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 | Fraudulent Concealment; Consumer Protection Act July 1, 2005

Sloan v. Thompson No. 54122-6-I (Court of Appeals, Division I)

Short principles:
  • Actual, subjective knowledge, rather than intent, is the key element of a cause of action for fraudulent concealment.
  • Ordinarily a breach of a private contract affecting no one but the parties to the contract is not an act or practice affecting the public interest

Thompson built a home for his family's retirement use where he and his family lived on and off for six years. Eventually they sold the home to the Sloans. The home was alleged to have serious construction defects. The Sloans sued for, among other things, fraudulent concealment and alleged Consumer Protection Act claims. The trial court found in favor of the Thompson on both counts.

The Court of Appeals reversed the trial court regarding the fraudulent concealment claims and noted that a "builder-vendor of a residential dwelling has a duty to speak in those situations where: there is a concealed defect in the premises of the residential dwelling, the builder-vendor has knowledge of the defect, the defect is dangerous to the property, health or life of the purchaser, and the defect is unknown to the purchaser and a careful, reasonable inspection on the part of the purchaser would not disclose the defect." The defect must substantially and adversely affect the value of the property or operate to materially impair or defeat the purpose of the transaction. Actual, subjective knowledge, rather than intent, is the key element of a cause of action for fraudulent concealment.

Thompson admitted to doing all of the defective construction himself, without permits and without consulting the code. Because Thompson testified that he was familiar with code books and "knew what the codes were" as far as framing is concerned, he could not claim ignorance of the conditions that were later determined to be defective related to framing. The Court stated that if Thompson, by his own admission, knew the framing codes and then proceeded to construct a first floor frame which the unrefuted expert testimony found to be terrible, unsafe, unethical, and out and out dangerous, it could not see how Thompson could not be attributed with knowledge of the defects. The Court also held that the 'as-is' provision in the purchase contract did not immunize Thompson from fraudulent concealment liability. Although courts routinely enforce "as is" clauses, it refused to do so where the seller knew about the defects and withheld material information.

The Court of Appeals sustained the trial court finding that the Consumer Protection act did not apply applying the following factors to determining whether an action affects the public interest:

  1. Were the alleged acts committed in the course of defendant's business?
  2. Did defendant advertise to the public in general?
  3. Did defendant actively solicit this particular plaintiff, indicating potential solicitation of others?
  4. Did plaintiff and defendant occupy unequal bargaining positions?


The Court held that because Thompson built this home with the intention of it being his retirement home, lived in it with his family for the greater portion of six years and left only when personal reasons necessitated the family's relocation, substantial evidence supported a determination that the sale was simply a private transaction. Ordinarily a breach of a private contract affecting no one but the parties to the contract is not an act or practice affecting the public interest in contrast to the likelihood that additional plaintiffs have been or will be injured in exactly the same fashion that changes this from a private dispute to one that affects the public interest.