Vogan v. Hayes Appraisal Associates, Inc.

588 N.W.2d 420 (1999)

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Nature of the Case

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Facts

Vogan (P) wanted to build a home and got a construction loan from Mid America. Mid America, in turn, hired Hayes (D) to monitor the progress of the new home for P. P obtained a $170,000 mortgage based on a construction price of about that amount and a finished appraisal of $250,000. Mid America was to disburse progress payments to the contractor based on progress reports from D. The lot was purchased with P’s own money, and D issued a progress report in December 1989 that 25% of the home had been completed. By February 1990 there was less than $2,000 remaining of the $170,000 mortgage and the contractor had determined that it would take another $70,000 to complete the job. P took out a second mortgage for $42,050 and turned that money plus some more of their own over the Mid America to continue to make progress payments to the contractor based on D’s reports. Eventually, by October, the contractor defaulted. Based on D’s reports the home was 60% completed on March 20, 1990, and then in just eight days later it was 90% completed. As late as October 1990, substantial work remained to be completed. At trial, another contractor estimated it would take another $60,000 to complete. P stopped making mortgage payments, and Mid America sued to foreclose. P counterclaimed alleging that the bank had improperly authorized payment of the funds and did not follow its own loan procedures to retain 30% of the funds until completion. P and Mid America settled out of court for an undisclosed sum. P then filed its petition against D for negligence. D filed a motion for summary judgment stating that even if there was negligence, it could not be the proximate cause of the harm to P because Mid-American had already released most of the loan funds by the March 1990 progress report. The court denied that motion. The case went to trial on a contract theory. P got the verdict. D moved for judgment notwithstanding the verdict, and it was denied. D appealed. D contends that the evidence was insufficient to prove P were third party beneficiaries or that its conduct proximately caused any damages to P. The court of appeals reversed. This appeal resulted.