Fraud Scienter Clarified and Disclosure Act Accrual Fixed at Closing: The Idaho Supreme Court’s Dual Holdings in VanRenselaar v. Batres

Introduction

In VanRenselaar v. Batres, the Idaho Supreme Court addressed recurring problems at the intersection of residential real estate transactions, statutory seller disclosures, and common-law fraud. After purchasing a 1939 home from Gabriel and Maria Batres, Daniel and Theresa VanRenselaar discovered significant structural and permitting issues that contradicted representations on the statutorily required property condition disclosure form.

The buyers sued three years after closing, alleging fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of the Idaho Property Condition Disclosure Act (the “Disclosure Act”), Idaho Code §§ 55-2501 to -2524. A jury found for the buyers on all but the covenant claim and awarded $63,024 in damages. Post-trial, the district court dismissed the Disclosure Act claim as time-barred under a three-year statute, but upheld the fraud verdict.

On appeal, the Court:

Clarified Idaho’s fraud scienter element: the fourth element is satisfied by knowledge of falsity or ignorance of truth (including reckless disregard), not just actual knowledge of falsity.
Set a clear accrual rule for Disclosure Act claims: they accrue at closing, when the buyer is first damaged; the applicable limitations period is three years under Idaho Code § 5-218(1) (liability created by statute).
Affirmed the fraud verdict (timeliness and sufficiency) and left the damages undisturbed, noting the jury attributed all damages to fraud.
Deemed the contract claim issues moot (no effect on damages) and corrected the attorney fee framework, holding that the parties’ PSA’s broad fee clause requires a claim-by-claim prevailing party analysis; buyers get fees below and on appeal.

Summary of the Opinion

The Idaho Supreme Court affirmed in part, reversed in part, and remanded:

Fraud claim: Not time-barred; substantial evidence supports the verdict. The buyers discovered the facts constituting fraud only after the City of Nampa’s post-closing inspection revealed structural defects and unpermitted work. The Court clarified that Idaho’s fourth fraud element is satisfied by knowledge of falsity or ignorance of truth (recklessness), aligning with longstanding Idaho precedent.
Disclosure Act claim: The three-year statute for “liability created by statute” (§ 5-218(1)) applies, not the five-year written contract statute. However, accrual is at closing because only then do buyers suffer damages; the district court erred in starting the clock upon delivery of the disclosure form. The claim was timely and is reinstated.
Breach of contract: Issues declared moot; the jury awarded a single damages figure and expressly allocated all damages to fraud. Any ruling on contract would not alter the result.
Damages: The verdict stands. The jury followed the no-double-recovery instruction and specified the entire $63,024 was for fraud.
Attorney fees: The district court abused its discretion in denying buyers’ fees. Under the PSA’s broad “in any way connected with this Agreement” clause, fees are awarded on a claim-by-claim basis. Buyers are entitled to trial-level fees on the claims they prevailed on, and fees and costs on appeal.

