Filed in District Court

State of Minnesota
Nov 4 2021
STATE OF MINNESOTA DISTRICT COURT

COUNTY OF OTTER TAIL SEVENTH JUDICIAL DISTRICT

State of Minnesota,

Plaintiff, ORDER AND MEMORANDUM

Defendant. Court File No. 56-CR-21-338.

of District Court, at the Otter Tail County Courthouse, in Fergus Falls, Minnesota, for a

Contested Omnibus Hearing, pursuant to Defendant’s Motion to Dismiss (Doc. 19; May 4,

2021). Defendant appeared personally and was represented by attorney Drew Huska. Assistant

Otter Tail County Attorney Ryan Murphy appeared on behalf of the State. The Court heard

testimony from attorney Steven Peloquin. The Court also received Exhibits 1-17. Defendant

submitted a brief prior to the hearing (Doc. 20; May 4, 2021), and a brief following the hearing

(Doc. 36; Sept. 17, 2021). The State submitted a responsive brief (Doc. 37; Oct. 1, 2021), and

Defendant submitted a reply (Doc. 39; Oct. 8, 2021). Based on the Complaint, the motion, the

memoranda, the testimony and exhibits, the arguments of counsel, and the applicable law, the

Court now enters the following:

ORDER

1. Defendant’s Motion to Dismiss is hereby granted.

2. The attached memorandum is hereby incorporated by reference herein.

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4th
Dated this _______ day of November, 2021. BY THE COURT:

____________________________
Court File No. 56-CR-21-338 Honorable Sharon G. Benson
Judge of District Court

MEMORANDUM

This case arises from a civil contracting dispute between a property owner and a general

contractor. After the contractor breached its contract, the property owner brought suit in order to

resolve the contractor’s equitable claims. When the contractor forfeited its security, and when

that suit proved costly to maintain, the property owner elected instead to discharge the now-

unsecured claims in bankruptcy, leaving the contractor to take what it can from the bankruptcy

estate alone. Following this outcome, the State charged the property owner with theft by swindle.

The Court dismisses for lack of probable cause to charge the offense.

Facts

Timothy Michael Stoll (hereinafter “Defendant”), and his wife, are the owners of real

property located in Otter Tail County. Dan Hokanson and D&M Roofing Company (hereinafter

“the Contractor”) are engaged in the field of construction work as a general contractor. Prior to

the events of this case, the Contractor began purchasing equipment in order to build housing

using cellular concrete. Cellular concrete is a type of insulated concrete that is commonly used

abroad, but that is not commonly used in this country. Defendant, who worked as a banker,

helped the Contractor facilitate the purchase. As a result, he became interested in building a

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cellular-concrete home. The Contractor was likewise interested in building a cellular-concrete

home in order to test the construction method, and to have an example home to point to.

Defendant and the Contractor exchanged proposals over email for the Contractor to build

a house for Defendant on Defendant’s land. In May 2015, the Contractor ultimately emailed a

bid to Defendant, which Defendant accepted, forming a contract. The document provided a

contract price of $297,000, along with various specifications for the construction. The Contractor

was to perform the majority of the work, with certain specified tasks left to Defendant to

perform. The document also provided that Defendant would make unspecified “[p]rogress

payments after appraisal is completed.” Both parties understood that, because of the novel

construction technique being used, it would be difficult for Defendant to obtain construction

financing. As such, the Contractor was to be responsible for carrying the costs of construction

until near the end of the process. It was anticipated that, once construction was far enough along

that an appraisal could be completed, Defendant would be able to obtain long-term financing

using a mortgage. Defendant would ultimately provide some materials, both for his own work,

and for the Contractor’s work, but the Contractor was responsible for the majority of the ongoing

costs of construction, including both materials and labor.

The Contractor began constructing the home in October 2015. The parties had agreed that

there would be no timeline for the project, and so construction occurred over a lengthy period of

time, continuing until events stopped it in December 2016. In September 2016, while

construction was still ongoing, Defendant solicited an appraisal of the home. Although the

structure was still unfinished, the property was valued at $399,000. At a meeting in October

2106, Defendant informed the Contractor that he was working on obtaining financing.

Thereafter, Defendant repeatedly asked for further information he said was needed for the

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application. Whether that was true or not, a final loan application was not made until December

2016. On an invoice dated December 1, 2016, the Contractor ultimately demanded $300,000

from Defendant as a progress payment. The Contractor also provided an invoice dated December

1, 2016 that reflected total costs of $330,000. Contemporaneous documents indicate that the

Contractor was claiming that additional work not contained in the original bid had been

performed, that additional materials not included in the original bid had been installed, or both.

Although this fact is disputed, there is evidence that Defendant did agree to have the Contractor

perform extra work, understanding that it was extra work. The Contractor did not provide an

itemization of the work included in either in the full invoice or in the progress-payment invoice.

It also did not provide an itemization of the work still unfinished.

When Defendant did not produce the progress payment demanded, the Contractor ceased

all work. While it is somewhat unclear when the decision to stop the work was made, it is

undisputed that the Contractor’s last work on the home was on or before December 1, 2016.

There is also no dispute that the work to be performed by the Contractor had not been completed.

Some of the State’s documents appear to assert that there was a meeting later in December

during which Defendant affirmatively agreed to settle the price of construction at $330,000,

though the documents could also be read as showing only that Defendant acknowledged the

demand the Contractor was making. Regardless of which of these may be true, the documents

also indicate that if any agreement was actually reached, it was almost immediately repudiated.

The Contractor did not resume work. Defendant proposed paying a lower amount. And the

Contractor demand a higher amount — $335,000 plus interest. In early December 2016,

Defendant moved into the home and performed work to complete construction. Once in the

home, Defendant began finding defects in the construction which would ultimately be

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documented by a retained expert. The value of these defects is in dispute, but no evidence has

been presented to contradict that some defects were present.

Defendant and the Contractor attempted to negotiate a settlement of the construction

price, but they did not succeed in coming to an agreement. Instead, negotiations dragged on. On

February 6, 2017, the Contractor proposed a complete settlement of the matter for $330,840,

along with a release of all counter-claims and a non-disparagement agreement. On February 13,

2017, Defendant, through his attorney, responded with a counter-offer to partially settle the

matter for $310,000. This partial settlement would have included a release of liability for

incomplete work, but would have preserved Defendant’s construction defect claims. The

Contractor responded that it was standing firm at its initial offer. On May 11, 2017, Defendant

made another settlement offer in which he listed various construction defects. The proposal was

that Defendant would waive additional claims, but reduce payment to $270,055. On May 25,

2017, Defendant’s attorney attempted to solicit a response from the Contractor, noting that

financing had been secured. The Contractor did not accept this offer or engage in further

negotiations at that time. As indicated, Defendant did obtain an appraisal of the completed home,

which valued the property at $400,000, and thereafter he obtained a letter of commitment for a

mortgage loan on the property. But the matter was not settled, and so the financing was not used.

