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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Hutton v. Realty Executives, Inc. (12/22/00) sp-5351

Hutton v. Realty Executives, Inc. (12/22/00) sp-5351

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.


                              )    Supreme Court No. S-9369
             Appellants,      )
                              )    Superior Court No.
     v.                       )    3AN-99-3896 CI
formerly HRT REAL ESTATE,     )
             Appellees.       )    [No. 5351 - December 22, 2000]

          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                        John Reese, Judge.

          Appearances:  John A. Treptow, Jahna M.
          Lindemuth, Dorsey & Whitney, LLP, Anchorage,
for Appellants.  Robert C. Auth, Lane, Powell, Spears, Lubersky,
LLP, Anchorage, for Appellees.

          Before:   Matthews, Chief Justice, Eastaugh,
          Fabe, Bryner, and Carpeneti, Justices.  

          MATTHEWS, Chief Justice.

          Peter and Nancy Hutton purchased real estate in February
1992.  In February 1997 they discovered that the real estate
violated zoning laws.  They filed suit against the seller's listing
agents in January 1999.  The trial court dismissed the complaint on
statute of limitations grounds.  The Huttons appeal.  Because the
issue of when the Huttons should have known of the zoning problem
is a question of fact, we reverse and remand.
          In February 1992 Peter and Nancy Hutton purchased a nine-
unit income property from the State of Alaska. [Fn. 1]  Realty
Executives, Inc., (formerly HRT Real Estate, Inc.) and Curtis L.
Nading (collectively Realty) were the state's listing agents
responsible for the sale.  Realty represented to the Huttons that
the property was a nine-unit apartment complex.  The Huttons do not
claim that Realty made any representations regarding how the
property was zoned.
          In February 1997 the Huttons attempted to refinance the
property through Northrim Bank.  Northrim Bank had an independent
appraisal performed.  The appraisal showed that the nine-unit
complex violated Anchorage zoning regulations, which permitted only
eight units on their lot. [Fn. 2]  Because the property violated
zoning laws, Northrim Bank denied the Huttons' application for
refinancing.  The Municipality of Anchorage denied the Huttons'
request for a variance and ordered the Huttons to convert the
property into an eight-unit complex to comply with zoning laws. 
The Huttons sold the property in 1998 at a loss.
          On January 20, 1999, the Huttons filed suit against
Realty, alleging negligent misrepresentation and a breach of its
professional duty to inform the Huttons of the property's zoning
problems. Realty moved to dismiss on statute of limitations
grounds, as seven years had passed since the sale of the property.
The trial court granted the motion to dismiss in July 1999.  The
Huttons appeal.
          We review an order dismissing a complaint for failure to
state a claim de novo. [Fn. 3]  "If, within the framework of the
complaint, evidence may be introduced which will sustain a grant of
relief to the plaintiff, the complaint is sufficient." [Fn. 4]  The
failure to file a complaint within the statute of limitations is
grounds for a Civil Rule 12(b)(6) motion to dismiss. [Fn. 5]
          The Huttons argue that the trial court incorrectly
applied the statutes of limitations, in violation of the discovery
rule. [Fn. 6]  Realty argues that the Huttons are charged with
constructive knowledge of the zoning laws as of the date of
purchase of the property, thus the statutes of limitations bar this
          The Huttons' claim of negligent misrepresentation is a
tort claim, subject to a two-year statute of limitations. [Fn. 7] 
The claim of breach of professional duty arises in part from
contract and, because the Huttons' cause of action accrued before
April 7, 1997, is governed by a six-year statute of limitations.
[Fn. 8]  As the property was sold in February 1992, and the claim
was brought in January 1999, the statutes of limitations bar the
Huttons' claims unless the discovery rule applies.
          Under the traditional rule, a cause of action accrues at
the time of the injury. [Fn. 9]  In Greater Area Inc. v. Bookman,
we adopted the discovery rule: the statute of limitations does not
begin to run until the plaintiff discovers, or reasonably should
discover, the existence of all the elements of his or her cause of
action. [Fn. 10]  For both causes of action, the critical question
is when should the Huttons have been aware of the zoning violation? 

