Fiduciary Duty and Constructive Fraud in the Context of Marriage

FIDUCIARY DUTY AND CONSTRUCTIVE FRAUD BETWEEN SPOUSES

A fiduciary duty exists between a husband and a wife as to the community property controlled by each spouse. Knight v. Knight, 301 S.W.3d 723, 731 (Tex. App.—Houston [14th Dist.] 2009, no pet.). “The breach of a legal or equitable duty which violates this fiduciary relationship existing between spouses is referred to as „fraud on the community,‟ a judicially created concept based on the theory of constructive fraud.” Id. Any such conduct in the marital relationship is termed fraud on the community because, although not actually fraudulent, it has all the consequences and legal effects of actual fraud. Id. Such conduct tends to deceive the other spouse or violate confidences that exist as a result of the marriage. Id.

A presumption of constructive fraud arises when a spouse unfairly disposes of the other spouse‟s interest in community property. Jean v. Tyson-Jean, 118 S.W.3d 1, 9 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). The burden is upon the disposing spouse or his donee to prove the fairness of a disposition of the other spouse‟s one-half community property. Id. In considering a claim of constructive fraud, the court may consider three factors: (1) the size of the gift in relation to the total size of the community estate; (2) the adequacy of the remaining estate; and (3) the relationship of the donor to the donee. Knight, 301 S.W.3d at 731.

SOURCE: HOUSTON COURT OF APPEALS - NO. 14-10-01081-CV - 10/4/11

Use of fraud to get someone to sign contract is actionable

TEXAS LAW RECOGNIZES DUTY NOT TO USE FRAUD TO PROCURE ASSENT TO CONTRACT Under Texas law, a party to a contract has “a duty to abstain from inducing another to enter into a contract through the use of fraudulent misrepresentations.” Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998). ELEMENTS OF FRAUD At common law, fraud is generally considered to have occurred when (a) “a party makes a material misrepresentation,” (b) “the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth and as a positive assertion,” (c) “the misrepresentation is made with the intention that it should be acted on by the other party,” and (d) “the other party relies on the misrepresentation and thereby suffers injury.” Comm. on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges: Business, Consumer, Insurance & Employment PJC 105.2 (2010). Also see --> fraudulent inducement of contract as distinct cause of action Rescission is an equitable remedy available in cases of fraud. See Bank One, Tex., N.A. v. Stewart, 967 S.W.2d 419, 455 (Tex. App.—Houston [14th Dist.] 1998, pet. denied). SOURCE: Beaumont Court of Appeals - 09-10-00364-CV - 5/26/11

No attorney's fees on fraud claim

Can a plaintiff be awarded attorney's fees when he or she obtains a judgment for fraud? Attorneys’ fees are not recoverable for prosecuting a fraud or negligent-misrepresentation claim. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d at 304 (citing New Amsterdam Cas. Co. v. Tex. Indus., 414 S.W.2d 914, 915 (Tex. 1967)); see also Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (West 2008) (setting forth claims for which attorneys’ fees are recoverable). SOURCE: Houston Court of Appeals (Beaumont caselaw b/c of transfer) - 14-08-00329-CV - 5/26/11

Distinguishing different types of fraud claims in Texas

  
COMMON-LAW FRAUD, FRAUD IN THE INDUCEMENT, STATUTORY FRAUD 

Common Law Fraud Claim To bring a claim for common law fraud, a plaintiff must show the following: (1) a material misrepresentation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001) (orig. proceeding).

Fraud in the Inducement Cause of Action To bring a claim for fraud in the inducement, a plaintiff must show the elements of fraud, see Balogh v. Ramos, 978 S.W.2d 696, 701 (Tex. App.—Corpus Christi 1998, pet. denied), and must show that she has been fraudulently induced to enter into a binding agreement. Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001) (“Without a binding agreement, there is no detrimental reliance, and thus no fraudulent inducement claim. That is, when a party has not incurred a contractual obligation, it has not been induced to do anything.”).

