Chapter 20: Constructive Fraud

§20.1 Generally

The Case : Kincaid v. SouthTrust Bank, 221 S.W.3d 32 (Tenn. Ct. App. 2006).

The Basic Facts: Storage company's creditor sued bank and its subsidiary after it obtained a deed in lieu of foreclosure. The theories asserted included constructive fraud.

The Bottom Line:

  • "Plaintiffs' second claim alleges a conspiracy to commit constructive fraud.FN8 Constructive fraud is a breach of a legal or equitable duty which is deemed fraudulent because of its tendency to deceive others, to violate public or private confidence, or to injure public interests. Cornwell v. Hodge, C.A. No. 44, 1986 WL 5890, at *3 (Tenn. Ct. App. May 23, 1986) (citing Bank of Blount County v. Dunn, 10 Tenn. App. 95 (1929)). Constructive frauds are acts, statements or omissions which operate as virtual frauds on individuals. Id. (citing Maxwell v. Land Developers, Inc., 485 S.W.2d 869 (Tenn. Ct. App. 1972)). They concern a breach of a legal or equitable duty, with or without fraudulent intent, and entail as an attribute of fraud, conduct which reasonably can be expected to influence the conduct of others. Id. (citing Parks v. Alexander, 608 S.W.2d 881 (Tenn. Ct. App. 1980)).
    FN8 Although Tennessee has not addressed this issue, some states have held that conspiracy to commit constructive fraud is a legal impossibility because one cannot conspire to commit a crime for which he does not have the intent to commit. See Witcher v. Reid, No. CH05-1974, 2006 WL 1494675, at *4 (Va. Cir. Ct. May 31, 2006); Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1996); see also Unkel v. Liggett Group Inc., [172 F.R.D. 474 (M.D. Fla. 1997)]. Conspiracy requires an element of intent to form a common design between two or more people and accomplish, through concerted action, an unlawful act or lawful act by unlawful means. Constructive fraud, on the other hand, is essentially fraud without the element of intent. Cornwell v. Hodge, 1986 WL 5890, at *3 (Tenn. Ct. App. May 23, 1986). Finding Plaintiffs' claim deficient for other reasons, we need not make this determination."
    221 S.W.3d at 39.
  • "Constructive fraud is essentially fraud without the element of intent. Neither actual dishonesty of purpose nor intent to deceive is an essential element of constructive fraud. Cornwell, 1986 WL 5890, at *3. The presence or absence of such an intent distinguishes actual fraud from constructive fraud. Id. Plaintiff's claim, however, is not one of constructive fraud, it is a claim of 'conspiracy to commit constructive fraud.' As explained earlier, intent is an essential element of a conspiracy claim, thus it is an essential element of this claim. Morgan, 165 F. Supp.2d at 720." Id. at 39-40.

After an accident, many injury victims and their families want more information on the accident and their legal rights. Consequently, many of them have found their way to these pages. While we are happy you are here, please understand Day on Torts: Leading Cases in Tennessee Tort Law was written to be a quick, invaluable reference for Tennessee tort lawyers. While the book provides the leading case for more than 300 tort law subjects and thousands of related case citations, it is not a substitute for personalized legal advice from a qualified lawyer.

Rather than researching these legal issues alone, we urge you to contact one of our award-winning lawyers who can sit down with you, review your case, answer your questions and clearly explain your rights and your options in a no-cost, no-obligation consultation. Our experienced attorneys handle all personal injury and wrongful death cases on a contingency basis, so we only get paid if we win. If for any reason you are unable to come to our office, we will gladly come to you.

To schedule an appointment, contact us online or call us at 615-742-4880 or toll-free at 866-812-8787.



The foregoing is an excerpt from Day on Torts: Leading Cases in Tennessee Tort Law, published by John A. Day, Civil Trial Specialist, Fellow in the American College of Trial Lawyers, recipient of Best Lawyers in America recognition, Martindale-Hubbell AV® Preeminent™ rated attorney, and Top 100 Tennessee Mid-South Super Lawyers designee. Read John’s full bio here.

To order a copy of the book, visit www.dayontortsbook.com. John also blogs regularly on key issues for tort lawyers. To subscribe to the Day on Torts blog, visit www.dayontorts.com.

Client Reviews
Everything was great. You guys are a great representative. I was satisfied with everything. Truly appreciate John Day and his hard-working staff.
★★★★★
We thought that you did an excellent job in representing us in our lawsuit. We would recommend you to anyone. Mitch Deese
★★★★★
The Law Offices of John Day is, without a doubt, the best in Nashville! They treated me with the utmost respect and tended to my every need. No question went unanswered. I was always kept informed of every step in the process. I received phenomenal results; I couldn't ask for more. I would definitely hire the Law Offices of John Day again. Anthony Santiago
★★★★★
I would definitely recommend to anyone to hire John Day's law firm because everyone was helpful, made everything clear and got the job done. I am satisfied with how my case was handled. June Keomahavong
★★★★★
It's been a long battle but this firm has been very efficient and has done a remarkable job for me! I highly recommend them to anyone needing legal assistance. Everyone has always been very kind and kept me informed of all actions promptly. Linda Bush
★★★★★
I had a great experience with the Law Offices of John Day. The staff was very accommodating, and my phone calls/emails were always responded to in a timely manner. They made the entire process very easy and stress-free for me, and I had confidence that my case was in good hands. I am very happy with the results, and I highly recommend! Casey Hutchinson
★★★★★