DOE(s) v. Boy Scouts of America

IN THE SUPREME COURT OF THE STATE OF IDAHO
Docket No. 42189
JOHN DOE I, JOHN DOE II, JOHN DOE )
III, JOHN DOE IV, JOHN DOE V, JOHN )
DOE VI, JOHN DOE VII, JOHN ELLIOTT, )
)
Plaintiffs-Appellants, )
) Boise, June 2015 Term
v. )
) 2015 Opinion No. 84
BOY SCOUTS OF AMERICA, )
CORPORATION OF THE PRESIDING ) Filed: August 27, 2015
BISHOP OF THE CHURCH OF JESUS )
CHRIST OF LATTER-DAY SAINTS, ) Stephen W. Kenyon, Clerk
CORPORATION OF THE PRESIDENT OF )
THE CHURCH OF JESUS CHRIST OF )
LATTER-DAY SAINTS, )
)
Defendants-Respondents. )
Appeal from the United States District Court by Certification re Questions of Law
to the Idaho Supreme Court.
The Supreme Court held Idaho’s fraud statute of limitations, Idaho Code section
5-218(4), applies to constructive fraud claims and that the discovery rule under
that statute applies in determining when a constructive fraud cause of action
accrues.
Chasan & Walton, LLC, Boise, and Dumas Law Group, Portland, for appellants.
Gilion C. Dumas argued.
Anderson Banducci, PLLC, Boise, for respondent Church of Jesus Christ of
Latter-Day Saints. Thomas A. Banducci argued.
Moffatt Thomas, Boise, for respondent Boy Scouts of America. Stephen R.
Thomas argued.
__________________________________
BURDICK, Justice
This case comes to the Idaho Supreme Court as a certified question from the United
States District Court for the District of Idaho.
1
I. FACTUAL AND PROCEDURAL BACKGROUND
The underlying case arose out of the claims of several men who joined Boy Scout troops
when they were children and were allegedly sexually abused by their scout leaders. The Church
of Jesus Christ of Latter Day Saints (LDS Church) sponsored some of the troops at issue in this
case. On June 24, 2013, Does I–IV 1 filed a complaint—which was later amended—against Boy
Scouts of America and the LDS Church (collectively, Respondents), alleging constructive fraud. 2
The complaint alleged that Respondents knew that boys in Scouting were in danger of being
sexually abused by adult volunteers and that Respondents failed to disclose that danger. The
complaint further alleged that Respondents not only remained silent about the dangers of
pedophilic scoutmasters, but also affirmatively represented to the boys that each scout leader was
a “great guy,” a “wonderful man,” or a “friend to whom you can always turn for advice.”
Respondents subsequently moved to certify questions to the Idaho Supreme Court,
challenging the constructive fraud claims on several grounds. The United States District Court
certified two narrow questions to this Court, which accepted certification on July 25, 2014, and
designated the Does as Appellants and the Boy Scouts and the LDS Church as Respondents.
II. STANDARD OF REVIEW
Courts of the United States may certify a controlling question of law in a pending action
to the Idaho Supreme Court where there is no controlling precedent in Idaho Supreme Court
decisions and the determination would materially advance the orderly resolution of the litigation
in the United States court. St. Luke’s Magic Valley Reg’l Med. Ctr. v. Luciani, 154 Idaho 37, 39–
40, 293 P.3d 661, 663–64 (2013) (citing I.A.R. 12.3(a)). The Court’s role “is limited to
answering the certified question” when the question presented is narrow. Peone v. Regulus Stud
Mills, Inc., 113 Idaho 374, 375, 744 P.2d 102, 103 (1987) (noting that “to now decide
[extraneous matters] would result in an advisory opinion on a question not certified”). This Court
exercises free review over questions of law. Harrigfeld v. Hancock, 140 Idaho 134, 136, 90 P.3d
884, 886 (2004).
III. CERTIFIED QUESTIONS OF LAW
1
The complaint was later amended twice to add additional plaintiffs to the cause of action, bringing the total number
of plaintiffs to sixteen. For the purposes of this opinion, the plaintiffs will be referred to collectively as “Appellants.”
2
More specifically, all of the Appellants have sued the Boy Scouts organization, but only eight of the sixteen also
sued the LDS Church.
2
The United States District Court for the District of Idaho certified the following
questions:
1. What statute of limitations applies to a constructive fraud claim where plaintiff alleges
that a breach of duty resulted in sex abuse?
