Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of San Diego County, Ronald L. Styn, Judge. Super. Ct. No. GIC871195
O'ROURKE, J.
Plaintiff Auf Mustafa appeals from a summary judgment in favor of defendant Anderson Appraisal Services, Inc. (Anderson) on Mustafa's law suit alleging that Anderson issued a false or misleading real estate appraisal report on certain property, inducing him to purchase the property and suffer damages when it was later placed in foreclosure. Mustafa contends he raised triable issues of material fact as to his causes of action for fraud, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty and negligence, intentional infliction of emotional distress and conspiracy. We conclude Anderson has not established it is entitled to summary adjudication of Mustafa's causes of action for intentional and negligent misrepresentation and conspiracy. We uphold summary adjudication of Mustafa's remaining causes of action. We reverse the judgment with directions set forth below.
FACTUAL AND PROCEDURAL BACKGROUND
We set out the undisputed evidence and facts in the light most favorable to Mustafa, the party opposing summary judgment. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar); Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 139.)
Some of the facts are taken from the declaration of Mustafa's expert, David Eshelman, to which Anderson unsuccessfully objected below. Anderson does not challenge the trial court's evidentiary rulings against it on appeal, and thus we are entitled to rely on that evidence in assessing the propriety of summary judgment. (See Code Civ. Proc., § 437c, subd. (c).) Other facts were set forth in Mustafa's separate statement of undisputed facts and assertedly supported by deposition testimony. We note that Anderson responded to Mustafa's separate statement below by claiming that Mustafa had not lodged deposition transcripts with the trial court. However, Anderson does not raise that point on appeal. We accept all facts in Mustafa's favor unless the trial court expressly sustained objections to the evidence supporting those facts. As for those objections to Mustafa's evidence that were sustained, we review the trial court's evidentiary ruling for abuse of discretion. (Alexander v. Codemasters Group Limited, supra, 104 Cal.App.4th at pp. 139-140, fn. 3.)
In late 2005, Genny Crane approached Mustafa to sell him the single family house she lived in located at 10727 Puebla Drive in La Mesa, California (the property). Crane wanted to sell the property at a price under the appraised value and use the equity to pay for debts. Mustafa gave Crane money to cover the cost of an appraisal. Crane had previously obtained appraisals from Anderson on the property in May 2004, showing a market value of $715,000, and September 2005, showing a market value of $750,000.
On December 7, 2005, Anderson issued an appraisal report on the property, identifying the client as Oak Hill Mortgage, Inc. (Oak Hill). About a week earlier, Anderson had received an e-mail asking it to change the name of the client for the appraisal report on the property to Oak Hill, but to send the appraisal directly to Crane. The report was prepared on Fannie Mae Form 1004, which was required by Fannie Mae to be used for appraisals, and signed by Anderson's president, Mark McDaniel.
McDaniel made false statements within the appraisal report including that he had personally inspected the property when he had not, and that he had performed the appraisal in accordance with the requirements of the Uniform Standards of Professional Appraisal Practice (USPAP). Anderson's appraisal report placed the property's value at $750,000 — $20,000 higher than its $730,000 sales price. The sale closed on December 21, 2005, at a sales price of $730,000. Mustafa relied on the $750,000 appraised value in going forward with the transaction. Yet Mustafa only received a copy of the actual appraisal report from Oak Hill in May 2006, after the close of escrow.
Under USPAP standards, the appraised value of the property as of December 2005 was $660,000. Had Mustafa known that the property's appraised value was $660,000, he would not have proceeded with the transaction. As a result of the sale, he suffered damage to his credit standing and tax liability as a result of the property being put in foreclosure.
Mustafa sued Anderson, Crane and other individuals and entities, filing a first amended complaint (the complaint) in December 2006. The complaint set forth causes of action for fraud (intentional and negligent misrepresentation), breach of the implied covenant of good faith and fair dealing, "breach of fiduciary duty/negligence," intentional infliction of emotional distress and "civil conspiracy." Mustafa alleged that unbeknownst to him, Crane with the assistance and approval of other defendants created "straw man" transactions in which she would procure a buyer for her property and use that person to sell the property at a higher value so she could cash out equity. Crane represented to the buyers that she would continue to live in the property, pay the mortgage, and hold the buyer harmless.
Anderson moved for summary judgment and alternatively summary adjudication of issues. It argued (1) Mustafa saw Anderson's appraisal report only after purchasing the property and as a result could not establish the essential element of reliance for his fraud and negligent misrepresentation causes of action; (2) Mustafa and Anderson had no contractual or fiduciary relationship to support causes of action for breach of the implied covenant of good faith and fair dealing and breach of fiduciary duty; (3) Mustafa could not establish outrageous conduct on Anderson's part or severe emotional distress; and (4) Mustafa's conspiracy cause of action failed due to his inability to establish any underlying tort.
