concluded

       that Johnson did not owe BSA a duty of care on negligence principles.

       Generally, whether a duty exists is a question of law for the court to decide.

       Rhodes v. Wright, 805 N.E.2d 382, 386 (Ind. 2004). Determining whether a duty

       exists is sometimes dependent upon underlying facts that must be resolved by a

       trier of fact. Id. Here, the trial court concluded that BSA had conceded that

       Johnson lacked actual knowledge required for a duty to arise. While we agree

       that Johnson had no duty of care toward BSA, we reach that conclusion on

       different grounds.

       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016   Page 5 of 13
[14]   BSA rests its negligence claim in part on its contention that it was a third-party

       beneficiary to Johnson’s contract with the Bank. The status of a third-party

       beneficiary to a contract can serve as the basis of duty in a negligence action.

       Emmons v. Brown, 600 N.E.2d 133, 134 (Ind. Ct. App. 1992). However, “in

       Indiana, a professional owes no duty to one with whom he has no contractual

       relationship unless the professional has actual knowledge that such third person

       will rely on his professional opinion.” Id. at 135. The trial court applied the

       rule in Emmons to conclude that, despite BSA’s third-party relationship as to

       Johnson and the Bank, Johnson had no actual knowledge that BSA would rely

       on his appraisal opinion.


[15]   The actual knowledge standard in Emmons is, as the Seventh Circuit Court of

       Appeals has observed, the rule announced by then-Chief Judge Cardozo of the

       Court of Appeals of New York in Ultramares Corp. v. Touche, 174 N.E. 441

       (N.Y. 1931). Decatur Ventures, LLC v. Daniel, 485 F.3d 387, 390 (7th Cir. 2007)

       (citing Ultramares, supra). In Ultramares, an accounting firm, Touche, Niven &

       Co. (“Touche”) was retained to prepare an audit opinion for Fred Stern & Co,

       Inc. (“Stern”). 174 N.E. at 442-43. The information upon which Touche relied

       was inaccurate because the balance sheet had been falsified by Stern’s

       management. Id. at 443. Touche, relying upon the falsified records, issued an

       audit opinion stating that Stern was solvent when Stern was actually insolvent.

       Id. After Touche issued the audit opinion, Stern used the opinion to obtain

       financing from Ultramares, shortly after which Stern declared bankruptcy. Id.




       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016    Page 6 of 13
[16]   Ultramares sued Touche, contending that Touche was negligent in its

       preparation of the audit report, and that the negligence was the cause of

       Ultramares’s damages because the company relied upon the accuracy of

       Touche’s report in making the decision to loan money to Stern. Id. at 442-43.

       Ultramares prevailed at trial, and Touche appealed. On appeal, the Court of

       Appeals of New York held that Touche had been negligent in preparing the

       audit report, but that Touche could not be liable to Ultramares “if there has

       been neither reckless misstatement nor insincere profession of opinion, but only

       honest blunder.” Id. at 448. Where there had been only negligence—that is,

       where there is no “[s]cienter…an indispensable element,” id. at 447—the court

       held that Touche’s duty extended only to those parties with whom the

       accountants were in privity. Id. at 448. To further extend the duty of care

       would, the Ultramares court observed, be “coincident or nearly so with the duty

       to refrain from fraud”—or, rather, would blur the distinction between

       negligence and fraud. Id. at 447.


[17]   The rule in Ultramares has been extended somewhat so that “a professional

       owes a duty of care only to his client plus any third party who the professional

       knows will see and rely on any opinion he renders.” Decatur, 485 F.3d at 390.

       This holding, as the Ultramares Court observed, avoids a situation where

       “[n]egligence…will have one standard when viewed in relation to the employer,

       and another and at times a stricter standard when viewed in relation to the

       public.” 174 N.E. at 448.




