Jack Nelson Jones Professional Association
January 15-21, 2018
Hill v. Hartness and Image Realty LLC, 2017 Ark. App. 644 (December 6, 2017)
This appeal comes from the Craighead County Circuit Court, honorable Pamela Honeycutt presiding. This case concerns the commencement of a statute of limitations period.
David and Dana Hill (collectively, “Hill”) bought a house in Jonesboro. Hill was represented by a buyer’s agent, Brooksie Felty Hartness and Image Realty LLC (collectively, “Hartness”). Hill entered into a real estate contract with the sellers on September 6, 2010, which set forth deadlines in which the seller was to provide the seller’s disclosures (three business days after signing the contract) and in which the buyer could obtain a home inspection (ten business days after acceptance of the offer). Hartness received a “Seller Property Disclosure” about September 8, which indicated settling issues with the house, but Hartness did not provide the disclosure to Hill. Hartness also allegedly told Hill that a home inspection was not necessary because the house was so new and it would be a waste of money. The deadline for home inspection passed, the sale closed on October 15, and, subsequently, Hill discovered settling and other problems with the house.
Hill sued Hartness on October 11, 2013, alleging: breach of the real estate contract, fraud, breach of fiduciary duty, and negligence. Hill recited in the complaint that Hartness was bound by Arkansas Real Estate Commission Regulation 10.6, which provides that real-estate agents are required to exert reasonable efforts to ascertain those facts that are material to the value of desirability of every property so that the agent will be informed about the property’s condition and thus avoid intentional or negligent misrepresentations to the public about the property.
Hartness asserted that there could not be breach of contract because she, as the real estate agent, was not a party to the written real estate contract between the buyer and seller, that this case was essentially a professional-negligence claim, and that the three-year statute of limitations barred the tort claims. Hartness argued that Hill was trying to assert that Hartness was a party to the real estate contract to trigger the longer five-year statute of limitations applicable to a breach of a written contract. Hill responded that Hartness was a party to the contract as the buyer’s agent and had duties under the contract to the buyer. As to the other claims, Hill argued that Hill did not suffer damages until the sale was closed, so the statute of limitations should have commenced in October 2010, not in September 2010 when Hartness failed in her obligations to her client. The trial court ultimately ruled in favor of Hartness and Hill appealed. This article only concerns the commencement of the statute of limitations of Hill’s claims.
On appeal, Hill’s first argued that the three-year statute of limitation (SOL) began to run on or after the date of closing, October 15, 2010. Hill argued that it was the actual conveyance of the home that triggered the SOL because they were not actually damaged until then. Hartness argued that any alleged wrongful conduct had to have occurred before closing. Hartness asserted that, at the latest, any alleged wrongs committed by Hartness occurred by mid-September 2010, weeks prior to closing.
The Court explained that section 16-56-105 of the Arkansas Code provides for a three-year statute of limitations period from the accrual of actions based in contract or liability, including unwritten breaches of duty. The statutory-limitations period begins to run when there is a complete and full cause of action and, in the absence of concealment or wrong, when the negligence occurs and not when it is discovered. The same statute applies, the Court pointed out, to claims for negligence, fraud, and breach of fiduciary duty.
The Court, citing to Chapman v. Alexander, noted that since 1877, the Arkansas Supreme Court has consistently applied the three-year statute of limitations period, and the accrual is when the negligent act occurs. Hill argued that Chapman was instructive in that it held that the SOL begins to run for tort claims upon the occurrence of the last element essential to the cause of action. Hill contended that there were no damages in existence to support a cause of action until property was conveyed. The Court refused to accept this argument because it would have required abandonment of the “occurrence rule” and adoption of the “date of injury” rule. The latter rule provides that the SOL begins to run, not from the occurrence of the negligent act, but rather from the time injury results from the negligent act.
The Court, citing to Chapman, explained that Arkansas adhered to the traditional “occurrence rule,” which provides that the commencement of the SOL is when the negligent act occurs and not when it is discovered. In defense, the Chapman opinion noted that professionals, like Hartness, should not be forced to defend some alleged act of malpractice that occurred many years ago. The Court, in Chapman, adhered to the “occurrence rule” despite arguments that it was too harsh, noting that such a change in the law should come from the legislature and not the courts. As such, the Court found that all of Hill’s tort claims were time-barred as having “occurred” before closing, and affirmed the trial court.