Lilley v. JP Morgan Chase and Ingram

1. The Honorable Russell W. Bench, Senior Judge, sat by special
assignment as authorized by law. See generally Utah Code Jud.
Admin. R. 11-201(6).
2013 UT App 285
_________________________________________________________
THE UTAH COURT OF APPEALS
KEITH LILLEY AND SHARON LILLEY,
Plaintiffs and Appellants,
v.
JP MORGAN CHASE AND BLAKE INGRAM,
Defendants and Appellee.
Memorandum Decision
No. 20120625-CA
Filed November 29, 2013
Third District Court, Silver Summit Department
The Honorable Todd M. Shaughnessy
No. 110500211
Matt G. Wadsworth, Brian E. Arnold, and
Kara M. Nally, Attorneys for Appellants
Ford G. Scalley and Jonathan H. Rupp, Attorneys
for Appellee
JUDGE MICHELE M. CHRISTIANSEN authored this Memorandum
Decision, in which JUDGE CAROLYN B. MCHUGH and SENIOR
JUDGE RUSSELL W. BENCH concurred.1
CHRISTIANSEN, Judge:
¶1 Keith and Sharon Lilley (Plaintiffs) appeal from the district
court’s order dismissing their breach of contract and negligence
causes of action against Defendant Blake Ingram. We affirm.

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¶2 “When reviewing a 12(b)(6) motion [to dismiss], we recite
the facts in a light most favorable to the non-moving party . . . .”
Wagner v. State, 2005 UT 54, ¶ 2, 122 P.3d 599. In 2003, Plaintiffs
purchased undeveloped land on which to build a home in Park
City, Utah. On December 16, 2005, Plaintiffs signed mortgage
documents with JP Morgan Chase Bank, NA (Lender) for
construction-to-permanent financing for a single unit, owner-
occupied family home. Prior to approving Plaintiffs’ loan and in
contemplation of funding the loan, Lender ordered an appraisal
from Ingram, a real estate appraiser, who completed the appraisal
in October 2005.
¶3 After construction of the home was completed, Plaintiffs
defaulted on their loan. In an amended complaint filed on July 5,
2011, Plaintiffs alleged that Ingram breached his contract and was
negligent in preparing an inflated appraisal of Plaintiffs’ home.
Plaintiffs claimed that they relied on Ingram’s appraisal when they
entered into their loan agreement with Lender and that the
negligently inflated appraisal caused them to borrow too much for
the construction of their residence. Ingram filed a motion to dismiss
under rule 12(b)(6) of the Utah Rules of Civil Procedure, arguing
that Plaintiffs’ complaint failed to state a claim upon which relief
could be granted. The district court dismissed Plaintiffs’ breach of
contract claim, concluding that Plaintiffs were not third-party
beneficiaries to any contract between Lender and Ingram. The court
also ruled that Plaintiffs’ negligence claim against Ingram was
barred by the general four-year statute of limitations. See Utah
Code Ann. § 78B-2-307(1)(a) (LexisNexis 2012). Plaintiffs appeal.
¶4 Plaintiffs challenge the district court’s rejection of their third-
party beneficiary claim and the court’s application of the four-year
statute of limitations to their negligence claim. “The grant of a
motion to dismiss pursuant to rule 12(b)(6) is a question of law that
we review for correctness, affording the [district] court’s decision
no deference.” Williams v. Bench, 2008 UT App 306, ¶ 6, 193 P.3d
640. In determining whether the district court properly granted
Ingram’s motion to dismiss, “we must accept the factual allegations
in the complaint as true and consider all reasonable inferences to

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20120625-CA 3 2013 UT App 285
be drawn from those facts in a light most favorable to [Plaintiffs].”
See Ho v. Jim’s Enters., Inc., 2001 UT 63, ¶ 6, 29 P.3d 633 (citation and
internal quotation marks omitted).
I. Third-Party Beneficiary Claim
¶5 Plaintiffs first challenge the district court’s dismissal of their
breach of contract claim. Because only Lender and Ingram are
direct parties to the appraisal contract, Plaintiffs must establish that
they are third-party beneficiaries of that contract in order to pursue
an alleged breach. “The existence of third party beneficiary status
is determined by examining a written contract.” Wagner v. Clifton,
2002 UT 109, ¶ 11, 62 P.3d 440 (citation and internal quotation
marks omitted). “The written contract must show that the
contracting parties clearly intended to confer a separate and
distinct benefit upon the third party.” Id. (citation and internal
quotation marks omitted). Indeed, “[i]t is not enough that the
parties to the contract know, expect or even intend that others will
benefit from the [contract] . . . . The contract must be undertaken
for the plaintiff’s direct benefit and the contract itself must
affirmatively make this intention clear.” SME Indus., Inc. v.
Thompson, Ventulett, Stainback & Assocs., Inc., 2001 UT 54, ¶ 47, 28
P.3d 669 (alterations in original) (citation and internal quotation
marks omitted). And “only if the written contract’s clear intent is
to confer rights upon a third party may that third party enforce
rights and obligations of the contract.” Wagner, 2002 UT 109, ¶ 13.
Finally, “[a] third party who benefits only incidentally from the
performance of a contract has no right to recover under that
contract.” American Towers Owners Ass’n, Inc. v. CCI Mech., Inc., 930
P.2d 1182, 1188 (Utah 1996) (citation and internal quotation marks
omitted), abrogated on other grounds by Davencourt at Pilgrims
Landing Homeowners Ass'n v. Davencourt at Pilgrims Landing, LC,
2009 UT 65, ¶ 55, 221 P.3d 234.
¶6 The only written document in the record on appeal that
might evidence a written contract between Lender and
Ingram—and thus demonstrate their intent to benefit Plaintiffs—is

