Business & Insurance Litigation Newsletter for Indiana

Unfulfilled Promises Sufficient to Support Actions for Fraudulent Concealment

In Yager v. McNamara, 874 N.E. 2d 629 (Ind. App. 2007), the developer of a subdivision made statements to plaintiffs assuring that development would be controlled so that all homes would be "upscale" and "exclusive." The developer retained control of the Homeowners Association and the Architectural Improvement Board for the subdivision. After plaintiffs built expensive 6,000 square foot homes, the developer then approved for construction homes approximately one-half the size of plaintiffs' homes. Plaintiffs alleged that the presence of smaller, less luxurious homes severely diminished the value of their homes, and therefore, they sued the developer for fraud and constructive fraud. The developer defended against the fraud claim by arguing that plaintiffs' designated evidence consisted of statements regarding future events, not statements of past or existing fact that would support a claim for fraud.

The court began by noting the general rule that "fraud may not be based on representations of future conduct." Bilimoria Computer Systems v. America Online, 829 N.E. 2d 850, 155 (Ind. Ct. App. 2005). The court further agreed with defendants that expressions of opinion cannot be the basis for an action in fraud and do not constitute actionable misrepresentations. However, the court found that while opinions and statements of future intent do support a fraud claim, such evidence may satisfy the requirement for constructive fraud. Constructive fraud arises by operation of law when there is a course of conduct which, if sanctioned by law, would secure an unconscionable advantage, irrespective of the actual intent to defraud. Id. The court found that the developer's conduct satisfied these requirements. The court's decision in this case illustrates further movement away from sanctioning conduct which disappoints expectations as mere "puffing."