2. When does a claim for constructive fraud related to childhood sex abuse accrue?
We rephrase the questions as: (1) which statute of limitations applies to constructive fraud causes
of action; and (2) when does a constructive fraud cause of action accrue. This is because the facts
underlying the constructive fraud claim only bear on whether the substance of the plaintiff’s
cause of action is constructive fraud, or something else.
Under Idaho law, in determining which statute of limitations applies to a cause of action,
courts must focus on the substance, rather than the form of a plaintiff’s allegations. 3 Trimming v.
Howard, 52 Idaho 412, 416, 16 P.2d 661, 662 (1932). Based on that legal principle,
Respondents, and in particular the Boy Scouts, spend much of their time arguing that the
underlying claim in this case is better characterized as a personal injury claim and that the
3
The Federal District Court also indicated that it is unclear in Idaho how the “substance” of a claim is determined.
Specifically, the District Court stated:
Additionally, while many courts repeat the rule that “the substance, not the form” governs when
determining which statute of limitations applies, courts disagree as to what “substance” means in
this context. Some say you look to the ultimate harm suffered, or damages claimed, to figure out
the “substance” of the claims, while others say you do not. At least one commentator has
highlighted the difficulty of defining the “substance” of any given claim: “To say that the
substance or nature of the claim determines the applicable limitations period, however, is merely
to beg the question: the nature of what aspect of the claim?” Eli J. Richardson, Eliminating the
Limitations of Limitations Law, 29 Ariz. St. L.J. 1015, 1030 (Winter 1997). Given this uncertainty,
along with the potentially far-reaching implications of accurately characterizing the “substance” of
plaintiffs’ claims and then selecting the governing statute of limitations, the Court will certify this
question to the Idaho Supreme Court: What statute of limitations applies to a constructive-fraud
claim where plaintiff alleges that a breach of duty resulted in sex abuse? The Court’s phrasing of
the question is not intended to restrict the Idaho Supreme Court’s consideration of the issue.
Although this opinion is limited to addressing which statute of limitations applies to constructive fraud claims, we
offer guidance as to how to determine the “substance” of a claim under Idaho law for purposes of applying the
appropriate statute of limitations. As this Court said in Barnett v. Aetna Life Ins. Co., 99 Idaho 246, 580 P.2d 849
(1978): “The substance, not the form, of the action controls and determines the applicable Statute of Limitations.”
This Court has elaborated that “[t]he test . . . is not whether the fraud or mistake occurred in a contract or
independently of contract, but the test rather is whether the action seeks relief from or on account of fraud or
mistake.” DBSI/TRI V v. Bender, 130 Idaho 796, 809, 948 P.2d 151, 164 (1997) (internal citations omitted). Thus,
the focus in Idaho is not on the remedy sought or the type of damages, but on the source of the damages. Applying
that legal principle to this case, the issue is whether John Doe’s action seeks relief from or on account of
constructive fraud.
3
personal injury statute of limitations should apply. 4 However, the Federal District Court rejected
this argument and suggested that the claim was indeed a claim for constructive fraud rather than
personal injury or something else. The Federal District Court stated:
[P]laintiffs are not complaining that the Boy Scouts and the LDS Church sexually
abused them; they are complaining that these institutions deceived them by telling
them to trust their Scoutmasters and, at the same time, not telling them about the
dangers of pedophilic Scoutmasters. So in that sense, plaintiffs are not pursuing
personal-injury claims; they are pursuing fraud claims.
Thus, the Appellants’ constructive fraud claim may very well have had characteristics of a
personal injury claim, or may have been insufficiently pled, but that issue is not before this
Court. Rather, from the Certification Order, the narrow issue before this Court is which statute of
limitations applies to a constructive fraud claim. Thus, this opinion will not address whether
Appellants’ claims are more appropriately characterized as constructive fraud, personal injury, or
any other claim. That is for the Federal District Court to decide. If this Court were to decide the
true nature of Appellants’ claim, it would result in an advisory opinion on a question not
certified. Thus, for purposes of this opinion, it will be assumed, without deciding, that the
Appellants in the underlying action asserted a constructive fraud claim.
A. Idaho Code section 5-218(4)’s statute of limitations applies to constructive fraud cases in
Idaho.
