Wednesday, August 24, 2011

If I do not Believe my Homeowners Association's Parking Regulations are Effective, do I have a Case for Fraud?

Nope. In a fraud case, one of the many elements you have to prove is called "detrimental reliance." This means that you relied on the defendant's false statement to your detriment. In other words, because you believed the statement was true, you took some action that you would not have taken had you known the statement was really false.

For example, you wouldn't have paid $5,000.00 for a "Rolex" watch at the swap meet if you knew it was just an imitation, worth only $50.00, but because the seller told you it was a genuine Rolex, and even gave you a certificate of authenticity, you bought it. Later you found out the certificate was false, and your jeweler told you the watch was junk. Because you relied on the seller's word, believing his word and the certificate to be true, you were out of pocket $5,000.00. This is detrimental reliance.

In a recent Orange County case, a homeowner's complaint for fraud was thrown out for lack of detrimental reliance. The homeowners association ("HOA") notified plaintiff that amended parking regulations prohibiting the parking of inoperable vehicles on association property were effective immediately. Plaintiff objected, saying the amended regulations were not effective because they were not recorded, so he kept his inoperable van parked in a prohibited space for two months. The HOA had the van towed.

Plaintiff sued for fraud, claiming the HOA representation that the regulations were effective immediately was false. (Sui v. Price (2011) 196 Cal.App.4th 933; partial publication). The court held that plaintiff failed to plead detrimental reliance. Because plaintiff had alleged that he did not believe the regulations were effective, he could not possibly have relied upon the representation to his detriment. As the court said: "failure to believe the representation is the opposite of reliance." Moreover, the fact that plaintiff left his van parked in a prohibited space for two months indicated that plaintiff did not believe the parking regulations were effective.

So, to have a case for fraud, one of the elements you must prove is that when the statement was made to you, you believed it to be true, and acted upon it. In other words, if you did not believe the statement when it was made to you, and acted as if you did not believe it, then you did not detrimentally rely on the statement, and you have no case for fraud.

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