The delays in reaching a resolution eventually delivered a surprise. The Contractor filed a

mechanic’s lien against the home, but then did nothing to begin proceedings to enforce the lien.

As such, the lien was forfeited one year after construction — see Minn. Stat. § 514.12, subd. 3 —

leaving the Contractor’s claims without any underlying security. In January 2018, after the

mechanic’s lien had expired, Defendant commenced a civil action against the Contractor in order

to determine the amount he owed to the Contractor. Defendant’s complaint sought to adjudicate

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the value of the Contractor’s contributions, as well as any offsetting construction-defect claims,

the result of which was that Defendant ultimately requested the entry of a monetary judgment

against himself. This unusual action was necessary, in part, because the Contractor had not acted

to commence a suit, and because Defendant wanted to ensure that he preserved breach-of-

warranty claims that might otherwise be lost due to a short statute of limitations.

Following the filing of the lawsuit, Defendant’s settlement offers further decreased in

value. In January 2019, Defendant submitted a mediation statement proposing a total settlement

for $165,000. This position reflected the growing number of issues with the home; although it

also reflected Defendant’s willingness to release all claims, given that the home had not

experienced a structural failure. On March 7, 2019, Defendant, through his attorney, offered a

total settlement of the matter for $150,000. This letter also noted the possibility that Defendant

could file for bankruptcy protection. The Contractor rejected this offer. One final attempt at

resolution arose from informal mediation with the assigned federal judge. Under this settlement,

the Contractor would have bought the home, including the work Defendant had put into it, as

well as 15 acres of the underlying land, for $175,000. Initially it appeared that the parties had

reached a settlement on these terms, but this settlement likewise fell through.

With the costs of litigation mounting and the additional costs of a summary judgment

motion on the horizon, Defendant’s attorney ultimately recommended filing bankruptcy in order

to discharge the Contractor’s (now unsecured) claims. Defendant and his wife initially resisted

this advice. But in the end they agreed. They informed the Contractor that, if the final settlement

offer was not accepted, they would file for bankruptcy. When that settlement failed, they

followed through. A bankruptcy petition was filed in June 2019. The propriety of granting a

discharge, including the propriety of Defendant’s claimed homestead exemption, was questioned

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in the bankruptcy proceedings. But ultimately an order for discharge was entered in October

2020. This followed a new appraisal of the property with a substantially-diminished value.

In February 2021, during the pendency of the bankruptcy case, the State filed criminal

charges in this matter. Based on the representations of counsel, it appears that further

proceedings in bankruptcy court have been stayed pending this matter. The Complaint in this

matter charges Defendant with committing theft by swindle. Defendant now moves to dismiss

the Complaint on several grounds, the most important of which is that the State lacks probable

cause to believe that Defendant committed the offense charged.

Legal Analysis

The purpose of a probable-cause challenge is to “protect a defendant unjustly or

improperly charged from being compelled to stand trial.” State v. Florence, 239 N.W.2d 892,

900 (Minn. 1976). Such a challenge asks the trial court to determine whether, “[g]iven the facts

disclosed by the record, is it fair and reasonable … to require the defendant to stand trial.” Id. at

902. For the charge to survive the challenge, “the evidence worthy of consideration” must

“bring[] the charge against the [defendant] within reasonable probability.” State v. Florence, 239

N.W.2d 892, 896 (Minn. 1976). Said another way, the State must supply a record that

“establishes that the prosecutor possesses substantial evidence that [would] be admissible at trial

and that would justify denial of a motion for a directed verdict of acquittal.” State v. Rud, 359

N.W.2d 573, 579 (Minn. 1984). This means that the trial court must determine whether “there is

a fact question for the jury’s determination on each element of the crime charged.” State v.

Prigge, 907 N.W.2d 635, 640 (Minn. 2018).

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The test for granting a directed verdict of acquittal is the same as the test for determining

whether a jury question exists in any sort of case, whether criminal or civil. State v. Slaughter,

691 N.W.2d 70, 75 (Minn. 2005). “[T]he court must view the credibility of the evidence, and

every inference which may fairly be drawn therefrom, in favor of the adverse party.” State v.

Trei, 624 N.W.2d 595, 598 (Minn. App. 2001) (quoting Paradise v. City of Minneapolis, 297

N.W.2d 152, 155 (Minn. 1980)). It does not “assess the relative credibility or weight of

conflicting evidence.” State v. Barker, 888 N.W.2d 348, 353 (Minn. App. 2016). Instead, it asks

only “whether the evidence is sufficient to present a fact question for the jury’s determination.”

Slaughter, 691 N.W.2d at 75. However, in doing so, the trial court need not assume that the jury

will credit evidence that is “inherently incredible.” Florence, 239 N.W.2d at 903.

A probable-cause motion is analogous to other motions that require the trial court to

determine, based on a paper record, whether the nonmoving party could survive a motion for a

directed verdict. See DLH, Inc. v. Russ, 566 N.W.2d 60, 70 (Minn. 1997). As has been said in the

context of such motions, a trial court determining whether a jury question exists “is not required

to ignore its conclusion that a particular piece of evidence may have no probative value, such

that reasonable persons could not draw different conclusions from the evidence presented.” Id.

And, as has been said in the same context, the trial court “must view the evidence presented

through the prism of the substantive evidentiary burden.” Richie v. Paramount Pictures Corp.,

544 N.W.2d 21, 26 (Minn. 1996). In other words, in a criminal case, a jury properly decides the

issue of guilt only if “the facts in the record and the legitimate inferences drawn from them

would permit the jury to reasonably conclude that the defendant was guilty beyond a reasonable

doubt of the offense” charged. State v. Al-Naseer, 788 N.W.2d 469, 473 (Minn. 2010).

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The first step in analyzing probable cause in this case is to pin down the State’s actual

allegations. The State’s Complaint is broadly drafted, alleging that Defendant committed a theft

by swindle on or between the dates of December 5, 2015 and February 5, 2021 — although the

probable-cause statement contained in the Complaint also alleges acts that occurred outside that

time period, in May 2015. That probable cause statement does not specify what constituted the

“swindle,” although it does make prominent mention of the fact that Defendant made settlement

offers to the Contractor and the fact that Defendant filed for bankruptcy.

