Pleading and proving Constructive Fraud

 

CONSTRUCTIVE FRAUD:

The tort negligent misrepresentation (also known as “constructive fraud”) requires that each and all of the following elements be proved:

“(1) a misrepresentation of a past or existing material fact,

(2) without reasonable grounds for believing it to be true,

(3) with intent to induce another’s reliance on the fact misrepresented,

(4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed, and

(5) damages.”

(Fox v. Pollack (1986) 181 Cal.App.3d 954, 962)

“Where a person makes statements which he does not believe to be true, in a reckless manner without knowing whether they are true or false, the element of scienter is satisfied and he is liable for intentional misrepresentation.” (Yellow Creek Logging Corp. v. Dare (1963) 216 Cal.App.2d 50, 57)

” If defendant’s belief is both honest and reasonable, the misrepresentation is innocent and there is no tort liability.” (Diediker v. Peelle Financial Corp. (1997) 60 Cal.App.4th 288, 297.)

“In its generic sense, constructive fraud comprises all acts, omissions and concealments involving a breach of legal or equitable duty, trust, or confidence, and resulting in damage to another… Constructive fraud exists in cases in which conduct, although not actually fraudulent, ought to be so treated–that is, in which such conduct is a constructive or quasi fraud, having all the actual consequences and all the legal effects of actual fraud.” (Estate of Arbuckle (1950) 98 Cal. App. 2d 562, 568; See also Santa Cruz v. McLeod (1961) 189 Cal. App. 2d 222, 234.)