IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

HOME LOAN CORPORATION,            )

D/B/A EXPANDED MORTGAGE          )

CREDIT,           )

                  )

      Plaintiff,        )

                                                                         )

Vs.               )

                  )

ROBERT L. BILLINGSLEA,             )

DWAIN D. THARPE, ALLEN       )

DESOUZA, MAJOR D. EVERETT           )       Civil Action File

NINA EVERETT, BRIAN GALE,       )

GREGORY A. HAEHNLEIN,        )      No. 1:03-CV-1425 CAP

SHANNON G. PARSONS,          )

JOHN J. MAURER, JACKIE O.         )

SMITH, JR., DHFJ, LLC, HLMJ        )

ENTERPRISES, SUMMERSTONE       )

ENTERPRISES, INC., FALCON            )

APPRAISALS, LLC, STEVENS            )

AND ASSOCIATES, LLC,        )

F/K/A STEVENS AND MCCLUNG,      )

LLC, CMDR FINANCIAL SERVICES      )

F/K/A CALEB & ASSOCIATES            )

MORTGAGE, INC., GAME        )

ENTERPRISES, LLC AND PARTIES      )

X, Y AND Z.       )

                  )

      Defendants.       )

_____________________________________)

FALCON DEFENDANTS BRIEF IN

SUPPORT OF THEIR MOTION FOR

SUMMARY JUDGMENT ON ALL STATE CLAIMS

COMES NOW, Falcon Appraisals, LLC, Gregory A.

Haehnlein, Shannon G. Parson, (hereinafter "Falcon Defendants") and

hereby file this Brief in Support of their/its Motion for Summary

Judgment pursuant to Fed.R.Civ.P. 56, on all State Law Claims filed

by Home Loan against them.

I.    Facts Relevant to This Motion

1.

Gregory A. Haehnlein, ("Haehnlein") and Shannon Parsons

("Parsons") formed Falcon Appraisals as an LLC.  The only members

of Falcon Appraisals were Haehnlein and Parsons.  Haehnlein Depo.

at 11.   Falcon Appraisals was created in 1999.   Haehnlein Depo. at

14.

2.

Haehnlein did appraisals, customer relations and bookwork for

Falcon Appraisals.  Haehnlein Depo. at 15.

3.

During the period of time Haehnlein appraised for Falcon

Appraisals, he held a Supervisor appraisal license in Georgia. 

Shannon Parsons was a Georgia Appraiser and Haehnlein was Parsons

Supervisor at Falcon Appraisals, LLC.  Haehnlein Depo. at 40.

4.

Haehnlein reviewed and signed off on Parsons' appraisals. 

Haehnlein Depo. at 42.

5.

The appraisal that Falcon Appraisers did for Caleb &

Associates concerning the 127 North Fourth Avenue Property,

Decatur, Georgia 30317 is attached to the Deposition at Plaintiff's

Exhibit 1; Haehnlein Depo. at 50.  The appraisal in question was done

specifically for Caleb & Associates.  Haehnlein Depo. at 55.

6.

      Haehnlein never met Allen Desouza.  Haehnlein Depo. at 16.

Haehnlein never met Cecil Level or Sandra Herrera.  Haehnlein Depo.

at 56.  Haehnlein met Major Everett once or twice.  Haehnlein Depo.

at 59.  Falcon Appraisals did "two or three, maybe four," appraisals

for Major Everett.  Haehnlein Depo. at 62.  Haehnlein does not know

of a company known as DHFJ.  Haehnlein Depo. at 63. 12.

Haehnlein does not know Dwain Tharpe.  13.  Haehnlein has never

heard of CMDR Financial Services, Summerstone Enterprises, Jackie

O. Smith, Brian Gale, HLMJ Enterprises, Nina Everett, Valerie

Everett, Stevens & Associates, Ronald Stevens, John Maurer, or

Game Enterprises, LLC.  Haehnlein Depo. at 137 - 139.  Haehnlein

Depo. at 87; 136.

7.