In opposition, Mustafa presented his own declaration and that of real estate expert David Eshelman on standard of care, valuation and related issues. Mustafa averred he had paid for the appraisal by giving Crane funds to cover the cost of the appraisal, and she had informed him who was conducting it and the appraisal report's conclusion that the property had appraised at $750,000. According to Mustafa, it was his understanding that if the appraised value came in at a lower amount, the property's purchase price would be adjusted downward. He stated he relied on Anderson's appraised value of the property in going forward with the purchase, and had he been told the true value of the property he would not have proceeded with the transaction. He stated he suffered damage to his credit standing, was responsible for approximately $60,000 in taxes, and was "emotionally distraught about what happened." Mustafa averred: "I constantly worried, suffered a loss of sleep, and anxiety."
Eshelman, a certified real property appraiser holding a California license, stated he had conducted his own appraisal of the property and determined its value to be $660,000 as of December 7, 2005. He opined McDaniel's actions violated the USPAP as well as typical standards for licensed real estate appraisers in part because McDaniel misled the scope of the work he and others performed, failed to physically inspect the property, and provided unsubstantiated information. Eshelman identified other false certifications within Anderson's appraisal and stated that due to McDaniel's violations, the report was invalid, inaccurate and misleading. Eshelman pointed out that the appraisal report contained appraiser's certifications, one of which stated: "The borrower [and] another lender at the request of the borrower, . . . may rely on this appraisal report as part of any mortgage finance transaction that involves any one or more of these parties." Based on this and other certifications in the appraisal, Eshelman opined that an appraiser would assume both buyer and seller would be made aware of the appraised value contained in an appraisal report before the signing of closing documents, and that all appraisers were aware a seller, buyer and lender rely on the valuation in closing a real estate purchase transaction.
This was a reference to "certification 23" in the December 7, 2005 appraisal report. Eshelman further averred: "In my opinion, by December 2005 most appraisers were aware of the changes in the Fannie Mae form concerning Appraiser's Certifications on page 6, numbers 21, 23, and 25 which increased the parties which were entitled to receive the appraisal report, increased the number of persons whom [sic] could rely on the appraisal report, and increased the signing appraiser's liability for intentional or negligent misrepresentation contained in the report. [¶] . . . In my opinion, in December 2005 it is highly unlikely that Anderson . . . appraisers were unaware of the content and meaning behind Certifications 21, 23, and 25 on page 6 of the report."
Anderson submitted objections to Mustafa's evidence including on grounds that many of Mustafa's statements constituted inadmissible hearsay. It objected to most of Eshelman's statements and conclusions as irrelevant to the issue of Mustafa's reliance. At oral argument on the matter, Mustafa raised, and Anderson later briefed, the relevance of Mirkin v. Wasserman (1993) 5 Cal.4th 1082 (Mirkin), which addressed application of the "fraud-on-the-market" doctrine (grounded on a theory of indirect or presumed reliance by a plaintiff) to actions for common law fraud.
Sustaining some of Anderson's objections to Mustafa's declaration and overruling the rest, the trial court granted summary adjudication as to Mustafa's causes of action with the exception of his cause of action for breach of the implied covenant of good faith and fair dealing. It granted Mustafa leave to amend the latter cause of action to allege a third party beneficiary theory. The court's resolution of the fraud causes of action turned on the element of actual reliance; in part, it reasoned, "There is no evidence establishing Plaintiff reviewed the Anderson appraisal prior to closing on the property. Therefore, there is no evidence establishing Plaintiff relied on the Anderson appraisal in going forward with [the] property transaction." Mustafa declined to amend and by stipulation allowed entry of judgment on the entire complaint. He appeals from that judgment.
The trial court sustained Anderson's objection Nos. 2 through 4 and 6, which were made on grounds of hearsay and relevance and overruled the remainder of Anderson's objections. The court did not state whether it sustained the objections on both or one of the stated grounds, though it observed later in its ruling that Mustafa's declaration statement that Crane advised him of the result of Anderson's appraisal was inadmissible hearsay.
DISCUSSION
I. Standard of Review
Summary judgment is properly granted when there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) "[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact. . . . A prima facie showing is one that is sufficient to support the position of the party in question." (Aguilar v. Atlantic, supra, 25 Cal.4th at pp. 850-851, fns. omitted.) Although the burden of production shifts, the moving party always bears the burden of persuasion. (Id. at p. 850.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Ibid.)
