CACI No. 4111. Constructive Fraud (Civ. Code, § 1573)

Judicial Council of California Civil Jury Instructions (2020 edition)

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4111.Constructive Fraud (Civ. Code, § 1573)
[Name of plaintiff] claims that [he/she/nonbinary pronoun] was harmed
because [name of defendant] misled [him/her/nonbinary pronoun] by failing
to provide [name of plaintiff] with complete and accurate information. To
establish this claim, [name of plaintiff] must prove all of the following:
1. That [name of defendant] was [name of plaintiff]’s
[agent/stockbroker/real estate agent/real estate broker/corporate
officer/partner/[insert other fiduciary relationship]];
2. That [name of defendant] acted on [name of plaintiff]’s behalf for
purposes of [insert description of transaction, e.g., purchasing a
residential property];
3. That [name of defendant] knew, or should have known, that
[specify information at issue];
4. That [name of defendant] misled [name of plaintiff] by [failing to
disclose this information/providing [name of plaintiff] with
information that was inaccurate or incomplete];
5. That [name of plaintiff] was harmed; and
6. That [name of defendant]’s conduct was a substantial factor in
causing [name of plaintiff]’s harm.
New November 2017; Revised May 2020
Directions for Use
Give this instruction for a claim of constructive fraud under Civil Code section
1573. Under the statute, constructive fraud is a particular kind of breach of fiduciary
duty in which the defendant has misled the plaintiff to the plaintiff’s prejudice or
detriment. Constructive fraud differs from actual fraud (see CACI Nos. 19001903
on different claims involving actual fraud) in that no fraudulent intent is required.
(Civ. Code, § 1573(1).) Thus, if one who is under a fiduciary duty to provide
complete and accurate information to the plaintiff fails to do so and the plaintiff is
misled to the plaintiff’s prejudice, there is a claim for constructive fraud despite the
lack of any intent to mislead or deceive.
In element 4, choose the first option if it was the defendant’s failure to disclose
information that misled the plaintiff. Choose the second option if the defendant
provided information to the plaintiff, but the plaintiff was misled because the
information was inaccurate or incomplete.
In a fiduciary relationship, there is a rebuttable presumption of reasonable reliance.
The defendant bears the burden of rebutting the presumption by proving by
substantial evidence that the plaintiff could not have reasonably relied on the
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misleading information or omission. (Edmunds v. Valley Circle Estates (1993) 16
Cal.App.4th 1290, 1301-1302 [20 Cal.Rptr.2d 701].)
There are cases that set forth the elements of constructive fraud as “(1) a fiduciary
or confidential relationship; (2) nondisclosure (breach of fiduciary duty); (3) intent
to deceive, and (4) reliance and resulting injury (causation).” (See, e.g., Younan v.
Equifax Inc. (1980) 111 Cal.App.3d 498, 516 fn. 14 [169 Cal.Rptr. 478]; see also
Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105, 1131
[167 Cal.Rptr.3d 832].) However, these elements conflict with the statute in at least
two ways. First, the statute clearly states that no fraudulent intent (or intent to
deceive) is required. Second, the statute is not limited to nondisclosure; it extends to
information that is disclosed, but misleading.
For discussion of the statute of limitations for constructive fraud, see CACI No.
4120, Affırmative Defense - Statute of Limitations.
Sources and Authority
• Constructive Fraud. Civil Code section 1573.
• “A fiduciary must tell its principal of all information it possesses that is material
to the principal’s interests. A fiduciary’s failure to share material information
with the principal is constructive fraud, a term of art obviating actual fraudulent
intent.” (Michel v. Moore & Associates, Inc. (2007) 156 Cal.App.4th 756, 762
[67 Cal.Rptr.3d 797], internal citations omitted.)
• “In its generic sense, constructive fraud comprises all acts, omissions and
concealments involving a breach of legal or equitable duty, trust, or confidence,
and resulting in damages to another. [Citations.] Constructive fraud exists in
cases in which conduct, although not actually fraudulent, ought to be so
treated - that is, in which such conduct is a constructive or quasi fraud, having
all the actual consequences and all the legal effects of actual fraud.”
(Prakashpalan, supra, 223 Cal.App.4th at p. 1131.)
• “The failure of the fiduciary to disclose a material fact to his principal which
might affect the fiduciary’s motives or the principal’s decision, which is known
(or should be known) to the fiduciary, may constitute constructive fraud. Also, a
careless misstatement may constitute constructive fraud even though there is no
fraudulent intent.” (Assilzadeh v. Cal. Fed. Bank (2000) 82 Cal.App.4th 399, 415
[98 Cal.Rptr.2d 176].)
• “[A] representation in the context of a trust or fiduciary relationship creates a
rebuttable presumption of reasonable reliance subject to being overcome by
substantial evidence to the contrary.” (Edmunds, supra, 16 Cal.App.4th at p.
1302.)
• “This rebuttable presumption implements the long recognized public policy of
imposing fiduciary duties upon partners in their relationship to one another.
Indeed, this policy is lodged in the statutory and case law of this state. It is more
than the simple shifting of the burden of proof to facilitate the determination of
a particular action. Consequently, [defendant] had the burden of proving by
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substantial evidence that [plaintiff] did not rely on the alleged false statement.”
(Edmunds, supra, 16 Cal.App.4th at p. 1302.)
• “Confidential and fiduciary relations are in law, synonymous and may be said to
exist whenever trust and confidence is reposed by one person in another.”
(Barrett v. Bank of Am. (1986) 183 Cal.App.3d 1362, 1369 [229 Cal.Rptr. 16].)
Secondary Sources
5 Witkin, California Procedure (5th ed. 2008) Pleading § 717
1 Witkin, Summary of California Law (11th ed. 2017) Contracts § 295
3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Businesss Torts,
§ 40.01 (Matthew Bender)
17 California Forms of Pleading and Practice, Ch. 215, Duress, Fraud, Menace,
Undue Influence, and Mistake, § 215.130 (Matthew Bender)
23 California Forms of Pleading and Practice, Ch. 269, Fraud and Deceit, § 269.101
et seq. (Matthew Bender)
9 California Points and Authorities, Ch. 92, Duress, Fraud, Menace, Undue
Influence, and Mistake, § 92.44 et seq. (Matthew Bender)
27 California Legal Forms - Transaction Guide, Ch. 77, Discharge of Obligations,
§ 77.125 (Matthew Bender)
Matthew Bender Practice Guide: California Contract Litigation, Ch. 17, Attacking or
Defending Existence of Contract - Fraud, Duress, Menace, and Undue Influence,
17.19
4112-4119. Reserved for Future Use
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