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Hill v. Hartness

Court of Appeals of Arkansas, Divisions III, IV

December 6, 2017



          Lyons & Cone, P.L.C., by: Jim Lyons, for appellants.

          Barber Law Firm PLLC, by: Scott M. Strauss and Breana Ott Mackey, for appellees.


         This appeal concerns the entry of summary judgment in favor of a real estate agent in the lawsuit filed by her clients subsequent to their purchase of a home. The house had settling and other problems that the buyers did not know about until after the sale had been completed, which the buyers blamed on the real estate agent. The trial court granted summary judgment on the tort claims as barred by the three-year statute of limitations and on the breach-of-contract claim because the real estate agent was not a party to the offer-and-acceptance contract between the buyer and seller. We affirm.

         The facts are not in material dispute. Appellants David and Dana Hill (collectively "Hill") bought a house located at 4208 Nobhill Circle in Jonesboro. Hill was represented by a buyer's agent, appellees Brooksie Felty Hartness and Image Realty LLC[1] (collectively "Hartness"). Hill entered into a real estate contract with the sellers, Martin and Karen Hesch, on September 6, 2010. The offer and acceptance set forth deadlines in which the seller was to provide the seller's disclosure (three business days after signing the offer and acceptance) and in which the buyer could exercise the right to obtain a home inspection (ten business days after acceptance of the offer). The sellers provided a "Seller Property Disclosure" to Hartness on or about September 8, which indicated settling issues, but Hartness did not provide this 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 aforementioned deadlines passed in September. The sale closed on October 15, 2010, after which Hill discovered settling and other problems.

         Hill sued Hartness in a complaint filed on October 11, 2013, asserting five causes of action: breach of the real estate contract (the offer and acceptance), violation of the Deceptive Trade Practices Act, [2] 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 or 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. Hill appended the offer-and-acceptance contract and the Arkansas Real Estate Commission Regulations as exhibits to the complaint. Hartness subsequently moved for summary judgment on all counts, asserting primarily that there could be no breach of contract because 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, unsuccessfully, to assert that Hartness was a party to this offer and acceptance 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. Hill argued that, as to the other claims, Hill did not suffer damages until the sale was closed, so the statute of limitations should commence in October 2010, not in September 2010 when Hartness failed in her obligations to her clients. The trial court ultimately granted the motion for summary judgment. Hill appeals.

         On appeal, Hill presents two arguments for reversal: (1) that the trial court erred in finding that the statute of limitations had begun to run on the fraud, breach-of-fiduciary-duty, and negligence claims at any time before the October 15, 2010 closing; and (2) that the trial court erred in finding that Hartness was not a party to the written real estate contract in order to trigger a five-year statute of limitations.

         The standard of review is well settled. A motion for summary judgment should be granted when, in light of the pleadings and other documents before the circuit court, there is no genuine issue of material fact, and the moving party is entitled to a judgment as a matter of law. Ark. R. Civ. P. 56(c) (2017). When reviewing whether a motion for summary judgment should have been granted, this court determines whether the evidentiary items presented by the moving party in support of the motion left a material question of fact unanswered. Flentje v. First Nat'l Bank of Wynne, 340 Ark. 563, 11 S.W.3d 531 (2000). The burden of sustaining a motion for summary judgment is always the responsibility of the moving party. Id. All proof submitted must be viewed in a light most favorable to the party resisting the motion, and any doubts and inferences must be resolved against the moving party. Bomar v. Moser, 369 Ark. 123, 251 S.W.3d 234 (2007). Summary judgment is proper, however, when the statute of limitations bars an action. Alexander v. Twin City Bank, 322 Ark. 478, 910 S.W.2d 196 (1995); IC Corp. v. Hoover Treated Wood Prods., Inc., 2011 Ark.App. 589, 385 S.W.3d 880; Tony Smith Trucking v. Woods & Woods, Ltd., 75 Ark.App. 134, 55 S.W.3d 327 (2001).

         Hill's first argument focuses on when the three-year statute of limitations (SOL) began to run, which Hill contends was on or after the date of closing, October 15, 2010. Hill argues that it is the actual conveyance of the home that triggers the SOL because the buyers were not actually damaged until then. Hartness argues that any alleged wrongful conduct had to have occurred before closing. Hartness asserts that, at the latest, any alleged wrongs committed by Hartness occurred by mid-September 2010, weeks prior to closing. We hold that the trial court did not err in deeming the "occurrence rule" to apply and therefore did not err in entering summary judgment because the complaint was filed after the expiration of three years from the occurrence of the alleged wrongful acts.