Statutory Fraud [real estate transaction] To bring a claim for statutory fraud, [ Plaintiff ] must show the following: (1) the transaction involved real estate; (2) [ Defendant ]. made a false representation of a material fact or made a false promise to do an act to [ Defrauded Party ], or benefited by not disclosing that a third party’s representation or promise was false; (3) the false representation was made for the purpose of inducing [ Defrauded Party ] [ Name ] to enter into a contract; (4) [ Defrauded Party ] relied on the false representation or promise in entering into the contract; and (5) the reliance caused [ Defrauded Party ] injury. See Tex. Bus. & Com. Code Ann. § 27.01 (West 2009) (titled “Fraud in Real Estate and Stock Transactions”); Fletcher v. Edwards, 26 S.W.3d 66, 77 (Tex. App.—Waco 2000, pet. denied) (“A plaintiff establishes a statutory fraudulent inducement claim under section 27.01 of the Business and Commerce Code by showing: a false representation of a material fact; made to induce a person to enter a contract; and relied on by that person in entering the contract.”). The statutory cause of action differs from the common law only in that to recover actual damages, it does not require proof that the defendant made a material false representation knowing it to be false or made it recklessly as a positive assertion without any knowledge of its truth. Fletcher, 26 S.W.3d at 77.

 SOURCE: San Antonio Court of Appeals - 04-10-00616-CV - 5/11/11

How does Fraudulent Inducement Cause of Action differ from Fraud?

    FRAUDULENT INDUCEMENT DEFINED:
    The fraud / fraudulent conduct must be relevant to contract-formation. 

“Fraudulent inducement . . . is a particular species of fraud that arises only in the context of a contract and requires the existence of a contract as part of its proof. That is, with a fraudulent inducement claim, the elements of fraud must be established as they relate to an agreement between the parties.” Haase v. Glazner, 62 S.W.3d 795, 798–99 (Tex. 2001).

Detrimental reliance by Plaintiff on deliberate falsehood by Defendant 

The elements of fraud are that a material representation was made, the representation was false, the speaker knew the statement was false when made, the statement was made to induce reliance, it did induce reliance, the reliance was justifiable, and the relying party suffered injury as a result. See Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010); Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009). [A] party who has actual knowledge of specific facts cannot have relied on a misrepresentation of the same facts. See Camden Mach. & Tool, Inc. v. Cascade Co., 870 S.W.2d 304, 311 (Tex. App.—Fort Worth 1993, no writ) (stating, in case where seller failed to disclose prior foundation repair but buyer discovered foundation settling in independent investigation, “When a person makes his own investigation of the facts, and knows the representations are false, he cannot, as a matter of law, be said to have relied upon the misrepresentations of another.”). The issue, then, is whether the [ name of litigants ] presented any evidence of reliance to support their claim for fraudulent inducement. See Grant Thornton, 314 S.W.3d at 923 (reliance is necessary element of fraud claims); Aquaplex, 297 S.W.3d at 774 (same). In the context of fraudulent inducement, this requires evidence that the claimant would not have entered into the contract but for the alleged misrepresentation or fraudulent nondisclosure. See ISG State Operations, Inc. v. Nat’l Heritage Ins. Co., 234 S.W.3d 711, 716 (Tex. App.—Eastland 2007, pet. denied) (stating that ordinary detrimental reliance is not sufficient to support fraudulent inducement claim; claimant must show that it was induced into executing contract) (citing Haase, 62 S.W.3d at 798); Procter v. RMC Capital Corp., 47 S.W.3d 828, 834 (Tex. App.—Beaumont 2001, no pet.) (holding that home buyer seeking to avoid effect of “as is” clause on basis of fraudulent inducement must put forth some evidence that he would not have assented to “as is” clause in contract but for seller’s misrepresentations about property condition at issue); see also Dallas Farm Mach. Co. v. Reaves, 158 Tex. 1, 12–13, 307 S.W.2d 233, 240 (1957) (adopting the rule: “If one is induced to go through the form of making a contract because of some fraud or misrepresentation made by the other party or his agent, relative to a material element of the agreement, such that if he had known the truth he would not have given his assent, the contract may be avoided by him.”) (quoting 1 Elliot on Contracts § 70 (1913), emphasis added).

