Tag: fraud

Fraud or Mistake? And How It Can Effect a Claim Against a Professional Designer.

All claims against professional designers are perempted (extinguished) under La. R.S. 9:5607 five years after the project is completed with an exception for fraud. In cases of fraud, an otherwise untimely lawsuit can go forward. For this reason, plaintiffs often allege fraud when the claim may be perempted. This scenario was present in the recent First Circuit decision in Markiewicz v. Sun Constr., L.L.C, 2019-1590 (La. App. 1 Cir. 9/18/20), 2020 WL 5587265. The decision helps to explain when a designer’s alleged conduct falls outside of ordinary negligence based upon the standard of care and becomes fraudulent.

Broadly, fraud is designed as “a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other.” La. C.C. art. 1953. Fraudulent intent or intent to deceive is a necessary element of a fraudulent misrepresentation. Therefore, fraud cannot be predicated on a mere mistake or negligence, however gross.

In Markiewicz, the plaintiff homeowners filed a class action lawsuit in 2006 arising from flooding of their neighborhood. Ten years later, plaintiffs added as defendants the engineers involved in the design of the drainage system, including the engineers who prepared the surveys for the development. Absent fraud, the newly added claims would be untimely. Plaintiffs alleged that the engineers fraudulently provided incorrect or misleading survey certificates, despite their knowledge that the certificates were incorrect.

The engineers filed a motion for summary judgment on peremption because more than five years had passed from the completion of their services. The engineers argued that plaintiffs could not prove fraud under facts of the case such that the fraud exception would not apply.   

The Markiewicz court ruled for defendants. Although there was a dispute as to whether the engineers’ measurements were erroneous, the court found that plaintiffs failed to prove that the services were fraudulent. The plaintiffs provided no evidence that the engineers were aware of any discrepancy in preparing the surveys or that they knowingly misrepresented the surveys. As such, the court found that the fraud exception did not apply, and plaintiffs’ claims against the engineers were perempted. Through its analysis, the Markiewicz court made clear that labelling allegedly negligent conduct as fraudulent is insufficient to defeat a supported motion. While fraud may be established by circumstantial evidence, including highly suspicious facts and circumstances, the court found the record devoid of such facts.

Real Estate Liability: Recovery Denied in “As Is” Sale Despite Quick Discovery of Mold

In the recent case of Riedel v. Fenasci, 2018-0540 (La. App. 1 Cir. 12/28/18), _______ So. 3d _______, 2018 WL 6818716, home buyers sued the sellers and the involved real estate agents after mold was discovered shortly following the sale. This is a common fact pattern in humid South Louisiana. The buyers lost in the trial court when there was no evidence that the sellers or the agents knew of the problem. The result was affirmed by the First Circuit Court of Appeal. 

The Riedels identified mold weeks after the closing and filed a claim with their homeowner’s insurer. But the claim was denied when the insurer’s inspection revealed long- term damage, rot, and deterioration in a ceiling due to water damage.  That finding prompted the suit.

Against the sellers, the Riedels contended that they “had to have known” about the moisture and mold in the home prior to the sale.  Because the home was sold “as is,” they had to establish fraud to recover. However, the sellers had not lived in the home for years and had received no complaints from tenants over this time. Under such facts, the claim of fraud was not supported.

The Riedels also sued both agents for negligent misrepresentation, and their own agent for breach of fiduciary duty.  In assessing the claim against the agents, the Riedel Court agreed that real estate agents are liable for negligent misrepresentation when they fail to disclose hidden defects in the property which were known or should have been known to them. The Court also agreed that a purchaser’s real estate agent owes a fiduciary duty, the highest duty of care recognized by law.  Nevertheless, when the plaintiffs’ own inspector found no visible evidence of mold prior to the sale and there was no indication that the agents possessed prior knowledge of the mold, the claim against the agents was also dismissed.

Marty Golden has been practicing law based in Baton Rouge, Louisiana for over thirty years, concentrating in civil litigation primarily involving injuries, property damage, insurance coverage, and contract disputes. Much of his practice is defending and advising real estate agents in suits by property buyers and sellers, but Marty also defends other professionals, insurance companies, manufacturers, and business owners. Marty has a special interest in all things procedural, because they are the rules of the road for litigators and knowing them better than his opponent gives him a leg up in court.