## Facts

- Electric Investment Company owned a summer hotel property at Antlers Park, Dakota County, Minnesota, including the hotel building, land, and personal property used in operations.
- On April 15, 1909, Ulysses G. McElrath and others leased the property for a term of years, agreeing to pay specified semiannual sums and operate the hotel under specified conditions.
- Plaintiffs alleged the lessor made representations to induce the lease, including that a third-party electric traction company would complete an electric railroad to and beyond Antlers Park and run cars from Minneapolis by about July 1, 1909.
- Plaintiffs also alleged representations that Antlers Park would be developed into an important summer resort for Minneapolis residents and that plaintiffs would net at least $1,500 per year above expenses through defendant’s assistance.
- Plaintiffs alleged these statements were false, were made with fraudulent intent to induce contracting, and were known by defendant to be false when made.
- The railroad was not completed to Antlers Park, and the expected resort traffic and profits did not occur, prompting plaintiffs’ action for damages for fraud and deceit.

## Issues

1. Whether alleging a knowing, intentional false statement that a third party “would” complete and operate a railroad by a specified time states a claim for deceit, or instead alleges only a non-actionable prediction of a future event.
2. Whether statements about future resort development and expected net profits constitute actionable misrepresentations of fact or non-actionable opinion and conjecture.

## Decision

- The Minnesota Supreme Court affirmed the order overruling defendant’s general demurrer.
- The complaint stated a cause of action for deceit based on the definite representation that the railroad would be completed and operating to Antlers Park by the summer of 1909, where plaintiffs alleged defendant knew that representation was false and made it to induce the lease.
- Statements about Antlers Park becoming an important resort and plaintiffs earning specified profits were treated as opinion or conjecture about future business prospects and were not independently actionable as fraud.

## Legal Principles

- Fraud ordinarily cannot be based solely on promises, predictions, or opinions about future events.
- A statement framed in future terms can be actionable in deceit when it is alleged as a positive assertion, is known to be false when made, is intended to induce action, and is relied upon to the plaintiff’s detriment.
- Courts may treat an asserted future event as a misrepresentation of present knowledge, present intention, or existing facts when the pleader alleges the speaker knew the event would not occur.
- Optimistic statements about future development or profits, without more, are generally non-actionable as sales talk or conjecture.

## Conclusion

The court allowed the fraud action to proceed past demurrer because a complaint alleging a definite, knowingly false representation that a railroad would be completed and operating by a specified time, made to induce a lease and relied upon by the lessees, can support an action for deceit, even though the representation concerns a future event.


McElrath v. Elec. Inv. Co., 114 Minn. 358, 131 N.W. 380 (Minn. 1911)