Durland v. United States

Supreme Court of United States
161 U.S. 306 (1896)

ELI5:

Rule of Law:

The federal mail fraud statute's prohibition on 'any scheme or artifice to defraud' is not limited to misrepresentations of past or existing facts, but also encompasses fraudulent schemes based on promises regarding future performance when the promisor has no intention of fulfilling them.

Facts:

Durland was the president of the Provident Bond and Investment Company.
The company issued bonds to the public which promised future payments to investors based on certain conditions being met.
Durland solicited money from the public for these bonds, representing them as a legitimate investment opportunity.
The business was presented without any misrepresentation as to the company's actual existence or solvency.
The government alleged that Durland's operation was a scheme to defraud, and that he never intended for the bonds to mature or to return any money to investors.
Durland allegedly intended from the outset to appropriate the investors' money for his own personal use.
To execute this scheme, Durland caused numerous letters and circulars to be deposited in the United States post office.

Procedural Posture:

Durland was charged under two separate indictments in a federal trial court for violating the mail fraud statute.
A jury found Durland guilty on both indictments.
Durland challenged the conviction, arguing that the indictment was fatally defective because it alleged fraud based on future promises rather than on a misrepresentation of an existing fact.
The case was brought before the United States Supreme Court for review of the conviction.

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Issue:

Does the federal mail fraud statute's prohibition on 'any scheme or artifice to defraud' apply only to misrepresentations of past or existing facts, or does it also encompass fraudulent schemes based on promises concerning the future?

Opinions:

Majority - Mr. Justice Brewer

No. The federal mail fraud statute is not limited to misrepresentations of past or existing facts but also includes fraudulent schemes based on promises about the future. The plain language of the statute, 'any scheme or artifice to defraud,' is intentionally broad. The evil the statute seeks to remedy is the allurement of schemes promising large returns on small investments, which often rely on 'suggestions and promises as to the future.' The critical element is the defendant's fraudulent intent and purpose at the inception of the scheme, not whether the misrepresentation was of a past, present, or future fact. To limit the statute to common law 'false pretences' requiring a misrepresentation of an existing fact would 'strip it of value' and undermine its purpose of protecting the public from intentional efforts to despoil them through the use of the mail.

Analysis:

This decision significantly broadened the scope of the federal mail fraud statute, detaching it from the stricter common-law definition of fraud which required a misrepresentation of a past or existing fact. By focusing on the defendant's fraudulent intent, even when a scheme is based on future promises, the Court made the statute a more powerful and flexible tool for federal prosecutors. This interpretation established that a promise made with a present intent not to perform can be the basis for a mail fraud conviction, a foundational principle that continues to define mail and wire fraud jurisprudence today.

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