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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.