We review the trial court's decision de novo, considering all of the evidence offered in connection with the motion – except that which the court properly excluded – and the uncontradicted inferences the evidence reasonably supports. (Shin v. Ahn (2007) 42 Cal.4th 482, 499; Kahn v. East Side Union High School District (2003) 31 Cal.4th 990, 1003; Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476-477.) In doing so, we apply the same three-step analysis required of the trial court. (Bono v. Clark (2002) 103 Cal.App.4th 1409, 1431-1432.) After identifying the issues framed by the pleadings, we determine whether the moving party has established facts justifying judgment in its favor. If the moving party has carried its initial burden, we then decide whether the opposing party has demonstrated the existence of a triable, material fact issue. (Bono, at p. 1432.) We strictly construe the moving party's evidence and liberally construe the opposing party's evidence without weighing the evidence or conflicting inferences. (Aguilar, supra, 25 Cal.4th at p. 856; Code Civ. Proc., § 437c, subd. (c); Woodridge Escondido Property Owners Ass'n. v. Nielsen (2005) 130 Cal.App.4th 559, 567-568.)
II. Trial Court Rulings on Anderson's Evidentiary Objections
Mustafa made the following statements in his opposing summary judgment declaration: (1) "Crane represented that the appraisal was to be performed by [Anderson], an appraisal firm that she had used in the past"; (2) "I was informed by [Crane] that [Anderson] appraised the property of 10727 Puebla Drive, La Mesa, California at a value of $750,000.00"; (3) "Crane represented to me that she was advised by [Anderson] that that property appraised at the value of $750,000.00"; (4) "Crane confirmed my understanding [that if the appraised value came in at a lower amount the sales purchase price would be adjusted downward], and in fact, stated that since the appraised value came in at a higher value than the purchase price that there was a sufficient equity cushion in the value of the property." The trial court sustained Anderson's objections to these statements (see footnote 3, ante).
Mustafa contends the trial court erred in its evidentiary ruling because he did not offer the evidence to prove the content of Crane's communications, but to provide evidence as to "why he believed [Anderson] had correctly appraised the property for the amount of $750,000" and "why he proceeded with the transaction. . . ." He argues this is a well-established form of nonhearsay, namely, evidence of his state of mind to show his reliance on Crane's statements. Mustafa also contends Crane's statements concerning Anderson's appraisal are admissible as statements made by a conspirator under Evidence Code section 1223. Anderson responds that Mustafa's use of Crane's out of court statements to explain his own conduct is "rank hearsay" and that Crane's statement that she was advised by Anderson about the appraisal report is "double hearsay." In making these arguments, Anderson incorrectly assumes Mustafa relies on the state of mind exception to the hearsay rule under Evidence Code section 1250.
Anderson's double hearsay argument is incorrect. To the extent Crane recounted a statement by an Anderson agent (Mustafa's declaration does not identify the person with whom she assertedly spoke, only that she was advised by "Anderson Appraisal, Inc.") the evidence is not hearsay because it is a statement by Anderson, a party, offered against Anderson, and it thus falls within the hearsay exception for a party admission. (Evid. Code, § 1220; see Estate of Anderson (1997) 60 Cal.App.4th 436, 441.) And Crane's statement, as we explain below, is not hearsay because it was not offered for the truth of the matter asserted.
Rather, Mustafa is maintaining his declaration recounting Crane's statement is not hearsay. He is correct. Under the Evidence Code, "evidence of a statement that was made other than by a witness while testifying at the hearing and that is offered to prove the truth of the matter stated" constitutes hearsay and, absent an applicable hearsay exception, is inadmissible. (Evid. Code, § 1200, subds. (a), (b).) However, "[a] statement by the declarant may be admitted if it tends to show the mental state or attitude of the person who heard it or read it. . . . [¶] Typical issues on which these statements are commonly offered are knowledge . . . [and] belief . . . ." (1 Witkin, Cal. Evidence (4th ed. 2000) Hearsay, § 40, pp. 722-724; see also Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2008) ¶¶ 8:1049, pp. 8D-11-8D-12 [out-of-court statement is not hearsay if offered to show the effect on the hearer, reader or viewer rather than to prove the content of the statement]; 8:1062, p. 8D-15 [out-of-court statement may be admissable nonhearsay to prove the state of mind of the hearer, reader or viewer when that is an issue in the case]).) An extrajudicial statement is not hearsay if used " 'to prove . . . the hearer . . . obtained certain information by hearing . . . the statement and, believing such information to be true, acted in conformity with such belief.' . . . 'The statement is not hearsay, since it is the hearer's reaction to the statement that is the relevant fact sought to be proved — not the truth of the matter asserted in the statement.' " (Holland v. Union Pacific R. Co. (2007) 154 Cal.App.4th 940, 942, quoting 1 Jefferson, Cal. Evidence Benchbook (2d ed. 1982) Hearsay & Nonhearsay, § 1.4, p. 57; see also Wiz Technology, Inc. v. Coopers & Lybrand (2003) 106 Cal.App.4th 1, 13 [declaration by defendant auditing firm's partner that he had learned of plaintiff's breach of certain contract terms from other identified persons was not inadmissible hearsay because it was offered for the good faith of auditing firm's decision to resign; " '[w]here the reasonableness of a person's conduct is at issue, statements of others on which he acted are admissible' "], quoting Silva v. Lucky Stores, Inc. (1998) 65 Cal.App.4th 256, 265.)
