law-fraud-cause-of-action

law-fraud | fraud vs breach of contract | statutory fraud | fraud in real estate transactions | fraudulent inducement
of contract | fraudulent concealment of tort or breach as limitations tolling theory | fraudulent misrepresentation |
negligent misrepresentation | breach of contract vs. fraud claim | Deceptive Trade Practices (DTPA) claim |

FRAUD DEFINED - ELEMENTS OF COMMON-LAW TORT

The elements of a cause of action for 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).
Fraud

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.).

To prevail on a fraud claim, a plaintiff must prove 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 injury. Ernst & Young, L.L.P. v.
Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001); Hartford Fire Ins. Co. v. C. Springs 300, Ltd., 287 S.W.
3d 771, 781 (Tex. App.—Houston [1st Dist.] 2009, pet. denied).

ELEMENTS OF FRAUD - CASES INVOLVING FRAUD CLAIMS FROM THE
HOUSTON COURTS OF APPEALS

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). 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.
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.
Andress v. Meah Investments No. 2, Ltd. (Tex.App.- Houston [1st Dist] Sep. 10, 2009)(Keyes)
(fraud, imposition of exemplary damages)
AFFIRM TRIAL COURT JUDGMENT IN PART, REVERSE TC JUDGMENT IN PART, AND REMAND CASE TO TC
FOR FURTHER PROCEEDINGS: Opinion by Justice Keyes
Before Justices Jennings, Keyes and Higley
01-07-00792-CV Morris Andress v. Meah Investments No. 2, Ltd.
Appeal from 239th District Court of Brazoria County
Trial Court Judge: Hon. Patrick Edward Sebesta

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).
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)
AFFIRM TRIAL COURT JUDGMENT: Opinion by Justice Terry Jennings
Before Justices Taft and Jennings, The Honorable Hudson
01-07-00952-CV Kelly Wood v. Texas Chiropractic College

To prove a fraud claim, a plaintiff must show (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); Johnson & Higgins of Texas, Inc. v.
Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex. 1998).

Both parties agree that the elements of a fraud claim are (1) a material misrepresentation, (2) that was either
known to be false when made or was asserted without knowledge of its truth, (3) which was intended to be acted
upon, (4) which was relied upon, and (5) which caused injury. See Dow Chem. Co. v. Francis, 46 S.W.3d 237,
242 (Tex. 2001). Kone did not challenge the fifth element, injury, in its no-evidence motion for summary
judgment.
Christus Health v. Kone, Inc. (Tex.App.- Houston [14th Dist.] Jun. 25, 2009)(Brown)
(fraud and fraud-in-the-inducement claims relating to a contract for elevator-maintenance services,
one-satisfaction rule does not apply here, pleading sufficiency, special exceptions, affidavit found to be
conclusory)
AFFIRMED: Opinion by Justice Brown
Before Justices Anderson, Frost and Brown
14-07-00786-CV Christus Health and Christus Health Gulf Coast v. Kone, Inc
Appeal from 127th District Court of Harris County
Trial Court Judge: S harolyn P. Wood

To prove fraud, a party must establish (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 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 upon it, and (6) the party thereby suffered injury. Lundy v. Masson, 260
S.W.3d 482, 492 (Tex. App.- Houston [14th Dist.] 2008, pet. denied).
Sandhu v. Pinglia Investments of Texas, LLC (Tex.App.- Houston [14th Dist.] Jun. 25, 2009)(Seymore)
(commercial real estate transaction: financing of purchase of shopping center, suit for breach of promissory
note, summary judgment procedure, affirmative defenses not properly asserted in response to Plaintiff's motion,
proof of balance due and damages in note suit)
Decision: TRIAL COURT'S JUDGMENT AFFIRMED: Opinion by Justice Charles Seymore
Panel members: Chief Justice Hedges, Justices Anderson and Seymore
14-08-00184-CV Raghbir Sandhu v. Pinglia Investments of Texas, LLC and Sumer Pinglia
Appeal from 164th District Court of Harris County

A fraud cause of action has six elements: (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. FirstMerit Bank, 52 S.W.3d at 758. A negligent misrepresentation cause of action has four
elements: (1) the representation is made by a defendant in the course of his business, or in a transaction in
which he has a pecuniary interest, (2) the defendant supplies "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 suffers pecuniary loss by justifiably relying on the representation. Henry
Schein, Inc. v. Stromboe, 102 S.W.3d 675, 686 n.24 (Tex. 2002).
Grant v. Laughlin Environmental, Inc. (Tex.App.- Houston [1st Dist.] Dec. 18, 2008)(Jennings)
(summary judgment evidence, conclusory affidavit, breach of contract, quantum meruit, fraud, negligent
misrepresentation)

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