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					Fraud


Duress 28-2-402. What constitutes duress. Duress consists in:
   (1) unlawful confinement of the person of the party, of the husband or wife of such
party, or of an ancestor, descendant, or adopted child of such party, husband, or wife;
   (2) unlawful detention of the property of any such person; or
   (3) confinement of such person, lawful in form but fraudulently obtained or
fraudulently made unjustly harassing or oppressive.

Menace 28-2-403. What constitutes menace. Menace consists in a threat of:
   (1) such duress as is specified in subsections (1) and (3) of 28-2-402;
   (2) unlawful and violent injury to the person or property of any such person in
circumstances described in 28-2-402; or
   (3) injury to the character of any such person.


Actual Fraud

   1)   a representation
   2)   falsity of the representation
   3)   materiality of the representation
   4)   speaker's knowledge of the falsity of the representation or ignorance of its
        truth
   5)   speaker's intent it should be relied upon
   6)   the hearer's ignorance of the falsity of the representation
   7)   the hearer's reliance on the representation
   8)   the hearer's right to rely on the representation
   9)   consequent and proximate injury caused by the reliance on the
        representation.

Constructive Fraud

   1) any breach of duty which, without an actually fraudulent intent, gains an
      advantage to the person in fault or anyone claiming under him by misleading
      another to his prejudice or to the prejudice of anyone claiming under him; or
   2) any such act or omission as the law especially declares to be fraudulent,
      without respect to actual fraud.



Negligent Misrepresentation (Note SOL is 3 years as this is a type of Negligence)

Type 1 “Negligent Fraud”

Elements of a claim for

a. the defendant made a representation as to a past or existing material fact;

b. the representation must have been untrue;
c. regardless of its actual belief, the defendant must have made the representation
without any reasonable ground for believing it to be true;

d. the representation must have been made with the intent to induce the plaintiff to
rely on it;

e. the plaintiff must have been unaware of the falsity of the representation; it must
have acted in reliance upon the truth of the representation and it must have been
justified in relying upon the representation;

f. the plaintiff, as a result of its reliance, must sustain damage.



Type 2 “Professional Duty”

Unless he/she represents that he has greater or less skill or knowledge, one who
undertakes to render services in the practice of a profession or trade is required to
exercise the skill and knowledge normally possessed by members of that profession
or trade in good standing in similar communities. A plaintiff must prove that the
professional owed him/her a duty, [and] that the professional failed to live up to that
duty, thus causing damages to the plaintiff.

OR

One who, in the course of his business, profession or employment, or in any other
transaction in which he has a pecuniary interest, supplies false information for the
guidance of others in their business transactions, is subject to liability for pecuniary
loss caused to them by their justifiable reliance upon the information, if he fails to
exercise reasonable care or competence in obtaining or communicating the
information.

       As opposed to Malpractice/Professional Negligence (duty to client and usually
       requires expert)


Type 3 “Realtor”

Occurs where sellers of real property, by words or conduct, create a false impression
concerning serious impairment or other important matters and subsequently fail
to disclose the relevant facts



“Punitive” Actual Fraud (never forget or Malice)

 A defendant is guilty of actual fraud if the defendant:


 (a) makes a representation with knowledge of its falsity; or
 (b) conceals a material fact with the purpose of depriving the plaintiff of property

 or legal rights or otherwise causing injury.


 (AND) Actual fraud exists only when the plaintiff has a right to rely upon the

 representation of the defendant and suffers injury as a result of that reliance



Deceit – Is in theory it own tort that reads exactly like Actual Fraud. Montana cases
awarding under deceit never make clear what it means in MT. In other jurisdictions this
is the “Scobey Doo” tort. In essence if you are “old man withers” dressing up as a ghost
to scare aware the locals and buy their land cheap, you are likely guilty of deceit. Note
this is class actionable (and you only have to prove one person is mislead in the class)

