## Facts

- The sellers owned a frame apartment house and learned shortly after acquiring it that the premises had substantial termite infestation.
- A pest-control specialist advised that complete treatment required drilling and injecting chemicals throughout the basement, including under a basement apartment floor, and that regular inspections for at least a year were needed to ensure eradication.
- The sellers declined to remove the basement apartment floors, resulting in incomplete treatment; the specialist would not guarantee eradication.
- After the partial treatment, termite damage was not readily apparent on the surface.
- The sellers sold the apartment house to the buyers without disclosing the termite condition.
- About six weeks after taking possession, the buyers discovered the termite infestation and learned the sellers had known of it.
- The buyers continued making payments under the purchase contract for a period, later defaulted, and their interest was forfeited under a contractual forfeiture clause; they nonetheless sued for damages based on fraudulent concealment rather than rescission.
- The trial court found for the buyers and awarded $3,950 in damages; the sellers appealed liability and damages.

## Issues

1. Whether a seller of real property who knows of a serious, latent termite infestation not discoverable by reasonable inspection has a duty to disclose it to a buyer absent specific inquiry, and whether nondisclosure constitutes fraudulent concealment.
2. Whether the buyers waived or lost the right to recover fraud damages by continuing to make payments after discovering the infestation and later defaulting and forfeiting their interest.
3. Whether the evidence supported the trial court’s damages award of $3,950.

## Decision

- The court affirmed the judgment for the buyers.
- A seller who knows of a serious, latent termite infestation in a frame building that is not readily observable on reasonable inspection has a duty to disclose the condition; failure to do so constitutes fraud.
- The buyers did not waive the fraud claim by making post-discovery payments or by later defaulting and forfeiting their contract interest because a damages action for fraud in the inducement is independent of the underlying contract.
- The $3,950 damages award was supported by the evidence and within the testimony presented.

## Legal Principles

- A vendor must disclose concealed defects that are dangerous to property, health, or life when the defects are known to the vendor, unknown to the purchaser, and not discoverable by careful examination; silence in such circumstances is actionable fraud.
- A latent termite infestation in a frame building may qualify as a serious and dangerous condition requiring disclosure when it is not readily observable upon reasonable inspection.
- A buyer may maintain an action for damages for fraud in inducing a real-property sale contract even if the buyer later affirms the contract by continued performance or fails to complete contractual duties; the fraud claim is independent of the contract.
- On appeal, unchallenged findings of fact are treated as established facts.

## Conclusion

The court held that sellers who know of a serious, hidden termite infestation must disclose it to prospective buyers, and that buyers may recover damages for fraudulent concealment even if they continued payments after discovery and later forfeited their contract interest; the damages award was affirmed as supported by the record.


Obde v. Schlemeyer, 56 Wn.2d 449, 353 P.2d 672 (Wash. 1960)