Aetna Life Ins. Co. v. Mcelvain

Aetna Life Insurance Company (Aetna) appeals the lower courts order in this case originally brought by Aetna to foreclose on its first mortgage on certain Montana farmland. The Fallon County District Court ruled that Aetna could foreclose but held that Aetna had defrauded respondents Shepherds, the second mortgagees. The court - Page 140 awarded Shepherds the first $149,821.19 (plus $40,000 for attorneys fees) from the foreclosure sale of the ranch. This appeal raises issues of whether a South Dakota district court judgment collaterally estops Shepherds from successfully relitigating the issue of Aetnas alleged fraud; whether Shepherds had actual or constructive notice of the fraudulent scheme, which precludes them from recovering for fraud; whether Western Farm Management Company (Western Farm), a loan broker, was the agent of Aetna and, if so, whether the fraudulent acts of Western Farm are imputable to Aetna. We conclude that Shepherds cannot successfully allege fraud on Aetnas part because the South Dakota judgment collaterally estops then from relitigating this issue and because Shepherds had imputed knowledge of the fraudulent scheme. Thus, we reverse the District Court and remand this case for the entry of judgment in Aetnas favor.