Kelley v. Carbone

837 N.E.2d 438, 361 Ill. App. 3d 477, 297 Ill. Dec. 355, 2005 WL 2738308
CourtAppellate Court of Illinois
DecidedOctober 11, 2005
Docket2-05-0097
StatusPublished
Cited by20 cases

This text of 837 N.E.2d 438 (Kelley v. Carbone) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Kelley v. Carbone, 837 N.E.2d 438, 361 Ill. App. 3d 477, 297 Ill. Dec. 355, 2005 WL 2738308 (Ill. Ct. App. 2005).

Opinion

PRESIDING JUSTICE O’MALLEY

delivered the opinion of the court:

Plaintiffs, Ron and Lisa Kelley, Kelley Partners, Inc., Guy Mullen, and Mullen Enterprises, Inc., appeal the trial court’s order dismissing their complaint against defendants, Michael J. Carbone and Michael J. Carbone & Associates, Inc. Plaintiffs contend that the trial court erred in ruling that defendants owed them no duty. We reverse and remand.

Plaintiffs’ third amended complaint alleges the following facts. Plaintiffs leased business properties from Triad Randall Lake, L.L.C. (Triad). The Kelley plaintiffs operated an Oil Works business while the Mullen plaintiffs operated a car wash facility on an adjacent parcel. Each lease provided that after five years the lessees would have an option to purchase the property pursuant to a formula set out in the lease. While the formula is somewhat complex, for present purposes it is sufficient to note that the purchase price was based on an appraisal performed by defendants. The leases referred to defendants by name as the appraisers.

Defendants’ initial appraisal stated that it was prepared for Todd Surta, president of Triad, and it certified that it met the Uniform Standards of Professional Appraisal Practice (USPAP). It also provided that it was to “be used by the client to support possible future purchase agreements between the client and the current lessee of the subject property.”

Plaintiffs exercised their options to purchase the properties. Thereafter, they sued defendants for negligent misrepresentation. Plaintiffs alleged that the appraisal did not in fact conform to the USPAP. Plaintiffs alleged numerous specific mistakes. Plaintiffs contended that, as a result of these errors, they paid higher prices for the properties.

Defendants moved to dismiss the third amended complaint. They argued that they owed no duty to plaintiffs, who were not their clients. The trial court agreed and dismissed the complaint with prejudice. Plaintiffs timely appeal.

Defendants moved to dismiss the complaint pursuant to section 2 — 615 of the Code of Civil Procedure (735 ILCS 5/2—615 (West 2004)). Such a motion challenges only the complaint’s legal sufficiency. Jarvis v. South Oak Dodge, Inc., 201 Ill. 2d 81, 85 (2002). “The critical inquiry is whether the allegations of the complaint, when considered in a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief may be granted.” Jarvis, 201 Ill. 2d at 86. In ruling on a section 2 — 615 motion, a court must accept as true all well-pleaded facts in the complaint and draw all reasonable inferences favorable to the pleader. American National Bank & Trust Co. v. City of Chicago, 192 Ill. 2d 274, 279 (2000). A cause of action should not be dismissed on the pleadings unless it appears that no set of facts can be proved that will entitle the plaintiff to recover. Loftus v. Mingo, 158 Ill. App. 3d 733, 738 (1987). We review de novo the dismissal of a complaint under section 2 — 615. Jarvis, 201 Ill. 2d at 86.

Plaintiffs contend that their complaint states a cause of action for negligent misrepresentation. They maintain that defendants owed them a duty despite the lack of contractual privity. Plaintiffs also contend that an action for negligent misrepresentation is an exception to the Moorman rule that purely economic damages are not recoverable in tort. See Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69 (1982). Defendants agree that plaintiffs could maintain a cause of action for negligent misrepresentation despite the lack of contractual privity and that such an action is an exception to the Moorman economic-loss doctrine. However, they contend that plaintiffs’ complaint does not allege that defendants owed them a duty under the facts of this case.

To plead a cause of action for negligence, a plaintiff must allege the existence of a duty owed by the defendant to the plaintiff, a breach of that duty, and an injury proximately caused by the breach. Kirwan v. Lincolnshire-Riverwoods Fire Protection District, 349 Ill. App. 3d 150, 155 (2004). The existence of a duty is a question of law to be decided by the court. Downs v. Steel & Craft Builders, Inc., 358 Ill. App. 3d 201, 204 (2005). For a duty to exist, the plaintiff and the defendant must stand in such a relationship that the law imposes upon the defendant an obligation of reasonable conduct for the plaintiffs benefit. Kopka v. Kamensky & Rubenstein, 354 Ill. App. 3d 930, 934 (2004).

In Rozny v. Marnul, 43 Ill. 2d 54 (1969), the supreme court formally abandoned the concept of privity of contract in actions for negligent misrepresentation. Thus, a defendant in the business of supplying information may owe a duty to a plaintiff despite the fact that the plaintiff was not the defendant’s client. Accordingly, tort liability is to be measured “by the scope of the duty owed rather than the artificial concepts of privity [of contract].” Rozny, 43 Ill. 2d at 62. However, liability is limited to the person or the limited group of persons for whose benefit and guidance the information is intended. Rozny, 43 Ill. 2d at 66-67; Restatement (Second) of Torts § 552 (1977).

To plead a cause of action for negligent misrepresentation against a provider of information employed by a third party, a plaintiff must allege that the purpose and intent of the relationship was to benefit or influence the plaintiff. Pelham v. Greisheimer, 92 Ill. 2d 13, 21 (1982); Brumley v. Touche, Ross & Co., 139 Ill. App. 3d 831, 836 (1985). Thus, to show that defendants owed them a duty, plaintiffs here had to allege that the appraisal was intended to benefit or influence plaintiffs. Plaintiffs have done so.

The appraisal itself stated that it was to “be used by the client to support possible future purchase agreements between the client and the current lessee of the subject property.” Plaintiffs also allege that defendants were provided with copies of the leases, which detailed plaintiffs’ options to purchase the properties. Defendants knew that plaintiffs’ decisions to purchase the properties would be influenced by their appraisal of the properties. Thus, plaintiffs have established that they were part of the limited class for whose guidance the appraisal was intended.

The “third-party duty” cases have typically involved professionals such as lawyers and accountants. Rozny involved a faulty survey, which caused the ultimate purchaser of the property to place his garage on the lot line. Rozny, 43 Ill. 2d at 58. Our research has not uncovered an Illinois case specifically imposing a similar duty on an appraiser, but cases in other states have done so. In Costa v. Niemon, 123 Wis. 2d 410, 366 N.W2d 896 (App. 1985), the plaintiffs alleged that the defendant, who was paid by the lender, negligently performed an appraisal, causing the plaintiffs to overpay for their house. The appeals court upheld a finding of liability, rejecting the argument that harm to a remote purchaser of the property was not foreseeable. The court stated, “It is beyond serious dispute that an appraiser’s negligently performed calculation of the value of property is an act or omission which would foreseeably cause some harm to someone.” Costa, 123 Wis. 2d at 414, 366 N.W.2d at 899. Other cases have also held that third-party liability extends to appraisers.

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Bluebook (online)
837 N.E.2d 438, 361 Ill. App. 3d 477, 297 Ill. Dec. 355, 2005 WL 2738308, Counsel Stack Legal Research, https://law.counselstack.com/opinion/kelley-v-carbone-illappct-2005.