SOURCE: Houston Court of Appeals for the First Appellate District – 01-10-00492-CV – 5/19/11

RELATED LEGAL TERMS: fraud vs. fraudulent inducement of contract, fraudulent misrepresentation, fraudulent concealment, failure to disclose material fact,

Suing for misrepresentation, fraud, failure to perform a promise made

DIFFERENTIATING NEGLIGENT MISREPRESENTATION, FRAUD, INTENT NOT TO PERFORM PROMISE

To prevail on a negligent misrepresentation claim, a plaintiff must show (1) the representation in question was made by the defendant in the course of his business or in a transaction in which he had a pecuniary interest, (2) the defendant supplied false information for the guidance of others in their business, (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information, and (4) the plaintiff suffered pecuniary loss by justifiably relying on the representation. Fed. Land Bank Ass'n of Tyler v. Shane, 825 S.W.2d 439, 442 (Tex. 1991); see also Roof Sys., Inc. v. Johns Manville Corp., 130 S.W.3d 430, 439 (Tex. App.-Houston [14th Dist.] 2004, no pet.) (“The 'false information' contemplated in a negligent misrepresentation case is a misstatement of existing fact, not a promise of future conduct.”).

Elements of Fraud under Texas Law

To prevail in a cause of action for fraud, one must provide sufficient evidence of the elements of fraud, which are (1) a material misrepresentation was made; (2) it was false; (3) when the representation was made, the speaker knew it was false or the statement was recklessly asserted without any knowledge of its truth; (4) the speaker made the false representation with the intent that it be acted on by the other party; (5) the other party acted in reliance on the misrepresentation; and (6) the party suffered injury as a result. Taylor Elec. Servs., Inc. v. Armstrong Elec. Supply Co., 167 S.W.3d 522, 526 (Tex. App.-Fort Worth 2005, no pet.) (citing DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990)); see Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 921 (Tex. 2010).

Failure to perform contractual promise vs. fraud

A promise to do an act in the future is actionable fraud when made with the intention, design and purpose of deceiving, and with no intention of performing the act. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986). While a party's intent is determined at the time the party made the representation, it may be inferred from the party's subsequent acts after the representation is made. Id. Failure to perform, standing alone, is no evidence of the promissor's intent not to perform when the promise was made. Id. at 435. However, that fact is a circumstance to be considered with other facts to establish intent. Id. Since intent to defraud is not susceptible to direct proof, it invariably must be proven by circumstantial evidence. Id. “'Slight circumstantial evidence of fraud,' when considered with the breach of promise to perform, is sufficient to support a finding of fraudulent intent.” Id. (quoting Maulding v. Niemeyer, 241 S.W.2d 733, 738 (Tex. Civ. App.-El Paso 1951, orig. proceeding)).

SOURCE: Dallas Court of Appeals 05-09-01397-CV 4/22/11

LEGAL CONCEPTS AND TERMS: fraud, fraudulent intent, fraudulent mis-representation, non-performance of promise, fraud vs. breach of contract claim 

When Is Fraudulent Misrepresentation Actionable in Texas? - Essential Elements of Fraudulent Misrepresentation as a Tort

FRAUDULENT MISREPRESENTATION AS A CAUSE OF ACTION UNDER TEXAS LAW 

The elements of a fraudulent misrepresentation claim include proof by the plaintiff that (1) the defendant made a material misrepresentation; (2) the representation was false; (3) the defendant knew the representation was false when made or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the defendant made the representation with the intention that it should be acted upon; (5) the representation was in fact justifiably relied upon; and (6) damage to the plaintiff resulted. See Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010); see also Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 575 (Tex. 2001).
 