       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016   Page 7 of 13
[18]   Indiana courts have construed the Ultramares rule quite narrowly. Thus, in

       Emmons, this Court concluded that an appraiser owed no duty to a buyer of real

       estate whose name appeared multiple times in documents used by the appraiser

       to value the home—even where the appraiser’s failure to properly appraise the

       property led to the buyers’ incurring costs when the roof of the home failed.

       600 N.E.2d at 135-36. This is because, as the Emmons Court noted, the duty

       owed by the appraiser was to the FHA for the purpose of underwriting risk to

       the FHA and its insurers. Id. at 134-35. And, as the Seventh Circuit observed,

       “appraisers expect lenders to use their opinions to protect themselves from

       borrowers.” Decatur, 485 F.3d at 390 (emphasis in original). This observation

       applies a fortiori to the risk posed to lenders from sellers who, if anything, want

       more money from lenders than borrowers do.


[19]   BSA argues that it is “self-evident” to licensed real estate professionals that

       appraisers like Johnson owe a duty of care to sellers in situations like the one in

       this case. (Appellant’s Br. at 20.) To further its point, BSA observes that the

       standard purchase agreement form used by realtors in central Indiana includes

       the following text: “If buyer obtains an appraisal of the property, this

       agreement is contingent upon the property appraising at no less than the agreed

       upon purchase price.” (Appellant’s Br. at 21.) Despite this, and despite the

       designated evidence that both buyer and seller real estate agents know of this




       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016     Page 8 of 13
       contingency, BSA insists that Johnson be held liable to BSA for alleged errors

       in the appraisal.2


[20]   BSA appears to insist that Johnson be held liable to BSA for a professional

       opinion intended to secure the Bank against BSA’s representations to its buyer

       and to the Bank concerning the value of the real estate. In an arms-length

       transaction like the one here, we cannot conclude that Johnson had any duty to

       serve two masters with conflicting interests. Whether Johnson was bound by or

       aware of the code of ethics of a professional association, or knew that a poor

       appraisal might be associated with the real estate for some period of time, does

       not change the fundamental arrangement of the duties at issue here. And,

       despite BSA’s suggestions to the contrary, the law determines whether a duty of

       care exists—not a non-governmental professional association’s code of ethics.


[21]   To reach BSA’s suggested conclusion would be to require that an agent of the

       Bank serve instead as an agent of the seller, disrupting the basic purpose of the

       Bank’s contract with the appraiser in derogation of basic contract law

       principles. We cannot agree with BSA’s proposed result.


[22]   Johnson’s duty was to the Bank and as a matter of law cannot—because of the

       contradictory interests at issue—have extended to BSA. And because Johnson




       2
         BSA places great stock in documents issued by the Mid-Indiana Board of Realtors (“MIBOR”) as
       establishing a duty of care. Organizations such as MIBOR are not governmental licensing agencies, but
       rather are private professional organizations. Whether Johnson, as an associate member of MIBOR, is
       subject to any discipline within that organization is a separate question from that of liability in this case.

       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016                                 Page 9 of 13
       had no duty of care toward BSA, BSA had no basis upon which to rely on

       Johnson’s opinion.


[23]   Accordingly, BSA could not as a matter of law rely upon Johnson’s opinion,

       and entry of summary judgment against BSA was not error.


                                                      Fraud
[24]   BSA also contends that Johnson’s appraisal report amounted to fraud. The

       elements of fraud in Indiana are well established:

               To prove fraud, a plaintiff must establish the following elements:
               (1) a material misrepresentation of past or existing fact which (2)
               was untrue, (3) was made with knowledge of or in reckless
               ignorance of its falsity, (4) was made with the intent to deceive,
               (5) was rightfully relied upon by the complaining party, and (6)
               which proximately caused the injury or damage of which the
               plaintiff complains.


       Angel v. Powelson, 977 N.E.2d 434, 445 (Ind. Ct. App. 2012) (citing, inter alia,

       Lawyers Title Ins. Co. v. Pokraka, 595 N.E.2d 244, 249 (Ind. 1992)).