In response to this ambiguous Complaint, Defendant has made voluminous submissions

addressing many possible constructions of the Complaint. He notes that the State cannot penalize

him for invoking the protections of federal bankruptcy law. And he further explains the propriety

of his bankruptcy filings with reference to state and federal law. Defendant’s submissions also

point to the fact that the State cannot penalize him for filing a lawsuit in good faith or for

asserting contractual rights in good faith. They explain why the State cannot penalize him for

refusing to accept certain terms within the Contractor’s settlement offer. And they explain why

the State cannot penalize him for having owed a debt. Finally, Defendant notes that all the

property he acquired was acquired when it became attached to his real estate prior to December

2016, and all the services he received were performed prior to December 2016. As such, none of

the alleged conduct which occurred after that date could have been the primary mechanism by

which he obtained that property or those services. In light of all of these constraints, Defendant

challenges the State to identify just what course of conduct constitutes the alleged swindle.

The State has elected not to offer any challenge or response to the bulk of these

arguments. Instead, it has retreated to claiming that a single act — one outside of the dates

charged in the Complaint — constituted the swindle. The State asserts that “[t]he swindle here is

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the defendant tricking, or inducing, Mr. Hokanson into building [a] house without intending to

pay Mr. Hokanson.” (State’s Br. 7) “The defendant induced Mr. Hokanson into building the

house by promising payment without intending to [pay] or having ability to pay.” (Id.) “This act

of inducement is the affirmative fraudulent behavior that must be shown by the State.” (Id.) In

other words, the State is alleging what is commonly known as promissory fraud — a variety of

what is known as fraud in the inducement. While this argument clarifies the issues in dispute, it

raises numerous problems for the State.

I. The State Cannot Show Theft by Swindle

The first problem with this argument is that it fundamentally changes and recasts the

nature of the offense charged. Even when the problem with the charging dates is ignored, there

remains a problem with the State’s choice of offense. Minnesota’s theft statute contains two

major provisions relating to fraud-based theft. The first offense is theft by false representation.

Minn. Stat. § 609.52, subd. 2(a)(3). The theft statute explicitly provides that promissory fraud —

“a promise made with intent not to perform” — is one way of committing theft by false

representation. Minn. Stat. § 609.52, subd. 2(a)(3)(ii). However, theft by swindle — which is the

offense charged here — is a different offense. Minn. Stat. § 609.52, subd. 2(a)(4). By contrast,

the theft-by-swindle provision of the theft statute does not contain an allowance for promissory

fraud. Id. Instead, it requires the use of a “swindl[e]” committed by means of an “artifice, trick,

device, or any other means.” Id.; State v. Flicek, 657 N.W.2d 592, 596 (Minn. App. 2003). Theft

by swindle is a useful offense because it may cover certain fraudulent schemes that do not,

strictly speaking, involve a false representation. But, in general, theft by swindle is more difficult

to prove than theft by false representation, precisely because it requires such a scheme.

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As explained by the reporter for the committee that drafted the modern criminal code,

theft by swindle “can best be described as [an offense] involving the obtaining of the victim’s

property by those deceptive means that entail the use of rather elaborate schemes or skillful

manipulation to bring about the successful deception.” Maynard E. Pirsig, Proposed Revision of

the Minnesota Criminal Code, 47 Minn. L. Rev. 417, 436-37 (1963). “It is the use of elaborate

schemes and skillful manipulation that distinguishes it from obtaining goods by false pretenses.”

Id. In other words, “the gist of the offense is the cheating and defrauding of another by deliberate

artifice.” State v. Ruffin, 158 N.W.2d 202, 205 (Minn. 1968). The offense was “designed to reach

the class of offenders who perpetrate swindling schemes, as various as the mind of man is

suggestive, upon unwary victims.” Id. And it requires a “fraudulent scheme, trick, or device.” Id.

It is “where a victim’s confidence” has been “fraudulently procured by a method which

normally dispels suspicion or caution” that “the requirements of the statute have been satisfied.”

State v. Lone, 361 N.W.2d 854, 858 (Minn. 1985). In other words, the crux of the offense is that

there is some sort of “deliberate artifice” used, State v. Ulvestad, 414 N.W.2d 737, 740 (Minn.

App. 1987) — whether the artifice is akin to a confidence man’s trick or whether it is akin to a

fiduciary’s betrayal. What is required is “[a] clever plan or idea, esp[ecially] one intended to

deceive.” Artifice, Black’s Law Dictionary (11th ed. 2019). Inevitably, if this artifice involves a

false representation, it is a false representation about some extrinsic fact. The false representation

that a person will pay for goods or services accepted does not constitute such an artifice.

The case of State v. Cunningham, 99 N.W.2d 908 (Minn. 1959) is illustrative. In that

case, the defendant purchased paint from a paint store using a blank counter check. Id. at 909.

The check was later returned for the reason that the defendant had “no account” at the bank from

which the check was drawn. Id. at 910. It was one of 73 fraudulent checks that the defendant had

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passed in the past sixteen months. Id. Clearly, then, the defendant had accepted the goods in

question based on a promise to pay that he had no intention of keeping. Nonetheless, the

Supreme Court held that the conduct described above, standing alone, would not constitute a

theft by swindle. Id. at 913. “[S]ince the act of obtaining goods by false pretenses was made

indictable in another section, the crime of swindling must include some additional or different

element.” Id. at 912. It was only because the defendant in that case had used an additional

confidence trick to keep the owner of the paint store from scrutinizing the check — pretending to

arrange for further deliveries to a known job site — that the scheme required for a theft by

swindle was present. Id. at 914. It other words, the elements of the offense were met by the

“subtle and crafty device” which the defendant had used to create “confusion,” not by the

defendant’s mere commission of a promissory fraud. Id.

The history of the theft by swindle statute likewise confirms this understanding. The

offense was originally enacted explicitly as a prohibition on “three-card monte” scams — a

version of the classic “shell game” confidence-man trick executed using playing cards. See

Minn. Stat. ch. 99, § 15 (1878). Soon thereafter, the statute was broadened to include all

swindles. Minn. Stat. § 6257 (1891). As a result, notable prosecutions were brought for various

other classic confidence-man tricks. See, e.g., State v. Wilson, 75 N.W. 715, 716 (Minn. 1898)

(pigeon drop); State v. Smith, 85 N.W. 12, 13 (Minn. 1901) (short change); State v. Evans, 92

N.W. 976 (Minn. 1903) (marked card); State v. Brooks, 187 N.W. 607 (Minn. 1922) (fake horse-

race scheme); State v. Yurkiewicz, 292 N.W. 782, 784 (Minn. 1940) (fake stock).