Fraudulent inducement of contract 
 
As a general rule, a party is not bound by a contract procured by fraud. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998); see also Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 179 (Tex. 1997).
 
Detrimental reliance on false representations
 
A false representation made indirectly to a third party and later relied on by the defrauded party may constitute fraud under certain circumstances. See BP Am. Prod. Co. v. Marshall, 288 S.W.3d 430, 444–45 (Tex. App.—San Antonio 2008, pet. granted) (holding misrepresentations made to one sibling acting as agent for all siblings constituted misrepresentations to all siblings). “[A] person who makes a misrepresentation is liable to the person or class of persons the maker intends or ‘has reason to expect’ will act in reliance upon the misrepresentation.” Ernst & Young, 51 S.W.3d at 578. “Even an obvious risk that a misrepresentation might be repeated to a third party is not enough to satisfy the reason-to-expect standard; rather, the alleged fraudfeasor must ‘have information that would lead a reasonable man to conclude that there is an especial likelihood that it will reach those persons and will influence their conduct.’” Id. at 580 (quoting Restatement (Second) of Torts § 531 cmt. d (1977)) (emphasis added).
 
Deliberate misrepresentation vs. mistake, misunderstanding 
 
Fraud requires proof of an affirmative misrepresentation, not simply a misunderstanding by a party. See Orion Ref. Corp. v. UOP, 259 S.W.3d 749, 771–72 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) (stating misunderstanding and other evidence do not amount to actionable misrepresentations).

SOURCE: Houston Court of Appeals 01-10-00104-CV 4/28/11

Fraud and Negligent Misrepresentation Cause of Action in Texas

     
PROVING A CAUSE OF ACTION FOR COMMON-LAW FRAUD AND NEGLIGENT MISREPRESENTATION - WHAT ARE THE ESSENTIAL ELEMENTS UNDER TEXAS LAW? 

In order to prove fraud, a party must show that (1) a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001). Fraud by nondisclosure is a subcategory of fraud. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997).

In order to prove negligent misrepresentation, a plaintiff must show that (1) the defendant made a representation in the course of its business, or in a transaction in which it has a pecuniary interest, (2) the defendant supplied “false information” for the guidance of others in their business, (3) the defendant did not exercise reasonable care or competence in obtaining or communicating the information, and (4) the plaintiff suffered a pecuniary loss by justifiably relying on the representation. Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 686 n. 24 (Tex. 2002) (citing Fed. Land Bank Ass’n v. Sloane, 825 S.W.2d 439, 442 (Tex. 1991)). 
    
SOURCE: Cash Rent-A-Car v. Old American County Mutual Fire Ins. Co. (Tex.App.- Houston [1st Dist.] Jan. 14, 2009) (Jennings)(conversion, trespass, fraud, negligent misrepresentation, breach of contract and bailment agreement, violations of the Texas Theft Liability Act, the Texas Deceptive Trade Practices Act (“DTPA”), and the Texas Insurance Code)