         Arkansas Code Annotated section 16-56-105 (Repl. 2005) 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. Riggs v. Thomas, 283 Ark. 148, 671 S.W.2d 756 (1984). The same statute applies to claims for negligence, fraud, and breach of fiduciary duty. See Chalmers v. Toyota Motor Sales, USA, Inc., 326 Ark. 895, 935 S.W.2d 258 (1996); Rice v. Ragsdale, 104 Ark.App. 364, 292 S.W.3d 856 (2009).

         Since 1877, our supreme court has consistently held that the three-year limitations period applies to legal malpractice actions, and the accrual is when the negligent act occurs. Chapman v. Alexander, 307 Ark. 87, 817 S.W.2d 425 (1991) (citing White v. Reagan, 32 Ark. 281 (1877)). Hill argues that Chapman is instructive in that it holds that the SOL begins to run for torts upon the occurrence of the last element essential to the cause of action. Hill contends that there were no damages in existence to support a cause of action until the property was conveyed. To accept this argument, however, Arkansas would have to abandon the occurrence rule and adopt the so-called "date of injury" rule. This 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. Our supreme court has expressly refused to abrogate the occurrence rule and adopt the "date of injury" rule, and thus the occurrence rule remains. See Moix-McNutt v. Brown, 348 Ark. 518, 522, 74 S.W.3d 612, 614 (2002) (holding that although appellant argued that common sense required that a plaintiff actually suffer a loss or damages arising out of the negligent act before a cause of action arose, this was precisely the argument that the supreme court had repeatedly rejected).

         In Chapman, our supreme court explained the application of the commencement of the SOL in legal malpractice (negligence) actions, stating that it is when the negligent act occurs and not when it is discovered; it declined to adopt the "discovery rule" or "date of injury rule." Chapman, 307 Ark. at 91, 817 S.W.2d at 427. The same rule applies to an action brought against an abstractor for damages resulting from an omission in the abstract of title. St. Paul Fire & Marine Ins. Co. v. Crittenden Abstract & Title Co., 255 Ark. 706, 502 S.W.2d 100 (1973). In Flemens v. Harris, 323 Ark. 421, 427, 915 S.W.2d 685, 689 (1996), the supreme court applied the occurrence rule when the defendant was an insurance agent alleged to have committed a negligent act "in keeping with our traditional rule in professional malpractice cases." See also Ford's Inc. v. Russell Brown & Co., 299 Ark. 426, 429, 773 S.W.2d 90, 92-93 (1989) (holding that the occurrence rule applied to claim against accountant from date erroneous advice given, not the date a tax-delinquency assessment was made because of erroneous advice). The Chapman opinion noted that an abstractor, accountant, architect, attorney, escrow agent, financial advisor, insurance agent, medical doctor, stockbroker, or other such person should not be forced to defend some alleged act of malpractice that occurred many years ago. Chapman, 307 Ark. at 88-89, 817 S.W.2d at 426. The Chapman opinion went on to adhere to the traditional "occurrence rule" despite arguments that this rule was too harsh, noting that such a change in the law should come from the legislature and not the courts. Chapman, 307 Ark. at 89-90, 817 S.W.2d at 426-427; see also Ragar v. Brown, 332 Ark. 214, 964 S.W.2d 372 (1998); Smith v. Elder, 312 Ark. 384, 392, 849 S.W.2d 513, 517 (1993);Tate v. Lab. Corp. of Am. Holdings, 102 Ark.App. 354, 285 S.W.3d 261 (2008); Morrow Cash Heating & Air, Inc. v. Jackson, 96 Ark.App. 105, 239 S.W.3d 8 (2006). Thus, all the tort claims[3] are time-barred as having "occurred" before closing, and Hill's first point on appeal holds no merit.

         Hill's second point on appeal is that the trial court erred in finding that Hartness did not breach the written real estate contract. If Hartness was a party to the real estate contract here, then a five-year SOL would apply to allegations of breach of this written contract. See Ark. Code Ann. ยง 16-56-111. The trial court rejected Hill's argument and entered summary judgment on the breach-of-contract claim. Hill's arguments focus on the contentions that (1) Hartness signed the contract as the buyer's agent and representative of the real estate company; (2)the contract disclosed to the seller that Hartness was Hill's agent and responsible to Hill; (3)the contract for the sale of the Nobhill Circle house entitled Hartness to a commission; and (4) Arkansas Real Estate Commission Regulations require agents to exert reasonable efforts to inform their clients of material facts as to the value or desirability of the subject property, which Hartness did not do. Hill adds that the "gist" of the complaint clearly asserted a breach of this written contract, ...

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