The statute remained substantially unchanged until the comprehensive revision of

Minnesota’s criminal statutes. Minn. Stat. § 614.11 (1961). Prior to the comprehensive revision,

it provided that “[e]very person who, by means of three-card monte, so-called, or of any other

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form or device, sleight of hand, or other means, by use of cards or instruments of like character,

or by any other instrument, trick, or device, obtains from another person any money or other

property of any description, shall be guilty of the crime of swindling….” Id. (emphasis added).

Following the revision, the statute was shorted considerably. Minn. Stat. § 609.52, subd. 2(4)

(1965). But the new language was intended to supersede the old language “without change of

substance.” Minn. Stat. 609.52, 1963 Advisory Committee Comment. And existing caselaw

explicitly continues to apply. Id. In 1981, the statute was broadened slightly by changing

“property” to “property or services.” Minn. Stat. § 609.52, subd. 2(4) (1981). But it has

otherwise been unchanged since the comprehensive revision. See Minn. Stat. § 609.52 (2020).

What this means is that the original purpose of the statute still substantially informs its

meaning. To be sure, the statute may be used to prosecute fraudulent schemes that were not used

by the “bunco steerer” or by the practitioner of the “confidence game.” Evans, 92 N.W. at 977;

Cunningham, 99 N.W.2d at 911. It has been used to prosecute everything from fake-repair

rackets, State v. Wells, 121 N.W.2d 68 (Minn. 1963), to false insurance-claim schemes. State v.

Olkon, 299 N.W.2d 89, 106 (Minn. 1980). But the defining feature of the offense has remained

the presence of a fraudulent scheme — an “artifice, trick, [or] device.” Minn. Stat. § 609.52,

subd. 2(a)(4). The State is required to identify such a scheme in order to pursue a charge of theft

by swindle. If, instead, it seeks to rely on promissory fraud alone, then it must charge the

appropriate version of theft, and it must meet the burdens required in order to prove that offense.

This is not a mere technicality. There are real reasons to guard the distinction between

theft by fraudulent representation and theft by swindle, even if the offenses will still legitimately

overlap in many particular cases. First, Courts strictly construe statutes to limit non-explicit

departures from the common law. Do v. Am. Fam. Mut. Ins. Co., 779 N.W.2d 853, 858 (Minn.

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2010). The fraudulent-representation provision explicitly departs from the common law by

permitting a conviction to be based on mere promissory fraud. See Pirsig, at 435 (noting State v.

Thaden, 45 N.W. 614, 615 (Minn. 1890)). The existence of this explicit departure should not be

read to support an implicit departure within another provision that is distinct but related.

Second, criminal liability based on promissory fraud also implicates constitutional

constraints. The Minnesota Constitution provides that “[n]o person shall be imprisoned for debt

in this state, but this shall not prevent the legislature from [criminalizing] fraud in contracting

said debt.” Minn. Const. art. I, § 12. Although fraud can be prosecuted, the non-fraudulent debtor

has a constitutional right that should not be unduly chilled. Courts strictly construe statutes so as

to avoid creating potential constitutional conflicts. State v. Irby, 848 N.W.2d 515, 521 (Minn.

2014). And the theft-by-fraudulent-representation statute avoids such a confrontation by

explicitly stipulating that “[f]ailure to perform is not evidence of intent not to perform unless

corroborated by other substantial evidence.” Minn. Stat. § 609.52, subd. 2(a)(3)(ii). This

requirement serves the important constitutional purpose of keeping the rights of non-fraudulent

debtors from being chilled by the threat of erroneous or vindictive prosecutions.

The requirement of corroboration also serves an important public policy goal. The

requirement was intended to assuage “fears that persons who promise in good faith and later are

unable to perform will be convicted as a result of inferring from their failure to perform the

existence of a prior wrongful intent.” Pirsig, at 436. Given that courts construe related statutes

together, see State v. Lucas, 589 N.W.2d 91, 94 (Minn. 1999); State v. Bolsinger, 21 N.W.2d

480, 486 (Minn. 1946), it would be improper to permit the State to bypass the requirement of

substantial corroboration contained in the theft-by-false-representation provision of the theft

statute by allowing the State to bring charges under the theft-by-swindle provision, while

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nonetheless basing those charges on the type of mere promissory fraud that is explicitly

addressed by the theft-by-false-representation provision.

In conclusion, the State has elected to charge theft by swindle in this case. Defendant has

challenged the State to identify what scheme or artifice it is alleging he perpetrated. The State

has responded with only a single answer — that Defendant entered into a contract with the

Contractor while allegedly having no intention to perform. This allegation does not represent the

sort of scheme, artifice, trick, or device required to sustain a charge of theft by swindle. It is

merely an allegation of promissory fraud, which can support only a different, but related, charge.

Given the comprehensive arguments offered by Defendant, and the limited response by the State,

the Court need not engage in a further discussion of the facts. Because theft by swindle is a

distinct crime from theft by false representation, the State lacks the ability to present proof as to

an essential element of the offense it has actually charged. As such, the Complaint must be

dismissed, even if another charge might be appropriate.

II. The State Cannot Show Theft by Fraudulent Representation

In the alternative, Defendant argues that, even if he could be convicted based on mere

promissory fraud, the State lacks probable cause to sustain an allegation of promissory fraud.

The Court elects to address this argument because doing so will likely promote judicial

economy. For the sake of this analysis, the Court will treat the State’s Complaint as though it had

actually charged theft by false representation, and it will ask whether the evidence presented

would permit a reasonable factfinder to conclude that Defendant acted fraudulently. The Court

agrees with Defendant that the evidence would not permit a properly-instructed jury to find guilt.

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As such, the Complaint would have to be dismissed even if the State had charged the version of

theft that comports with the arguments it is now making.

a. Proof Required

In order to prove a charge of theft by false representation, the State must show that

Defendant obtained property or services “by intentionally deceiving [another] person with a false

representation.” Minn. Stat. § 609.52, subd. 2(a)(3). As relevant to this case, a “false

representation” includes “a promise made with intent not to perform.” Minn. Stat. § 609.52,

subd. 2(a)(3)(ii). However, as the statute sets forth, “[f]ailure to perform” a contractual

obligation after the time of contracting “is not evidence of intent not to perform” at the time of

contracting, “unless corroborated by other substantial evidence.” Id.

The principle that a broken promise does not itself constitute fraud is in accord with a

long line of authority. As the Minnesota Supreme Court has stated, “fraud cannot be predicated

upon the mere fact that a promise has been broken.” McCreight v. Davey Tree Expert Co., N.W.