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20120625-CA 4 2013 UT App 285
the appraisal report drafted by Ingram. The appraisal report states
the following as its intended use:
The intended use of this appraisal report is to assist
the lender in evaluating the subject property for
lending purposes. This report has been prepared for
[Lender], who is the client. This report is intended for
use only by the aforementioned client and is not intended
for use by any other party for any other purpose.
Information regarding this appraisal will be released
only to the client regardless of who has paid or will
pay for this report.
(Emphasis added.) In another section, the report also states, “This
report is intended for use[] only by [Lender] for loan purposes only
and is not intended for use by any other party or for any other purpose,”
and, “The purpose of this appraisal is to estimate market value . . . .
The function of this report is to assist the above-named lender in
evaluating the subject property for mortgage lending purposes.”
(Emphasis added.)
¶7 Plaintiffs argue that the “only reason Mr. Ingram performed
an appraisal was for [Plaintiffs’] financial lending decision.”
(Emphasis omitted.) However, the plain language of the appraisal
report indicates that the function and purpose of the report was to
assist Lender in “evaluating the subject property for mortgage
lending purposes.” Plaintiffs have failed to identify any provision
in the appraisal report suggesting that the appraisal was for their
benefit. Instead, the written language of the appraisal report
expressly states the opposite—that the report was not to be used by
“any other party or for any other purpose.” (Emphasis added.)
Therefore, the plain language of the appraisal report does not
demonstrate a “clear intent . . . to confer rights” upon Plaintiffs
such that they may “enforce rights and obligations of the contract.”
See Wagner, 2002 UT 109, ¶ 13. Indeed, the plain language of the
report expressly rejects such an intent.

Lilley v. JP Morgan Chase
20120625-CA 5 2013 UT App 285
¶8 Plaintiffs direct our attention to material outside the four
corners of the appraisal report and the record in arguing that they
are the intended third-party beneficiaries of the appraisal. For
example, they point to the appraisal order form submitted by
Lender to Ingram. Plaintiffs assert that every such order form
“contains certain provisions stating that [the appraisal] had to be
done in conformance with Uniform Standards of Professional
Appraisal Practice (‘USPAP’) and FANNIE MAE/FREDDIE MAC
guidelines.” Plaintiffs also claim that the Equal Credit Opportunity
Act, along with the order form and “other contemporaneous facts”
impute Ingram “with the knowledge that [Plaintiffs] are relying
and using [Ingram’s] appraisal in making their financial lending
decision.”
¶9 As an initial matter, no copy of the order form is included in
the record for our review. Moreover, even accepting as true
Plaintiffs’ allegation that the order form and relevant regulations
impute to Ingram the knowledge that Plaintiffs claim it does, we
note that “[i]t is not enough that the parties to the contract know,
expect or even intend that others will benefit from the [contract].”
SME Indus., 2001 UT 54, ¶ 47 (alterations in original) (citation and
internal quotation marks omitted). Any knowledge on Ingram’s
part that Plaintiffs would subsequently use the appraisal report is
insufficient to create third-party beneficiary status in Plaintiffs
because the appraisal report was not “undertaken for [Plaintiffs’]
direct benefit,” nor did the appraisal report itself “affirmatively
make this intention clear.” Id. (citation and internal quotation
marks omitted). Accordingly, we conclude that the district court
correctly dismissed Plaintiffs’ breach of contract claim as a matter
of law because Plaintiffs are not third-party beneficiaries of the
appraisal report.
II. Plaintiffs’ Negligence Claim
¶10 The district court also determined that Plaintiffs’ negligence
claim was barred by the four-year statute of limitations. Utah Code
section 78B-2-307(1)(a) provides that an “action may be brought
within four years . . . after the last charge is made or the last