In its order certifying questions to this Court, the Federal District Court noted that the
question of which statute of limitations applies in constructive fraud cases is still up in the air in
Idaho. The District Court identified three potential candidates: Idaho Code section 5-218(4),
which governs fraud claims; Idaho Code section 5-219(4), which governs personal injury claims;
and Idaho Code section 5-224, which is a catch-all statute of limitations. Appellants argue that
Idaho’s fraud statute of limitations applies, while Respondents assert that either Idaho’s personal
injury statute of limitations or Idaho’s catch-all statute of limitations should apply.
Because the Federal District Court rejected the argument that the underlying claim was a
personal injury claim, Idaho’s personal injury statute of limitations is not applicable here. It
certainly should not apply to constructive fraud claims as a class because constructive fraud
generally results in an economic harm rather than personal injury. Idaho’s personal injury statute
of limitations does not contemplate the type of harm that results from constructive fraud. Indeed,
4
In fact, both parties spend a great deal of time arguing issues that are simply not before this Court on certification.
Thus, only the parties’ arguments that are relevant to the narrow issues on Certification will be addressed in this
opinion.
4
Idaho Code section 5-219(4) only applies to personal injury claims and requires filing within two
years:
[a]n action to recover damages . . . for an injury to the person . . . the cause of
action shall be deemed to have accrued as of the time of the occurrence, act or
omission complained of, and the limitation period shall not be extended by any
reason of any continuing consequences or damages resulting therefrom or any
continuing professional or commercial relationship between the injured party and
the alleged wrongdoer . . . .
Thus, although this statute of limitations may have applied had the Federal District Court
concluded that the underlying action was actually a personal injury claim, the statute is wholly
inapplicable to constructive fraud claims generally. The question then is whether the catch-all
statute of limitations or the fraud statute of limitations should apply.
Under Idaho Code section 5-218(4), actions for relief on the ground of fraud or mistake
must be brought within three years. Idaho’s catch-all statute of limitations applies to causes of
action that do not otherwise fall under another statute of limitations. Indeed, Idaho Code section
5-224 provides that “[a]n action for relief not hereinbefore provided for must be commenced
within four (4) years after the cause of action shall have accrued.” Thus, if Idaho’s fraud statute
of limitations does not apply to constructive fraud claims, the catch-all statute of limitations will
apply.
Idaho Code section 5-218(4)’s plain language does not include constructive fraud as a
claim governed by its statute of limitations. However, in Hillock v. Idaho Title & Trust Co., this
Court was confronted with the issue of which statute of limitations applied where Hillock
brought an “action for relief on the ground of mistake, or the constructive fraud resulting
therefrom.” 22 Idaho 440, 126 P. 612 (1912). In that case, Hillock hired Idaho Title and Trust in
April of 1907 to prepare a title abstract for a tract of land. Id. at 443, 126 P. at 613. Hillock
subsequently relied on the accuracy of the certificate and abstract to purchase the land. Id.
However, in September of 1911, Hillock discovered for the first time that the abstract failed to
disclose an outstanding tax deed on the tract of land. Id. Hillock brought suit in January of 1912,
seeking damages for the amount of money it cost to remove the tax deed and clear title to the
property. Id. Idaho Title and Trust filed a demurrer on the grounds that the statute of limitations
barred Hillock’s claims. Id. The trial court sustained the demurrer, and Hillock appealed. Id.
On appeal, Hillock asserted that the fraud statute of limitations applied because the action
was “an action for relief on the ground of mistake, or the constructive fraud resulting therefrom.”
5
Id. at 444, 126 P. at 613. Idaho Title and Trust argued the trial court correctly determined that the
statute of limitations for actions in contract governed and barred plaintiff’s claims. Id. This Court
reversed the trial court and held, without distinguishing between mistake and constructive fraud,
that the fraud statute of limitations applied and that the cause of action did not accrue until the
plaintiffs discovered the facts constituting the fraud or mistake. Id. at 446, 126 P. at 614.
Specifically, this Court stated: “if those representations are untrue, whether they be caused by
mistake or actual fraud, it amounts in law to a fraud upon the purchaser of the abstract . . . [and]
it seems to us he would have his action for false or fraudulent misrepresentation . . . .” Id. The
Court went on to note:
The test, therefore, under subd. 4 of section 4054, is not whether the fraud or
mistake occurred in a contract or independently of contract, but the test rather is
whether the action seeks relief from or on account of a fraud or mistake.
