Court Holds Two-Year Statute of Limitations Not Applicable to an Agent’s Obligation to a Buyer

In William L. Lyon & Associates, Inc. v. Superior Court (Henley), a California Appellate Court recently held that the two-year statute of limitations set forth in Civil Code §2079 does not apply to claims brought by buyers against a dual agent.  The Court also held that the two-year statute of limitations on the buyer-broker agreement are subject to the discovery rule.

In William L. Lyon, Henley sued William L. Lyon and their agent, as well as sellers arising out of defects in the paint and stucco of the home they purchased.  The Henleys bought the house after signing a buyer-broker agreement that gave Lyon and the agent the exclusive right to represent them.  Lyon acted as a dual agency in the transaction.  The buyer-broker agreement included a two-year statute of limitations.  The Henleys subsequently discovered construction defects, which caused them to file suit.  They later amended their complaint to include Lyon.  They alleged breach of contract, negligence, fraud, breach of fiduciary duty and negligent non-disclosure defect claims.  The seller cross-complained against Lyon for negligence, breach of fiduciary duty, breach of contract and indemnity.  Lyon filed a motion for summary judgment pursuant to Civil Code Section §2079.4 contending that the Henleys’ claims were barred by the two-year statute of limitations.  The court deemed the limitation period tolled pending mediation between the parties.  As to the sellers, the court concluded that the buyers’ claims were based on duties owed exclusively to the sellers were timely filed.  Lyon petitioned for a writ of mandate asking the appellate court to review the decision.  The court of appeal denied the petition holding that the trial court did not err in denying the motion for summary judgment, but the court of appeal affirmed the decision for different reasons.

The court of appeal held that Civil Code §2079.4 did not apply because it imposed statutory duties on a listing agent to the buyer, but in this case, the Henleys had asserted breach of fiduciary duty claims based on Lyon’s obligation as their agent.  The Court therefore, determined that the statute of limitations period set forth in Civil Code §2079.4 did not apply to the Henleys’ claims against Lyon.  The court concluded that the Henleys’ breach of contract claim set forth in the buyer-broker agreement would apply based on the discovery rule.  That limitation period would begin to run when the buyers discovered the malfeasance.

The Court reiterated that the statute of limitations is as follows:  breach of fiduciary duty – four year; fraud – three year; negligence – two year.  Negligent misrepresentation could be two years if it is truly a negligence claim or three years if it is a fraud claim.

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