56 Wash. 2d 449, 353 P.2d 672 (1960)
In April 1954 Mr. and Mrs. Robert Schlemeyer purchased an apartment house from a Mr. Ayars on an installment contract.1 Shortly after acquiring the property the Schlemeyers discovered substantial termite infestation throughout the premises.
The Schlemeyers retained pest-control specialist Mr. Senske who performed eradication measures and repairs that eliminated surface evidence of the infestation.2 Senske advised that complete treatment required drilling and pumping fluid into all basement floors and walls including the portion beneath the basement apartment but Schlemeyer refused to incur the expense of tearing up those floors.3 Senske further stated that even a complete job would require regular inspections for a full year before success could be confirmed and he refused to provide any guarantee under the circumstances.4
In November 1954 the Schlemeyers sold the apartment house to Mr. and Mrs. Fred Obde.5 The Obdes paid $5,000 in cash executed a promissory note for $2,250 in favor of the Schlemeyers and assumed the remaining $34,750 balance owed on the Ayars installment contract.6
Approximately six weeks after taking possession the Obdes discovered the termite condition.7 They continued making payments on the Ayars contract for a time then consulted Senske who disclosed for the first time that the Schlemeyers had known of the infestation before the sale.8 The Obdes thereafter ceased performance under the Ayars contract and the property reverted to Ayars pursuant to the forfeiture clause.9
The Obdes sued the Schlemeyers for fraudulent concealment.10 Following a trial on the merits the trial court entered findings of fact and conclusions of law in favor of the plaintiffs and awarded them $3,950 in damages.11 The defendants appealed to the Supreme Court of Washington.12
Whether the sellers had a duty to disclose the known termite infestation to the buyers?13
Where there are concealed defects in demised premises, dangerous to the property, health or life of the tenant, which defects are known to the landlord when the lease is made, but unknown to the tenant, and which a careful examination on his part would not disclose, it is the landlord’s duty to disclose them to the tenant before leasing, and his failure to do so amounts to a fraud.14 This rule applies equally to the vendor-purchaser relationship.15 The modern trend imposes a duty to speak whenever justice, equity, and fair dealing demand it.16
Yes. The Schlemeyers discovered substantial termite infestation shortly after purchasing the apartment house in April 1954.17 They retained Senske, who advised that complete treatment required drilling and pumping fluid into all basement floors and walls, including the portion beneath the basement apartment, but Schlemeyer refused to incur the expense of tearing up those floors.18 Senske further stated that even a complete job would require regular inspections for a full year before success could be confirmed and he refused to provide any guarantee under the circumstances.
In November 1954 the Schlemeyers sold the apartment house to the Obdes without disclosing the condition.19 The termite infestation was a serious and dangerous condition that was latent after the partial treatment.20 Justice, equity, and fair dealing demanded that the Schlemeyers inform the Obdes of the condition.21
The sellers had a duty to disclose the known termite infestation to the buyers.22
Whether the buyers waived any fraud claim by continuing payments on the underlying contract after discovering the infestation?23
No. Approximately six weeks after taking possession the Obdes discovered the termite condition.26 They continued making payments on the Ayars contract for a time then consulted Senske who disclosed for the first time that the Schlemeyers had known of the infestation before the sale. The Obdes thereafter ceased performance under the Ayars contract and the property reverted to Ayars pursuant to the forfeiture clause. This is a suit for damages rather than rescission so the continued payments do not constitute a waiver.27
The buyers did not waive any fraud claim by continuing payments on the underlying contract after discovering the infestation.28
Whether the buyers' subsequent default and forfeiture on the contract barred their damages action?29
A vendee is entitled to maintain an action against the vendor for fraud or deceit in the transaction even though he has not complied with all the duties imposed upon him by the contract.30 His default is not a bar to an action by him for fraud or deceit practiced by the vendor in regard to some matter relative to the contract.31
No. The Obdes defaulted on the Ayars contract after learning of the fraud from Senske.32 The action for fraudulent concealment is independent of the contract so the default and forfeiture do not bar recovery of damages.33 A vendee remains entitled to pursue the fraud claim despite noncompliance with contract duties.34
The buyers' subsequent default and forfeiture on the contract did not bar their damages action.35
Whether the trial court's award of $3,950 in damages was supported by competent evidence?36
The measure of damages in a case of fraudulent concealment is the difference between the actual value of the property and what the property would have been worth had the misrepresentations been true.37 Expert testimony based on proper hypothetical questions regarding recent purchases is competent to establish diminution in value.38
Yes. The trial court found that because of the termite condition the value of the premises has been reduced to the extent of $3,950.00 and the plaintiffs have been damaged to that extent.39 Wieber a qualified realtor and appraiser examined the premises and estimated that the termite condition had reduced the value of the property by some thirty per cent.40 Applying this estimate to the two purchases in 1954 for approximately $40,000 by persons unaware of the termite condition Wieber rendered an opinion that the actual value of the premises was about $25,000.41
The judgment awarding damages of $3,950 is well within the limits of the testimony in the record relating to damages.42
The trial court's award of $3,950 in damages was supported by competent evidence.43