In this case the allegations are that a false certificate was delivered, and that the
certificate was false by reason of a mistake made on the part of the abstractor. The
whole transaction and consequent damage sustained harks back to the contract,
but is no less a mistake and fraudulent representation. Although a
misrepresentation is made through mistake of the facts as they actually exist,
when such misrepresentation is made by one whose duty it is to know the facts
and who represents himself as possessing all the facts with reference to the matter,
the misrepresentation is in law equally as fraudulent and actionable as if it had
been knowingly made.
Id. at 450, 126 P. at 616. The Court went on to hold that the fraud statute of limitations applied.
Id. Thus, although the Court did not explicitly hold that the fraud statute of limitations applies to
constructive fraud claims, by not distinguishing between constructive fraud, fraud, and mistake,
the Court implicitly held that actions arising out of fraud, mistake, and constructive fraud all fall
under the purview of the fraud statute of limitations.
Furthermore, this Court has suggested in other cases that the fraud statute of limitations
would apply to constructive fraud claims. For instance, in Nancy Lee Mines, Inc. v. Harrison, 95
Idaho 546, 547, 511 P.2d 828, 829 (1973), this Court alluded to the fact that it would apply the
fraud statute of limitations to a constructive fraud claim. There, Nancy Lee Mines sued
Harrison’s estate to recover stock Harrison purchased at two separate stock assessment sales. Id.
at 546, 511 P.2d at 828. Intervenors in the suit alleged that Harrison had committed fraud in
connection with the stock assessment sales. Id. It is unclear whether the intervenors alleged
actual fraud or constructive fraud or both; the background description only states that they
alleged “fraud and illegal procedures” surrounding the stock sales. Id. However, in analyzing the
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issues, this Court stated that “the action” would be barred by the statute of limitations “[u]nless
there was undiscovered fraud . . . .” Id. at 547, 511 P.2d at 829. In discussing the undiscovered
fraud, this Court assumed it could either be actual or constructive fraud:
[T]he statute does not begin to run in fraud cases ‘until the discovery’ of the
fraud. However, actual knowledge of the fraud will be inferred if the allegedly
aggrieved party could have discovered it by the exercise of due diligence. It is
unnecessary to consider the issue of whether or not there was any fraud (actual or
constructive) in this case. If there was any fraud it could have been discovered in
the exercise of reasonable diligence at the time it was alleged to have been
committed.
Id. at 547, 511 P.2d at 829 (footnote omitted). Thus, in Nancy Lee, this Court suggested that the
statute of limitations for fraud would apply to constructive fraud claims.
Similarly, in Witt v. Jones, 111 Idaho 165, 172–73, 722 P.2d 474, 481–82 (1986), Justice
Bistline’s dissent suggested that Idaho’s fraud statute of limitations should apply to constructive
fraud claims. In his dissent, Justice Bristline quoted the following language from a California
Supreme Court case dealing with the appropriate statute of limitations for a constructive fraud
claim:
The statute of limitations to be applied is determined by the nature of the right
sued upon, not by the form of the action or the relief demanded. The remedy
sought here, i.e., the imposition of a constructive trust, is used to prevent unjust
enrichment or to compel restoration of property by one who is not justly entitled
to it. The usual situation in which the relief is granted is found in cases where the
substantive basis of the action is that the property has been obtained through
actual fraud, violation of a confidential relationship, or breach of trust.
The basis of the present action is that Mary violated confidential relationships
with her husband and with Eva by failing to perform her part of the agreement
after she had benefited from her husband’s performance. Such a violation of a
confidential relationship constitutes constructive fraud and where, as here, unjust
enrichment results a constructive trust may be imposed. The fact that a breach of
contract is involved is not decisive as to the applicable statute of limitations. In
Souza v. McCue Construction Co. v. Superior Court, 57 Cal. 2d 508, 511, 20 Cal.
Rptr. 634, 370 P.2d 338, we held that section 338, subdivision 4, of the Code of
Civil Procedure, relating to relief on the ground of fraud, was applicable where
the action was based on a fraudulent breach of a contractual duty. Constructive
fraud is the substantive basis of the action to impose a constructive trust in the
present case, and where constructive fraud is the gravamen of the action the three-
year period prescribed in section 338, subdivision 4, of the Code of Civil
Procedure applies. Since this action was filed within three years after Mary’s
death, it is not barred by the statute.
