May 13, 2022
By: Diana Adjadj, Esq.
Concealment and fraud liability resulting from homeowners’ failure to disclose and intentional concealment of structural defects in a newly purchased home.
Concealment of material facts, that occur within a contract negotiation can often amount to fraud. In pervious articles our offices discussed how fraud can result from various actions including fraud by false promise, intentional fraud and deceit, fraud by concealment, fraud resulting from breach of fiduciary duty, and constructive fraud.
Concealment, also known as fraudulent concealment, is discussed in California civil code section 1710(3). The civil code defines concealment and deceit interchangeable. In CCP § 1710(3) concealment fraud or deceit is defined as follows:
“A deceit, within the meaning of the last section, is … [t]he suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact.”
Defrauded homebuyers file an action against homeowners and real estate agents in Riverside, California for various causes of action including fraud, concealment, and breach of contract following their failure and intentional concealment of known structural defects in the home.
Prior to the close of escrow, the home seller was aware of defects in the structure of his house yet failed to disclose this material information to the buyers. Additionally, the seller’s real estate agents, also aware of the structural damage, concealed the known material fact from the buyers with the intention not to terminate or disrupt the sale of the property. Once the homebuyers closed on the sale of the home they discovered that the seller and his real estate agents were aware of structural defects prior to the close of the purchase.
Defrauded homebuyers attempted to resolve this dispute prior to a jury trial to no avail. Following a prolonged jury trial, the jury reached a verdict in which they awarded the homebuyers $69,300 in fraud damages.
Steven Ackerman, et al. v. Ronald Evans, (Split Jury Verdict; January 09, 2001; Causes of Action: breach of contract, fraud, intentional misrepresentation, fraud and concealment, negligent breach of fiduciary duty, negligence, constructive fraud and misrepresentation, concealment; Filing Court: Superior Court of California, Riverside County)
|Contract Damages /Remedies:|| |
|Compensatory Damages||Damages that compensate the plaintiff for the unique loss they suffered as a result of the breach of contract, which includes costs and expenses incurred as a result of the breach of contract.|
(AKA: Consequential Damages)
|If there is an actual loss suffered by the non-breaching party.|
|Punitive Damages||Punitive damages are only awarded to an injured plaintiff when the defendant’s conduct was despicable or reprehensible. Punitive damages are designed to punish a wrongdoer for the wrongful conduct and discourage similar conduct in the future.||There is a showing of fraud, bad faith, breach of fiduciary, oppression, deceit or malice|
|Liquidated Damages||A liquidated damages clause in a contract that specifies an amount of damages, payable to a non-breaching party in the event of a specific type of breach or failure to preform. In order for a liquidated damages clause to be found enforceable amount it must be a reasonable “estimate” of actual damages which will be sustained by a non-breaching party in the event of a breach.|
|(1) A liquidated damages clause is included in the agreement; and|
(2) The specific amount of payable damages is a reasonable estimate of actual damages.
|Specific Performance||In situations in which monetary damages will not make a plaintiff whole, a court may order specific performance. This requires the breaching party to perform their obligations under the contract. Specific performance is a common remedy in real estate disputes, since each piece of real property is considered unique.|
|What is bargained for in the terms of the agreement must be unique so that no award for monetary damages would suffice.|
The common law equitable remedy of rescission
|The word “rescission” is derived from the word “rescind” which means to cancel or set aside. It seeks to restore the parties to a contract to the positions they held before they first entered into the contract. Rescission nullifies or “undoes” the contract which relieves all parties of their duties and obligations under the contract.||There are numerous grounds for rescission however the most common:|
Mistake of Fact or Law
Failure to Disclose a Material Fact
Intentional Concealment of a Material Fact