BROOKLYN, N.Y. A state court yesterday dismissed part of a civil suit brought by Polish & Slavic FCU claiming its real estate appraiser provided overvalued appraisals on two troubled, multi-million dollar properties in the high-priced Hamptons Long Island beach community, but will continue the suit on other counts.
The civil claims against Ronald Saar and his company, R.J. Saar Associates Inc., are for appraisals on the two properties bought by the same Polish & Slavic member, for a home appraised at $2 million in East Hampton, and another for $2.3 million in nearby Amagansett, N.Y. The member defaulted on the loans and the credit union has since foreclosed on both properties.
Polish & Slavic alleges that Saar deviated from the Uniform Standards of Professional Appraisers (USPA) by using properties located in a different neighborhood for comparable sales and applying excessive adjustments to those comparable sales, resulting in estimated market values substantially higher than the properties’ actual value.
The Brooklyn credit union alleges that the actual value of the East Hampton property as of May 21, 2007 did not exceed $1.4 million; and the actual value of the Amagansett property did not exceed $1.95 million.
Polish & Slavic asserts claims for negligence, negligent misrepresentation, fraudulent misrepresentation, constructive fraud, violation of General Business Law and breach of contract. In each of the claims, the credit union alleges that the malfeasance of Saar in producing the appraisal caused Polish & Slavic to approve the loans and realize losses “well in excess of $100,000.”
The appraiser argues the suit should be dismissed as premature since the credit union has not yet sustained any monetary loss, and that the claims of fraudulent misrepresentation, constructive fraud and negligent misrepresentation should be dismissed since appraisals are matters of opinion and not fact.
The court denied the claim that the suit is premature. “While the amount recovered by [the credit union] at the foreclosure sales of the properties may have a bearing on the ultimate measure of damages, since plaintiff is presently asserting actual loss as the result of its reliance on the allegedly inflated appraisals, the instant action is not premature,” said the New York Supreme Court for Kings County.
The court also rejected the appraiser’s argument that the charges of fraudulent misrepresentation, constructive fraud and negligent misrepresentation are without merit, ruling “an assessment of market value that is based upon misrepresentations concerning existing facts may support a cause of action for fraud.”
Polish & Slavic’s allegations that Saar misrepresented that the comparable sales grid comprised of properties located in the same neighborhood as the East Hampton property, when in fact it included properties located in the Village of East Hampton, where home values are significantly higher, may be considered a factual representation rather than a mere matter of opinion, according to the decision.
As a result, the court refused to grant Saar’s motion to dismiss the charges of fraudulent misrepresentation, constructive fraud and negligent misrepresentation and will continue the suit.