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Id. (internal citations omitted) (quoting Day v. Greene, 59 Cal. 2d 404, 29 Cal. Rptr. 785, 380
P.2d 385 (1963)). Justice Bistline went on to note that Idaho’s fraud statute was patterned after
California’s fraud statute, which implies that Idaho’s fraud statute would apply to constructive
fraud claims. Id. The foregoing cases illustrate this Court’s inclination to apply the fraud statute
of limitations to constructive fraud claims.
Additionally, the proof required for fraud and constructive fraud claims lends further
strength to the conclusion that the fraud statute of limitations applies to constructive fraud
claims. Under Idaho law, actual fraud consists of nine elements that a plaintiff must prove by
clear and convincing evidence. Specifically, to prove actual fraud, a plaintiff must show: (1) a
statement or a representation of fact; (2) its falsity; (3) its materiality; (4) the speaker’s
knowledge of its falsity; (5) the speaker’s intent that there be reliance; (6) the hearer’s ignorance
of the falsity of the statement; (7) reliance by the hearer; (8) justifiable reliance; and (9) resultant
injury. Glaze v. Deffenbaugh, 144 Idaho 829, 833, 172 P.3d 1104, 1108 (2007) (quoting Mannos
v. Moss, 143 Idaho 927, 931, 155 P.3d 1166, 1170 (2007)) (internal quotation marks omitted).
Similarly, a constructive fraud claim requires a plaintiff to prove seven of the nine
elements of fraud, as well as a relationship of trust and confidence. Indeed, as the Court stated in
McGhee v. McGhee, 82 Idaho 367, 371, 353 P.2d 760, 762 (1960):
Constructive fraud is a breach of legal or equitable duty which, irrespective of the
moral guilt of the fraud feasor, the law declares fraudulent because of its tendency
to deceive others, to violate public or private confidence, or to injure public
interests. Neither actual dishonesty of purpose nor intent to deceive is an essential
element of constructive fraud.
(quoting 37 C.J.S. Fraud § 2, p. 211). This Court went on to state that “[i]n its generic sense,
constructive fraud comprises all acts, omissions and concealments involving a breach of legal or
equitable duty, trust, or confidence,” which result in damage to another. McGhee, 82 Idaho at
371, 353 P.2d at 762. Thus, “[c]onstructive fraud usually arises from a breach of duty where a
relation of trust and confidence exists; such relationship may be said to exist whenever trust or
confidence is reposed by one person in the integrity and fidelity of another.” Id.; Hines v. Hines,
129 Idaho 847, 853, 934 P.2d 20, 26 (1997) (“An action in constructive fraud exists when there
has been a breach of a duty arising from a relationship of trust and confidence, as in a fiduciary
duty.”). “Examples of relationships from which the law will impose fiduciary obligations on the
parties include when the parties are: members of the same family, partners, attorney and client,
8
executor and beneficiary of an estate, principal and agent, insurer and insured, or close friends.”
Gray v. Tri-Way Const. Servs., Inc., 147 Idaho 378, 386, 210 P.3d 63, 71 (2009).
“The gist of a constructive fraud finding is to avoid the need to prove intent (i.e.,
knowledge of falsity or intent to induce reliance) [under the elements required to prove actual
fraud], since it is inferred directly from the relationship and the breach.” Country Cove Dev., Inc.
v. May, 143 Idaho 595, 601, 150 P.3d 288, 294 (2006). In sum, if a plaintiff establishes that there
has been a breach of duty arising from a relationship of trust and confidence, the plaintiff is not
required to prove (1) the speaker’s knowledge of the falsity regarding the statement or
representation of fact, or (2) the speaker’s intent that the hearer rely on the statement or
representation of fact, to sustain a claim of constructive fraud. See Country Cove, 143 Idaho at
601, 150 P. 3d at 294. However, the party is still required to prove the remaining seven elements
of actual fraud. Gray, 147 Idaho at 386, 210 P.3d at 71. Because the elements of a constructive
fraud claim are essentially the same as the elements of fraud claims, it follows that the same
statute of limitations should apply to both claims.