Lilley v. JP Morgan Chase
20120625-CA 6 2013 UT App 285
payment is received . . . upon a contract, obligation, or liability not
founded upon an instrument in writing.” Utah Code Ann.
§ 78B-2-307(1)(a) (LexisNexis 2012) (emphasis added). The final
phrase of section 78B-2-307(1)(a) is a catch-all provision that
includes negligence actions. See, e.g., Ellis v. Estate of Ellis, 2007 UT
77, ¶ 30, 169 P.3d 441 (“Ellis was required to file her negligence
claim within four years pursuant to the general statute of
limitations.”); DOIT, Inc. v. Touche, Ross, & Co., 926 P.2d 835, 843
(Utah 1996) (stating that negligence claims are governed by the
catch-all four-year statute of limitations); Ladd v. Bowers Trucking,
Inc., 2011 UT App 355, ¶ 4 n.1, 264 P.3d 752 (“A four-year statute
of limitations applies to negligence actions . . . .”).
¶11 A third party may bring a tort action against an appraiser
for negligent preparation of an appraisal report, regardless of third-
party beneficiary status. In West v. Inter-Financial, Inc., 2006 UT App
222, 139 P.3d 1059, this court held that “[r]eal estate appraisers
have an independent duty of care to persons with whom they have
no contractual relationship when performing an appraisal.” Id.
¶ 22. However, such a negligence action must be filed within the
four-year statute of limitations period. See Ladd, 2011 UT App 355,
¶ 4 n.1. Because Plaintiffs obtained financing from Lender in
reliance on the appraisal report on December 16, 2005, any alleged
injury resulting from that report must have occurred on that date.
See Clark v. Deloitte & Touche LLP, 2001 UT 90, ¶ 22, 34 P.3d 209.
Thus, the four-year limitations period had began to run as of
December 16, 2005, and Plaintiffs’ negligence action must have
been filed as of December 16, 2009. Plaintiffs filed their first
complaint on March 11, 2011. Accordingly, the district court
correctly determined that any negligence claim brought by
Plaintiffs was clearly barred by the four-year statute of limitations
imposed by section 78B-2-307(1)(a).
III. Liability Stemming from “Written Instruments”
¶12 Alternatively, Plaintiffs argue that the four-year statute of
limitations does not bar their claims because Ingram’s liability
arose from “written instruments,” as opposed to an independent

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tort duty. Under this theory, they argue that the six-year statute of
limitations set forth in Utah Code section 78B-2-309(2) applies
because that statute allows for causes of action to be brought within
six years “upon any contract, obligation, or liability founded upon an
instrument in writing.” Utah Code Ann. § 78B-2-309(2)
(LexisNexis 2012) (emphasis added).
¶13 However, the language of the relevant written documents
is not sufficiently connected with Plaintiffs’ cause of action for the
six-year statute of limitations to apply in this instance. Our
supreme court has observed that Bracklein v. Realty Insurance Co.
sets forth “the test for determining whether the six-year [statute of
limitations] applies to a particular case.” Brigham Young University
v. Paulsen Construction Co., 744 P.2d 1370, 1372 (Utah 1987). Under
Bracklein, “if the fact of liability arises or is assumed or imposed
from the instrument itself, or its recitals, the liability is founded
upon an instrument in writing.” Bracklein v. Realty Insurance Co., 80
P.2d 471 (Utah 1938); see also Paulsen, 744 P.2d at 1372. The liability
must “grow[] out of written instruments, not remotely or
ultimately, but immediately.” Bracklein, 80 P.2d at 476 (emphasis,
citation, and internal quotation marks omitted). The Bracklein court
further explained,
If the instrument acknowledges or states a fact from
which the law implies an obligation to pay, such
obligation is founded upon a written instrument
within the statute. If the writing upon its face shows
a liability to pay, such liability is on a written
instrument within the statute of limitations.
Id.
¶14 Again, the only document available for our review is
Ingram’s appraisal report. Nothing in this report suggests, either
implicitly or on its face, that “liability arises or is assumed or
imposed” upon Ingram with respect to Plaintiffs. For example, it
does not include any terms that would impose upon Ingram an
“obligation to pay” or confer any specific benefit on Plaintiffs. Nor

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does the report provide for any remedies to Plaintiffs in the event
of a breach by Ingram. Other than citing the general duties and
imputed knowledge ascribed to real estate appraisers as outlined
in USPAP and the Fannie Mae/Freddie Mac guidelines—and that
might have been part of the order form—Plaintiffs are unable to
identify any language in the appraisal report that “immediately”
imposes liability on Ingram with respect to Plaintiffs. See id.
Furthermore, it is unlikely that Ingram’s liability, if it exists at all,
would even stem “remotely or ultimately” from the appraisal
report. See id.
¶15 By contrast, in Paulsen, the supreme court determined that
liability did flow from written instruments because the plaintiffs in
that case were able to show that the defendants had “supervisory
responsibilities as general contractors as defined under their
individual agreements.” Paulsen, 744 P.2d at 1372. It was only the
“alleged breach of [the defendants’] contractual duties [that gave
the plaintiff] any basis for asserting that they [were] liable.” Id. In
other words, the written instruments in Paulsen were sufficient to
impose liability because they immediately established the
defendants’ responsibilities and corresponding liabilities with
respect to the plaintiffs. Such is not the case here, and we therefore
conclude that the appraisal report does not sufficiently impose
liability on Ingram with respect to Plaintiffs. Thus, Plaintiffs have
no cognizable claim that would fall within the six-year statute of
limitations.
¶16 Accordingly, we conclude that the district court correctly
dismissed all of Plaintiffs’ claims against Ingram. Affirmed.