## Facts

- Merrill J. Sharp and Winnie H. Sharp bought shares of stock in Idaho Investment Corporation (IIC).
- An IIC salesman solicited the Sharps and used written sales materials (a circular or “kit”) and oral statements describing IIC’s business and prospects.
- The salesman’s statements and materials included optimistic descriptions, projections about future success, and comparisons suggesting IIC could become like larger, successful insurance or financial companies.
- The Sharps later contended they were induced to purchase the stock by false and misleading statements and omissions about IIC’s condition and prospects.
- Merrill Sharp testified that he did not read the written circular until after the purchase and that his decision was influenced by his familiarity with, and confidence in, individuals involved with IIC based on their connection to another enterprise he viewed as successful.
- The Sharps sued IIC and certain officers, asserting common-law fraud (and also alleging securities-law theories) and seeking monetary recovery.
- The case was tried to the court without a jury, and the trial court entered judgment for the Sharps and awarded damages.
- IIC and its officers appealed, arguing the Sharps did not prove the required elements of common-law fraud.

## Issues

1. Whether the Sharps proved, by clear and convincing evidence, all elements of common-law fraud, including a false representation of material existing fact and actual, justifiable reliance.
2. Whether the salesman’s optimistic statements and written materials were actionable misrepresentations of fact or instead nonactionable opinion, prediction, or sales puffing.
3. Whether the record supported imposing liability on IIC and the individual officers on a fraud theory.

## Decision

- The Idaho Supreme Court reversed the trial court’s judgment for the Sharps.
- The Court held the Sharps failed to establish common-law fraud by clear and convincing evidence.
- The Court reasoned that many challenged statements were general optimism, opinion, or predictions about the future rather than false statements of existing material fact.
- The Court also concluded the Sharps did not prove actual reliance on the written sales materials or specific claimed misrepresentations, given testimony that the circular was not read until after the purchase and that the investment decision rested on other considerations.
- Because the plaintiffs did not prove essential elements of fraud, the damages award could not stand.

## Legal Principles

- Common-law fraud must be proven by clear and convincing evidence.
- A plaintiff alleging fraud must prove all required elements, including: a material representation of fact, falsity, knowledge (or reckless disregard), intent to induce reliance, actual reliance, a right to rely, and resulting damages; failure of any element defeats the claim.
- Statements of opinion, general sales talk, and forecasts of future success ordinarily are not actionable as fraud absent proof they amount to a false statement of present fact.
- Actual and justifiable reliance is required; a plaintiff who did not read the claimed written misstatements before investing generally cannot show reliance on them.
- Fraud standards apply even when the claimed misrepresentations arise in connection with the sale of stock; the transaction’s securities context does not remove the reliance and falsity requirements of common-law fraud.

## Conclusion

Sharp v. Idaho Investment Corp. reversed a bench-trial fraud judgment for stock purchasers because the plaintiffs did not prove by clear and convincing evidence that defendants made false statements of existing material fact or that the plaintiffs actually and justifiably relied on the alleged misrepresentations, especially where the buyers did not read the written sales circular until after investing and much of the sales talk amounted to nonactionable optimism and predictions.


Sharp v. Idaho Investment Corp., 504 P.2d 386 (1972)