623, 625 (Minn. 1934). “There must be evidence to justify a trier of fact in concluding that, when

the promise was made, there was no intention of performing it.” Id. This must be “affirmative

evidence.” Benson v. Rostad, 384 N.W.2d 190, 194 (Minn. App. 1986). That is because “[i]t

would be as wrong morally as legally, as offensive to logic as to law, to hold that mere denial

and nonperformance are evidence that, if a promise was made, it was made fraudulently.”

McCreight, N.W. at 625; see also Valspar Refinish, Inc. v. Gaylord's, Inc., 764 N.W.2d 359, 369

(Minn. 2009) (quoting Vandeputte v. Soderholm, 216 N.W.2d 144, 147 (Minn. 1974)); Belisle v.

Southdale Realty Co., 168 N.W.2d 361, 363 (Minn. 1969) (“[A] representation or expectation as

to future acts or events is not a sufficient basis to support an action for fraud merely because the

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represented act or event did not take place….”); Hackenjos v. Kemper Chevrolet Co., 257 N.W.

518, 519 (Minn. 1934) (It is “an essential element in actionable promissory fraud” that the

“defendant made [the] promises with the intention not to keep them.”).

Moreover, while a broken promise is not sufficient to prove that a defendant induced a

counter-party to contract with him by means of promissory fraud, the general rule is that a

broken promise is necessary in order to sustain a claim of fraud. See, e.g., Wixon Jewelers, Inc.

v. Di-Star, Ltd., 218 F.3d 913, 914 (8th Cir. 2000) (“For a fraud in the inducement claim to

succeed, the defendant must not have met the obligations of the contract, among other

elements.”); see also U.S. ex rel. O'Donnell v. Countrywide Home Loans, Inc., 822 F.3d 650, 660

(2d Cir. 2016) (promissory fraud requires proof of “the fact of breach”). Therefore, where a

defendant’s performance of a contract has been excused by the counter-party’s prior breach, it

cannot be the case that any loss on the part of the counter-party is attributable to promissory

fraud on the part of the defendant. Id. A claim of promissory fraud may not always rise with a

breach-of-contract claim, but the former will always fall with the latter.

This general rule — that promissory fraud is actionable only where breach of contract is

also actionable — is just as applicable to a criminal prosecution for fraud as it is to a civil claim

for fraud. That is because the rule is a necessary result of the requirement that the alleged fraud

must cause the loss claimed by the counter-party. See Ayres & Klass, Promissory Fraud Without

Breach, 2004 Wis. L. Rev. 507, 509-10 (2004). 1 Legal causation is no less an aspect of theft by

false representation than it is an aspect of civil fraud. See Minn. Stat. § 609.52, subd. 2(a)(3)

1
For a discussion of the few rare and exotic cases where this might not be true, see the remainder of the
cited article by Ayres & Klass. This includes mention of a criminal statute that is quite unlike Minnesota’s theft
statute in that it lacks an element of causation. Id. at n.11. The facts of this case are not exotic and neither is the
criminal statute at issue in this case. As such, the case is governed by the general rule.

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(offense requires “obtain[ing] … property … or … services … by … deceiving [another] person”

(emphasis added)). And even under the criminal law, proximate causation can be interrupted by

an intervening cause. State v. Smith, 835 N.W.2d 1, 4 (Minn. 2013). If the counter-party relieves

the defendant of his obligation to perform by its own material breach, that is an intervening event

not induced by the defendant’s alleged misrepresentation. Once the defendant is legally excused

from performing, then it is immaterial whether or not the defendant lacked the intent to perform

at the time the contract was made. Any loss caused to the counter-party becomes the result of the

defendant’s legal entitlement, and not the result of any alleged promissory fraud.

b. The State Has Not Presented Evidence of an Unexcused Breach

The lack of ability to show that Defendant committed an unexcused breach of contract is

the State’s first major obstacle to showing theft by false representation. The only false

representation the State identifies that could conceivably have caused the Contractor a loss of the

magnitude alleged in the Complaint is if Defendant entered into their initial contract without the

intent to perform. But in order to show that such a promise caused a loss on the part of the

Contractor, the State must show that Defendant breached this promise. Based on the evidence

and arguments submitted, there is no indication that the State is able to make this showing.

The State repeatedly argues that Defendant made a fraudulent promise to pay, such that

the lack of payment constitutes a breach of the promise. But that characterization of Defendant’s

promise misses a subtle detail. This is that Defendant did not make an unqualified promise to

pay. Rather, he made a promise to be bound by a contract. In other words, his only promise to

pay was contingent on the Contractor’s own counter-performance. There can be no breach of

Defendant’s promise if the contract was lawfully rescinded, or if Defendant’s obligation to

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perform under the contract was excused by the Contractor’s own prior material breach. Although

the Court’s review of the record is somewhat hampered by the fact that the State has not even

attempted to engage in an analysis of the applicable contract law, it appears from the record here

that this is precisely what happened — the Contractor was first to breach the parties’ contract,

which left Defendant without any contractual duty to perform, and which in turn mooted any

possible claim of promissory fraud in the inducement of the contract.

To reiterate the essential facts, Defendant and the Contractor entered into a contract to

perform construction work for a total contract price of $297,000. The contract indicated that

progress payments would be due once it was possible to perform an appraisal — something

which the parties contemplated would be necessary in order for Defendant to secure financing.

However, the contract did not specify the amount or basis of these progress payments. While the

record indicates that some changes were made to the project during construction, the State does

not point to any evidence that there were written change orders or that the parties orally agreed to

fix a price for the changes while they were being made. Nor was there any itemization of the

extras at that time. Indeed there is correspondence from Defendant in October 2016 asking about

the price of the extras. Eventually, the Contractor demanded a progress payment of $300,000 —

a figure in excess of the total contract price. Defendant did not make the progress payment

demanded. Concurrent with these events, the Contractor ceased all work on the project, leaving

the contract uncompleted. Defendant has contended, and the State does not refute, that the work

left to be completed was substantial — indeed, the unrebutted evidence is that it cost thousands

of dollars to complete. In other words, the Contractor did not “substantially complete” the

project, as that term is used in the law.

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While it is understandable that the Contractor wanted payment, the State has not

presented a prima facie case that the Contractor was within its legal rights to demand this

payment as a condition of continuing to work on the project. Although the parties’ contract

provided that Defendant should make progress payments, this provision was so vague as to be

meaningless. It is well-settled that a contractual provision “which is so vague, indefinite, and

uncertain as to place the meaning and intent of the parties in the realm of speculation” is

unenforceable. King v. Dalton Motors, Inc., 109 N.W.2d 51, 52 (Minn. 1961). It is true that

partial performance of an indefinite agreement may entitle a party to compensation based on

equitable principles. See Restatement (Second) of Contracts § 34. But any such entitlement is

one awarded by a court, not a contractual right. Id. It is also true that a vague or indefinite

promise may be given meaning by extrinsic evidence. Nord v. Herreid, 305 N.W.2d 337, 340

(Minn. 1981). But the State points to no evidence clarifying when progress payments were to be

made or what their amounts would be. And even if there were such evidence, Defendant has

another excuse. He objected to making partial payments without an inventory. That objection

was well-grounded because, under the circumstances of this particular case, the lack of an

inventory would have prevented an effective partial waiver of the mechanic’s lien. See Minn.

