Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am
In Gust, Rosenfeld & Henderson v. Prudential Ins. Co. of Am., 182 Ariz. 586, 588, 898 P.2d 964, 966 (1995), Rosenfeld, that law firm leased office space and was given a "most favored nation" clause in its lease that "entitled Gust to receive as good a deal on rent and other allowances as any tenant who signed a lease at any time up until the building was eighty-five percent occupied." Id. at 587, 898 P.2d at 965.
Later that year, another law firm, Snell & Wilmer, entered a contract with the landlord that contained terms more favorable than those in the Gust, Rosenfeld lease.
Three years later, Gust, Rosenfeld developed a suspicion that Snell & Wilmer had a more favorable lease, and so it asked the leasing agent, but it was assured that nothing had changed such that Gust, Rosenfeld's most-favored-nation clause could have been invoked.
Approximately seventeen years after Snell & Wilmer had signed its more favorable lease, however, Gust, Rosenfeld became aware of it and brought an action against the landlord, Prudential Insurance Company. Prudential raised the statute-of-limitations defense since more than six years had passed since the breach had occurred. Id. at 588, 898 P.2d at 966.
The trial court applied the discovery rule, and the jury determined that the statute of limitations did not bar Gust, Rosenfeld's claim.
The Arizona Supreme Court granted review to determine whether the discovery rule may apply to breach-of-contract actions.
The court opined that "the rationale behind the discovery rule is that it is unjust to deprive a plaintiff of a cause of action before the plaintiff has a reasonable basis for believing that a claim exists." Id. at 589, 898 P.2d at 967.
It reasoned that, because the rule's rationale "relates more to the circumstances under which a legal duty is breached and less to the nature of the cause of action, we believe Arizona courts should be able to apply the rule to appropriate cases in contract as well as in tort." Id. at 590, 898 P.2d at 968.
The breach involved a private transaction between Prudential's predecessor and a third party.
The conduct was difficult for Gust to detect because Gust was not a party to it.
The leasing agent was in a position of superior knowledge and had a full opportunity to know that its conduct constituted a breach of the lessor's contractual duty to Gust.
These are the circumstances under which application of the discovery rule is most warranted. Id.