Purchaser of Defective Home is Time Barred from Bringing Fraud
and Negligent Construction Claims
A Publication of Skidmore & Associates, A Legal Professional
Association
By:
Eric E. Skidmore, Esq.
The proverbial “wet basement” cases will never be under-litigated
in Ohio. This type of litigation is extremely contentious, because
it usually involves a family’s primary asset - their home.
The defects in the home are daily reminders to the homeowners that
they have been wronged. These cases routinely consist of a buyer
who is allegedly wronged in the purchase of a home, based upon the
seller’s failure to disclose certain defects. The basic query
is similar to the question asked during the House Judiciary Committee
hearings on Watergate in 1974, “What did he know and when
did he know it?” In a recent decision, an Ohio court of appeals
held that as soon as you know of defects in a home, the clock begins
to tick, and with each passing day a wronged buyer gets closer to
a time barred statute of limitation.
I. The Jones Case
On June 19, 2003 the Ohio Tenth District Court of Appeals (“10th
District Court”) affirmed a trial court’s decision barring
a purchaser’s fraud and negligent construction claims, based
upon the statute of limitations under Ohio Revised Code (“O.R.C”)
2305.09. Jones v. Hughey, 153 Ohio App. 3d 314 (Ohio 10th
Dist., 2003).
A. Facts
The holding of the 10th District Court in the Jones case is fact
intensive. It is important to review the facts in order to understand
the ruling of the10th District Court. In 1987, Defendant Larry
W. Hughey (“Seller”) purchased vacant land in Orient,
Ohio, with the intent to construct his home. Id. at 316.
In order to save costs, Seller did most of the construction himself.
Id. In June, 1988, Seller completed the house and moved
in. Id. Seller intended to live in the house for the rest
of his life, however, during the time Seller resided in the house,
six shingles blew off the roof and water seeped into the basement.
Id. Seller stated that he sealed the basement and the water
problem was corrected. Id. In 1994, Seller’s wife
was having problems with her father, who lived next door, and
they decided to sell the house. Id.
In September, 1994, Richard L. Jones (“Buyer”) entered
into a purchase agreement with Seller, relying upon Seller’s
representations in a property disclosure form. Id. Buyer
took possession of the house on January 1, 1995. Id.
Almost immediately, Buyer became cognizant of numerous noticeable
defects. Id. Buyer testified that he experienced the following
problems upon moving in: leaking in the sunroom, children’s
bedrooms and master bedroom; well did not operate correctly and
learned of improper installation of pump; windows in a bedroom
were not properly installed; improper installation of living room
bay window; improper connection of kitchen counters; linoleum
kitchen floor peeling; wood floor board defects, drywall seaming;
improper installation of soffits; and improper installation of
vinyl siding. Id. In the spring of 1998, Buyer was alerted
to the fact that there were serious structural problems in the
roofing and floor systems of the house. Id. at 317. Buyer
attested that in 1998, Buyer hired an industrial engineer to inspect
the house, wherein Buyer was notified of the numerous major and
minor defects. Id. On January 29, 2001 Buyer filed a complaint
against the Seller, alleging causes of action for fraud, negligent
construction and negligence in the completion of a property disclosure
form. Id. at 315. The Seller filed for summary judgment
which was granted by the trial court, holding that the Buyer was
placed on notice that the home was negligently constructed shortly
after moving into the residence in 1995, and therefore, the statute
of limitations commenced on Buyer’s causes of action that
year. Id. at 317. The Buyer appealed the trial court’s
decision.
B. Law and Argument
O.R.C. 2305.09 provides that, “an action for any of the
following causes shall be brought within four years after the
cause thereof accrued;
(C) for relief on the ground of fraud;
(D) for an injury to the rights of the plaintiff not arising
on contract...[i]f the action is for ... fraud, [the cause shall
not accrue] until the fraud is discovered.” Id.
at 318.