Here, the fact in issue for which Crane's statements were offered was Mustafa's belief or knowledge about the results of Anderson's appraisal and the reasonableness of his ensuing conduct in reliance on that information, not the truth or falsity of the matters stated by Crane. There is no dispute Anderson's appraisal report reached the conclusion that the property had an indicated value of $750,000. As such, the truth of Crane's statements is not at issue in this case. Crane's statements, admitted for this purpose, are not hearsay. The trial court erred by excluding Mustafa's declaration statements.
Anderson maintains further that even if we accept Mustafa's declaration statements, Mustafa's claim of reliance fails because the statements are communications by Crane, not Anderson, and his claim is not actionable under Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, because it is based only on oral receipt of the appraisal report's contents.We address these substantive contentions below.
III. Fraud/Negligent Misrepresentation Causes of Action
Mustafa contends the trial court erred when it ruled he could not establish reliance as a matter of law merely because he did not see a copy of Anderson's December 2005 appraisal report before the close of escrow. He argues section 533 of the Restatement Second of Torts permits him to prove actual reliance in the absence of direct communication with Anderson, as illustrated by cases such as Mirkin, supra, 5 Cal.4th 1082, Bullock v. Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, and Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167. Mustafa contends he established the element of actual reliance by Crane's indirect communication of the contents of Anderson's appraisal report, combined with Eshelman's declaration explaining that Anderson acknowledged and would assume its report would be transmitted to Mustafa as the homebuyer.
Anderson responds that Mustafa's reliance on Mirkin, supra, 5 Cal.4th 1082 and the other cases is misplaced. It maintains Mirkin and its progeny do not eliminate the need for a plaintiff in Mustafa's position to prove actual reliance, and it asserts the indirect communication rule on which Mustafa relies has never been applied outside the context of a securities or class action litigation. Rather, Anderson argues we should follow Soderberg v. McKinney (1996) 44 Cal.App.4th 1760 (Soderberg), involving a claim of fraud in connection with a real estate appraisal report, which requires a plaintiff prove actual reliance on the appraisal report.
"California courts have always required plaintiffs in actions for deceit to plead and prove the common law element of actual reliance." (Mirkin, supra, 5 Cal.4th at p. 1092.) Proof of actual reliance is required even in actions for fraud based on an omission. (Id. at p. 1093.) With respect to the element of justifiable or reasonable reliance, "whether a party's reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts." (Guido v. Koopman (1991) 1 Cal.App.4th 837, 843; see also Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) The element of reliance is the same for claims of intentional and negligent misrepresentation. (Mariani v. Price Waterhouse (1999) 70 Cal.App.4th 685, 708.) Our threshold inquiry here is whether Anderson met its initial summary judgment burden of production to make a prima facie showing that, for purposes of the causes of action for intentional and negligent misrepresentation, Mustafa cannot prove the essential element of actual reliance. If Anderson meets that burden, the question then becomes whether Mustafa's evidence raised a triable issue of material fact on that element. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at pp. 850-851.)
The facts are not in dispute about how Mustafa heard about the results of the appraisal; he learned Anderson had appraised the property at $750,000 from Crane telling him so, and he obtained the actual appraisal report well after the close of escrow. Further, Anderson does not dispute Mustafa's declaration statement that he relied on the $750,000 appraised value "in going forward with the transaction." On review of a summary judgment we do not weigh the parties' evidence or make any factual findings of our own, however we "must nevertheless determine what any evidence or inference could show or imply to a reasonable trier of fact." (Aguilar, at p. 856, italics omitted.) Mustafa does not expressly state that Crane told him about the appraisal report results before the close of escrow. Yet a trier of fact could reasonably infer from Mustafa's assertion that he relied on those results in "going forward" with the sale that Crane's representation about the appraisal report results occurred at some time before completion of the transaction.