However, Respondents argue that because this Court has compared constructive fraud
claims to breach of fiduciary duty claims, Idaho’s catch-all statute of limitations should apply to
constructive fraud claims. Specifically, Respondents point out that this Court has applied Idaho
Code section 5-224 to cases involving a breach of fiduciary duty, and that because this Court has
reasoned that a constructive fraud claim is essentially a breach of fiduciary duty claim, Idaho
Code section 5-224 should apply. We disagree.
Although this Court has held that Idaho’s catch-all statute of limitations applies to breach
of fiduciary duty claims, Jones v. Runft, Leroy, Coffin & Matthews, Chartered, 125 Idaho 607,
614, 873 P.2d 861, 868 (1994), we have never explicitly held that a breach of fiduciary duty is
required to establish a constructive fraud claim. Rather, the law outlined above illustrates that
constructive fraud contemplates relationships outside of a fiduciary relationship. Indeed, in Hines
v. Hines, 129 Idaho 847, 853, 934 P.2d 20, 26 (1997), this Court noted that “an action in
constructive fraud exists when there has been a breach of a duty arising from a relationship of
trust and confidence, as in a fiduciary duty.” See also McGhee, 82 Idaho at 371, 353 P.2d at 762
(“Constructive fraud usually arises from a breach of duty where a relation of trust and confidence
exists; such relationship may be said to exist whenever trust or confidence is reposed by one
person in the integrity and fidelity of another.”). Thus, a fiduciary relationship is only one
9
example of the kind of relationship of trust and confidence that can give rise to a constructive
fraud claim.
What is more, showing a breach of a legal or equitable duty, trust, or confidence is only a
part of proving a constructive fraud claim: a plaintiff is still required to prove the other seven
elements of fraud as outlined above. In other words, despite being similar in several respects, a
breach of fiduciary duty claim and constructive fraud claim are two distinct causes of action. See
Country Cove Dev., Inc. v. May, 143 Idaho 595, 601, 150 P.3d 288, 294 (2006) (addressing
constructive fraud claims and breach of fiduciary duty claims separately, which suggests they are
in fact distinct causes of action). Indeed, “‘[t]o establish a claim for breach of fiduciary duty, [a]
plaintiff must establish that defendants owed plaintiff a fiduciary duty and that the fiduciary duty
was breached.’” Bushi v. Sage Health Care, PLLC, 146 Idaho 764, 769, 203 P.3d 694, 699
(2009) (quoting Tolley v. THI Co., 140 Idaho 253, 261, 92 P.3d 503, 511 (2004)). Constructive
fraud, on the other hand, requires a plaintiff to show a breach of a duty where a relationship of
trust or confidence exists along with the other seven elements of actual fraud. Gray, 147 Idaho at
386, 210 P.3d at 71. Thus, while a constructive fraud claim may include a breach of fiduciary
duty, it does not necessarily follow that a breach of fiduciary duty always results in constructive
fraud, nor is a breach of fiduciary duty required to establish constructive fraud. Thus, we
conclude that a constructive fraud claim is not removed from the fraud statute of limitations
merely because it involves a breach of fiduciary duty.
Our sister courts are in line with this reasoning and in concluding that fraud statutes of
limitations govern constructive fraud claims. For instance, the Montana Supreme Court, after
noting that it previously defined constructive fraud as fraud, held that Montana’s statute of
limitations for actions on the ground of “fraud or mistake” applied to constructive fraud cases.
Tynes v. Bankers Life Co., 730 P.2d 1115, 1120 (Mont. 1986) (“[A] cause of action premised on
constructive fraud is subject to a two-year [fraud] statute of limitations.”). The Montana Supreme
Court reached that conclusion even though it acknowledged that constructive fraud claims in
Montana—like constructive fraud claims in Idaho—involve a “breach of duty” and do not
require fraudulent intent. Id. at 1124–25 (Weber, J., dissent). Similarly, the Supreme Court of
Virginia construed Virginia’s fraud statute of limitations to contemplate both actual and
constructive fraud even though that statute made no distinction between the two. Excalibur Ins.
Co. v. Speller, 257 S.E.2d 848, 850 (Va. 1979). Indiana courts have also held that Indiana’s six-
10
year statute of limitations for fraud applies to constructive as well as actual fraud. Wells v. Stone
City Bank, 691 N.E.2d 1246, 1250 (Ind. Ct. App. 1998). Finally, California courts have
recognized that California’s fraud statute, which is similar to Idaho’s fraud statute, 5 applies to
constructive fraud claims. Santa Cruz Cnty. v. McLeod, 189 Cal. App. 2d 222, 229-30, 11 Cal.
