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Jackson v. Fox & Lazo

2005 WL 3500319 (N.J. Super. App. Div. 2005) (Unpublished)

CONTRACTS; STATUTE OF LIMITATIONS—Even though a buyer knew of termite damage before closing, if it was ostensibly repaired and the buyer later discovered that the extent of the damage was well beyond what was known before closing, the statute of limitations for filing suit may run from the date of that later discovery or from when that later discovery should reasonably have taken place, rather than from the closing date.

“Prior to closing, a home inspection revealed active termite infestation. The estimated cost to repair was $5000.” The seller claimed that her real estate broker recommended a termite contractor who could do the repair for less money. The broker claimed that “it did not more than give the seller a list of contractors.” Further, according to the broker, the seller hired the contractor; the broker did not. Closing took place on September 15, 1997. On September 30, “extensive, active termite infestation was discovered when a wall-mounted air conditioner was removed by a contractor who was doing home remodeling work.” The estimated cost for repairs was about $150,000. If it turned out that the infestation required the house to be demolished, the replacement cost would have been over $200,000. Shortly after the problem was discovered, the buyer sued the seller, the termite repair companies, and the broker. The proceedings took a tortuous path including dismissals, application of a dispute resolution clause in the agreement of sale, mediation, and the like. Eventually, on September 19, 2003, the buyer again filed suit against the broker for allegedly failing “to properly investigate the licensing and insurance credentials of the termite inspector and repair company that was used by the seller and against which [by this time, the buyer] had an uncollectible judgment.” The lower court dismissed the claim on the theory that the six-year statute of limitations ran out on September 15, 2003. The buyer successfully appealed to the Appellate Division. The Appellate Division based its reversal on the “discovery rule.” Under that rule, “an action will not accrue until ‘the injured party discovers, or by an exercise of reasonable diligence and intelligence should have discovered, that he may have a basis for an actionable claim.’” In such cases, “[t]he crucial inquiry is ‘whether the facts presented would alert a reasonable person exercising ordinary diligence that he or she was injured due to the fault of another. The standard is basically an objective one whether plaintiff knew or should have known of sufficient facts to start the statute of limitations running.” The Appellate Division did not need a hearing to determine when the buyer had “sufficient knowledge of injury and [of] the culpable party to trigger an accrual date.” It found undisputed that the buyer did not discover “that the active termite infestation was not properly treated and repaired” until September 30, 1997. The Court believed that the buyer “could not have reasonably known on September 15, 1997, when she closed, that termites still remained.” Consequently, the September 19, 2003 filing was within the six-year statute of limitations.


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