law-reliance-element-fraud | common law fraud cause of action in Texas |
RELIANCE AS ELEMENT OF FRAUD CAUSE OF ACTION
O&B contends that there is no evidence of reliance, which is an essential element of any fraud claim. See Haase
v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001); Gray v. Waste Res., Inc., 222 S.W.3d 522, 524 (Tex. App.-Houston
[14th Dist.] 2007, no pet.). A fraud plaintiff must prove that based on the alleged
misrepresentation, he either took an action or failed to take an action, which caused him
harm. See Van Marcontell v. Jacoby, 260 S.W.3d 686, 691 (Tex. App.-Dallas 2008, no pet.); TCA Bldg. Co. v.
Entech, Inc., 86 S.W.3d 667, 674 (Tex. App.-Austin 2002, no pet.). Appellees presented no evidence of any
action taken or not taken in reliance on the alleged misrepresentations.[1] For example, there is no evidence that
they passed up the opportunity to drive other higher paying loads or that they could have quit their jobs with O&B
and obtained a better paying job. See Johnson & Johnson Med., Inc. v. Sanchez, 924 S.W.2d 925, 928, 930 (Tex.
1996) (rendering take nothing judgment on fraud claim because plaintiff did not show detrimental reliance on
employer's promise of job recall after layoff by, for example, turning down other job offers). Indeed, the testimony
from three drivers showed that truck driving jobs in the area were difficult to obtain at that time. Without evidence
that they suffered an actual loss based on an action they did or did not take in reliance on O&B's alleged
misrepresentations, appellees' fraud claims fail. See Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 211
(Tex. 2002); Johnson & Johnson, 924 S.W.2d at 930. We sustain O&B's third issue.
O and B Farms, Inc.v. Black (Tex.App.- Houston [14th Dist.] Oct. 29, 2009)(Yates)
(fraud and civil conspiracy claims award of attorney's fees, exemplary damages reversed)
(breach of contract damages proven)(contingency fee contract insufficient to establish reasonable attorney's fees)
AFFIRMED AS MODIFIED: Opinion by Justice Brock Yates
Before Chief Justice Hedges, Justices Brock Yates and Frost
14-08-00595-CV O and B Farms, Inc., and B and O Farms, LLC v. Eldon Jay Black, Kevin Lee Donahoo, Thomas
David Horrell, Jr., Charles Richard Weeks, Ronald Russell Swisshelm, and Casey Ross Gray
Appeal from 220th District Court of Hamilton County
Trial Court Judge: Hon. James E. Morgan
To recover on an action for fraud, the plaintiff 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. Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex. 1998).
One of the elements of a fraud claim is that the plaintiff actually and justifiably relied on the misrepresentation to
suffer injury. Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex.2001); RESTATEMENT
(SECOND) OF TORTS § 537 (1977). In this regard, a party to an arm's length transaction must exercise ordinary
care and reasonable diligence for the protection of his own interests, and a failure to do so is not excused by mere
confidence in the honesty and integrity of the other party. Thigpen v. Locke, 363 S.W.2d 247, 251 (Tex.1962);
Coastal Bank SSB v. Chase Bank of Tex., N.A., 135 S.W.3d 840, 843 (Tex.App.-Houston [1st Dist.] 2004, no pet.).
Therefore, 47 reliance upon an oral representation that is directly contradicted by the express, unambiguous
terms of a written agreement between the parties is not justified as a matter of law. DRC Parts & Accessories,
L.L.C. v. VM Motori, S.P.A., 112 S.W.3d 854, 858 (Tex.App.-Houston [14th Dist.] 2003, pet. denied). In DRC Parts,
the Fourteenth Court of Appeals stated,
This principle is also dictated by policy and practical considerations. If written contracts are to serve a purpose
under the law, relative to oral agreements, it is to provide greater certainty regarding what the terms of the
transaction are and that those terms will be binding, thereby lessening the potential for error, misfortune, and
dispute.
Id. The Fourteenth Court of Appeals further explained that
a party's exercise of a right under the written contract, which is contrary to the oral agreement, would subject that
party to a fraudulent inducement claim based on the oral agreement. In that event, however, the party who
entered into the written contract while relying on a contrary oral agreement would have thereby itself entered into
the written contract with an intent not to perform it. Thus, in order to show its reliance on the oral agreement to
sustain its own fraudulent inducement claim, that party would necessarily prove that it was guilty of fraudulent
inducement as well.
The essential issue, then, is not whether that party's evidence of the contrary oral agreement is admissible or
sufficient to prove that agreement, but instead whether the law will deem such reliance to be justified and thereby
favor that party to the detriment of the other contracting party, which has at least declared its intent in the contract
and sought to abide by its terms. Because such an approach would defeat the ability of written contracts to
provide certainty and avoid dispute, the prevailing rule, recited above, is instead that a party who enters into a
written contract while relying on a contrary oral agreement does so at its peril and is not rewarded with a claim for
fraudulent inducement when the other party seeks to invoke its rights under the contract.
Id. at 858-59.
The undisputed evidence shows that McIntosh received the written promissory note, i.e., the DeClaire Note, but
did not read it other than to verify that DeClaire had signed it. He subsequently gave the DeClaire Note to Russell,
his financial advisor, who also admitted that he did not read the DeClaire Note. It was not until the Partnership
attempted to enforce the DeClaire Note that McIntosh discovered that it included the sole recourse language.
Because the parties entered into a valid, written promissory note, McIntosh cannot now complain that he justifiably
relied on a prior oral representation as a matter of law. See id.; see also In re Media Arts Group, 116 S.W.3d 900,
908 (Tex.App.-Houston [14th Dist.] 2003, orig. proceeding) (stating that, absent fraud, a party to a contract may
not successfully claim he believed the provisions of a contract were different from those plainly set out in the
contract or he did not understand the language used). Moreover, "a party to a written agreement is charged as a
matter of law with knowledge of its provisions ... unless he can demonstrate that he was tricked into its execution."
Town North Nat. Bank v. Broaddus, 569 S.W.2d 489, 492 (Tex.1978) (quoting Texas Export Dev., 519 S.W.2d at
139). The Partnership did not claim that it was tricked into accepting the terms of the DeClaire Note. Rather, the
evidence shows that McIntosh 48 and Russell failed to read the contents of the DeClaire Note.
DeClaire v. G & B MCINTOSH FAMILY LTD., 260 SW 3d 34 01-06-00423-CV.- Tex: Court of Appeals, Houston
May 8, 2008 DeClaire v. G&B McIntosh Family LP
Thus, because the Partnership cannot rely on a prior oral agreement after accepting the terms of the written
promissory note, we conclude that legally insufficient evidence supports the trial court's findings of fact and
conclusions of law stating that the written contract was procured by fraud.
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