          Realty argues that the Huttons should have known of the
zoning violation as of the date of the real estate purchase,
because the Huttons are charged with constructive knowledge of the
law.  As a general rule, people are presumed to know the law. [Fn.
11]  "This Court is not unmindful of the presumption that a person
contracts with reference to the liability imposed by the law, and
is presumed to have knowledge of it and to govern himself
accordingly in such contracts as he may choose to make." [Fn. 12] 
          But constructive knowledge cannot be used to bar cases
arising out of a professional relationship, where plaintiffs claim
that they have relied on a professional to impart the knowledge
which the professional now asserts the plaintiffs should have
possessed constructively.  One case in which this point arose was
Breck v. Moore. [Fn. 13]  There the Moores sued their attorney for
professional negligence associated with a real estate transaction.
[Fn. 14]  The attorney had not advised the Moores that there were
building restrictions on the property. [Fn. 15]  Although the
restrictions were attached to the Moores' title insurance policy,
which was given to the Moores soon after the closing, they did not
read the restrictions. [Fn. 16]  We affirmed the trial court's
application of the discovery rule, concluding that it was
reasonable for the Moores to rely on their attorney to review the
documents and advise them of any restrictions, even though the
documents were in their possession. [Fn. 17] 
          Similarly, in Moore v. Allstate Insurance Co., we
reversed a trial court's dismissal of claims against an insurance
company because the discovery rule tolled the statute of
limitations. [Fn. 18]  There, Moore had purchased flood insurance
that would cover the full replacement value of the house. [Fn. 19] 
However, she was ultimately awarded only forty percent of the
home's value because of a provision of federal law of which she was
unaware. [Fn. 20]  We rejected the argument that, because Moore was
a legal secretary in the insurance industry, she could have looked
in the Federal Register and learned that she would not be entitled
to full replacement value. [Fn. 21]  There was no reason that Moore
should have discovered her claims until she received the lower
award because she was entitled to rely on her broker's
representations, rather than do research on her own. [Fn. 22]
          These cases show that in situations where a plaintiff is
advised by a professional such as an attorney or insurance agent,
constructive knowledge will not necessarily trigger the running of
a statute of limitations.  In the present case, the defendants are
a real estate agent and agency.  They are similarly unable to use
constructive knowledge as a matter of law as a basis to dismiss
claims of misrepresentation and professional negligence based on a
limitations defense.  
          The question of when the Huttons should have known of
their zoning problem is one of fact, not properly resolved on a
Rule 12(b)(6) motion to dismiss.
          We hold that constructive knowledge does not, as a matter
of law, bar claims for misrepresentation or breach of professional
duty, where the subject of the constructive knowledge is the same
subject about which the defendants allegedly had a professional
duty to advise the plaintiffs.  The question of when the Huttons
should have known that their property was in violation of zoning
laws is a factual one which needs to be decided.  We therefore
REVERSE the superior court's decision and REMAND for proceedings
consistent with this opinion.


Footnote 1:

     All facts alleged in the complaint are accepted as true for
the purposes of this appeal from an Alaska Civil Rule 12(b)(6)
dismissal.  See Shooshanian v. Wagner, 672 P.2d 455, 461 (Alaska

Footnote 2:

     See Anchorage Municipal Code 21.40.045 (1999).

Footnote 3:

     See Kollodge v. State, 757 P.2d 1024, 1026 n.4 (Alaska 1988).

Footnote 4:

     Id. at 1026.

Footnote 5:

     See Toney v. City of Anchorage Police Dep't, 950 P.2d 123,
124, 126 (Alaska 1997).

Footnote 6:

     The Huttons also argue that the trial court inappropriately
decided the merits of their claim.  Because we reverse the trial
court's decision on statute of limitations grounds, we do not
address this claim.

Footnote 7:

     See AS 09.10.070(a); see also Austin v. Fulton Ins. Co., 444
P.2d 536, 539 (Alaska 1968) ("Misrepresentation and negligence are
tort concepts, not contract, and the two-year statute of limitation
respecting torts governs in this instance.").

Footnote 8:

     See AS 09.10.050; Lee Houston & Assocs. v. Racine, 806 P.2d
848, 854 (Alaska 1991).  In 1997, AS 09.10.053 was enacted,
creating a three-year statute of limitations for actions based on
contract.  That statute does not govern this case because it
applies only to causes of action that accrue on or after August 7,

Footnote 9:

     See Pedersen v. Zielski, 822 P.2d 903, 906 (Alaska 1991).

Footnote 10:

     657 P.2d 828, 829 (Alaska 1982).

Footnote 11:

     See Ferrell v. Baxter, 484 P.2d 250, 265 (Alaska 1971).

Footnote 12:

     Schlothan v. Einstoss, 17 Alaska 253, 262 (D. Alaska Terr.
1957) (internal quotations omitted).

Footnote 13:

     910 P.2d 599 (Alaska 1996).

Footnote 14:

     See id. at 601. 

Footnote 15:

     See id. at 602.

Footnote 16:

     See id.

Footnote 17:

     See id. at 605-06.

Footnote 18:

     995 P.2d 231, 239 (Alaska 2000).

Footnote 19:

     See id. at 232.

Footnote 20:

     See id. at 233.

Footnote 21:

     See id. at 239.

Footnote 22:

     See id.