law-fraud | fraudulent inducement | fraudulent concealment | fraudulent misrepresentation |
ELEMENTS OF COMMON-LAW FRAUD
To establish common law fraud, a plaintiff must prove (1) the defendant made a material
representation, (2) which was false, (3) which was either known to be false when made or which
was recklessly made as a positive assertion without knowledge of its truth, (4) which the
speaker made with intent that it be acted upon, and (5) the other party took action in reliance
upon the misrepresentation, and (6) thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.
3d 749, 758 (Tex. 2001); Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc.,
960 S.W.2d 41, 47 (Tex. 1998).
As to the intent element, evidence must be presented that a representation was made with the
intent to deceive and with no intention of performing as represented at the time the
representation was made. Formosa, 960 S.W.2d at 48; Spoljaric v. Percival Tours, Inc., 708 S.
W.2d 432, 434 (Tex. 1986). The speaker’s intent at the time of the representation may be
inferred from the speaker’s subsequent acts after the representation was made. Spoljaric, 708
S.W.2d at 434.
Statutory Fraud [real estate transaction}
Section 27.01 of the Texas Business and Commerce Code provides a statutory cause of action for fraud
in a real estate transaction. See Tex. Bus. & Com. Code Ann. § 27.01 (West 2009). Such fraud occurs
if: (1) a person makes a false representation of a past or existing material fact in a real estate
transaction to another person for the purpose of inducing the making of a contract; and (2) the false
representation is relied on by the person entering into the contract. Id. at § 27.01(a)(1).
FRAUD VS. BREACH OF CONTRACT
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).
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)).
“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)). 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
A plaintiff seeking to prevail on a fraud claim must prove that (1) the defendant made a material
misrepresentation; (2) the defendant knew the representation was false or made the
representation recklessly without any knowledge of its truth; (3) the defendant made the
representation with the intent that the other party would act on that representation or intended to
induce the party’s reliance on the representation; and (4) the plaintiff suffered an injury by
actively and justifiably relying on that representation. See De Santis v. Wackenhut Corp., 793 S.
W.2d 670, 688 (Tex. 1990); Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex. 1983).
Exxon Corp. v. Miesch, No. 05-1076 (Tex. Mar. 27, 2009)(Wainwright)(plugging of oil well to prejudice
future production subsequent to dispute over royalties, false statement to Railroad Commission, fraud,
statute of limitations, oil and gas law,)
STATUTE OF LIMITATIONS FOR FRAUD
Unlike most of Emerald and the royalty owners’ other claims, which have a two-year statute of limitations,
the statute of limitations for fraud is four years. Tex. Civ. Prac. & Rem. Code § 16.004(a)(4). The statute
of limitations for fraud begins to run from the time the party knew of the misrepresentation. Little v.
Smith, 943 S.W.2d 414, 420 (Tex. 1997).
MEASURE OF DAMAGES
We note that the “measure of damages in a fraud case is the actual amount of the plaintiff’s loss that
directly and proximately results from the defendant’s fraudulent conduct.” Tilton v. Marshall, 925 S.W.2d
672, 680 (Tex. 1996).
INDUCEMENT, DETRIMENTAL RELIANCE
One who makes a fraudulent misrepresentation is subject to liability to the persons or class of persons
whom he intends or has reason to expect to act or to refrain from action in reliance upon the
misrepresentation for pecuniary loss suffered by them through their justifiable reliance in the type of
transaction in which he intends or has reason to expect their conduct to be influenced.
Restatement (Second) of Torts § 531 (1977). Like the defendants in Ernst & Young, Exxon argues that
this approach reduces the intent-to-induce element to a foreseeability standard. We rejected that
argument in Ernst & Young, holding that section 531’s “reason-to-expect standard requires more than
mere foreseeability; the claimant’s reliance must be ‘especially likely’ and justifiable, and the transaction
sued upon must be the type the defendant contemplated.” Ernst & Young, 51 S.W.3d at 580. Evidence
that reliance on false public information as part of a general industry practice is insufficient, as a matter
of law, to prove an intent to induce reliance. Id. at 581–82. Even an obvious risk that a
misrepresentation might be repeated to a third party is not sufficient to satisfy the reason-to-expect
standard. A plaintiff must show that “[t]he maker of the misrepresentation [has] 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 581 (citing Restatement (Second) of Torts § 531 (1977)). The
standard is not met if a plaintiff merely foresees that some party may rely on statements made in a
public filing. In order to prove intent-to-induce reliance under this standard, the party must show an
especial likelihood that the party who made the misstatement knew the claimant would rely on the
information in the type of transaction the defendant contemplated. See Ernst & Young, 51 S.W.3d at
580.
Exxon Corp. v. Miesch, No. 05-1076 (Tex. Mar. 27, 2009)(Wainwright)(plugging of oil well to prejudice
future production subsequent to dispute over royalties, false statement to Railroad Commission, fraud,
statute of limitations, oil and gas law,)
08‑1081 ANN CASSTEVENS v. DANIEL SMITH AND SHANNON SMITH; from Smith County; 6th district
(06‑07‑00116‑CV, 269 SW3d 222, 10‑23‑08, pet denied June 2009)
Fraud--Common-Law and Statutory
Casstevens also alleges that she was defrauded by the Smiths both on a common-law basis and for
statutory fraud (Tex. Bus. & Com. Code Ann. § 27.01 (Vernon 2002) (fraud in a real estate transaction)).
Common-law fraud occurs if (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).
Statutory fraud under the Texas Business and Commerce Code in a real estate transaction occurs when
a party makes a false representation of fact or a false promise to induce the plaintiff to enter into an
agreement, the plaintiff relies on the false promise by entering into the agreement, and the reliance
causes injury to the plaintiff. Tex. Bus. & Com. Code Ann. § 27.01.
Also see:
Texas Causes of Action --> Distinguishing different types of fraud as basis of legal action |
fraud in the inducement | fraud by nondisclosure |
2011 Texas Supreme Court Opinions | 2011 Tex Sup Ct Per Curiams
Texas Caselaw Topics Pages | Texas Opinions homepage |