Fraudulent Inducement Claim Is Similar to Fraud

FRAUDULENT INDUCEMENT (OF CONTRACT, ETC.) Fraudulent inducement is a type of fraud and, like any cause of action for fraud, requires (1) a material misrepresentation, (2) which was false, (3) which was either known to be false when made or was asserted without knowledge of its truth, (4) which was intended to be acted upon, (5) which was relied upon, and (6) which caused injury. See Formosa Plastics, 960 S.W.2d at 47; Texas S. Univ. v. State St. Bank & Trust Co., 212 S.W.3d 893, 914 (Tex. App.--Houston [1st Dist.] 2007, pet. denied). FRAUDULENT INDUCEMENT AND FRAUD: SHARED ELEMENTS [C]ourts have held that a summary judgment motion--if directed at the element of one cause of action--can be effective against even subsequently pleaded claims if they share that same element. See Wortham v. Dow Chem. Co., 179 S.W.3d 189, 202 (Tex. App.--Houston [14th Dist.] 2005, no pet.); Lampasas v. Spring Center, Inc., 988 S.W.2d 428, 435-37 (Tex. App.--Houston [14th Dist.] 1999, no pet.). Consequently, even though Karbach did not specifically use the term "fraudulent inducement" in his original petition, the district court's order granting summary judgment as to each of Karbach's claims, including fraud, was effective against his later-pleaded fraudulent inducement claim. Even considering the tri-party loan agreement as the basis of the fraudulent inducement claim, as we have discussed, our analysis does not change. SOURCE: 03-06-00636-CV (Third Court of Appeals - Austin) (11/6/09)

When is a broken promise actionable as fraud, rather than merely as a breach of contractual obligation?

TEXAS SUPREME COURT FINDS OCCASION TO RESTATE FRAUD ELEMENTS: The elements of fraud are: (1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001) (citing Formosa Plastics Corp. v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998)). BROKEN PROMISES: BREACH OF CONTRACT VS. FRAUD "A promise of future performance constitutes an actionable misrepresentation if the promise was made with no intention of performing at the time it was made.” Formosa Plastics, 960 S.W.2d at 48. “Proving that a party had no intention of performing at the time a contract was made is not easy, as intent to defraud is not usually susceptible to direct proof.” Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 305 (Tex. 2006) (citing Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986)). While breach of the contract alone is not evidence that a party did not intend to perform, “breach combined with ‘slight circumstantial evidence’ of fraud” is some evidence of fraudulent intent, enough to support a verdict. Id. “[A] party’s intent is determined at the time the party made the representation, [but] it may be inferred from the party’s subsequent acts after the representation is made.” Spoljaric, 708 S.W.2d at 434 (citing Chicago, T. & M.C. Ry. Co. v. Titterington, 19 S.W. 472, 474 (1892)). SOURCE: Aquaplex, Inc v. Rancho Law Valencia, Inc., No. 08-0280 (Tex. Oct 30, 2009) (per curiam) (fraud damages, proving amount of damages, remittiture by court of appeals or new trial)

Elements of Fraud by Misrepresentation Claim

ELEMENTS OF A FRAUD CLAIM BASED ON MISREPRESENTATION IN TEXAS A plaintiff must allege the following to state a cause of action for fraud based on misrepresentation: (1) a material representation was made; (2) it was false; (3) when the representation was made, the speaker knew it was false or the statement was made recklessly without any knowledge of its truth and as a positive assertion; (4) the speaker made the representation with the intent that it should be acted upon by the other party; (5) the other party acted in reliance on the representation; and (6) the party thereby suffered injury. DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990). SOURCE: 03-07-00149-CV (10/7/09) (Third Court of Appeals in Austin, TX)

Failure to produce evidence of false representation dooms fraud claim

Elements of Fraud Cause of Action

 To recover on an action for fraud, the plaintiff must prove: (1) a material representation was made, (2) the representation was false, (3) when the speaker made the representation, he knew it was false or made it recklessly without knowledge of the truth as a positive assertion, (4) the speaker made it with the intention that it should be acted upon by the party, (5) the party acted in reliance upon it, and (6) the party thereby suffered injury. Solutioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 385 (Tex. App.-Houston [14th Dist.] 2007, no pet.).

Allegation of fraud was conclusory and did not raise issue of fact to avert summary judgment; no evidence of specific false representation produced.

