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Illinois App. Court (1st Dist) Rejects Appraiser’s Claim Against Lender for De-Listing Him and Notifying AMCs

appraisalThe Court of Appeals of the State of Illinois, First District, recently affirmed a summary judgment ruling in favor of a mortgage lender on an appraiser’s claims of intentional interference with a business relationship arising from the lender barring the appraiser from working on its loans and notifying various appraisal management companies of this decision.

In so ruling, the First District held that there was no evidence that the lender intended to interfere with the appraiser’s relationships with other lenders, and no evidence that lender acted with an improper purpose.

A copy of the opinion in Masella v. JPMorgan Chase Bank N.A. is available at:  Link to Opinion.

A real estate appraiser (“Appraiser”) brought suit against a financial institution (“Financial Institution”) for intentional interference with a business relationship, alleging that Financial Institution acted with malice when it (1) placed Appraiser on a list of individuals ineligible to do appraisals for Financial Institution and (2) provided the list to appraisal management companies (“AMCs”).

The suit arose out of an appraisal conducted by Appraiser which was given to Financial Institution as part of a transfer when Financial Institution purchased a loan.

After obtaining its own appraisal, Financial Institution found discrepancies in the appraisal report done by Appraiser and followed its established internal procedures in conducting a review. The review eventually led to Appraiser being placed on Financial Institution’s ineligible list, which was disseminated to AMCs used by Financial Institution.

Appraiser alleged that this caused AMCs to stop working with him and resulted in the destruction of his business. Financial institution moved for summary judgment which the trial court granted.

On appeal, Appraiser argued that the trial court erred in granting summary judgment because different inferences and conclusions could be drawn from the facts as to whether Financial Institution intended to interfere with Appraiser’s business relationships and whether Financial Institution acted with an improper purpose.

The elements of a claim for tortious interference with prospective business advantage include: “‘(1) plaintiff’s reasonable expectation of entering a valid business relationship; (2) the defendant’s knowledge of the plaintiff’s expectancy; (3) purposeful or intentional interference by the defendant that prevents the plaintiff’s legitimate expectancy from ripening into a valid business relationship; and (4) damages to the plaintiff resulting from such interference.’” Miller v. Lockport Realty Group, Inc., 377 Ill. App. 3d 369, 374 (2007) (quoting Soderlund Brothers, Inc. v. Carrier Corp., 278 Ill. App. 3d 606, 615 (1995)).

The trial court found that Appraiser had failed to establish the third element. “The element of ‘purposeful’ or ‘intentional’ interference refers to some impropriety committed by the defendant in interfering with the plaintiff’s expectancy of entering into a business relationship with an identifiable third party.” Atanus v. American Airlines, Inc., 403 Ill. App. 3d 549, 557 (2010) (citing Romanek v. Connelly, 324 Ill. App. 3d 393, 406 (2001); Dowd & Dowd Ltd. v. Gleason, 181 Ill. 2d 460, 485 (1998)).

A claim for intentional interference “must set forth facts which suggest that defendant acted with the purpose of injuring plaintiff’s expectancies.” J. Eck & Sons, Inc. v. Reuben H. Donnelley Corp., 2013 Ill. App. 3d 510, 515 (1991).

The First District agreed with the trial court that Financial Institution acted to protect the interest of itself and its clients, and the facts and inferences that could be reasonably drawn from those facts did not establish that Financial Institution acted improperly and with the intent to injure Appraiser’s relationships with third parties.

The Appellate Court noted that when the report’s possible deficiency came to light, Financial Institution followed its internal procedure for reviewing and investigating troublesome appraisals. This review uncovered several issues with the report, and Financial Institution later found that Appraiser’s valuation was not properly supported nor was it in line with recent sales of similar homes in the vicinity.

It was then that Financial Institution sent its letter to Appraiser asking him to respond to the issues. The Court found that Financial Institution offered Appraiser abundant time to obtain the permission of the original loan owner and respond to the letter prior to Financial Institution’s sending the report to the Value Provider Management Group (“VPM”) counsel.

The Appellate Court further noted that Financial Institution went so far as to contact Appraiser by phone when he failed to respond to the letter, and that the VPM counsel did not consider the report until four months after the initial letter was sent. After finding that the concerns were valid and placing Appraiser on the ineligible list, Appraiser failed to appeal the decision.

The First District found that Financial Institution followed its established procedures in reviewing the appraisal report made by Appraiser, sending the initial letter asking for clarification as to its concerns, and determining that Appraiser was ineligible.

The Appellate Court noted that Financial Institution did not deviate from those procedures or treat the report any differently in an attempt to tortiously interfere with Appraiser’s business relationships.

The First District also held that Financial Institution did not act improperly nor with an intent to interfere with Appraiser’s business relationships when it disseminated the ineligible list to AMCs, with which Financial Institution had contractual relationships.

Appraiser argued that he met the third element as Financial Institution knew that disseminating the list would result in AMCs not retaining him for other institutions which sought to sell their mortgages to Financial Institution. However, the Appellate Court agreed with the trial court that there was no evidence that Financial Institution desired to interfere with Appraiser’s business relationships and was only acting to protect its own commercial interests.

The Appellate Court further held that even if Financial Institution knew that AMCs would no longer retain Appraiser for other institutions, Appraiser was still required to show that Financial Institution acted improperly despite the incidental consequences. Id. The Appellate Court found there was no evidence to establish Financial Institution acted in an improper way.

Appraiser finally argued that divergent inferences could be drawn as to the motives of Financial Institution based on the circumstances surrounding its letter to the Illinois regulator (“IDFPR”) and because the mortgage was paid off at the time Appraiser was found ineligible and disseminated the list. However, the Appellate Court disagreed.

The First District reasoned that Financial Institution sent the letter to the IDFPR after completing its full review process which had uncovered several problems with Appraiser’s report.

Financial Institution stated in the letter that it was submitting same pursuant to the requirements of section 129E of the federal Truth in Lending Act, which requires lenders to make a report to the proper agency under such circumstances. The Court found the evidence showed that Financial Institution sent the letter based on its belief that it was required to under TILA.

In addition, the Appellate Court found that although Financial Institution’s interest in the subject mortgage ceased when the mortgage was paid, it had a continuing interest in protecting its mortgage business and obtaining valid appraisals.

Thus, the First District found, by not ignoring the issues it found in the report, Financial Institution was acting to protect its business interests.

In sum, the Appellate Court ruled that there was no evidence to support that Financial Institution acted with improper purpose of malice towards Appraiser, and that the trial court did not err in granting summary judgment.  Accordingly, it affirmed summary judgment in favor of Financial Institution.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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