Rptr. 249, 253-54 (Ct. App. 1961). There, the court noted:
The code section makes no distinction between actual fraud, constructive fraud,
and mistake insofar as the tolling of the statute is concerned. It commences to run
upon discovery in all three cases.
* * * this [period under Code Civ.Proc. § 338, subd. 4] does not begin to run until
the fraud or mistake has been discovered * * *. And these rules relating to the
computation of the period from the discovery of the fraud apply as well to the
discovery of mistake.
‘Those provisions [Code Civ.Proc. § 338, subd. 4] apply as well in cases
involving constructive fraud * * * and the period of limitation is therefore three
years from the discovery of the fraud.’
Id. (internal citations omitted) (internal quotation marks omitted).
The foregoing case law illustrates that the fraud statute of limitations applies to
constructive fraud claims even though those claims may also involve a breach of fiduciary duty.
We are persuaded to follow the line of cases from our sister courts that hold that the fraud statute
of limitations govern constructive fraud claims. We note again that it is left for the trial courts to
determine whether a plaintiff’s cause of action is, in substance, a true constructive fraud claim, or
a breach of fiduciary duty claim or something else. The appropriate characterization of John
Doe’s cause of action in this case is not before this Court. We therefore hold that Idaho Code
section 5-218(4) governs constructive fraud claims. Thus, the only issue left to decide is when a
constructive fraud cause of action accrues.
B. The discovery rule applies to constructive fraud claims for purposes of determining
when the cause of action accrued.
Appellants argue that the discovery rule under Idaho’s fraud statute of limitations should
apply to constructive fraud claims due to the inherent difficulty in discovering the underlying
fraud in such cases. Respondents, on the other hand, argue that a constructive fraud cause of
action, where the plaintiff alleges a breach of duty resulting in sex abuse, accrues when the
5
California’s fraud statute reads: “An action for relief on the ground of fraud or mistake. The cause of action in that
case is not deemed to have accrued until the discovery, by the aggrieved party, of the facts constituting the fraud or
mistake.” Cal. Civ. Proc. Code § 338(d).
11
sexual abuse occurs because the abuse is immediately discoverable by a reasonable person and
the sex abuse puts the plaintiff on notice that they have a potential constructive fraud claim.
Idaho Code section 5-218(4) provides that fraud causes of action do not accrue “until the
discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” In McCoy v.
Lyons, 120 Idaho 765, 820 P.2d 360 (1991), this Court addressed that aspect of Idaho Code
section 5-218(4) and held that the statute does not begin to run until the plaintiff knew or
reasonably should have known of the facts constituting the fraud. The Court explained that
“discovery,” as used in the statute, means the point in time when the plaintiff had actual or
constructive knowledge of the facts constituting the fraud and that application of Idaho Code
section 5-218(4) does not depend on when the plaintiff should have been aware that something
was wrong. Id. at 773, 820 P.2d at 368. Because we conclude that Idaho Code section 5-218(4)
applies to constructive fraud claims, it follows that the statute’s discovery rule also applies to
constructive fraud claims. 6 Thus, when the constructive fraud cause of action accrued will be a
question of fact for the Federal District Court based on when the Appellants had actual or
constructive knowledge of the facts constituting the constructive fraud.
IV. CONCLUSION
Based on the foregoing, we hold that Idaho’s fraud statute of limitations, Idaho Code
section 5-218(4), applies to constructive fraud claims and that the discovery rule under that
statute applies in determining when a constructive fraud cause of action accrues.
Chief Justice J. JONES and Justices EISMANN, HORTON and WALTERS, J., Pro tem,
CONCUR.
6
The Federal District Court recognized this in its Certification Order:
The logical first step would be to determine which statute of limitations applies. If, for example,
the Idaho Supreme Court were to hold that the fraud statute of limitations applies, then the statute
itself would appear to directly answer the question. It expressly states that fraud claims do not
accrue “until discovery, by the aggrieved party, of the facts constituting the fraud . . . .” Idaho
Code § 5-218(4); see also Nancy Lee Mines, 511 P.2d at 829 (assuming fraud action would not
accrue until failure to discover constructive or action fraud). But if the Idaho Supreme Court
determines that a different limitations statute governs, then a discovery rule arguably might not
apply.
12