Phelps v. Aurora State Bank

• Decision Date: 08 July 1932
• Docket Number: No. 28810.,28810.
• Citation: 243 N.W. 682,186 Minn. 479
• Parties: PHELPS et al. v. AURORA STATE BANK.
• Court: Minnesota Supreme Court

243 N.W. 682

186 Minn. 479

PHELPS et al. v. AURORA STATE BANK.

No. 28810.

Supreme Court of Minnesota.

July 8, 1932.

Appeal from District Court, St. Louis County; Edward Freeman, Judge.

Action by Edna Phelps and others against the Aurora State Bank. The trial court vacated findings of a jury in favor of the plaintiffs, and directed judgment for the defendant. From an order denying their motion for a new trial, the plaintiffs appeal.

Order affirmed.

Gannon, Strizich & Kleffman, of Hibbing, for appellants.

Philip M. Stone, of Virginia, for respondent.

DIBELL, J.

Action to recover $2,604.33 on a count for money had and received. The trial court submitted to the jury two questions arising upon the issues made. They were found favorably to the plaintiff and if given effect would permit a recovery of $777.37. Afterwards the court vacated the findings and directed judgment for the defendant. The plaintiffs appeal from the order denying their motion for a new trial.

1. Our holdings are that a material promise, to be performed in the future, made with intent to defraud, the maker intending at the time not to keep it, constitutes actionable fraud. Smith v. Vosika, 163 Minn. 12, 203 N. W. 428; Roman v. Lorence, 162 Minn. 198, 202 N. W. 707; Hansen v. Daniel Hayes Co., 152 Minn. 222, 188 N. W. 317; Holmes v. Wilkes, 130 Minn. 170, 153 N. W. 308. And it is a part of the same doctrine, viewed from a different angle, that to constitute actionable fraud there must be an intention not to perform when the promise is made, and a mere broken promise to do something in the future is not fraud. Maguire v. Maguire, 171 Minn. 492, 214 N. W. 666, 215 N. W. 522; Cannon Falls Holding Co. v. Peterson, 184 Minn. 294, 238 N. W. 487. Other cases and many applications of the doctrine are found in 3 Dunnell, Minn. Dig. (2d Ed. and Supp.) § 3827.

2. On January 20, 1920, Frank V. Anderson made a mortgage to the defendant bank on property in Aurora for $2,000. Afterwards he applied to his sister, the plaintiff Edna Phelps, for a loan on a second mortgage. She, acting for herself and minor children, went to the defendant bank and had some talk about taking a second mortgage from her brother upon the property mortgaged to the bank. The mortgage from Anderson to the bank provided that the bank might collect the rents of the mortgaged property and apply them on the mortgage note. The validity of this provision is not of present concern. The plaintiff on November 8, 1920, took a second mortgage from her brother for $1,600. She claims that the bank promised her that it would exercise its right to collect rents and would apply them upon the first mortgage; that it fraudulently made this promise; that she relied upon it; that the bank collected the rents and used them for its own purposes; and that it did not apply any of them upon the first mortgage. It is conceded that the bank made collections but did not apply them upon the mortgage, and it was not required by its contract with Anderson to do so. The claim of the plaintiff in short is that there was a promise of something to be done in the future made with intent not to perform it and therefore that it was fraudulent and actionable.

It might be difficult to find a consideration for the defendant's promise. There was no definite advantage to the defendant in having the plaintiff take a second mortgage upon the property. It was only a guess that the plaintiff, who held the second mortgage, might take care of the property by redemption if necessary. It was just as good a guess that the mortgagor having given a second mortgage would not pay the first. It does not...