Suspension of Prescription in Redhibition Suits: Jordan v. Equitable Relocation Management Corporation

Introduction

Thomas William Jordan and Patricia Smith JORDAN v. EMPLOYEE TRANSFER CORPoration and Equitable Relocation Management Corporation is a landmark case adjudicated by the Supreme Court of Louisiana on June 22, 1987. This case centers around a redhibition suit filed by the Jordans against their home sellers, involving significant issues related to the statute of limitations (prescription) and the disclosure of latent defects in the property.

The primary parties involved are Thomas and Patricia Jordan, the plaintiffs, and Employee Transfer Corporation along with Equitable Relocation Management Corporation, the defendants. The core legal issues pertain to the timing of the discovery of a redhibitory defect (structural damage and water leakage in the property) and whether the statute of limitations was correctly applied given the defendants' alleged bad faith in withholding critical information.

Summary of the Judgment

The Jordans purchased a property from Employee Transfer Corporation, which later became Equitable Relocation Management Corporation. After experiencing repeated water damage in their den, the Jordans discovered that the property had underlying structural issues not disclosed at the time of sale. The Jordans filed a redhibition suit to rescind the sale and seek damages a year after the purchase. The trial court and the court of appeal upheld the defendants' argument that the statute of limitations had expired. However, the Supreme Court of Louisiana reversed this decision, ruling that the defendants' failure to disclose known defects constituted bad faith, thereby suspending the running of the prescription period until the plaintiffs discovered the defects. Consequently, the Jordans filed the suit within the acceptable timeframe, and the case was remanded for a decision on the merits.

Analysis

Precedents Cited

The judgment extensively discusses several precedents that shape the court’s reasoning:

Lee v. Equitable Life Assurance Society of the United States (1980): This case established that notice sufficient to alert a party to potential issues can trigger the start of the prescription period.
CARTWRIGHT v. CHRYSLER CORPORATION (1970): Clarified that prescription begins when a plaintiff has actual knowledge of the facts that entitle them to sue, emphasizing that mere suspicion is inadequate unless it is combined with reasonable diligence.
YOUNG v. CLEMENT (1979) and Cordova v. Hartford Accident Indemnity Co. (1980): These cases refined the understanding of “notice,” highlighting that prescription does not commence if the plaintiff's ignorance is not willful and does not result from negligence.
GRIFFIN v. KINBERGER (1987): Reinforced the notion that prescription is contingent upon the reasonableness of the plaintiff’s actions in recognizing and acting upon potential damages.

Legal Reasoning

The crux of the Supreme Court’s reasoning lies in the intersection of bad faith disclosure by the defendants and the commencement of the statute of limitations. Under Louisiana Civil Code 2534, redhibition suits must typically be filed within one year of the sale. However, if the seller knowingly conceals defects, bad faith is established, suspending the running of this limitation period until the defect is discovered by the purchaser.

In this case, Key, the realtor, failed to disclose the Maroney report detailing structural damage, despite having access to it. This omission constituted bad faith, thereby suspending the prescription period. The court assessed that the Jordans did not discover the true extent of the defects until December 1, 1982, ensuring that their suit was filed within an acceptable timeframe from discovery, not from the date of sale. The Supreme Court emphasized that prescription should not prematurely bar legitimate claims, especially when negation arises from the seller’s misconduct.

Impact

This judgment has significant implications for redhibition suits and property transactions in Louisiana. It establishes that sellers must disclose known defects to avoid inducing bad faith claims, which can suspend limitation periods. Additionally, it refines the understanding of when the statute of limitations begins, focusing on the discoverability of the defect rather than the date of sale. This protects buyers from latent defects and ensures that they have ample time to recognize and act upon such issues without being unfairly barred by prescription.

Moreover, the case clarifies the level of diligence required from plaintiffs to discover defects, highlighting the balance between preventing fraudulent concealment and avoiding unreasonable delays in litigation. Future cases will reference this decision when determining the start of prescription periods in scenarios involving non-disclosure or concealment of material facts.

Complex Concepts Simplified

Redhibition Suit

A redhibition suit is a legal action in Louisiana that allows a buyer to rescind a property sale or seek damages if the property has hidden defects (redhibitory vices) that render it unfit for its intended use or significantly diminish its value.

Prescription (Statute of Limitations)

Prescription refers to the legal timeframe within which a lawsuit must be filed. After this period elapses, the claim is barred. In this case, the prescription period is typically one year from the date of sale unless suspended due to the seller's bad faith.

Bad Faith

Bad faith in legal terms refers to dishonesty or intentional withholding of critical information. Here, the defendants’ failure to disclose known defects in the property constituted bad faith.

Suspension of Prescription

Suspension of prescription means pausing the running of the limitation period. In this case, the prescription period did not start running until the Jordans discovered the property’s defects, not from the date of sale.

Conclusion

The Supreme Court of Louisiana’s decision in Jordan v. Equitable Relocation Management Corporation underscores the judiciary’s commitment to fairness in property transactions. By recognizing the defendants' bad faith in concealing defects, the court ensured that the Jordans were afforded adequate time to seek justice without being constrained by rigid prescription deadlines. This case serves as a critical precedent for redhibition suits, highlighting the necessity for transparency in sales and the protection of buyers against undisclosed property flaws. Legal practitioners and property buyers alike should heed the principles established in this judgment to navigate the complexities of property law effectively.

Ultimately, this ruling reinforces the importance of due diligence and honest disclosure in real estate transactions, ensuring that parties are not unfairly disadvantaged by latent defects or procedural technicalities.