Detailed Analysis

Precedents Cited and Their Role

I.C. § 5-218(4) (Fraud SOL and discovery rule). Fraud claims accrue upon “discovery of the facts constituting the fraud.” The Court applied this rule to hold the fraud claim timely.
DBSI/TRI V v. Bender, 130 Idaho 796 (1997) and Nerco Mins. Co. v. Morrison Knudsen Corp., 140 Idaho 144 (2004): Both cases illustrate when information in hand supplies “sufficient suspicion” or circumstantial evidence such that reasonable diligence would reveal fraud (starting the limitations period). The Court distinguished these commercial settings from a residential real estate purchase with latent defects and a limited pre-sale inspection.
Lindberg v. Roseth, 137 Idaho 222 (2002): A home inspection does not bar a fraud action where latent defects exist. This anchored the Court’s conclusion that the buyers did not discover the fraud until post-closing municipal inspections.
Davis v. Tuma, 167 Idaho 267 (2020): Recorded instruments are not per se constructive notice for limitations purposes, though they inform what due diligence could reveal. The Court declined to impute pre-closing notice from permit records to these buyers.
Frontier Dev. Grp., LLC v. Caravella, 157 Idaho 589 (2014) and Jenkins v. Boise Cascade Corp., 141 Idaho 233 (2005): Establish the correct fourth fraud element: knowledge of falsity or ignorance of truth. The Court explicitly “clarified” Idaho law to favor this formulation.
Parker v. Herron, 30 Idaho 327 (1917): Historic Idaho recognition that recklessness (representations made without knowledge of truth or falsity) suffices for fraud scienter.
Bolognese v. Forte, 153 Idaho 857 (2012) and the Disclosure Act, I.C. §§ 55-2507, -2511: Address the Disclosure Act’s “actual knowledge” focus for statutory misstatements. The Court carefully separated this statutory standard from common-law fraud’s broader scienter.
Corner Post, Inc. v. Board of Governors of the Federal Reserve System, 603 U.S. 799 (2024), and Gabelli v. SEC, 568 U.S. 442 (2013): Articulate accrual principles: a right accrues when the plaintiff has a complete and present cause of action. Used to anchor the conclusion that Disclosure Act claims accrue at closing, when damages first exist.
Path to Health, LLP v. Long, 161 Idaho 50 (2016); Sumpter v. Holland Realty, 140 Idaho 349 (2004); and Dep’t of Health & Welfare v. Beason, 173 Idaho 672 (2024): Provide the tort-versus-contract framework for choosing the right statute of limitations. The Court applied these to classify the Disclosure Act remedy as a statutory liability governed by § 5-218(1).
Humphries v. Becker, 159 Idaho 728 (2016) and Restatement (Second) of Torts § 531: Support that buyers may rely on property condition disclosure forms; sellers have reason to expect reliance.
Standards cases for directed verdict/JNOV and substantial evidence: Pocatello Auto Color v. Akzo Coatings, 127 Idaho 41 (1995); Streamline Builders, LLC v. Chase, 174 Idaho 765 (2024); Genho v. Riverdale Hot Springs, 174 Idaho 894 (2024); Reding v. Reding, 141 Idaho 369 (2005). These frame the appellate lens: no reweighing; reasonable minds standard.
Attorney fee framework: Sunnyside Park Utilities, Inc. v. Sorrells, 568 P.3d 820 (Idaho 2025); McOmber v. Thompson, 572 P.3d 736 (Idaho 2025); Tricore Invs., LLC v. Estate of Warren, 168 Idaho 596 (2021). These decisions underpin the contract-based, claim-by-claim fee entitlement under broad “in any way connected with” clauses.

Legal Reasoning

1) Fraud limitations: discovery, diligence, and the residential setting

The sellers contended the fraud claim was untimely because the buyers received a pre-sale inspection report and observed some issues while renting before closing. The Court reiterated Idaho’s discovery rule for fraud: the period starts upon discovery of facts constituting fraud, which requires more than suspicion.

Key factual points guided the analysis:

The pre-sale inspection did not reveal the attic conversion’s noncompliance or the kitchen addition’s foundational deficiencies. It flagged only limited attic access and acceptable foundation performance.
City of Nampa inspectors later identified structural flaws and permitting problems not apparent to the buyers (or to an ordinary home inspector) before closing.
Awareness of unrelated missteps (e.g., misinstalled water heater) did not place buyers on notice of latent structural defects with the attic or kitchen addition.

Distinguishing Bender and Nerco (commercial contexts with audit and engineering reports triggering inquiry notice), the Court emphasized Lindberg’s residential rule: inspections do not bar fraud claims for latent defects. The record did not justify imputing earlier discovery; the fraud claim filed June 29, 2020 was within three years of the spring 2018 municipal inspection discoveries.

2) The clarified fourth element of fraud: “knowledge of falsity or ignorance of truth”

Recognizing inconsistent formulations in Idaho decisions, the Court “took the opportunity to clarify” that using only “knowledge of falsity” is incomplete. The correct articulation is: the speaker’s knowledge of falsity or ignorance of truth, including reckless disregard. This aligns with Frontier Dev. Group, Jenkins, and Parker, and promotes candor in disclosure practice.