Haehlein never did an appraisal were he was not allowed inside

the property.  Haehnlein Depo. at 71.  The information for the North

Fourth Avenue property came off a database called Red Link. 

Haehnlein believes Red Link to be a reliable source of information. 

Haehnlein Depo. at  98 – 99; 110.

II.      Plaintiffs State Claims Against Falcon Defendants

In Home Loan's Amended Complaint, (filed after being once

dismissed by this Court) Home Loan pleads Seven (7) Counts against

approximately Sixteen (16) Defendants [perhaps the exact number is

unknown, since some LLCs are alter egos and Home Loan leaves the

door open as to defendants X, Y and Z.]  Amended Complaint.

It is important to note that Home Loan seeks recovery against

Falcon Defendants via only Four (4) Counts.  They are: Count I

Common Law Fraud and Conspiracy to Commit Common Law Fraud;

Count III, Negligent Misrepresentation (As Real Estate Appraisers);

Count VI Federal RICO and Count VII Attorneys Fees and Costs. 

Amended Complaint.

This Brief will show that recovery may not be had, as a matter

of law, under any State Law theory plead by Home Loan against these

appraiser defendants.  That is, Summary Judgment should be granted

as to Counts I, III, and VII.   Count VI, will be reviewed in a separate

Motion and Brief for Summary Judgment.

Falcon Defendants will show that Georgia case law, which

must be applied by this Court sitting in Supplemental Jurisdiction

(Pendent Jurisdiction), precludes recovery against these appraisers

under Count I, Common Law Fraud and Conspiracy to Commit

Fraud; Count III, Negligent Misrepresentation; and the derivative

Count, Count VII Attorney's Fees and Costs.  Wherefore, Falcon

Defendants, who provided only one appraisal to an entity not this

Plaintiff and for which Plaintiff never paid, will show there is no

viable theory by which Home Loan may hold them liable and thus,

summary judgment is appropriate as a matter of law at this time.

          III.  Summary Judgment Standard

Summary judgment is appropriate when the movant can

demonstrate that the pleadings, depositions, affidavits, and other

evidence available to the court establish no genuine issue of material

fact. Fed. R. Civ. P. 56(c). Once the movant has met its burden, the

nonmovant must demonstrate that there are fact issues warranting a

trial. Fed. R. Civ. P. 56(e). In opposing summary judgment, the

nonmoving may not rely on conclusory allegations in his pleadings;

rather, he must set forth sufficient evidence supporting a claimed

factual dispute to require a fact finder to resolve the parties' differing

versions of the truth at trial. Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 249, 106 S. Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). If the

nonmovant fails to make a showing on an element for which he bears

the burden of proof, the movant is entitled to judgment as a matter of

law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91

L.Ed.2d 265 (1986). The evidence must be viewed in a light most

favorable to the nonmovant. Id.

IV.      Argument and Citation of Authority

A.     Erie Applies to Pendent State Law Claims

While this Court may have original jurisdiction concerning

claims that arise under United State law, the Supplemental

Jurisdiction Claims, [pendent state claims] must be resolved in the

same manner that a state court would resolve them. 

28 U.S.C. § 1367 , originally enacted as part of the Judicial

Improvements Act of 1990, codifies the previous case-law doctrines

of pendent claim, ancillary and pendent-party jurisdiction under the

heading of "supplemental jurisdiction." Section 1367 establishes the

parameters by which a federal court exercises supplemental

jurisdiction over claims, including state claims that are related to the

claims over which the court has original jurisdiction.  Pointer v.

Western Heights Independent School Dist., 1996 OK 74, 919 P.2d 5

(1996).

28 USC § 1367 retains the dichotomy formerly derived from

for accepting or declining supplemental jurisdiction espoused in,

United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct.

1130, 16 L.Ed.2d 218 (1966).  See, Palmer v. Hospital Auth., 22 F.3d

1559, 1563 (11th Cir.1994).

