Opinion ID: 874386
Heading Depth: 2
Heading Rank: 4

Heading: Constructive Fraud Claim

Text: In addition, Gray asserts the district court erred in ordering summary judgment against him on his claim for constructive fraud. The district court found no indication in the record that Gray was justified in relying upon any alleged oral representations by Tri-Way that they had an agreement. Gray argues that contrary to the district court's determination, there is evidence in the record to support the reasonableness of his reliance on Tri-Way's representations regarding the bonus compensation. The evidence Gray directs this Court's attention to is as follows: (1) Tri-Way never told Gray that it had rejected the terms of his employment agreement, and (2) Tri-way allowed Gray to begin working and only later attempted to negotiate the terms of his employment agreement. An action in constructive fraud exists when there has been a breach of a duty arising from a relationship of trust and confidence, as in a fiduciary duty. Hines v. Hines, 129 Idaho 847, 853, 934 P.2d 20, 26 (1997). Examples of relationships from which the law will impose fiduciary obligations on the parties include when the parties are: members of the same family, partners, attorney and client, executor and beneficiary of an estate, principal and agent, insurer and insured, or close friends. Mitchell v. Barendregt, 120 Idaho 837, 844, 820 P.2d 707, 714 (Ct.App.1991). The gist of a constructive fraud finding is to avoid the need to prove intent (i.e., knowledge of falsity or intent to induce reliance) [under the elements required to prove actual fraud], since it is inferred directly from the relationship and the breach. Country Cove Dev., Inc. v. May, 143 Idaho 595, 601, 150 P.3d 288, 294 (2006). A party must establish nine elements to prove [actual] fraud: `(1) a statement or a representation of fact; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity; (5) the speaker's intent that there be reliance; (6) the hearer's ignorance of the falsity of the statement; (7) reliance by the hearer; (8) justifiable reliance; and (9) resultant injury.' Glaze v. Deffenbaugh, 144 Idaho 829, 833, 172 P.3d 1104, 1108 (2007) (quoting Mannos v. Moss, 143 Idaho 927, 931, 155 P.3d 1166, 1170 (2007)). In sum, if a plaintiff establishes that there has been a breach of duty arising from a relationship of trust and confidence, the plaintiff is not required to prove (1) the speaker's knowledge of the falsity regarding the statement or representation of fact, or (2) the speaker's intent that the hearer rely on the statement or representation of fact, to sustain a claim of constructive fraud. See Country Cove, 143 Idaho at 601, 150 P.3d at 294. However, the party is still required to prove the remaining seven elements of actual fraud. Assuming, without deciding, that Gray is correct that his longstanding friendship with Allard and Gray's trust in Tri-Way to protect his interests establishes a relationship of trust and confidence between Gray and the Tri-Way parties, Gray's claim for constructive fraud still fails. Based on the evidence in the record, there are no disputed issues of material fact that Gray failed to establish justifiable reliance. Under section 544 of the Restatement (Second) of Torts, [t]he recipient of a fraudulent misrepresentation of intention is justified in relying upon it if the existence of the intention is material and the recipient has reason to believe that it will be carried out. Whether the recipient has reason for this belief depends upon the circumstances under which the statement was made, including the fact that it was made for the purpose of inducing the recipient to act in reliance upon it and the form and manner in which it was expressed. Restatement (Second) of Torts § 544, comment a (1965). Under the circumstances of this case, we agree with the district court that Gray had no reason to believe that Tri-Way would carry out the terms of the employment agreement. As set forth above, Gray continued to send and receive draft employment agreements after he began working for Tri-Way on June 1, 2004 that contained handwritten notes and italicized type in the very sections addressing the bonus compensation at issue. Although these changes were relatively minor, they indicate that Gray was aware that Section 4.3, governing incentive or bonus pay, was still being negotiated. Gray began work on June 1, 2004 without a formal agreement in place at his own risk. Thus, the fact that Tri-Way never informed Gray that it rejected the terms of the employment agreement, or the fact that Tri-Way allowed Gray to begin work without an agreement in place, does not establish justifiable reliance on Gray's part. Therefore, we affirm the district court's summary judgment dismissal of Gray's claim for constructive fraud.