Mustafa's declaration is direct evidence of his reliance. (See Boeken v. Philip Morris Inc. (2005) 127 Cal.App.4th 1640, 1659 [explaining difference between direct and circumstantial proof of reliance on false representations].) Notably, Anderson omitted Mustafa's statement about his reliance from its reply to Mustafa's separate statement of undisputed facts. Thus, Anderson did not attempt to rebut the statement with responsive evidence. Anderson only objected to the statement as "[i]rrelevant as to issue of reliance as does not state [sic] when the representation was made." The trial court overruled the objection, and Anderson does not challenge that ruling on appeal.
As we explain below, we conclude, given these undisputed facts, Anderson has not met its initial burden to show Mustafa cannot demonstrate the element of actual reliance. Mustafa does not seek to avoid his obligation to prove actual reliance; he maintains he can prove that element by showing he based his decision to proceed in part by Anderson's false and misleading conclusion as to the property's value, which he received indirectly from Crane, and Anderson foresaw or contemplated Crane's transmittal of that information to him. We agree. Mirkin, supra, 5 Cal.4th 1082 recognized and upheld the validity of the principle of actual reliance through indirect communication, a principle from the Restatement Second of Torts, section 533: " 'The maker of a fraudulent misrepresentation is subject to liability for pecuniary loss to another who acts in justifiable reliance upon it if the misrepresentation, although not made directly to the other, is made to a third person and the maker intends or has reason to expect that its terms will be repeated or its substance communicated to the other, and that it will influence his conduct in the transaction or type of transactions involved.' " (Mirkin, at p. 1095.) In reviewing an order sustaining a demurrer, Mirkin held the indirect communication principle did not assist the plaintiff class of company stock purchasers in that case, who conceded they "cannot allege that they actually read or heard the alleged misrepresentations" about the company's prospects and financial status, and thus could not show they justifiably relied upon them. (Id. at pp. 1089, 1096, italics added; see also Small v. Fritz Companies, Inc., supra, 30 Cal.4th at p. 180 [distinguishing Mirkin on grounds plaintiffs there never heard the misrepresentation].)
Contrary to Anderson's argument, Mirkin acknowledged with approval cases relying on the Restatement's indirect communication rule to establish actual reliance in circumstances other than securities or class litigation: Varwig v. Anderson-Behel Porsche/Audi, Inc. (1977) 74 Cal.App.3d 578, involving an automobile purchase, and Barnhouse v. City of Pinole (1982) 133 Cal.App.3d 171, a property sales transaction. In both cases, the defendants (a car dealer in Varwig and a property developer in Barnhouse)had reason to expect or foresee there would be subsequent purchasers and that the original buyers of the products would repeat their fraudulent misrepresentations or nondisclosures to those purchasers. (Mirkin, supra, 5 Cal.4th at pp. 1096-1097.) Varwig is particularly apposite. There, the defendant car seller argued it made its alleged fraudulent representation not to the ultimate buyer (Varwig), but to the intermediary auto seller, and that as a result its representation as to title was not actionable by the plaintiff. (Varwig, 74 Cal.App.3d at p. 581.) The Court of Appeal rejected the argument, noting the contract for the sale of the car between defendant and the auto seller contained a certification that the car would be resold or "wholesaled," putting the defendant on notice of a subsequent purchaser. (Ibid.) The court held that under these facts and section 533 of the Restatement Second of Torts, the defendant's representation to the auto seller was in law an indirect misrepresentation to the plaintiff, who purchased the car in reliance upon the auto seller's repetition of the representation. (Ibid; see also Gawara v. U.S. Brass Corp. (1998) 63 Cal.App.4th 1341, 1351, 1355; Geernaert v. Mitchell (1995) 31 Cal.App.4th 601, 605.) Varwig explained further, relying on comment g to the Restatement, "It is not necessary that the maker of the representation 'have any particular person in mind. It is enough that he intends or has reason to expect to have it repeated to a particular class of persons and that the person relying upon it is one of that class.' " (Varwig, 74 Cal.App.3d at p. 581, quoting Rest.2d Torts, § 533, com. g.)
Further, in Boeken v. Philip Morris Inc., supra, 127 Cal.App.4th 1640 and Bullock v. Philip Morris USA, Inc. (2008) 159 Cal.App.4th 655, the Courts of Appeal, relying on Mirkin and the foregoing section of the Restatement, rejected contentions by defendant Philip Morris that plaintiff smokers (in a non-class action setting) were required to prove that its false and misleading representations were made directly to them and that such proof must include the exact words of the false or misleading representation upon which the plaintiffs' relied. (Boeken, at p. 1660; Bullock, at pp. 675-676 [actual reliance is established if the defendant made a misrepresentation to a third party, the defendant intended or had reason to expect that the substance of the communication would be repeated to the plaintiff and would induce the plaintiff's reliance, and the plaintiff was misled when the substance of the communication was repeated to the plaintiff].)