Except for Federal RICO, this Court must apply Georgia state

law for the rule of decision on all other claims. Otherwise, the

outcome of the pendent state claims would turn on the discretion of

forum selection by the Plaintiff and not on law.

Because of the difficulties associated with the application

of the Erie [Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58

S. Ct. 817 (1938)] doctrine, we have adopted a multi-step

analysis for determining whether state or federal law

should apply to a particular issue raised in a diversity

case. See, e.g., Alexander Proudfoot Co. World

Headquarters L.P. v. Thayer, 877 F.2d 912, 917-19 (11th

Cir. 1989).

The first step of the analysis is to determine whether state

and federal law conflict with respect to the disputed issue

before the district court. If no conflict exists, then the

analysis need proceed no further, for the court can apply

state and federal law harmoniously to the issue at hand.

See Chemerinsky, supra, § 5.3 at 515. However, if the

applicable state and federal law conflict, the district court

must ask whether a congressional statute or Federal Rule

of Civil Procedure covers the disputed issue. Hanna v.

Plumer, 380 U.S. 460, 469-70, 85 S. Ct. 1136, 1143

(1965). If a federal statute or rule of procedure is on

point, the district court is to apply federal rather than

state law. Id. at 471, 85 S. Ct. at 1144.(FN12) If no

federal statute or rule is on point, then the court must

determine whether federal judge-made law, rather than

state law, should be applied. Alexander Proudfoot, 877

F.2d at 917.

In making this determination respecting federal judge-

made law, the district court should begin its inquiry by

deciding whether failure to apply state law to the

disputed issue would lead to different outcomes in state

and federal court. Guaranty Trust Co. v. York, 326 U.S.

99, 109, 65 S. Ct. 1464, 1470 (1945). That is, with

respect to the state law standard at issue, the court must

ask: "Would application of the standard have so

important an effect upon the fortunes of one or both of

the litigants that failure to apply it would unfairly

discriminate against citizens of the forum State, or be

likely to cause a plaintiff to choose the federal court?"

Gasperini, 518 U.S. at 428, 116 S. Ct. at 2220 (internal

punctuation omitted).(FN13) If the answer is "no," then

the district court should apply federal judge-made law. If

the answer is "yes," meaning that state law is outcome-

determinative, the court must apply the state law

standard, unless affirmative "countervailing federal

interests" are at stake that warrant application of federal

law. Id. at 432, 116 S. Ct. at 2222; Byrd v. Blue Ridge

Rural Elec. Coop., 356 U.S. 525, 537, 78 S. Ct. 893, 901

(1958). These steps, when taken together, constitute the

proper analysis that a district court should employ in

cases involving Erie issues. See Chemerinsky, supra, §

5.3 at 315 (summarizing the multi-step Erie analysis). 

Esfeld, et al. v.Costa Crocire, S.P.A., 289 F.3rd 1300 (11th

Cir. 2002).

Thus, under the caselaw developing under 28 USC § 1367, old

Guaranty, supra, and old Blue Ridge, supra, this Court must apply the

Georgia law on issues that arise outside of federal question

jurisdiction.  That is, Georgia law will apply to common law fraud,

common law conspiracy, negligence, negligent misrepresentation,

attorney's fees and punitive damages.  Federal law will apply to

Federal RICO.

B.    Home Loan's Negligence Theory Fails

Home Loan's claim for "negligence," against these Real Estate

Appraisers is completely, absolutely and totally barred by the

Intended Use Disclaimer contained in the one appraisal on which

Home Loan has sued.  That disclaimer states:

Purpose. Intended Use, And Intended User of The

Appraisal:

The purpose of the appraisal is to estimate the market

value of the subject property, as defined in this report, on

behalf of the referenced client as the intended user of this

report. The intended use of the appraisal is to assist the

client, as the intended user of this report, in evaluating

the subject property for lending purposes. The use of this

appraisal by anyone other than the stated intended

user, or for any other use than the stated intended

use, is prohibited. (Emphasis Supplied).  Plaintiff's

Exhibit 1, Haehnlein Depo.

