Johnson v. Hayman & Associates, Inc.
2015 SD 63
S.D.2015Background
- Fannie Mae hired Hayman to perform a visual structural inspection of a foreclosed Rapid City house and to prepare a report identifying foundation/drainage issues and recommending downspout/grading changes and a French drain/sump pump.
- Fannie Mae implemented some repairs (sheetrock, painting, installed French drain) but sold the house “as‑is, where‑is” to the Masons; Hayman had no role in repairs or later sales and did not prepare the report for prospective buyers.
- The Masons later sold the house to the Johnsons in 2012; the Johnsons neither saw nor knew of the Hayman report before purchase, performed their own inspections (including Drew Inspection), negotiated a lower price, and closed via warranty deed.
- After purchase the Johnsons discovered additional movement/settling; later engineers (Albertson, Terracon) concluded Hayman’s report used invalid assumptions and recommended more extensive (and costly) foundation remediation.
- The Johnsons sued Hayman for professional negligence; Hayman moved for summary judgment arguing it owed no duty to subsequent purchasers like the Johnsons. The circuit court granted summary judgment; the South Dakota Supreme Court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hayman owed a duty to the Johnsons (foreseeability/duty) | Hayman’s negligent inspection/report foreseeably harmed subsequent purchasers; Hayman should have anticipated resale and harm to later buyers. | Hayman inspected solely for Fannie Mae’s benefit; subsequent purchaser reliance was not foreseeable; Johnsons did not rely on the report and had their own inspections. | No duty. Not reasonably foreseeable Hayman’s report would harm the Johnsons under these facts; summary judgment for Hayman affirmed. |
| Whether reliance is a required element of professional negligence | Reliance is not an element of professional negligence; court erred by treating reliance as necessary. | Reliance is relevant to foreseeability/duty when extending liability to third parties; court properly considered it as part of duty analysis. | Reliance is not a standalone element of professional negligence but is relevant to foreseeability/duty; here lack of foreseeable reliance supports no duty. |
Key Cases Cited
- Limpert v. Bail, 447 N.W.2d 48 (S.D. 1989) (contractor’s duty can extend to third parties injured by negligent performance when harm is foreseeable)
- Brown v. Fowler, 279 N.W.2d 907 (S.D. 1979) (builder‑vendor may owe duty to subsequent purchasers because defects are foreseeable to harm later buyers)
- Muhlenkort v. Union Cnty. Land Trust, 530 N.W.2d 658 (S.D. 1995) (to extend professional liability to third parties, foreseeability and some third‑party reliance are considered)
- Fisher Sand & Gravel Co. v. S.D. Dep’t of Transp., 558 N.W.2d 864 (S.D. 1997) (duty analysis includes policy concerns and protection of those who reasonably rely on others)