Unlike Mirkin, and like Varwig, Barnhouse, and the above-referenced Philip Morris cases, the undisputed evidence and inferences drawn in Mustafa's favor show Mustafa received Anderson's false and inflated appraised value through Crane and relied upon it in proceeding with the sale. And Anderson's appraisal report was specific as to the transaction, the parties, and who might receive the report: it identifies the property by address, the "borrower" as Mustafa, and the seller as Crane. The report contains an "Appraiser's Certification" section stating in part: "The lender/client may disclose or distribute this appraisal report to: the borrower; another lender at the request of the borrower; the mortgagee or its successors and assigns; . . . without having to obtain the appraiser's . . . consent." These circumstances, combined with Eshelman's declaration that an appraiser would be aware that a seller, buyer and lender would rely on the valuation in closing a real property purchase, permit a reasonable trier of fact to conclude it was foreseeable to Anderson and its appraiser, McDaniel – they had ample reason to expect – that Crane would transmit the false and misleading information about the property's appraised value to Mustafa. Given the foregoing evidence, summary judgment of Mustafa's causes of action for negligent and intentional misrepresentation was not warranted on grounds Mustafa lacked evidence of actual reliance.
Soderberg, supra, 44 Cal.App.4th 1760 does not assist Anderson, but rather compels our conclusion in Mustafa's favor under these undisputed facts. Anderson claims that Soderberg held a plaintiff may state claims for negligent and intentional misrepresentation against a real estate appraiser only if the plaintiff read and relied upon the report before consummating the real estate transaction. It maintains the Soderberg court did not adopt Mirkin'sindirect communication rule in the context of a real estate appraisal. Anderson's characterization of Soderberg's holding and conclusions is incorrect.
In Soderberg, a mortgage broker, (Home Loans), contacted the plaintiff trustee, Soderberg, about investing into a second deed of trust on certain property. The plaintiff was told the amount due on the first trust deed and that the property had an appraised value of $670,000; he then verbally committed to invest certain money pending receipt of the appraisal report and other documents, confirmed the defendant appraiser's valuation after receiving the appraisal report, and sent a check to Home Loans. (Soderberg, supra, 44 Cal.App.4th at p. 1763.) When the borrowers defaulted, plaintiff learned for the first time that the true value of the property was much less. (Id. at pp. 1763-1764.) It was apparently undisputed that the plaintiff would not have invested in the loan had he known of the property's true value. (Id. at p. 1764.) He sued the defendant appraiser (and Home Loans) for negligent misrepresentation and breach of contract (among other causes of action) and the trial court granted summary adjudication of those claims in the defendant's favor based on its argument it owed no duty to Soderberg. (Ibid.)
At issue on appeal was the essential element of duty, not reliance. The plaintiff argued the defendant owed him a duty under Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370 (Bily) for purposes of his negligent misrepresentation cause of action, because the defendant knew that Home Loans would give potential third party investors a copy of the appraisal report. (Soderberg, supra, 44 Cal.App.4th at p. 1767.) Bily held that an auditor's liability for general negligence in the conduct of an audit of its client's financial statements is confined to the client who contracts for or engages the audit services. (Bily, supra, 3 Cal.4th at p. 406; Soderberg, at p. 1766.) However, Bily went on to hold that a limited class of third parties could bring a negligent misrepresentation cause of action: "[A] further narrow class of persons who, although not clients, may reasonably come to receive and rely on an audit report and whose existence constitutes a risk of audit reporting that may fairly be imposed on the auditor. Such persons are specifically intended beneficiaries of the audit report who are known to the auditor and for whose benefit it renders the audit report. While such persons may not recover on a general negligence theory, we hold they may . . . recover on a theory of negligent misrepresentation." (Bily, at pp. 406-407; Soderberg, at p. 1766.) The Soderberg court applied Bily's holding to real estate appraisers (Soderberg, at p. 1768), and emphasized it was not necessary that the maker know the potential investor by name or specific identity; it was enough that the appraiser " 'knows with substantial certainty that plaintiff, or the particular class of persons to which plaintiff belongs, will rely on the representation in the course of the transaction.' " (Ibid., quoting Bily, 3 Cal.4th at p. 414.) Further, it was enough that the maker of the representation " 'supplies the information for repetition to a certain group or class of persons and that the plaintiff proves to be one of them, even though the maker never had heard of him by name when the information was given.' " (Soderberg, at p. 1769, quoting Rest.2d Tort, § 552, com. h, pp. 132-133.)
