Opinion ID: 2387279
Heading Depth: 1
Heading Rank: 7

Heading: Fraud and Constructive Fraud

Text: Lee next maintains that the auto carriers made false representations of material fact when they marketed and sold Farm Bureau memberships contrary to the statutory public policy of Arkansas because those memberships are void. See Ark.Code Ann. § 2-2-407 (Repl.1992). Thus, the auto carriers, according to Lee, were guilty of either actual or constructive fraud. Further, he claims that while the agents of FBM or SFB may have been unaware that Farm Bureau memberships sold to non-farmers were void, FBM and SFB, presumably through other officers and representatives, were both cognizant of the fact that such memberships were void. Again, Lee obtained no ruling from the trial judge on whether memberships sold to non-farmers are void as against Arkansas's public policy. But, in addition, there was no proof that the auto carriers' agent, Melvin Hicks, in any way defrauded Dennis Lee or other non-farmer insureds by failing to tell them the truth about Act 116. Indeed, the proof is to the contrary because the agents believed the memberships in the county Farm Bureaus to be valid. To be guilty of fraud or deceit, a false representation must be made. Fidelity Mortgage Co. v. Cook, 307 Ark. 496, 821 S.W.2d 39 (1991). In order to extend the tort of deceit to instances where the false representation is due to silence, this court has stated that the false representation must include (1) concealment of material information and (2) non-disclosure of certain pertinent information. Id. at 500, 821 S.W.2d at 42 (quoting Baskin v. Collins, 305 Ark. 137, 806 S.W.2d 3 (1991)). American Jurisprudence further illuminates the difference between concealment and mere silence. The law distinguishes between passive concealment and active concealment, or in other words, between mere silence and the suppression or concealment of a fact, the difference consisting in the fact that concealment implies a purpose or design, while the simple failure to disclose a fact does not. Mere silence is not representation, and a mere failure to volunteer information does not constitute fraud. Thus, as a general rule, to constitute fraud by concealment or suppression of the truth there must be something more than mere silence or a mere failure to disclose known facts. Where there is no obligation to speak, silence cannot be termed suppression, and therefore is not a fraud. Either party may, therefore, be innocently silent as to matters upon which each may openly exercise his judgment. Silence, in order to be an actionable fraud, must relate to a material matter known to the party and which it is his legal duty to communicate to the other contracting party, whether the duty arises from a relation of trust, from confidence, for inequality of condition and knowledge, or other attendant circumstances. 37 AM. JUR.2d Fraud and Deceit § 145. Here, the contention is made that the auto carriers' agents defrauded non-farmer applicants by not revealing that Farm Bureau membership was limited under Act 116 of 1921 to those engaged in agriculture. As an initial matter, we do not concede that Lee's interpretation of Act 116 in this context is correct. But, regardless of that point, Lee presented no evidence that agents for the auto carriers were even aware that Act 116 existed, much less that they concealed or failed to disclose information about the application of the Act to non-farmer members. Nor did Lee present evidence that the auto carriers themselves were aware that the memberships might be void under Act 116. Finally, Lee presented nothing to show that the Farm Bureau Federation, if aware of Act 116, purposefully withheld that information and accepted nonfarmers as members with the knowledge that non-farmer memberships were against public policy. There is nothing in the way of proof to sustain Lee's theory of misrepresentation by concealment. The facts and circumstances of this case do not support reversal on this point. This is essentially an issue of sufficiency of the evidence. When determining whether substantial evidence exists, we view the evidence in the light most favorable to the appellee. Turner v. Stewart, 330 Ark. 134, 952 S.W.2d 156 (1997). Substantial evidence of no fraud, either actual or constructive, exists in this case, and we affirm the trial judge.