It is no flippant statement by Falcon Appraisers to assert that

the disclaimer bars Home Loan from any recovery sounding in

negligence.  

The development of appraiser liability law tracks the evolution

of accountant liability.  The debate concerning whether to hold

accountants liable for downstream parties not in privity has been

continuing for close to 30 years. 

Accountants long had been held not liable for their

negligence to relying third parties. In an oft-quoted

opinion, Justice Benjamin Cardozo expressed the concern

that "if liability exists, a thoughtless slip or blunder ...

may expose accountants to a liability in an indeterminate

amount for an indeterminate time to an indeterminate

class." Ultramares v. Touche, 255 N.Y. 170, 174 N.E.

441 (1931). It was this case that established a privity

requirement in order to find accountants liable to third

parties. The privity rule requires a connection between

the accountant and the party relying on the information

provided by the accountant, such as a contractual

obligation binding the auditors to the plaintiff. In 1986

Illinois was the first state to enact a statute that

established what is called a near-privity standard of the

accountant and those non-clients relying on that

professional's written statements. Illinois Public

Accounting Act, 225 ILCS 450 (2002). In interpreting

that statute, the court in Chestnut v. Pestine Brinati,

Gamer Ltd., 281 Ill.App.3d 715, 667 N.E.2d 543 (1st

Dist. 1996), found that contractual privity was not

necessary. An investor sued an accounting firm for

negligent misrepresentations made about a company's

financial condition. The court held the statute created an

exception to the general rule of liability where the

accountant prepares and sends a writing to specific

persons intended to rely on the accountant's services. In

denying the defendant's motion for summary judgment,

the court stated the plaintiffs had demonstrated that an

issue of fact existed regarding whether defendants knew

plaintiff would rely on the reports and financial

statements it had prepared. To adopt defendant's position

would mean "as a matter of law, that accountants are

never liable to third parties absent fraud or intentional

misrepresentation, unless they agree in writing to expose

themselves to liability." A few states, such as Wisconsin

and Mississippi, have adopted a broader standard of

liability and hold a defendant liable for all reasonably

foreseeable consequences of their negligence. The

Restatement Section 522 is yet another approach

followed in many states. It requires actual knowledge or

intent to supply negligently prepared information to

another, and an intent or knowledge that such

information will influence the transaction causing the

plaintiff's harm. Thus, under Section 522, accountants

must receive notice of potential third party claims or at

least know that the misrepresentation will reach the

plaintiff.    Clifford, Robert A., Accountants' Liability,

Chicago Lawyer, October 2002.

There is no Georgia statute, similar to the Illinois Public

Accounting Act, 225 ILCS 450 (2002)., concerning real estate

appraisers which dictates liability toward third parties not in privity. 

Falcon was not in privity with Home Loan.  It was in privity

with Caleb & Associates, the entity that employed it to prepare the

one appraisal in this case.  Haehnlein Depo. at 50; 55.  In the absence

of historical common law privity, Home Loan must travel another

road to hold Falcon in this suit.  The most well known path is

Restatement of Torts § 552.

Perhaps a historical review is in order. In 1976 the American

Law Institute, Philadelphia, Pennsylvania, ("ALI")  issued § 552 of

the Restatement of Torts.  Its states:

Restatement (Second) of Torts (1976) § 552. Information

Negligently Supplied for the Guidance of Others (1) One

who, in the course of his business, profession or

employment, or in any other transaction in which he has

a pecuniary interest, supplies false information for the

guidance of others in their business transactions, is

subject to liability for pecuniary loss caused to them by

their justifiable reliance on the information, if he fails to

exercise reasonable care or competence in obtaining or

communicating the information. (2) Except as stated in

Subsection (3), the liability stated in Subsection (1) is

limited to loss suffered (a) by the person or one of a

limited group of persons for whose benefit and guidance

he intends to supply the information or knows that the

recipient intends to supply it; and (b) through reliance

upon it in a transaction that he intends the information to

influence or knows that the recipient so intends or in a

substantially similar transaction.