[25]   The trial court concluded that, as a matter of law, BSA could not pursue a fraud

       claim against Johnson because Johnson’s appraisal was a statement of opinion

       rather than of fact. This Court has observed, in the context of appraisals of real

       estate, that “[m]ere expressions of opinion cannot be the basis for an action in

       fraud; an action in fraud requires misrepresentation of material fact.” Block v.

       Lake Mortg. Co., 601 N.E.2d 449, 451 (Ind. Ct. App. 1992). BSA argues,

       directing our attention to the holdings of courts in other states, that


       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016    Page 10 of 13
       representations of quality or condition should give rise to an action in fraud

       when they are asserted as fact. (Appellant’s Br. at 23.)


[26]   Even if we were to adopt such a rationale, there nevertheless remains the

       problem of reliance. Reliance by its nature requires not merely that a

       misstatement was made, but also that the complaining party took some kind of

       action in response to the misstatement. BSA took action before the appraisal by

       entering into a sales contract with a contract provision that indicated the sale

       depended upon financing and, in turn, an appraisal. But BSA directs us to no

       detrimental action or change of position on its part after Johnson was retained

       to perform the appraisal. Moreover, BSA acknowledges that the risk to the

       transaction of an unfavorable appraisal was known to it in advance of

       Johnson’s work appraising the real estate. (Appellant’s Br. at 21.)


[27]   Nevertheless, BSA insists that it was defrauded, advancing an upside-down

       theory of fraud. Rather than fraud resulting from action taken in reliance upon

       representations already made, BSA suggests that the purportedly fraudulent

       representation may come after reliance—in this case, entering into the sales

       agreement—has already occurred. We thus decline to adopt the approach BSA

       suggests.


[28]   We accordingly conclude that the trial court did not err when it granted

       Johnson’s motion for summary judgment as to BSA’s fraud claim.




       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016   Page 11 of 13
                                             Slander of Title
[29]   We turn now to BSA’s contention that the trial court erred when it entered

       summary judgment as to its slander of title claim.


[30]   This state first recognized the tort of slander of title in May v. Anderson, 14 Ind.

       App. 251, 42 N.E. 946 (1896). In establishing the cause of action, the May

       Court stated that a recovery for slander of title required proof that “statements

       were false; that they were made maliciously, and that thereby the completion of

       the trade was prevented,” causing the plaintiff damages. May, 42 N.E. at 947.

       Crucially, in May, May had stated that he held a lien on real estate Anderson

       was attempting to sell, and May’s false claim of a lien prevented the sale; that

       is, May made a false statement concerning the existence and nature of

       Anderson’s title to the property, not a false statement concerning the property’s

       monetary value. Id. In subsequent cases, this Court has reaffirmed that an

       actionable claim of slander of title requires proof that “the defendant made

       false, malicious statements regarding the plaintiff’s ownership of the land in

       question.” Walsh & Kelly, Inc. v. Int’l Contractors, Inc., 943 N.E.2d 394, 398 (Ind.

       Ct. App. 2011) (citing Davis v. Sponhauer, 574 N.E.2d 292, 300 (Ind. 1991))

       (emphasis added), trans. denied.


[31]   Here, BSA has not made an allegation that Johnson impugned BSA’s claim of

       title to the real estate. Further, the undisputed facts show that Johnson

       concluded that the real estate had a value different from that which BSA sought

       to obtain in a sale. This is not, however, the same as making a statement


       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016       Page 12 of 13
       concerning the very fact of BSA’s ownership; it is the fact of ownership that the

       tort of slander of title protects, not the monetary value per se of the ownership

       interest. We accordingly find no error in the trial court’s conclusions

       concerning BSA’s claim of slander of title.



                                                Conclusion
[32]   The trial court did not err when it granted summary judgment to Johnson on

       BSA’s claims for negligence, fraud, and slander of title.


[33]   Affirmed.


       Bradford, J., and Altice, J., concur.




       Court of Appeals of Indiana | Opinion 49A02-1506-CT-749 | May 16, 2016    Page 13 of 13