Cases

Lee vs. Armstrong (Defendant attorney made false statements as to the legal status of a
tract of land, serious omissions, and other post sale conduct. District court found in favor of
the plaintiff buyers for fraud and punitive damages) Supreme Court upheld the lower court.
             1. Shows how to the punitive damage limit on contracts does not affect fraud
                 cases arising under contracts.
             2. Frequent cite case

Davis v. Church of Jesus Christ of Latter Day Saints (Plaintiff had a slip and fall issue
with her church. Defendant church asked plaintiff to go to their doctor out of state
(promised to pay). Church did not pay. Defendant lost at lower court on fraud related
claims) Supreme Court upheld the lower court (mostly)
                  1. A promise to pay at a latter date is note fraud (it may be breach of
                      contract)
                  2. No charitable immunity

Durbin v. Ross (Defendant Realtor made several misstatement/lies about a property
(septic system problems, location of road). Plaintiff sues for fraud, constructive fraud,
negligent misrepresentation, and consumer protection. Key issue was whether an expert
needed to testify to establish negligent misrepresentation) Plaintiff wins across the board
        1. Expert witness not necessary in most fraud, constructive fraud, negligent
        misrepresentation, or consumer protection Also note Flinger v. Northwestern Agency
        283 Mont 71 (1997) same as to an insurance agent
        2. Realtors can be subject to claims of non-clients in negligent misrepresentation
        claim
        3. Consumer protection claim is consistent with and not preempted by the laws
        covering realtors.
        4. Really spells out the “professional” version of negligent misrepresentation

H-D Irrigating, Inc. v. Kimble Properties, Inc (Defendant seller failed to tell the plaintiff
buyer the extent and cause of erosion. )
       1. Note the difference between patent and a latent defect
        2. Some find the following to be a type of constructive fraud or as a third type of
        negligent misrepresentation “where sellers [of real property], by words or
        conduct, create a false impression concerning serious impairment or other
        important matters and subsequently fail to disclose the relevant facts.”
        3. Note the liability of principles for their own fraud (even if it advances a corporate
        or employers interest) “clearly established that a director or officer of a
        corporation is individually liable for fraudulent acts or false representations of
        his own or in which he participates even though his action in such respect
        may be in furtherance of the corporation's business. This personal liability
        attaches regardless of whether liability also attaches to the corporation.”

May v. ERA landmark Real Estate of Bozeman (Defendant seller sold a house for
Plaintiff seller but added contract language different then the “as is” language that the seller
wanted and failed to inform them of it. Plaintiff pleads a number of theories fraud, breach,
negligent misrepresentation, and others. District court granted summery judgment on all
the claims to the defendant) Supreme court overturned the summery judgment and ordered
the case back for trial.
         1. Make sure to put all possible allegations of fraud in the complaint (and plead
              each of the nine elements of fraud)
         2. Expert testimony not required for violation of covenant of good faith and fair
              dealing
         3. The Negligent Fraud type of negligent misrepresentation

Hallenberg v. General Mills Operation (Defendant grain cleaner destroyed plaintiffs
grain and replaced it with a different variety. Defendant sued on actual fraud and negligent
misrepresentation. Defendant won on negligent misrepresentation but not on actual fraud
(lower court felt they were mutually exclusive). District court ruled that no punitive for
negligent misrepresentation) Supreme Court overruled the case as to prohibition on punitive
damages.
        1. Case makes clear that punitive damage actual fraud is different then the tort of
actual fraud and that any tort in theory could be done with actual fraud for punitive
(negligent misrepresentation and consumer protection are two that have been in MT)


Scams

Canadian Lottery – A scam where an individual is induced to send money to pay taxes
or fees to collect their lottery winnings. (Also called the pre-loan payment scam)

The Rubber Check – A scam where an individual receives a large check or money order
to pay for good or services. The scammer requests part of the overpayment back (wired
of course). The money order bounces and the victim is left paying a hefty fee and loan to
the bank. (Often uses classified ads or eBay)

When you combine the two you get one of the most successful scam in history the
Rubber Lottery. Billions of dollars in victims (120 million a year)….its a thing of beauty.

Remember it is illegal for a US citizen to participate in a foreign lottery

				
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