As Anderson notes, Bily relied on section 552 of the Restatement Second of Torts, "Information Negligently Supplied for the Guidance of Others." In general, "one who negligently supplies false information 'for the guidance of others in their business transactions' is liable for economic loss suffered by the recipients in justifiable reliance on the information." (Bily, supra, 3 Cal.4th at p. 392, quoting Rest.2d Torts, § 552, subd. (1), pp. 126-127.)
Soderberg held these principles compelled reversal of the summary adjudication of the negligent misrepresentation claim. Plaintiff there presented evidence that the defendant had done 200 appraisals for Home Loans, Home Loans always sent a copy of his reports to potential investors, and on occasion Home Loans had contacted the defendant with investor inquiries about his reports. (Soderberg, at p. 1771.) He presented expert testimony that an appraiser who provides reports to a mortgage company knows someone other than the broker is really the one taking the risk and relying on that report, and that a potential investor in always involved. (Ibid.) Accordingly, Soderberg held the defendant did not establish as a matter of law he believed the appraisal would be used solely by Home Loans; "viewing the evidence most favorably to plaintiffs, [the defendant] knew that a particular group or class of persons to which plaintiffs belonged – potential investors contacted by Home Loans – would rely on his report in the course of a specific type of transaction he contemplated – investing in a deed of trust secured by the appraised property." (Ibid.) Soderberg did not discuss Mirkin or the element of reliance because in that case it was undisputed that before investing in the property, the plaintiff was told its appraised value and also received the appraisal. (Soderberg, supra, 44 Cal.App.4th at p. 1763.) The outcome of the court's decision thus did not turn on the question of whether indirect communication was sufficient to prove actual reliance because those facts were not presented. An opinion is not authority for a point not raised, considered, or resolved. (Styne v. Stevens (2001) 26 Cal.4th 42, 58-59; Chevron U.S.A., Inc. v. Workers' Comp. Appeals Bd. (1999) 19 Cal.4th 1182, 1195.) Even were we to apply Soderberg's duty analysis, we would reach the same conclusion as to summary judgment based on the evidence indicating Anderson knew about Mustafa's involvement as the buyer of specific property, and Mustafa's expert testimony explaining Anderson would assume the buyer would rely on its report.
IV. Negligence Cause of Action
Mustafa contends the court erred in granting summary judgment on his negligence cause of action; that the court should have granted him leave to amend that cause of action to allege a "third party beneficiary" theory of negligence as it did with his breach of contract cause of action. Mustafa maintains the fact he was identified in the appraisal report, and evidence that Anderson was aware he could and most likely would receive the report, supports a third party beneficiary negligence cause of action.
Mustafa's argument is based on footnote 16 in Bily, supra, 3 Cal.4th at p. 406, in which the court noted that "[i]n theory, there is an additional class of persons who may be the practical and legal equivalent of 'clients.' It is possible the audit engagement contract might expressly identify a particular third party or parties so as to make them express third party beneficiaries of the contract. Third party beneficiaries may under appropriate circumstances possess the rights of parties to the contract." (Ibid., citing Martinez v. Socoma Companies, Inc. (1974) 11 Cal.3d 394, 400-403, Outdoor Services, Inc. v. Pabagold, Inc. (1986) 185 Cal.App.3d 676, 681-684, & Civ. Code, § 1559.) This footnote was addressed by the court in Mariani v. Price Waterhouse (1999) 70 Cal.App.4th 685, in the context of a demurrer. The court pointed out that there was no allegation in the pleadings that Mariani, either as an individual or as a general partner, had engaged the services of the respondent, Price Waterhouse. (Id. at p. 696.) Scrutinizing the letters and other evidence cited by the plaintiff, the court found there was no reasonable possibility plaintiffs could amend their complaint to allege Mariani was Price Waterhouse's "client" or "client equivalent" within the meaning of Bily, supra, 3 Cal.4th 370. (Mariani, at p. 697.)
Civil Code section 1559 states: "A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it."
As Mustafa acknowledges by his request to amend, like the plaintiff in Mariani he did not allege such a third party beneficiary theory in his first amended complaint. The flaw in his argument on appeal is that he did not seek leave to amend in the trial court to assert such a third party beneficiary theory for his negligence cause of action. He merely argued he had raised a triable issue of material fact under Bily's footnote 16. For that reason, he is precluded from seeking leave to amend that cause of action for the first time on appeal. (Distefano v. Forester (2001) 85 Cal.App.4th 1249, 1264-1265; see Burkle v. Burkle (2006) 141 Cal.App.4th 1029, 1042, fn. 9.)
