The "fraudulent promise" rule provides that fraud may be predicated upon the failure to perform a promise where the promise is the device used to accomplish the fraud. What the plaintiff relies upon is not the breach of a verbal promise to convey (or cause to be conveyed) real estate, but the deceiving of plaintiff by a false promise made to him by the defendant, without intention of performance by him, for the fraudulent purpose of putting him in an advantageous position at the expense of the plaintiff, and acted upon by the plaintiff to his detriment.
Plaintiff bank filed a suit against defendant maker of a promissory note and his wife seeking collection of a promissory note, plus interest. Defendant counterclaimed for fraudulent inducement. Plaintiff's summary judgment motion was denied. The circuit court certified a standing question, presenting the issue of whether defendant had standing to assert a fraud in the inducement claim as a defense and/or a counterclaim where defendant relied upon the oral promise of plaintiff to his financial detriment that plaintiff had no contemporaneous intention of fulfilling and where a third party was the beneficiary of the oral promise. The state supreme court answered the question affirmatively and remanded the case.
Did defendant maker of a promissory note has standing to assert fraudulent inducement as a defense and/or counterclaim to a lender's attempt to enforce the note?
The fact that the agreement was reduced to writing did not negate the precedent oral promise that was the motivating factor making the agreement. The integration clause did not exclude the possibility of a fraudulent inducement claim. The fact that defendant maker was a sophisticated business person did not resolve the matter. Although an automobile dealership was the beneficiary of the oral promise allegedly made to induce defendant to sign the promissory note, the damages asserted, the sale of parcels of defendant's real estate to pay the note, could not have been claimed by the dealership as the dealership was not a party to the note. Defendant was the injured party.