Importantly, the Court separated this common-law scienter standard from the Disclosure Act’s “actual knowledge” architecture: one may commit fraud by recklessly asserting facts without knowing their truth, but a Disclosure Act violation focuses on statements “actually known” to the transferor to be erroneous, and on the act’s willful or negligent failure duties. The two regimes coexist but employ different knowledge thresholds.

3) Substantial evidence supported fraud on all three misrepresentations

The jury found fraud in three statements on the disclosure form:

“Have any substantial additions or alterations been made without a building permit?” The record permitted inferences that major work (attic conversion, kitchen addition) lacked permits and would not have passed inspections; the sellers’ equivocation on inspections, inability to produce contractor receipts, and evidence of owner-performed work (e.g., water heater, carport permit listing seller as builder) supported an inference of at least ignorance of truth. Intent to induce reliance was bolstered by the statutory structure permitting rescission based on disclosures and by the intended function of the form per Humphries.
“Are there any structural problems with the improvements?” Evidence from the architect (undersized members, missing stringers, unsafe attic living space, kitchen add-on not anchored to foundation) and the sellers’ own inability to justify “no” responses allowed the jury to find ignorance of truth or reckless disregard, satisfying scienter.
“Are there any structural problems with the foundation?” Testimony regarding missing rim joists, untreated sill plates, lack of anchor bolts for the kitchen addition, and the seller’s asserted role in building the kitchen supported a finding of at least ignorance of truth when asserting “no foundation problems.”

Because appellate review asks only whether substantial evidence supports the verdict (not whether clear and convincing evidence compels it), the Court refused to reweigh credibility or conflicts. The verdict stands.

4) Disclosure Act: the correct statute of limitations and a new accrual rule

Two distinct timing rulings govern Disclosure Act claims:

Which statute applies? The Court held that the three-year statute for “liability created by statute,” Idaho Code § 5-218(1), governs. Unlike the Path to Health setting (statutory duties attaching to an existing contract), the Disclosure Act imposes independent statutory duties on “any person who intends to transfer” residential property; liability depends on the statute, not the contract. The five-year written-contract statute (§ 5-216) does not apply.
When does the claim accrue? The Court set an important, clear rule: a Disclosure Act claim accrues at closing, because that is when buyers sustain damages. Until then, damages are speculative; financing may fail, contingencies may not clear, and a seller’s duty to amend (I.C. § 55-2513) continues to operate. Relying on Corner Post and Gabelli, the Court reasoned that a cause of action accrues when the plaintiff has a complete and present claim. Here, that is at the moment of closing, not upon delivery of the disclosure form or expiration of the rescission window.

Applying these principles, the buyers’ Disclosure Act claim (filed June 29, 2020) was timely because it accrued at the June 29, 2017 closing.

5) Contract claim issues are moot

The jury awarded the same damages for fraud, contract, and Disclosure Act, but explicitly allocated all of the $63,024 to fraud in response to a specific verdict question. Because the Court affirmed the fraud verdict and damages, any ruling on the contract claim could not change the outcome. The Court therefore declined to reach the contract-instruction and sufficiency arguments.

6) Damages allocation stands despite post-trial dismissal of the Disclosure Act claim

Even before the Court reinstated the Disclosure Act claim, the damages verdict would stand. The jury followed a no-double-recovery instruction and expressly pegged the entire award to fraud. Thus, equal damages on multiple theories posed no risk of an improper stacking or indeterminate allocation.

7) Attorney fees: broad PSA clause triggers claim-by-claim fees

The parties’ PSA contained a broad fee clause awarding fees to the “prevailing party” in any proceeding “in any way connected with this Agreement,” including on appeal. The district court erred by treating prevailing party under Rule 54 globally and by discounting the buyers’ mixed results.

Citing Sunnyside Park Utilities, McOmber, and Tricore, the Court held that such a broad clause requires a claim-by-claim prevailing party analysis tied to the contract language, not Rule 54’s all-or-nothing, action-as-a-whole approach. Under that standard, the buyers prevailed on claims connected with the PSA and are entitled to trial-level fees (amount to be determined on remand) and appellate fees and costs.

