## Facts

- William A. Brandt and John C. Brandt owned and operated Jameson’s Wilderness Resort on Lake McFarland in northern Minnesota from 1940 until selling it in 1947.
- On December 17, 1947, the Brandts agreed by contract for deed to sell the resort to Maurice and Lowell Spiess for $95,000 ($10,000 down; $85,000 payable in installments), with a clause stating payments made before default would be retained as liquidated damages.
- During negotiations, the Brandts told the buyers they were making “good money,” the buyers could make “good money,” and the buyers could make all future contract payments out of resort profits.
- The resort had in fact operated at a loss during each year of the Brandts’ ownership; the trial court found the Brandts concealed these losses.
- The buyers were relatively inexperienced and requested to see business records and asked about income, expenses, and recovery time; the Brandts withheld the books while continuing to make positive representations about profits.
- The buyers paid $10,000 down and a $20,000 installment due February 15, 1948, but could not meet the April 15 installment; they later paid $6,000 on May 28, 1948, after an agreement the Brandts would not foreclose and would give reasonable time to raise funds.
- Ten days later, the Brandts served a notice of cancellation of the contract.
- The buyers promptly sought counsel, sued for rescission based on fraud, sought to restrain cancellation, and tendered reconveyance in open court; the Brandts refused.

## Issues

1. Whether the sellers’ statements about profitability and the buyers’ ability to make payments from profits, together with concealment of losses, were actionable fraudulent misrepresentations of past or existing material facts.
2. Whether the buyers were justified in relying on the sellers’ representations despite the opportunity to investigate and their incomplete investigative efforts.
3. Whether the evidence and findings supported rescission and whether denial of a new trial was error.

## Decision

- The Minnesota Supreme Court affirmed the order denying the sellers’ motion for a new trial, leaving in place the judgment rescinding the contract and requiring return of the buyers’ payments.
- The court held that false representations about past or present income and profits are representations of existing material fact and are actionable when made as unqualified affirmations.
- The court held the buyers’ reliance was justified even though they could have discovered the truth by investigation and even though they attempted but did not complete an investigation.
- The court held the sellers’ withholding of the books after making direct profit and expense representations supported an inference of knowledge of falsity and intent to conceal.
- The court applied deferential review to fact findings and held the fraud findings were independently sufficient to sustain rescission.

## Legal Principles

- Fraud liability arises from a false representation of a past or existing material fact susceptible of knowledge, made knowingly false or asserted as of one’s own knowledge without knowing its truth, intended to induce reliance, with justified reliance and resulting pecuniary harm.
- A false representation of past or present income and profits is a false representation of a past or existing material fact, not mere opinion.
- An unqualified affirmation is treated as an assertion made as of the speaker’s own knowledge; bad motive is not required to establish fraud.
- A purchaser may rely on a material fraudulent representation even if the purchaser could have discovered the falsity through investigation; an incomplete investigation does not waive the right to rely.
- In rescission for fraud, the deception inquiry turns on whether the statements were reasonably calculated to deceive a person of the plaintiff’s actual capacity and experience; when the speaker is presumed to know the facts (such as an owner-operator), reliance may be presumed.
- On appeal, where independent factual findings support the judgment, error affecting only other findings does not require reversal if an unaffected finding is sufficient to sustain the result.

## Conclusion

The court upheld rescission of a resort sale where the owner-operators falsely represented profitability and concealed sustained losses, and it confirmed that buyers may justifiably rely on such factual profit representations despite an available or incomplete investigation, particularly when the sellers control the financial information and are presumed to know the truth.


Spiess v. Brandt, 230 Minn. 246, 41 N.W.2d 561 (Minn. 1950)