Upon its issue in 1976, it was, as many academic

pronouncements -- not law.

In the arena of real estate appraiser liability, Iowa appears to

have been the first state [to almost no fanfare] to make the non-privity

leap holding appraisers liable in 1981 under Section 552.  Larsen v.

United Federal Savings and Loan Ass'n, 300 N.W.2d 281 (Iowa

1981) .  Florida adopted Section 552 with regard to real estate

appraiser liability in 1990, but little national attention was paid to the

case or enactment.  First State Savings Bank v. Albright & Associates

Of Ocala, Inc., 561 So. 2d 1326, (Fla. App. 1990); following, by

analogy, First Florida Bank v. Max Mitchell & Company, 558 So.2d 9

(Fla. 1990).

It was not until 1996, when California agreed to hold real estate

appraiser liable to individuals and entities not in privity with the

appraiser that this particular legal issue got the attention of the

national real estate appraiser industry.  Soderberg, at Trustee, et al. v.

McKinney, 44 Cal. Appl 4th 1760, 52 Cal. Rptr. 2d 635 (1996). 

Soderberg, supra, launched a spate of discussion of this particular

topic in appraisal journals and some law review articles. 

Out of those discussions came the USPAP  Compliance

Agreement.  The Compliance Agreement, which is quoted above in

this brief, may be found at in the one appraisal Falcon submitted that

is the subject of its alleged liability at page 6, 2nd Ordinal Paragraph,

on the 2000 USPAP Compliance Addendum, entitled: "Purpose,

Intended Use, and Intended User of the Appraisal."   Exhibit 1,

Haehnlein Depo.

In the absence of this Compliance Agreement [Legal

Disclaimer], Home Loan could rely on Section 552 to assert that

Falcon was negligent and Home Loan relied on same.  Given that

Falcon Defendant's conditioned their appraisal opinion on the

inclusion of the USPAP Compliance Addendum, Home Loan's

negligence argument – lacking privity – fails.

Home Loan has no appraisal.  It is undisputed that the appraisal

was prepared for Caleb & Associates Mortgage, Inc. not Home Loan. 

Haehnlein Depo. at 50; 55.  It is undisputed that the 2000 USPAP

Compliance Addendum is attached to page 6 of the appraisal, thus,

alerting subsequent users of their inability to rely on the appraisal

without contacting and paying the appraisers for their opinion. Exhibit

1, Haehnlein Depo.  

When the Georgia allowed Section 552 to be applied to

accountants, the Georgia Courts wrote quite specifically, that Section

552 liability could be avoided by an appropriate disclaimer.  The

Georgia Court wrote:  "The additional duty that this rule [Section 552]

imposes may be, of course, limited by appropriate disclaimers which

would alert those not in privity with the supplier of information that

they may rely upon it only at their peril." Robert & Co. Assoc. v.

Rhodes-Haverty Partnership, 250 Ga. App. 680, 300 S.E.2d 503

(1983).

The nationally discussed, nationally debated, nationally

authored and used USPAP Compliance Agreement was crafted in

direct response to Section 552.  Given that Home Loan is not in direct

privity with Falcon Defendants, that Falcon Defendants prepared and

delivered their appraisal conditioned upon the USPAP Compliance

Agreement, given that Home Loan either did not read it or chose to

ignore it and closed the loan, Home Loan is now cut off in Georgia

from asserting negligence against these Appraisers.  Robert & Co.

Assoc., Supra.

C.    Home Loan's Common Law Fraud Fails

Home Loan sues the Falcon Appraiser for Common Law

Fraud, Count I.  Under Georgia law, which much be applied by this

Court because it is a pendent state claim, requires five (5) elements. 

Those elements are: (1) a false representation made by the defendant,

(2) scienter, (3) intention to induce the Plaintiff to act or refrain from

acting, (4) justifiable reliance, and (5) damages to Plaintiff.  Keller v.

Henderson, 248 Ga.App. 526, 545 S.E.2d 705 (2001); Brown v.