Stat. § 514.07 (providing that no interim payment is required without waiver). As such, it was

not a material breach of the contract that Defendant had not made progress payments.

It was also not a material breach of the contract that Defendant had not made a payment

in excess of the original contract price. It is black-letter law that a contract requires a meeting of

the minds — an offer and an acceptance to the terms of the work to be performed and the price to

be paid. See, e.g., SCI Minnesota Funeral Servs., Inc. v. Washburn-McReavy Funeral Corp., 795

N.W.2d 855, 864 (Minn. 2011); Malevich v. Hakola, 278 N.W.2d 541, 544 (Minn. 1979); Kileen

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v. Kennedy, 97 N.W. 126, 127 (Minn. 1903). No obligation arises in contract without such an

agreement — whether that agreement is expressed in the original contract or expressed in a

binding change order. See D.H. Blattner & Sons, Inc. v. Firemen's Ins. Co. of Newark, New

Jersey, 535 N.W.2d 671, 675 (Minn. App. 1995) (“[W]here one agrees to do, for a fixed sum, a

thing possible to be performed, he will not … become entitled to additional compensation where

the job is more costly or difficult than anticipated.”).

The only contract alleged to have been formed by a specific offer and acceptance was the

parties’ initial contract for $297,000. It appears that Defendant requested work beyond the scope

of that contract, and that the Contractor performed that work. But the parties did not agree to a

price for these additions. As such, this extra work was not strictly a part of the contract, and

Defendant’s only contractual obligation was to pay the contract price of $297,000. Although he

was certainly not entitled to receive the extra work for free, he did not break a specific promise

by refusing to pay a particular sum of money for this work because he had never made a specific

promise to pay a particular sum of money for this work. Therefore, it was not a material breach

of the parties’ contract for Defendant not to pay the $300,000 demanded by the contractor — an

amount that was larger than the original contract price — as a progress payment.

The result of all of this is that the record does not set forth even a prima facie case that

Defendant’s failure to make the payment demanded would have given the Contractor a legal

excuse to cease its work. Instead, the undisputed record shows that the opposite is true. When the

Contractor ceased its work, it gave Defendant a legal excuse not to perform. It is black-letter law

that if a contractor commits a material breach of contract, this will excuse the performance of the

contractor’s counter-party. Soderbeck v. Ctr. for Diagnostic Imaging, Inc., 793 N.W.2d 437, 441

(Minn. App. 2010). Stated differently, a party cannot assert a breach by its counter-party until

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completing all conditions precedent to its right to demand performance from the counter-party.

Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 833 (Minn. 2011). Thus, when the Contractor

ceased work before completion, it forfeited any contractual right to payment from Defendant.

None of this is to say that the Contractor was necessarily without recourse to demand

payment in some form. If Defendant had requested a change in the nature of the project that

increased the price of the work, then the Contractor was entitled to rescind the contract and to

receive compensation based on equitable principles. See, e.g., O'Brien & Gere Tech. Servs., Inc.

v. Fru-Con/Fluor Daniel Joint Venture, 380 F.3d 447, 454 (8th Cir. 2004); Trinity Prod., Inc. v.

Burgess Steel, L.L.C., 486 F.3d 325, 335 (8th Cir. 2007); see also 1A Bruner & O'Connor

Construction Law § 4:49. Likewise, if extra work was performed under circumstances that

implied an obligation to pay, then compensation for that extra work could also be based on

equitable principles. Elliott v. Caldwell, 45 N.W. 845, 847 (Minn. 1890). Similarly, if the

Contractor had substantially performed, or if it possessed a sufficient excuse for ceasing its work

entirely, then it would have been entitled to receive compensation for its part performance based

on equitable principles. See Dunkley Surfacing Co. v. George Madsen Const. Co., 173 N.W.2d

420, 422 (Minn. 1970); but see Ylijarvi v. Brockphaler, 7 N.W.2d 314, 320 (Minn. 1942).

But none of these remedies come from contractual obligations. Instead, these remedies

are implied by law because there are grounds for an award of equitable restitution based on the

application of quantum meruit. Indeed, such remedies often presuppose that the contract has

been rescinded. In other words, these remedies do not arise from the actual promises that

Defendant and the Contractor made to each other, so the fact that these remedies might be viable

does not mean that Defendant broke an actual promise. Moreover, none of these remedies come

with a specific pre-determined dollar value. That value must be determined in litigation, either

22
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through the judicial process or by a mutual settlement agreement. Defendant was under no fixed

obligation to make equitable restitution to the Contractor prior to the entry of a judgment. And it

is virtually unheard of for a party to make payments toward such restitution, while actual or

potential litigation is still pending, without a settlement as to the final amount of the obligation.

In short, Defendant did not breach any legal promise he had made — fraudulently or not — by

failing to pay the Contractor for its work once the Contractor failed to complete the project.

The State argues that Defendant did breach the contract because he agreed to pay the

Contractor whatever the value of his home was according to an appraisal to be conducted near

the completion of construction. Accordingly, it argues that Defendant owed the Contractor

$400,000, and that Defendant’s failure to comply with the Contractor’s demands for amounts far

less than this figure therefore constituted a breach. Even if the premise of this argument were

true, this argument does not actually overcome all of the problems discussed above, and so it

would not establish that Defendant was contractually liable. But the larger problem with this

argument is that it lacks any factual support in the record. The parties’ written contract does not

say that the contract price will be determined by means of an appraisal, it gives a specific dollar

figure. The State points to nothing specific in the record which contradicts the written contract.

Moreover, even if the State had such evidence, it would be legally insufficient. That is

because a claim of fraud in the inducement cannot be based on a promise that is directly contrary

to the terms of the contract so-induced. Northrop v. Piper, 271 N.W. 487, 489 (Minn. 1937)

(“[T]here is no fraud in a promissory representation which is plainly contradicted by the

undertaking or the stipulations of a binding written contract.”); Crosby v. Crescent Oil Co. of

Minnesota, 255 N.W. 853, 857 (Minn. 1934) (“Proof of promissory fraud, inducing a written

contract, cannot be made by representations contradictory of the terms of the integration.”). To

23
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hold otherwise would be to completely negate the purpose of written contracts. As such, nothing

in the State’s argument changes the Court’s conclusion that the State is unable to establish a

prima facie case that Defendant committed an unexcused breach of contract.

