Jehly v. Brown
2014 COA 39
Colo. Ct. App.2014Background
- Allen Brown owned land, hired a general contractor to build a house; the contractor discovered part of the property lay in a floodplain but did not tell Brown.
- Brown later sold the completed house to David and Peggy Jehly and completed a Seller's Property Disclosure form by writing "New Construction" across environmental pages without checking any boxes.
- The Jehlys were not told the property was partly in a floodplain before purchase.
- About five years after purchase, heavy rains caused severe basement flooding; the Jehlys sued Brown for fraudulent concealment.
- At a bench trial Brown denied personal knowledge of the floodplain and denied being informed by his contractor; the trial court ruled for Brown, finding plaintiffs failed to prove Brown had actual knowledge.
- Plaintiffs appealed, arguing the contractor’s knowledge should be imputed to Brown and that the court applied the wrong legal standard for fraudulent concealment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fraudulent concealment requires the principal's actual knowledge | Jehly: fraud claim satisfied because contractor knew the land was in a floodplain and that knowledge should be imputed to Brown | Brown: fraudulent concealment requires the seller's actual, conscious knowledge; he had none | Court: Fraudulent concealment requires actual (subjective) knowledge; plaintiffs failed to prove Brown had it and do not contest the factual finding of no actual knowledge |
| Whether an agent's undisclosed knowledge can be imputed to satisfy actual knowledge element of fraud | Jehly: contractor's knowledge of floodplain should be imputed to Brown under agency principles | Brown: undisclosed agent knowledge cannot be imputed to create subjective knowledge required for fraud | Court: Knowledge of an agent not communicated to principal cannot be imputed to satisfy the actual/subjective knowledge element for fraudulent concealment |
Key Cases Cited
- Kopeikin v. Merchants, Mortgage & Trust Corp., 679 P.2d 599 (Colo. 1984) (sets elements of fraudulent concealment and emphasizes actual knowledge requirement)
- Ackmann v. Merchants, Mortgage & Trust Corp., 645 P.2d 7 (Colo. 1982) (actual knowledge, not mere constructive knowledge, is required for fraudulent concealment)
- Meyer v. Schwartz, 638 P.2d 821 (Colo. App. 1981) (reiterates actual knowledge as essential element of fraudulent concealment)
- Wright v. Vail Run Resort Cmty. Ass'n, 917 P.2d 364 (Colo. App. 1996) (interprets "actual knowledge" as conscious awareness)
- Denver Business Sales Co. v. Lewis, 365 P.2d 895 (Colo. 1961) (fraud liability requires proof of actual knowledge; negligence principles inapplicable)
- Brickell v. Collins, 262 S.E.2d 387 (N.C. Ct. App. 1980) (agent's knowledge may support negligence claims but does not impute actual knowledge for fraud)