As a general rule, a cause of action accrues at the time the
wrongful act was committed. Id. (citing, Harris v. Liston,
86 Ohio St. 3d 203, 205 (1999). The 10th District Court noted
“there are certain instances where the legislature and/or
the Ohio Supreme Court have stated that a ‘discovery rule’
should apply for the purposes of determining when the applicable
limitation period begins to run.” Id. (citing Geraldo
v. First Dominion Mut. Life Ins. Co., 2002 WL31002770 (2002).
The 10th District Court noted the application of the “discovery
rule” in situations where the wrongful act does not immediately
result in injury or damage and therefore strict application of
the general rule can lead to an unjust result. Id. (citing
Liston 86 Ohio St. 3d at 205-206). The 10th District Court
noted that the Ohio Supreme Court has extended the discovery rule
to actions alleging damage to real property, wherein the effect
of the discovery rule was to delay the commencement of the statute
of limitations until “it is first discovered, or through
the exercise of reasonable diligence it should have been discovered,
that there is damage to the property.” Id. (citing
Liston, 86 Ohio St. 3d at 207).
In the case sub judice, Buyer conceded that some of
the defects were obvious at the time he moved into the house.
Id. at 319. Therefore, the 10th District Court affirmed
the trial court’s factual finding that it was undisputed
that the Buyer, upon moving in, was aware of numerous material
defects, placing the Buyer on notice that the house was negligently
constructed and that the Buyer was either alerted to the fact
or with the exercise of reasonable diligence, should have discovered
that the property disclosure form was fraudulently or negligently
completed. Id.
The Buyer alleged that he was not aware of the serious nature
of the defects with the house until 1998, upon retaining the industrial
engineer. However, the 10th District Court followed a line of
reasoning in other Ohio courts, holding it is “unnecessary
that the full extent of damages be ascertainable” in determining
the accrual date of a cause of action for statute of limitations
purposes. Id. (citing Beavercreek Local Schools v. Basic,
Inc., 71 Ohio App. 3d 669, 689 (1991). The 10th District Court
concluded that an accrual of a cause of action is not delayed
until the full extent of the resulting damage is known, rather,
no more than a reasonable opportunity to discover the fraud is
required to start the period of limitation. Id. at 319 - 320 (quoting
Beavercreek, 71 Ohio App. 3d at 689 and citing Zeppernic
v. P.N.C. Bank Nat’l Assn., 2000 WL 1262459 (2000).
The 10th District Court acknowledged the Buyer’s statement
that he first noticed water problems with the roof at the time
he moved into the residence in early 1995, therefore, the 10th
District Court sustained the trial court’s decision, determining
that the Buyer’s knowledge of numerous leaks in the house
during the spring of 1995 placed him on notice of a potential
defect and was sufficient to have prompted Buyer to further investigate
the cause of the leak at that time so as to alert the Buyer to
whether the Buyer had a cause of action against the Seller. Id.
at 321.
II. Commentary
Based upon the finding of the 10th District court, the four year
statute of limitations relative to Buyer’s claims expired
on January 1, 1999, approximately two years prior to Buyer’s
filing of the complaint. Buyer had no other recourse, thus Buyer
is stuck with a defective home and the cost to correct the defects.
If Buyer attempts to sell the home, then Buyer must disclose the
known defects to a prospective buyer.
The lesson to be learned from the Jones case is to be vigilant
as to details in the purchase of a home. Scrutinize the seller disclosure
statement and obtain an inspection of the home within the time increments
set forth in the purchase agreement. Obviously, if the seller built
the home himself, it is a home that you do not want to buy. The
structural soundness of the home is directly linked to the expertise
and workmanship of the seller, rather than an accredited builder.
Once one has purchased a home, one should immediately notify the
seller of any noticeable defects that were not represented or disclosed
in the disclosure form. If the seller does not remedy the situation
in a timely manner, the buyer should immediately seek legal redress.
Law in the state of Ohio, as espoused in the Jones case,
indicates that a buyer cannot wait to ascertain the full extent
of damages resulting from a defect. Unfortunately, the buyer in
the Jones case waited too long. The buyer should have retained
the expertise of an structural engineer upon noticing the defects
in 1995. Upon obtaining the expert’s advice, the buyer would
have filed the lawsuits earlier, and would not have been barred
by the four year statute of limitations.