Ragsdale Motors Co., 65 Ga.App. 727, 16 S.E.2d 176 (1941).

Fraud Element No. 1 fails: Opinion evidence will not support

Fraud Element No. 1.  An appraisal is a professional opinion of value

of real property at a fixed point in time.  An "opinion" cannot be used

to establish fraud element number one under Georgia law, "(1) a false

representation made by the defendant." Id.  "Statements of opinion

will not support a claim for fraud, under Georgia law."  Synergy

Worldwide, Inc. v. Long, Haynes & Carr, Inc., 44 F.Supp.2d 1348

(N.D.Ga. 1998).  "Statements of opinion are not factual

representations that are actionable as fraud."  ReMax North Atlanta v.

Clark, 244 Ga.App. 890, 537 S.E.2d 138 (2000).

Georgia law shows that a written appraisal, being a mere

professional opinion of value, cannot stand in the shoes of element

number one of a Georgia fraud claim.  Fraud fails. 

Fraud Element No. 4 fails: There was no "justifiable reliance,"

as a matter of law.  The only thing a review of the law under Element

4 will proves is that Home Loan did not read the appraisal on which is

now sues; Home Loan did not read the Disclaimer.  Ergo, no

justifiable reliance.  No element No. 4.  No fraud.

"In order to prove the element of justifiable reliance,[speaking

directly to the 5 elements of fraud] the plaintiff must show that he

exercised his duty of due diligence."  Hill v. Century 21 Max Stancil

Realty, 187 Ga.App. 754, 756, 371 S.E.2d 217 (1988); Hanlon v.

Thornton, 216 Ga.App. 500, 462 S.E.2d 154 (1995).

Due diligent extends, at least, to reading the report placed in

your hands.  Summary judgment was property granted against

Plaintiffs who filed a termite infestation claim, but failed to read the

termite infestation claim at closing.  When they sued, the Court held

they were barred by the plain language of the report and the things

they could have discovered by merely reading same.  Artzner, et al. v.

A & A Exterminators, Inc., 531 S.E.2d 200 (Ga.App. 2000).

Alan and Susan Artzner purchased a house from Joseph

and Dorothy O'Brien. The sales contract required that the

O'Briens have the house inspected prior to closing by a

licensed pest control operator and to provide at closing a

letter stating that the house was free from visible

evidence of active infestations caused by termites or

other wood destroying organisms. On September 27,

1995, Rusty Alexander, on behalf of A & A

Exterminators performed the inspection at the O'Briens'

request.

On November 6, 1995, N. R. Alexander, on behalf of A

& A Exterminators, issued an official Georgia Wood

Infestation Report based on the September 27, 1995

inspection. The report indicated that there had been a

prior treatment on the house in November 1983. The

report further indicated that there had been previous

termite infestation, but that, at the time of the inspection,

there was no active infestation of termites. A graph was

attached that showed the areas of the house in which A &

A Exterminators found evidence of previous termite

infestation. [T]he Artzners brought suit against A & A

Exterminators, Inc.1 A & A Exterminators filed a motion

for summary judgment. The trial court denied A & A

Exterminators' motion for summary judgment on the

Artzners' claims for breach of contract/guarantee and

professional negligence and granted the motion for

summary judgment on the Artzners' claims for fraud,

fraudulent concealment, negligent misrepresentation,

punitive damages, and OCGA § 13-6-11 attorney fees.

