Recently, the United States District Court for the Western District of Pennsylvania relied on the statute of limitations to dismiss claims related to allegedly improper transactions involving real estate. Although the statute of limitations is an affirmative defense, it can be asserted in a motion to dismiss if the defense clearly appears on the face of the complaint and the complaint demonstrates that the claims were filed beyond the applicable time period.

In this case (PR Liquidating Trust v. W. Land Servs.), the defendants relied on the statute of limitations to seek dismissal of a 2020 lawsuit arising out of their allegedly-improper acquisition of real estate in 2009. Essentially, the plaintiff claimed that one defendant improperly used the plaintiff’s money to buy property that it did not convey to the plaintiff but, instead, transferred to a related defendant.

The defendants moved to dismiss the case because the property at issue was conveyed by way of deeds recorded in 2009 and the relevant statutes of limitations for the asserted claims were two years, four years and five years. The plaintiff responded by urging the court to apply the discovery rule and toll the statutes of limitations until the date when the plaintiff knew or reasonably should have known of the claims, which, per the plaintiff, was within the relevant time periods.

contractUltimately, the court declined to apply the discovery rule, relying on the fact that the deeds were recorded in 2009. “In Pennsylvania, the recording of a deed gives constructive notice that precludes the invocation of the discovery rule.” In light of that constructive notice, the court was “compelled by applicable state law precedent to conclude that Plaintiff should have reasonably discovered the Properties were deeded to [Defendant], and not [Plaintiff], at the very latest, in 2009, when the properties were deeded and the deeds were recorded with the Westmoreland and Green County Recorder of Deeds.”

The court also rejected the plaintiff’s request for leave to amend the complaint as any such amendment would be futile given the statutes of limitations defense. Thus, the court dismissed the case with prejudice.

While this case focused on the recording of deeds, one may be able to argue the same analysis would apply to the recording of an oil and gas lease or memoranda of lease as well. Therefore, oil and gas companies in, or contemplating, actions involving deeds, leases or memoranda of leases should consider the recording date when determining whether a claim has been asserted within the relevant statute of limitations period.