In sum, Defendant induced the Contractor to supply materials and perform labor by

entering into a contract. The promise Defendant made in doing so was a promise to perform

according to the terms of the contract and the rules of contract law. Defendant was excused from

that duty by the Contractor’s breach, leaving the Contractor with only a potential claim in equity.

Because Defendant had no remaining contractual duty, there is no evidence that he breached his

promise. This lack of evidence undermines the State’s claim that he made the promise without

intending to perform. But it also severs the causal connection between the alleged fraud and any

loss suffered by the Contractor. For the same reason that the Contractor would not have a claim

for breach of contract, the Contractor would not have a claim for promissory fraud in the

inducement. And for the same reason that the Contractor would not have a civil claim for

promissory fraud, the State lacks a basis to bring a charge of theft by false representation.

c. The State Does Not Have Substantial Evidence of Fraudulent Intent

Independently, the State faces a second obstacle to showing theft by false representation.

Even if the charge were not barred as a matter of law, the State’s evidence fails as a matter of

fact. “Promissory fraud … is easy to allege and difficult to prove or disprove.” 26 Williston on

Contracts § 69:11. To sustain the charge, the State must be able to present “substantial evidence”

that will “corroborate[]” the allegation that Defendant made “a promise … with intent not to

perform.” Minn. Stat. § 609.52, subd. 2(a)(3)(ii). As previously explained, evidence is not

substantial if, when taken as true and viewed in the light most favorable to the State, it would not

24
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have probative value sufficient to allow reasonable persons to find guilt beyond a reasonable

doubt. Intent is a mental state that generally must be shown by circumstantial evidence. State v.

Cooper, 561 N.W.2d 175, 179 (Minn. 1997) (“intent” is “generally proved circumstantially”).

Where the evidence upon which the State relies is circumstantial, then that evidence must be

more than merely consistent with guilt; it must be able to exclude all rational hypotheses

consistent with innocence. State v. Silvernail, 831 N.W.2d 594, 599 (Minn. 2013); State v. Webb,

440 N.W.2d 426, 430 (Minn. 1989). In determining whether sufficient corroboration exists, the

Court does not weigh evidence or judge credibility. It asks only whether the State’s evidence

could be credited, and whether the exclusive inferences that the State seeks to draw from that

evidence are reasonable. Even under this deferential standard the State’s evidence still fails.

The State first argues that a factfinder could infer that Defendant made a promise without

intending to keep it because he has never paid the Contractor. This argument is insufficient

because failure to pay is merely consistent with guilt, and it is also rationally consistent with

innocence. This is because an intention to dishonor a promise can easily arise based on events

that occur after the promise is made. Indeed, in this case, there were several changes in

circumstances between the time Defendant entered the contract and the time when he was called

upon to pay. The Contractor increased the price demanded between these two times. Defendant

went through the process of actually attempting to obtain financing between these two times.

And Defendant was able to observe the actual condition of the project between these two times.

Even assuming that Defendant broke an enforceable promise, these changed circumstances

support the inference he “later decided not to follow through on his promise,” which would “not

be enough to support a verdict for fraud and misrepresentation.” Benson, 384 N.W.2d at 195.

25
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Second, the State argues that a factfinder could infer that Defendant made a fraudulent

promise because he later tried to renegotiate in bad faith. But this argument merely adds another

layer of unsupported conclusions. The fact that Defendant engaged in unsuccessful negotiations

does not mean that he negotiated in bad faith. The State argues that Defendant negotiated in bad

faith because he had agreed to pay the Contractor the appraised value of the home — $400,000

— but then refused to accept an offer to settle the matter for $330,000, which is less than this.

Again, the main problem with this argument is that it is factually flawed. Defendant did not agree

to pay an appraised value. He agreed to pay $297,000, and “evidence outside a written document

is not to be used to vary or contradict the plain terms of the document.” Hield v. Thyberg, 347

N.W.2d 503, 507 (Minn. 1984). This amount was less than the Contractor’s offer to settle the

matter, so rejection of the offer is not evidence of bad faith.

The State also argues that Defendant negotiated in bad faith because he offered to pay the

Contractor less than the $325,000 value that he later assigned to the home in his bankruptcy

filings. But that value reflected not just the value of the work the Contractor had performed, but

also the value of the underlying land, as well as the work Defendant did to complete the project.

It is only natural that there was a gap between Defendant’s assessment of the total value of the

property and what Defendant was willing to pay. In short, the State’s argument that Defendant

negotiated in bad faith begs the question. It asserts that Defendant made a fraudulent promise on

the basis that he later engaged in bad-faith negotiations. But those negotiations only appear to

have been in bad faith if one first entertains the assumption that Defendant was engaged in fraud

all along. Defendant’s former attorney testified that Defendant did negotiate in good faith.

Nothing in the record puts that assertion into contention.

26
State v. Stoll
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Third, the State argues that a factfinder could infer that Defendant made a fraudulent

promise because he never obtained a loan, which would have been necessary for him to pay the

Contractor. In other words, the State argues that Defendant could never pay the Contractor, so a

factfinder could infer that he never intended to pay. This argument does not follow from the

record. There is no dispute that all parties understood that Defendant would have to obtain

financing and that the novel design of the home would complicate this effort. The fact that the

Contractor ceased construction, and the fact that construction defects were identified in the

structure, further complicated this issue. Moreover, the State concedes that Defendant did obtain

a commitment for a bank loan during the time when the Contractor’s mechanic’s lien was still

active. In other words, Defendant did have the ability to pay the Contractor.

The State faults Defendant for failing to accept that financing offer, arguing that

Defendant lacked an ability to pay the Contractor without accepting that offer. But Defendant’s

former attorney explained the obvious flaw with that argument. As long as litigation was still

pending, a bank would not have finalized the loan. Defendant first needed to reach a settlement

with the Contractor before accepting financing. Without this, payment to the Contractor would

not have released the Contractor’s mechanic’s lien. And that lien would have taken priority over

the new mortgage. That would have posed a risk to the bank that would materially affect

financing. In short, it would not have made sense, legally or financially, to borrow money to pay

the Contractor without a final agreement. The fact that Defendant declined to engage in a course

of action that no reasonable attorney and no reasonable banker would have advised is not

evidence of fraudulent intent.

Finally, the State argues that a factfinder could infer that Defendant made a fraudulent

promise because he later filed for bankruptcy protections. It argues either (1) that bankruptcy

27
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was not necessary, and so was simply a part of the plan for defrauding the Contractor, or, in the

alternative, (2) that bankruptcy was necessary, indicating that Defendant never had the ability to

pay the Contractor. Both arguments are contradicted by the undisputed record.