Impact and Forward-Looking Implications

Fraud scienter aligned and clarified: Idaho practitioners should now treat the fourth element as satisfied by knowledge of falsity or ignorance of truth, including reckless indifference. This both harmonizes Idaho case law and lowers the bar from “actual knowledge of falsity” to the historically correct standard, reinforcing the duty to avoid careless affirmative statements.
Disclosure practices recalibrated: Sellers and agents should avoid checking “no” when they do not actually know the fact to be true. The safer, candid course is to check “do not know” and provide context, or investigate before answering. The Court expressly rejected the incentive to answer “no” when uncertain.
Accrual at closing extends buyer protection window: Because Disclosure Act claims accrue when the sale closes, buyers now have a clear, predictable three-year period beginning at closing to sue for statutory disclosure violations. Pre-closing delivery of the disclosure form no longer truncates the limitations clock.
Reliance on disclosure forms reaffirmed: Disclaimers in the form (lack of specialized knowledge) do not negate reliance; the form is meant to be relied upon and even supports rescission rights. Sellers should anticipate reliance and answer accordingly.
Permit records and diligence: The absence (or opacity) of public permitting records is not per se constructive notice under Idaho law. However, such records can inform what reasonable diligence would reveal. Buyers’ counsel should calibrate diligence expectations accordingly.
Verdict form design matters: Asking the jury to allocate damages to each theory (as here) insulates verdicts on appeal if a theory falls away post-trial. This opinion endorses clean allocation and no-double-recovery instructions.
Attorney fees strategy: Under broad fee clauses, litigants should brief and seek fees on a claim-by-claim basis for claims “in any way connected with” the agreement. Failure to apportion strictly between contract and tort is not fatal where the contract language is broad and the claims are connected.

Complex Concepts Simplified

Discovery rule (fraud): The limitations period starts when the plaintiff discovers, or should reasonably discover, the facts constituting fraud—not when they merely suspect something is wrong.
Accrual vs. discovery: “Accrual” marks the moment when a claim is complete and suit can be filed (usually when damages occur). Some statutes (like fraud) alter this by tying accrual to discovery. The Disclosure Act has no discovery rule; thus the Court used general accrual principles to fix the moment of damage at closing.
Statutory liability vs. contract claim: If a duty exists because of a statute (like the Disclosure Act) and not because the parties promised it in their contract, the action is one “upon a liability created by statute” subject to § 5-218(1)’s three-year period.
Fraud scienter clarified: It is enough that the speaker either knew the statement was false or did not know whether it was true (reckless ignorance). Idaho no longer accepts a truncated “knowledge of falsity” articulation.
Directed verdict/JNOV standard: Appellate courts view the evidence in the light most favorable to the verdict winner and ask only if substantial evidence could support the verdict; they do not reweigh credibility.
Mootness: If a court ruling would not change the parties’ rights or the relief awarded, the issue is moot and will not be decided.
Prevailing party—contract vs. Rule 54: Under a broad contractual fee clause, courts determine prevailing status claim-by-claim for covered claims, rather than using Rule 54’s overall, action-wide approach.

Conclusion

VanRenselaar v. Batres is a consequential real estate and tort decision that does three things of lasting importance. First, it clarifies Idaho’s fraud scienter: a defendant commits fraud by making material assertions with knowledge of falsity or with ignorance of their truth, including reckless indifference. Second, it confirms that Disclosure Act claims are governed by the three-year statute for statutory liabilities but, crucially, do not accrue until closing, when buyers first suffer damages. Third, it reinforces the primacy of contract language in fee awards: broad “in any way connected with this Agreement” clauses require claim-by-claim prevailing party determinations.

Practically, the opinion incentivizes careful, accurate seller disclosures and empowers buyers to rely on the statutory form and pursue timely remedies for latent defects. It also supplies clear guidance for trial lawyers on limitations, verdict-form design, and fee recovery strategies. In short, the Court both harmonized Idaho’s fraud doctrine and provided a predictable accrual rule for Disclosure Act claims—developments that will shape disclosure disputes and fraud litigation across Idaho’s residential real estate market.