Soderberg

In Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370 [ 11 Cal.Rptr.2d 51 , 834 P.2d 745 ], the Supreme Court held that an auditor may be liable to a third party—someone other than a client—who relies on an audit report containing negligent misrepresentations, provided the auditor intended that the third party use the report. In this case, we address whether such liability extends to a real estate appraiser who, although retained by a mortgage broker, knows that his report will be used by potential investors in the brokered loan. We hold that it does.

Background

For several years, Alan Soderberg, in his capacity as the trustee for A.D.S. Planning, Inc., Profit Sharing Plan Trust (the Trust), has invested pension money in loans secured by first and second deeds of trust. The Trust employs certain criteria in deciding whether to purchase a particular trust deed. The main factor is loan-to-value ratio, i.e., the difference between the total outstanding loans and the appraised value of the property. If a loan under consideration (together with any existing loans) exceeds 70 percent of the property’s value, the Trust will not make the investment. The value of the property is…