 In his summary judgment motion, Manley argued there is no evidence to support any of the elements of fraud. Appellant alleges Manley engaged in fraud, conspiracy to defraud, and constructive fraud. He claims his signature on the final settlement agreement was procured by fraud because Manley did not explain the settlement agreement to him and he admittedly signed without reading the agreement. However, appellant fails to point to a specific false representation by Manley. Mere conclusory statements do not constitute effective summary judgment proof and need not be given the same presumptive force as allegations of fact. Abbott Laboratories, Inc. v. Segura, 907 S.W.2d 503, 508 (Tex. 1995). Moreover, appellant attached no evidence to his motion. See Tex. R. Civ. P. 166a(i) ("The court must grant the motion unless the respondent produces summary judgment evidence raising a genuine issue of material fact."). Appellant's allegations of fraud amount to conclusory accusations and he presents no evidence raising a genuine issue of material fact on any element of his fraud cause of action. See Segura, 907 S.W.2d at 508. Specifically, appellant did not point to a single specific misrepresentation upon which he bases his claim. The trial court did not err in granting summary judgment on this claim.
 
SOURCE: 14-07-01085-CV (10/6/09) (14th Court of Appeals - Houston)

Fraud Cause of Action under Texas Law

  
WHAT ARE THE ELEMENTS OF FRAUD?

"The elements of fraud are a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of the truth, which was intended to be acted upon, which was relied upon, and which caused injury." DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990).
  
HOW DOES FRAUD DIFFER FROM FAILURE TO PERFORM CONTRACTUAL 
OBLIGATION?
 
A promise to do an act in the future is actionable fraud when made with the intention, design and purpose of deceiving, and with no intention of performing the act. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986).

SOURCE: 09-08-00296-CV (8/27/09)

The essential elements of his claim of fraud against the [defendants] were: (1) the [defendants] made a false representation to [plaintiff]; (2) the representation was material; (3) when the [defendants] made the representation, they knew the representation was false; (4) the [defendants] made the representation with the intent that [plaintiff] act on it; (5) [Plaintiff] relied on the representation; and (6) the representation caused [plaintiff] injury. Ernst & Young v. Pacific Mut. Life. Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001).

SOURCE: 07-08-0213-CV (9/11/09)

How does fraudulent inducement differ from fraud plain and simple?

FRAUD CAUSE OF ACTION VS. FRAUDULENT INDUCEMENT Fraudulent inducement is a particular species of fraud that arises only in the context of a contract and requires the existence of a contract as part of its proof. Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001); Clark v. Power Mktg. Direct, Inc., 192 S.W.3d 796, 799 (Tex. App.--Houston [1st Dist.] 2006, no pet.). That is, with a fraudulent inducement claim, the elements of fraud must be established as they relate to an agreement between the parties. Haase, 62 S.W.3d at 798-99. SOURCE: 01-07-00792-CV (9/10/09)

The Elements of Fraud (Common Law Cause of Action) | Proving Causation

The Elements of Common Law Fraud [per 1st CoA] Elements of common-law fraud are that (1) a material representation was made; (2) the representation was false; (3) when the speaker made it he knew it was false or made it recklessly without any knowledge of its truth and as a positive assertion; (4) the speaker made it with the intention that it should be acted upon by the party; (5) the party acted in reliance on it ; and (6) he thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 759 (Tex. 2001). Proving the Element of Causation To establish the element of causation in a fraud claim, a plaintiff must show that the defendant's acts or omissions were a cause-in-fact of foreseeable losses. Prospect High Income Fund, ML CBO IV v. Grant Thorton, LLP, 203 S.W.3d 602, 618 (Tex. App.--Dallas 2006, pet. denied) (citing Marathon Corp. v. Pitzner, 106 S.W.3d 724, 727 (Tex. 2003)). The defendant's acts or omissions are a cause-in-fact if the plaintiff can show, beyond mere conjecture, guess, or speculation, that an act or omission was a substantial factor in bringing about an injury which would not otherwise have occurred. Id. A plaintiff establishes reliance in a fraud claim by showing that the defendant's acts and representations induced it to either act or refrain from acting, to its detriment. Id. SOURCE: 01-07-00792-CV (9/10/09)