The Appeals Court wrote:

Setting aside the question of whether the other elements

of fraud are shown, we need focus only on the element of

justifiable reliance.  With the element of justifiable

reliance, "it is not sufficient to show that false

representations were knowingly made with an intent to

deceive - there must also be proof that due care was

exercised to discover the fraud. [Cit.]" Todd v. Martinez

Paint & Body, 238 Ga. App. 128, 128-129 (517 S.E.2d

844 ) (1999).  In this case, the evidence reflects that the

Artzners had a copy of the Wood Infestation Report

indicating previous termite infestation at the time of the

closing and a graph, which was attached to the report,

contained a drawing of the house with 16 marks across

the front of the house indicating the areas of previous

infestation. The front page of the report contained the

following language: … Note: If visible evidence of active

or previous infestation is reported it should be assumed

that some degree of damage is present[.] Evaluation of

damage and any corrective action should be performed

by a qualified inspector approved by the purchaser and

lending agency.  … "The law does not afford relief to one

who suffers by not using the ordinary means of

information, whether the neglect is due to indifference or

credulity." (Punctuation and citations omitted.) Howard

v. McFarland, 237 Ga. App. 483, 484 (515 S.E.2d 629)

(1999). Under the undisputed facts of this case, the

Artzners' lack of due diligence bars their recovery for

fraud and fraudulent concealment as a matter of law. Id.

      So, from Artzner, supra, we learn, that the Artzner's claim for

active termite damage failed because the Artzner's simply failed to

read the Wood Infestation Report and attached Graph showing 16

areas of prior termite infestation.  Id.

      Here Home Loan, a successful multi-million dollar mortgage

company in Texas received an appraisal that stated on its face, in

paraphrase, "Do not Rely on this Appraisal Without Calling and

Talking to the Appraiser Who Wrote it!"  Yet, having not paid for the

appraisal, not having a direct relationship with the appraiser, and in

the face of that warning that those other than the client relied on same

at their peril, Home Loan simply closed over that warning and

dispersed the funds.  Having done so, Home Loan completely

destroyed Element No. 4 of its future fraud claim.  Fraud fails.

D.      Negligent Misrepresentation Fails

      Home Loan sued Falcon Defendants for "negligent

misrepresentation," based on the same facts as asserted in its fraud

Count.  To dispose of this Count, this Court need look no further than

the Artzner case, again, supra.

The Artzners' claim against A & A Exterminators for

negligent misrepresentation must fail for the same

reason, i.e., lack of due diligence. * * * As the same

principles apply to both fraud and negligent

misrepresentation (Robert & Co. Assoc. v. Rhodes-

Haverty Partnership, 250 Ga. 680, 681 (300 S.E.2d 503)

[(1983)]; American Legion v. Foote & Davis, Inc., 193

Ga. App. 225, 227 (387 S.E.2d 380) [(1989)]), justifiable

reliance is also an essential element of a claim asserting

negligent misrepresentation. Therefore, [The Artzners']

failure to exercise due diligence, as a matter of law, also

bars [their] negligent misrepresentation claim. [Cit.]  * *

* Real Estate Intl. v. Buggay, 220 Ga. App. 449, 452

(469 S.E.2d 242) (1996). See also Guernsey Petroleum

Corp. v. Data General Corp., 183 Ga. App. 790, 795 (359

S.E.2d 920) (1987); Howard v. McFarland, supra at 485.

Accordingly, A & A Exterminators was entitled to

summary judgment on the negligent misrepresentation

claim. Id. (Emphasis Supplied.)

      Thus, Home Loan has no claim sounding in "negligent

misrepresentation" that will survive summary judgment.  Negligent

Misrepresentation fails.

E.    State Law Conspiracy Fails

      Home Loan sues Falcon Appraisers, at Count I, for common

law conspiracy to commit fraud.

      In a state law civil setting, Georgia defines conspiracy as:  "A

conspiracy is a combination of two or more persons to accomplish an

unlawful end or to accomplish a lawful end by unlawful means." 

Association Services, Inc. v. Bobbie Smith, 549 S.E.2d 454 (Ga.App.

2001).

