Fraud and Fraud by Nondisclosure

In order to recover on an action for fraud, a party must prove that: (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. Soluntioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 385 (Tex. App.-Houston [14th Dist.] 2007, no pet.).

Fraud by nondisclosure is a subcategory of fraud. Id. Failure to disclose information is actionable only when there is a duty to disclose. Id. The duty to disclose may arise: (1) when the parties have a confidential or fiduciary relationship; (2) when one party voluntarily discloses information; (3) when one party makes a representation which gives rise to the duty to disclose new information that the party is aware makes the earlier representation misleading or untrue; or (4) when one party makes a partial disclosure and conveys a false impression, which gives rise to the duty to speak. Id. Whether such a duty exists is a question of law. Bradford v. Vento, 48 S.W.3d 749, 755 (Tex. 2001).

In regard to Lombana's assertion that she had a "special relationship" with AIG that required disclosure of any additional requirements for reinstatement of the Policy, we note that an informal fiduciary relationship, which may arise from "a moral, social, domestic or purely personal relationship of trust and confidence," is generally called a "confidential relationship." Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 287 (Tex. 1998). A confidential relationship exists in cases in which "`influence has been acquired and abused, in which confidence has been reposed and betrayed.'" Id. (quoting Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992)). However, an insurer generally does not have a fiduciary relationship giving rise to a duty to an insured. See Rice v. Metro. Life Ins. Co., 324 S.W.3d 660, 678-79 (Tex. App.-Fort Worth 2010, no pet.). Here, Lombana has presented no evidence that she had a confidential or fiduciary relationship with AIG.

Likewise, Lombana presented no evidence that the AIG call representative made a material misrepresentation during the January 22, 2009 telephone conversation with her with knowledge of its falsity, or that the AIG call representative made a misrepresentation with the intent that Lombana rely on it.

Accordingly, we hold that the trial court did not err in granting AIG summary judgment on Lombana's claim for fraud and fraudulent nondisclosure.

SOURCE: HOUSTON COURT OF APPEALS - No. 01-12-00168-CV. - 2/27/2014

In her eleventh issue, Lombana argues that the trial court erred in granting AIG summary judgment on her claim that AIG committed fraud or fraud by nondisclosure because she presented evidence that AIG had "voluntarily disclosed" some information about reinstatement of the Policy to her, but failed to disclose additional requirements. She asserts that the parties had a "special relationship," requiring disclosure of "any additional requirements [AIG] would impose to reinstate" the Policy, and AIG had a duty to disclose "the whole truth concerning what it would require to reinstate the Policy." In its summary-judgment motion, AIG argued that Lombana's claim for fraud and fraud by nondisclosure failed as a matter of law due to a lack of justiciable reliance and because she provided no evidence of a material misrepresentation, made with knowledge of its falsity or without knowledge of the truth upon which AIG intended that she rely.

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