Proving the elements of fraud

What does it take to prevail with a fraud cause of action? [T]o recover against Smith and Langley on its fraud claim, KNC had to prove first that Smith and Langley each made an actual, material misrepresentation. Johnson v. Brown & Pritchard, 73 S.W.3d 193, 210 n. 45 (Tex. 2002). KNC also had to prove that it acted in reliance on the material misrepresentation. See Ernst & Young,51 S.W.3d at 578; Trenholm v. Ratcliff, 646 S.W.2d 927, 929-30 (Tex. 1983). “Material means a reasonable person would attach importance to and would be induced to act on the information in determining his choice of actions in the transaction in question.” Amer. Med. Int'l Inc. v. Giurintano, 821 S.W.2d 331, 338 (Tex. App.-Houston [14th Dist.] 1991, no writ). SOURCE: 05-08-00653-CV

Element of reliance: reasonable and justified

REASONABLE RELIANCE ELEMENT

Fraud, fraudulent inducement, negligent misrepresentation, and promissory estoppel all require reasonable and justified reliance upon a misrepresentation or promise. See Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001) (fraud); TMI, Inc. v. Brooks, 225 S.W.3d 783, 792, 795 (Tex. App.- Houston [14th Dist.] 2007, pet. denied) (fraudulent inducement); Ortiz v. Collins, 203 S.W.3d 414, 421 (Tex. App.- Houston [14th Dist.] 2006, no pet.) (fraud, negligent misrepresentation, and promissory estoppel).
  
When the parties' written agreement addresses the substance of the oral statement and contains language precluding reliance on external representations, Texas courts find reliance on subsequent oral promises unreasonable. See Simpson v. Woodbridge Props., L.L.C., 153 S.W.3d 682, 684 (Tex. App.- Dallas 2004, no pet.) (holding that disclaimer of reliance clause in contract negated reliance on post contract oral misrepresentations); Atlantic Lloyds Ins. Co. v. Butler, 137 S.W.3d 199, 226 (Tex. App.- Houston [1st Dist.] 2004, pet. denied) (holding that reliance on misrepresentation that was easily refutable with reasonable diligence was not justified or reasonable where two opposing parties were engaged in litigation and negotiating from equal bargaining positions); DRC Parts & Accessories, L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 856, 858-59 (Tex. App.- Houston [14th Dist.] 2003, pet. denied) (holding that reliance on both pre- and post-contractual oral representations, directly contradicted by express terms of contract, was not justified as matter of law); Airborne Freight Corp. v. C.R. Lee Enters., Inc., 847 S.W.2d 289, 297 (Tex. App.- El Paso 1992, writ denied) (finding that written contract containing ample cautionary language precluded exclusive reliance by reasonable businessperson on verbal statements contradicting written agreement).

SOURCE: Biosilk Spa, LP v. HG Shopping Centers, LP (Tex.App.- Houston [14th Dist.] May 8, 2008) (Yates) (fraud, fraudulent inducement, negligent misrepresentation, and promissory estoppel, no reasonable reliance)

Elements of fraud in Texas law, common-law fraud cause of action

BRIEF CITE ON THE ELEMENTS OF FRAUD AS A COMMON-LAW CLAIM 

In order to prove fraud, a plaintiff must show that (1) the defendant made a material representation that was false, (2) the defendant knew the representation was false or made it recklessly as a positive assertion without any knowledge of its truth, (3) the defendant intended to induce the plaintiff to act upon the representation, and (4) the plaintiff actually and justifiably relied on the representation, which caused the injury. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001). 
    
SOURCE: Wood v. Texas Chiropractic College (Tex.App.- Houston [1st Dist.] July 24, 2008) (Jennings) (suit by student against private educational institution, DTPA claim, misrepresentation, summary judgment affirmed, no showing of reliance) 


ELEMENTS OF FRAUD - CASE LAW SNIP (IMAGE)