It is well settled that a plaintiff cannot maintain an action

for a conspiracy n the absence of underlying actionable

conduct. … Where civil liability for a conspiracy is

sought to be imposed, the conspiracy of itself furnishes

no cause of action. The gist of the action is not the

conspiracy alleged, but the tort committed against the

plaintiff and the damage thereby done. (Citations and

punctuation omitted.) First Federal Savings Bank v. Hart,

185 Ga. App. 304, 305 (2) 363 S.E.2d 832 (1987). See

also Rose v. Zurowski, 236 Ga. App. 157, 157-158 (1)

511 S.E.2d 265 (1999).  Association Services, supra.

Since Home Loan cannot carry its burden on any state claim of

common law fraud and negligence, it cannot, as a matter of Georgia

state law, carry its burden on "conspiracy to commit," either state

defined fraud or state defined misrepresentation. Id.  State law

conspiracy fails.

E.      Attorney's Fees are Ancillary

If Summary Judgment is granted on the State Law claims, then

Count VII, Attorneys Fees, OCGA § 13-6-11 and Punitive Damages,

OCGA § 51-12-5.1, should not be reached for adjudication.  OCGA 

§ 13-6-11 is a remedial statute, ancillary to the primary cause of

action.  Brown v. Baker, 197 Ga. App. 485, 398 S.E.2d 797 (1990). 

Thus, if the main claim is dismissed the remedial statute for

attorney's fees stands dismissed.  The same applied for punitive

damages. If not recovery is had for the tort, no punitive damages may

flow from that alleged tort.  OCGA § 51-12-5.1(b).

V.      Conclusion

Wherefore, for the reasons stated in this Brief, Falcon

Defendants hereby move for summary judgment, pursuant to

Fed.R.Civ.P. 56, on all State Law Counts filed against them by Home

Loan, being Counts I, III and VI.

      This _____ day of March, 2004.

                                    Respectfully submitted,

                                    WOOD & MEREDITH, LLP

                                    _____________________

                                    Hugh C. Wood

                                    GA Bar No:  774210

                                    Attorneys for Falcon

                                    Defendants

3756 Lavista Rd,

Ste 250

Tucker, GA 30084

Phone: 404.633.4100

Fax: 404.633.0068

Web: www.woodandmeredith.com

Email: hwood@woodandmeredith.com

      28 USC § 1367. - Supplemental jurisdiction, states in pertinent part: 

(a) Except as provided in subsections (b) and (c) or as expressly provided

otherwise by Federal statute, in any civil action of which the district courts have

original jurisdiction, the district courts shall have supplemental jurisdiction over

all other claims that are so related to claims in the action within such original

jurisdiction that they form part of the same case or controversy under Article III

of the United States Constitution. Such supplemental jurisdiction shall include

claims that involve the joinder or intervention of additional parties.

(b) In any civil action of which the district courts have original jurisdiction

founded solely on section 1332 of this title, the district courts shall not have

supplemental jurisdiction under subsection (a) over claims by plaintiffs against

persons made parties under Rule 14, 19, 20, or 24 of the Federal Rules of Civil

Procedure, or over claims by persons proposed to be joined as plaintiffs under

Rule 19 of such rules, or seeking to intervene as plaintiffs under Rule 24 of such

rules, when exercising supplemental jurisdiction over such claims would be

inconsistent with the jurisdictional requirements of section 1332.

(c) The district courts may decline to exercise supplemental jurisdiction over a

claim under subsection (a) if: (1) the claim raises a novel or complex issue of

State law, (2) the claim substantially predominates over the claim or claims over

which the district court has original jurisdiction, (3) the district court has

dismissed all claims over which it has original jurisdiction.…

      New Mexico indicated three years prior to Iowa that, with the proper case, it probably

would adopt Section 552 for appraiser liability.  Stotlar v. Hester, 92 N.M. 25, 582 P.2d 403 (N.M.

Ct. App.), cert. denied 92 N.M. 180, 585 P.2d 403 (1978).

        Uniform Standards of Professional Appraisal Practice ("USPAP") to the fact pattern

complained of by Plaintiff. The Appraisal Foundation, Washington, DC, was Chartered by the

United States Congress to establish and oversee National Real Estate Appraisal Standards. In

furtherance of its Charter, The Foundation authorized the Appraisal Standards Board (ABS) to

issue national Regulations. The ABS prepares and annually updates the USPAP.