First, the fact that Defendant ultimately filed bankruptcy is not evidence of a fraudulent

scheme. Bankruptcy was only a viable option for Defendant to discharge the Contractor’s claims

against him because the Contractor failed to enforce its mechanic’s lien. Without that unexpected

event, a bankruptcy filing should have resulted in the Contractor foreclosing on Defendant’s

home. Defendant is a former banker who surely would have understood this. And nothing in the

record suggests that Defendant could or would have anticipated that the Contractor would fail to

preserve its mechanic’s lien. Even without exonerating evidence, it is highly implausible that

Defendant schemed to hire the Contractor to build him a home with the plan of discharging the

building costs in bankruptcy while maintaining ownership of the home. Moreover, the record

does contain exonerating evidence. Defendant’s former attorney testified that he was the one

who suggested bankruptcy, and that Defendant initially resisted taking that course.

Second, the fact that Defendant ultimately filed bankruptcy is not evidence of

Defendant’s financial condition years earlier when he contracted with the Contractor. During the

time in between, he incurred substantial legal fees as a result of this dispute, and he faced the

prospect of mounting fees for little in the way of return. This represented a substantial change,

both in terms of Defendant’s finances, and in terms of his legal options. One of the purposes of

the bankruptcy code is to protect debtors against excessive claims and excessive costs of

litigation. Another purpose is to prevent assets available for the payment of creditors from being

dissipated by excessive litigation costs. The fact that Defendant took advantage of the code when

faced with major litigation says little about what he would have done had there been no dispute.

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In short, none of the evidence the State cites provides substantial corroboration for the

allegation that Defendant made any promise with intent not to perform. The circumstances do

not yield a complete chain of inferences leading directly to guilt, nor do they reasonably exclude

innocence. At best, this evidence is merely consistent with a metaphysical possibility of guilt,

while also raising inferences in support of innocence that are equally, if not more, reasonable.

Moreover, the record also contains undisputed evidence in support of the conclusion that

Defendant did want to do right by the Contractor. For instance, a person in Defendant’s position

could have filed a lawsuit against the Contractor, in good faith, seeking to declare that the

Contractor was entitled to no compensation whatsoever, in light of its breach. See, e.g., Ylijarvi,

7 N.W.2d at 320 (“[I]n a case of a building on land under a contract which the builder fails to

complete … so that the owner cannot be charged with the contract price, the mere fact of the

building remaining on the land, and that the owner resumed possession and enjoys the fruits of

the labor, is not such an acceptance as alone will imply a promise to pay for it [such that the

builder may have no rights in quantum meruit].”). This is not what he did. Instead, he sought the

entry of a money judgment against himself. Given the existence of such exonerating evidence,

and given the implausibility of the inferences that the State seeks to have a factfinder draw in

support of guilt, the record does not establish that the prosecutor possesses substantial evidence

to corroborate that Defendant made a promise he did not intend to keep at the time he made it.

As such, the State’s contention that Defendant committed theft by promissory fraud must fail.

III. Statute of Limitations

In his reply memorandum, Defendant briefly mentions an additional challenge. He asserts

that, even if the State’s allegations were creditable, all of the conduct which induced the

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Contractor to contract with him, and subsequently to perform that contract, took place in 2015,

such that the five-year statute of limitations applicable to the offense would have fully run its

course prior to the filing of the State’s Complaint in 2021. See Minn. Stat. § 628.26(g). While

this argument has considerable merit, it also raises novel questions about when the statute of

limitations for theft by fraudulent representation begins to run. Because those questions have not

been fully briefed, and because resolution of those questions is unnecessary in light of the

Court’s other holdings, the Court declines to separately consider the merits of Defendant’s

statute-of-limitations argument.

Conclusion

In conclusion, the Court will summarize its holdings. The State has charged Defendant

with theft by swindle, occurring over a lengthy period of time, because Defendant received

materials and services from the Contractor, but has not paid the Contractor. Defendant has

pointed out that many of his actions over this period, such as the act of asserting his rights under

the law of contracts and the act of filing for bankruptcy protection — were legally privileged.

And he has noted that they occurred after any alleged theft was fully complete, such that they

could not have been the cause of the supposed theft. In response, the State has argued that

Defendant committed theft by falsely promising to pay the Contractor.

The Court holds that a false promise to perform a contract can constitute theft by false

representation, but that, standing alone, it cannot constitute theft by swindle. Since a false

promise to perform is all that the State alleges, the current charge must be dismissed. The Court

further holds that an unfulfilled contractual promise cannot constitute theft at all if the promisor

did not commit an unexcused breach of contract. This holding would require dismissal, even if

30
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the State had brought the proper charge, because the State has not shown that it has evidence of

an unexcused breach to present to a jury. In the alternative, the Court further holds that a false

promise cannot be prosecuted without substantial evidence that the promise was false at the time

it was made. This also requires dismissal because, based on the State’s evidence, no reasonable

jury could conclude beyond a reasonable doubt that Defendant intended not to perform the

contract at the time he entered into that contract. Even taking the evidence in the light most

favorable to the State, the circumstances that could be proved would support the inference that

Defendant’s lack of payment was due to events that occurred after the time of contracting.

None of this is to deny that Defendant has reaped a windfall. And none of this is to deny

that the Contractor is worthy of sympathy. It is difficult not to wish that someone could go back

in time to tell the Contractor: first, that a project with financing as complicated as the financing

on this project deserved a more detailed contract, especially with regard to progress payments,

second, that the best practice is to memorialize changes to a project with a change order

containing price terms, and third, that stopping work short of finishing the project was likely

both to hurt its legal claims and to further complicate efforts at obtaining financing. It is also

difficult not to wonder, first, why the Contractor’s attorney did not act to preserve the

Contractor’s mechanic’s lien, and second, whether the Contractor’s attorney appropriately

advised the Contractor what its best chances for recovery were once that mechanic’s lien had

been lost. Notwithstanding the reasons why the law is as it is, it cannot be denied that the

combination of all these failures has imposed a particularly harsh result on the Contractor.

But the power of the State to issue criminal charges is not a substitute for a time machine.

The criminal process imposes even greater constraints than the civil law, precisely because not

every civil wrong amounts to a white-collar crime. Based on the evidence, as it has been

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presented in these proceedings, any charge of theft that could be brought against Defendant

would fail for lack of proper evidence. It is neither fair nor reasonable to send a case to a jury

when no viable conviction could possibly result from trial.

Motion to Dismiss Granted.

32