J. Fife Symington and his development firm requested funding for a mall construction from the…

J. Fife Symington and his development firm requested funding for a mall construction from the Wells Fargo Bank in Phoenix. Arizona. The bank agreed to offer  financing if Symington could secure permanent financing from another source.  arranged a loan from various union funds (“the Funds”). Subsequently, Symington defaulted in repaying the Funds. and the Funds sued Wells Fargo. alleging that the bank knew of financial misrepresentations by Symington to the Funds and had actively concealed them from the Funds. The Ind awn ruled that 11.? Fargo had no duty to disclose Symington's Mee financial condition to the Funds. and the court  affirmed. JONES. C. ).: . . . A112002 recognizes the tort of fraudulent concealment: One Nay to a transaction who by concealment ce other action mtemionally prevents the other from acuutring material  is subject to the same liability to the ocher. foe pecuniary loss as though he had stared the nonexistence of the matter :tut the other was thus prevented from &covering Mice failure to disclose a material fact is cakulated to induce a false belief. “the distinction between conceal-mere and affirmative misrepresentation is tenuous.” The court of appeals dismissed the Funds' claims for fraudulent concealment on the basis that the Bank's fiduciary and contractual duty was to Symington and not to the Funds. Both the court of appeals and the Bank mistakenly cite hazier v. Southwest Savings & Loan Association foe the proposition that concealment was net proven because there was no duty to speak. In Frazier. the court explained that liability for concealment requires knowledge of the false inform.- non and action by the defendant that intentionally prevented the plaintiff from finding the truth. The Fra-ier court found concealment unproven, not because there was no duty to disclose, but because there was no evidence from which the jury could have found active concealment. In Arizona, whether a duty to speak exists at all is determined by reference to all the circumstances of the case. On the issue of duty in a fraudulent concealment dawn, we are persuaded by and affirm the reasoning articulated by the court of appeals decision in King v. O'Rielly Motor Co. In King. a car buyer sued a car dealer for fraudulently representing that the car the buyer purchased was “as good as new” when in fact the car had been in an accident and, unbeknownst to the buyer, had been repaired by the dealer. The car dealer argued that the dealer could not be liable to the buyer because the dealer was under no duty to disclose. The court stated that. while “it representations and fraudulent concealment from mere nondisclosure and the classification of the act or acts in question must, of course, depend on the facts of each case,” it was nevertheless true that “the facts of… would be supportive of a finding of misleading representation or fraudulent concealment. An Oregon court advanced similar reasoning in Paul r. Kelley. concluding that a duty to disclose is not necessary to prevail on a fraudulent concealment claim.

In Paul. the seller of real estate knew. before the closing, that he was required to install a storm sewer if a drainage ditch on the property were eliminated. Instead of installing the storm sewer, the sellers simply filled the ditch and sold the property. Buyers of the land sued the sellers when they learned they had to put in an expensive sewer system. The sellers defended on the grounds that they had no affirmative duty to disclose the ditch to the buyers. The court found this argument . stating: Such a duty is not necessary an active con.  such as the filling in of the ditch alleged in this case is to be distinguished from a simple nondisclosure…. Plaintiff's complaint sees forth faces alleging an active concealment of the drainage ditch and is  without the assertion of a duty to speak. The common law clearly distinguishes between concealment and nondisclosure. The former is characterized by deceptive acts or contrivances intended to hide information, mislead, avoid suspicion. sac prevent further inquiry into a material matter. The latter is characterized by mere silence. “Thus, fraudulent concealment—without any misrepresentation or duty to disclose—can constitute common law fraud.” The Funds in the instant case allege the Bank actively strategized to cover up the pending collapse of Symington' financial condition. This allegation fits the definition of concealment, not nondisclosure. Three evidentiary points are clear: the “unjustified and imprudent” loan extensions: the forbearance until one day after the date for the Mercado take-out obligation: and the failure to report Symington's false statements to federal banking authorities. The record reveals evidence of internal bank communications and communication between Symington aides and the Bank. Applying the law, we conclude that the Funds were not required to establish an affirmative duty to speak in order to prove fraudulent concealment. Actions by the Bank which intended to conceal material facts are, if proven, sufficient. In the final analysis, we reach two conclusions as to the fraudulent concealment claim: there are reason-able inferences from which a jury could find (I) the Bank had knowledge of false information being given the Funds, and (2) the Bank took measures intended to prevent the Funds from learning the truth. These inferences are grounded in fact and are sufficient to take the concealment theory to the jury. The opinion of the court of appeals is vacated, the judgment of the trial court is reversed, and this case is remanded to the trial court for proceedings consistent with this opinion.

Case Question

1. What are three types of fraud?

2. Why was the bank under no duty to disclose Symington 's financial condition to the Funds?

3. Cave an example to Illustrate the difference between knowing a material fact and fading to disclose x and 'concealing' the fact.


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