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FRAUD I BREACH OF FIDUCIARY DUTY – Constructive Fraud and Breach of Fiduciary Duty, what is the Difference?

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FRAUD I BREACH OF FIDUCIARY DUTY – Constructive Fraud and Breach of Fiduciary Duty, what is the Difference?

FRAUD I BREACH OF FIDUCIARY DUTY – Constructive Fraud and Breach of Fiduciary Duty, what is the Difference?

January 31, 2020

What is the difference between a Cause of Action for Constructive Fraud and a claim for Breach of Fiduciary Duty?

 [1] The Statutes of Limitations differ for Breach of Fiduciary Duty as opposed to Constructive Fraud

  • Constructive Fraud has a 3-year SOL: A lawsuit for constructive fraud must be filed within the three-year limitation period of California code of civil procedure section 338(d).

“[W]here the gravamen of the complaint is that defendant’s acts constituted … constructive fraud, the applicable statute of limitations is the [Code of Civil Procedure section 338, subdivision (d) three-year] limitations period, ’governing fraud even though the cause of action is designated by the plaintiff as a claim for breach of fiduciary duty.” Thomson v. Canyon (2011) 198 Cal.App.4th 594, 607 [129 Cal.Rptr.3d525]

Statute of Limitations: A fraud (deceit, intentional misrepresentation) lawsuit is required to be filed within three years before plaintiff either discovered facts constituting the fraud or with reasonable diligence could have (should have) discovered those facts, whichever comes first. Sun’n Sand, Inc. v. United California Bank(1978) 21 Cal.3d 671, 701; Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808; Kline v. Turner (2001) 87 Cal.App.4th 1369, 1374. The delayed-discovery rule in fraud cases applies and is codified in California Code of Civil Procedure § 338(d): “Within three years: (d) An action for relief on the ground of fraud or mistake…[is] not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.”

  • Breach of Fiduciary Duty has a 4-year SOL: A lawsuit for breach of fiduciary duty must be filed within the four-year limitation period of California code of civil procedure section 343.

The statute of limitations for breach of fiduciary duty is four years. (California Code of Civil Procedure§ 343.)” Stalberg v. Western Title Ins. Co. (1991) 230 Cal.App.3d 1223, 1230 [282 Cal.Rptr.43].

[2] Elements of proof differ for Breach of Fiduciary Duty as opposed to Constructive Fraud.

In order to prevail on a Breach of Fiduciary Duty Claim a Plaintiff must establish that the Defendant engaged in wrongful conduct. Alternatively, a Plaintiff can prevail on a Constructive Fraud claim even though the underlying conduct is not otherwise fraudulent.

  • Elements of Proof for Constructive Fraud: “Constructive fraud comprises any act, omission or concealment involving a breach of legal or equitable duty, trust or confidence which results in damage to another,even though the conduct is not otherwise fraudulent.” Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, 562; 2 Miller & Starr, Cal. Real Estate (2d ed. 1989), §3:20, p. 120-121; Civ. Code §1573(1). If a fiduciary relationship exists, any concealment of material fact is fraud. Byrum v. Brand (1990) 219 Cal.App.3d 926, 937-938; Main v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1997) 67 Cal.App.3d 19, 32.  Unlike actual fraud, constructive fraud does not require an intentional deception, an “intent to deceive” being implied from the failure to disclose. Mary Pickford Co. v. Bayly Bros., Inc. (1939) 12 Cal.2d 501, 525. Further, reasonable reliance is presumed upon a nondisclosure of the fiduciary, absent direct evidence of lack of reliance. Estate of Gump (1991) 1 Cal.App.4th 582, 601.
  • Elements of Proof for Breach of Fiduciary Duty: To establish a cause of action for breach of fiduciary duty, a plaintiff must demonstrate the existence of a fiduciary relationship, breach of that duty and damages. Shopoff & Cavallo LLP v. Hyon, (2008) 167 Cal.App.4th 1489, 1509.

Related Articles and Publications

 What is a Constructive Fraud?

Constructive Fraud occurs when a person or entity gains an unfair advantage over another through unjust or improper means, usually by lying (i.e., making a false representation of material fact) or omitting important details (i.e., Failing to disclose a material fact). Unlike a general cause of action for Fraud, Constructive Fraud does not require intent or actual knowledge of the lie or omission.

If you are interested in learning more about constructive fraud please see link below:

 What is a Fiduciary Duty?

Some relationships are so important that actions taken in violation of that relationship is grounds for damages in civil court.  These relationships carry with them a fiduciary duty and a violation of that duty may prompt a lawsuit claiming Breach of a Fiduciary Duty.

A fiduciary relationship is ‘ “ ‘any relation existing between parties to a transaction wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of the other party. Such a relation ordinarily arises where a confidence is reposed by one person in the integrity of another, and in such a relation the party in whom the confidence is reposed, if he voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts relating to the interest of the other party without the latter’s knowledge or consent. . . .’ ” ’ ” (Wolf v. Superior Court (2003) 107 Cal.App.4th 25, 29 [130Cal.Rptr.2d 860]

For more about fiduciaries or breach of fiduciary duties see the links below:

Causes of Action for Fraud and Breach of Fiduciary Duty in California: For other articles discussing the various causes of action for Fraud in California, links are included below:

For Fraud and Breach of Fiduciary Verdicts in California: Our articles discussing Fraud verdicts in California are included below:

Fraud Damages: Our articles discussing Fraud damages in California are included below:

Recovery from the Victims Of Corporate Fraud Compensation Fund of California: For articles discussing damages:

If you have fallen victim to fraud or have questions or fiduciary duties we encourage you to contact our offices at 619-432-5145 for a free consultation with one of our fraud attorneys and breach of fiduciary duty lawyers.

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