V. Intentional Infliction of Emotional Distress Cause of Action
In moving for summary judgment, Anderson argued the sole evidence of its involvement in the action was its issuance of an appraisal report, which could not as a matter of law constitute outrageous conduct of the sort to sustain a claim of intentional infliction of emotional distress even assuming the appraisal was erroneous. The trial court agreed, ruling Mustafa did not present evidence demonstrating that Anderson's actions rose to the level of outrageous conduct.
A claim for intentional infliction of emotional distress requires evidence of, inter alia, outrageous conduct by the defendant with the intention of causing or reckless disregard of the probability of causing severe emotional distress. (Agarwal v. Johnson (1979) 25 Cal.3d 932, 946, disapproved on other grounds in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 574, fn. 4.) " 'Conduct to be outrageous must be so extreme as to exceed all bounds of that usually tolerated in a civilized community.' " (Christensen v. Superior Court (1991) 54 Cal.3d 868, 903; see also Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 499, fn. 5 ["so extreme and outrageous 'as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community' "]; Trerice v. Blue Cross of California (1989) 209 Cal.App.3d 878, 883 ["exceed all bounds of that usually tolerated in a civilized society"].) While the outrageousness of a defendant's conduct normally presents an issue of fact, the question of whether conduct merits this characterization can be determined as a matter of law. (Trerice v. Blue Cross of California, at p. 883; see also Wilkins v. National Broadcasting Co., Inc. (1999) 71 Cal.App.4th 1066, 1087; Cochran v. Cochran (1998) 65 Cal.App.4th 488, 497-498.)
On this record, even viewed in the light most favorable to Mustafa, the evidence shows Anderson (1) misinformed him of the true market value of the property and (2) did not comply with the standard of care of real estate appraisers or the USPAP standards. Mustafa characterizes Anderson's conduct as knowingly and intentionally falsifying an appraisal report to create an inflated value with knowledge it would be used in a real property transaction, and in reckless disregard of the probability of causing Mustafa, the buyer, severe emotional distress. Even assuming we adopt that characterization of Anderson's conduct, we cannot say it is so severe, atrocious, or oppressive as to qualify as outrageous. The trial court properly granted summary judgment as to the cause of action for intentional infliction of emotional distress.
VI. Conspiracy
Mustafa contends, based on his previous arguments, that he raised triable issues of material fact to support his cause of action for conspiracy. He refers to evidence assertedly showing Anderson and Crane were "engaged in a conspiracy," namely, that they had done business together previously, the "unprofessional and illegal" nature of the December 2005 appraisal, and inflated appraised value. In moving for summary judgment, Anderson presented McDaniel's testimony that Anderson had no further involvement in the transaction other than completing an appraisal for Oak Hill; that Anderson "had no substantive communication with any other Defendant in this action regarding the appraisal or Subject Property" and "[a]t no time did Anderson conspire with anyone regarding the valuation of the Subject Property rendered in the Appraisal." Mustafa responded by asserting there was evidence Crane and Anderson had done prior appraisals on the property in May 2004 and September 2005. In its reply separate statement Anderson purported to dispute that evidence, but cited no evidence to contradict it.
" 'A civil conspiracy however atrocious, does not per se give rise to a cause of action unless a civil wrong has been committed resulting in damage.' " (Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39, 44; see also Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1062 [civil conspiracy does not give rise to a cause of action unless an independent civil wrong has been committed]; Everest Investors 8 v. Whitehall Real Estate Limited Partnership XI (2002) 100 Cal.App.4th 1102, 1106 [conspiracy must be activated by commission of an actual tort].) Indeed, "[c]onspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration." (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511.) The elements of civil conspiracy are the formation and operation of the conspiracy, a wrongful act done in the furtherance of the common design, and resulting damage to the plaintiff. (Rusheen v. Cohen, supra, 37 Cal.4th at p. 1062.)
Having concluded summary judgment was not warranted on Mustafa's causes of action for intentional and negligent misrepresentation, and accepting Mustafa's evidence of prior business dealings between Crane and Anderson respecting the particular property at issue, we hold summary judgment was likewise not appropriate on Mustafa's conspiracy cause of action.
DISPOSITION
The judgment is reversed and the trial court directed to enter an order denying summary adjudication of Mustafa's causes of action for intentional and negligent misrepresentation and conspiracy and granting summary adjudication of his causes of action for breach of fiduciary duty/negligence and intentional infliction of emotional distress. Mustafa shall recover his costs on appeal.
WE CONCUR: BENKE, Acting P. J., NARES, J.