Opinion ID: 1865218
Heading Depth: 1
Heading Rank: 12

Heading: Net Worth on the April 30, 1979 Financial Statement.

Text: The trial court ruled Hagen fraudulently misrepresented the net worth of Dittmann on the April 30, 1979 financial statement. The required elements of a fraud action are: (1) there was a false representation by a party of a past or existing material fact susceptible of knowledge; (2) made with knowledge of the falsity of the representation or made as of the party's own knowledge without knowing whether it was true or false; (3) with the intention to induce another to act in reliance thereon; (4) that the representation caused the other party to act in reliance thereon; and (5) that the party suffer pecuniary damage as a result of the reliance. Burns v. Valene, 298 Minn. 257, 261, 214 N.W.2d 686, 689 (1974); Davis v. Re-Trac Manufacturing Corp., 276 Minn. 116, 149 N.W.2d 37 (1967). The trial court premised its ruling of fraudulent misrepresentation, in part, on its earlier conclusion in the breach of warranty claim that the balance sheet overstated Dittmann's net worth. This, in turn, was based on the trial court's determination that the balance sheet was inaccurate because it was not prepared according to generally accepted accounting principles. As stated in the discussion of the breach of warranty claim, the statements on the balance sheet were not inaccurate because they were based on an accounting method which recognizes income and expense earlier than generally accepted accounting principles. We there noted Dittmann's accounting method was recognized by the IRS, had been used since inception of the corporation, and was used by Specialized Tours subsequent to the sale. The statement of net worth of Dittmann on the April 30, 1979 balance sheet, therefore, cannot be termed a false representation. Since the essential element of a false representation is missing, this fraud claim must fail.