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Sumpter v. Holland Realty, Inc.: Statute of Limitations Does Not Bar Buyer's Lawsuit

Idaho's highest court has considered whether the state's two year statute of limitations for professional malpractice governed allegations made by buyers against a real estate licensee.

In 1998, Douglas and Pamela Sumpter ("Buyers") entered into an exclusive buyer representation agreement with Holland Realty, Inc. ("Brokerage") and the Brokerage's representative, Cheryl Wettstein ("Salesperson"). The Buyers purchased a vacant lot and retained a builder ("Builder") allegedly recommended by the Salesperson to build a home on the property. The Builder constructed the home, but failed to pay his suppliers for building materials during construction. Following the completion of construction, the Builder filed for bankruptcy and the suppliers filed mechanics liens against the property, resulting in litigation between the Buyers and the suppliers.

In 2002, the Buyers filed a lawsuit against the Brokerage and the Salesperson. The Buyers alleged that the Salesperson breached her contractual duties to the Buyers by the following: failing to inform them that the Builder had financial difficulties; informing that they could not purchase title insurance to protect against lien claims; and failed to inform that they should seek professional advice about the need to obtain lien protection. The trial court dismissed the lawsuit, finding that the statute of limitations for actions alleging professional malpractice was two years and so the action filed by the Buyers was not timely filed. The Buyers appealed the trial court's ruling.

The Supreme Court of Idaho reversed the trial court, finding that the real estate licensees do not render "professional services" in the manner intended by the state's statute of limitations. The statute of limitations does not define "professional services", and so the court looked elsewhere to help define the legislature's intent in using the words "professional services" in the statute of limitations.

The court found two instances where the legislature has defined the term "professional services", namely in the creation of a "professional service corporation" and a "professional service limited liability company". In both cases, the statutes list a number of occupations as rendering professional services and both lists of occupations are identical but neither list includes real estate services. The court also noted that both lists included professions which generally required some type of apprenticeship or advanced education, such as a medical services or legal services.

The court rejected the argument by the Brokerage and the Salesperson that because the state regulates real estate services and requires a license, these services are necessarily professional services. The court found that obtaining a real estate license only required a high school education and 90 hours of education. Since these requirements were not equivalent to the requirements for the other occupations listed under the definition of "professional services", the court determined that real estate services did not qualify as professional services. Thus, the court reversed the trial court's dismissal of the Buyers' lawsuit and ruled that a four year statute of limitations applied.

The court's ruling allowed the Buyers lawsuit to proceed because the Buyers had filed this lawsuit within four years of the alleged breaches. A final issue for the court to consider was whether the trial court had correctly looked to the professional malpractice statute of limitations, as that is tort-based statute of limitation while the Buyers had alleged breach of contract in their complaint. The court stated that the trial court had correctly analyzed the Buyers' complaint, as the contractual duties serving as the basis of the Buyers' allegations were also statutory duties. The complaint was based on the following duties found in the Idaho real estate license statutes: exercise of reasonable care; promotion of the best interests of his/her client; disclosure of adverse facts to the client; to conduct a reasonable investigation of the property; and, when appropriate, to advise the client to obtain reasonable inspections or to seek the applicable professional advice (legal, tax, etc.). Since the duties described in the lawsuit were statutory and not contractual, the court ruled that the lower court had properly construed the Buyers' lawsuit as sounding in tort. Therefore, the court ruled that the four year statute of limitations applied to this lawsuit, not the statute of limitations for breach of contract allegations.

Sumpter v. Holland Realty, Inc., 93 P.3d 680 (Idaho 2004).