The Law of Fraud

Fraud consists of inducing a person to enter a contract by making false representations or concealing material facts that should be disclosed. This type of fraud is often asserted as a defense to a contract. For example, a seller of a house might misrepresent that the house has a new roof, when in fact the house does not have a new roof. Fraud can even include a promise made without any intent of later performing the promise.  Fraud is defined at Civil Code §§1566–1574; and 1710.

If a special relationship exists (sometimes known as a confidential relationship or a fiduciary relationship, such as the duty an agent owes to his principal or the duty a trustee owes to the beneficiaries of a trust), fraud can also include any advantage the fiduciary obtains by reason of his/her position. Some examples may be: acquiring property from a trust for a bargain price, entering a transaction with the trust while acting as trustee, or obtaining an advantage over the other beneficiaries of a trust. (Civil Code §1573)

An attorney-client relationship is not created between the client and the law firm until the attorney and client execute a written retainer agreement describing the legal work to be performed.


Aiding a Fiduciary’s Breach of Duty

A person who the law recognizes as owing a special duty of loyalty and honesty to another is referred to as a fiduciary.  Examples of fiduciary relationships are an agent acting for a principal under a power of attorney or a trustee acting on behalf of a settlor or beneficiaries of a trust.  A recent decision of the California Court of Appeals held that an individual may have liability for aiding a fiduciary in breaching his/her duty where the person knowingly provides substantial assistance to the fiduciary.  American Master Lease LLC vs. Idanta Partners (2014).  Fiduciary duties are also owed by a manager to a limited liability company, by officers and directors to a corporation that they govern, and among partners of a partnership.  The court held that liability for aiding and abetting a breach of fiduciary duty arises when the aider and abettor commits an independent tort by making a conscious decision to participate in tortious (wrongful) activity for the purpose of assisting another in performing a wrongful act.  There likely will be future litigation on the issue of whether third parties share liability for the wrongful act of a fiduciary.

If you have questions concerning your particular situation, then please call our Salinas office at 831-757-5426 during business hours to schedule a telephone conference or office visit, or complete the adjacent form and we will contact you.

An attorney-client relationship is not created between the client and the law firm until the attorney and client execute a written retainer agreement describing the legal work to be performed.


Double Damages Awarded for Misappropriation of Property

In certain types of claims, the court, in addition to any other remedy available, may awards double damages.  Probate Code §859 provides for double damages for misappropriation of property belonging to a minor, an elder, a dependent adult, a trust, or a decedent’s estate through the use of undue influence or bad faith.  Probate Code §4231.5 provides double damages against persons misappropriating property under a power of attorney.  Effective January 1, 2014, those provisions were revised to provide that the court may impose reasonable attorney fees and costs as additional damages for such wrongful taking of property.

If you have questions concerning your particular situation, then please call our Salinas office at 831-757-5426 during business hours to schedule a telephone conference or office visit, or complete the adjacent form and we will contact you.

An attorney-client relationship is not created between the client and the law firm until the attorney and client execute a written retainer agreement describing the legal work to be performed.


New Definition of Undue Influence and the Crime of Elder Financial Abuse

Undue influence was previously defined in Section 1575 of the California Civil Code as the use of one in whom a confidence is reposed by another or one who holds real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him, or in the taking of an unfair advantage of another’s weakness of mind, or taking a grossly oppressive and unfair advantage of another’s necessities or distress.  Previously the crime of financial elder abuse was defined by Welfare & Institutions Code §15610.30 to include the acquisition of property from an elder or dependent by undue influence.

A new definition has been adopted by the legislature, effective January 1, 2014, under Probate Code §86 and Welfare & Institutions Code §15610.70 as consisting of excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity.  The court must consider four factors in determining whether undue influence has been exercised, including the vulnerability of the victim, the influencer’s apparent authority, the actions or tactics used by the influencer, and the equity of the result.

The issue of undue influence often arises when an elderly person changes his/her will, trust, or other estate planning documents, or executes a conveyance of real property, when the elderly person is ill, frail, or easily influenced.

If you have questions concerning your particular situation, then please call our Salinas office at 831-757-5426 during business hours to schedule a telephone conference or office visit, or complete the adjacent form and we will contact you.

An attorney-client relationship is not created between the client and the law firm until the attorney and client execute a written retainer agreement describing the legal work to be performed.