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Complaint Stated Causes of Action for Breach of Contract and Fraud—Plaintiff Agreed to Forgo Compensation for Work Done for Defendant in Return for a Stake in Defendant’s Business—Defendant Terminated the Relationship Without Paying Plaintiff

The Second Department determined plaintiff had stated causes of action for breach of contract and fraud.  The complaint alleged plaintiff had agreed to forego compensation for his construction and managerial work for defendant in return for a stake in defendant’s business.  The complaint further alleged defendant, after plaintiff had done the work, terminated the relationship without paying plaintiff:

The essential elements for pleading a cause of action to recover damages for breach of contract are the existence of a contract, the plaintiff’s performance pursuant to the contract, the defendant’s breach of his or her contractual obligations, and damages resulting from the breach … . According the plaintiff the benefit of every possible favorable inference, the complaint alleged that the defendants breached the parties’ agreement and that, as a result, the plaintiff was entitled to recover its normal fees and compensation for the subject work. …

“The elements of a cause of action sounding in fraud are a material misrepresentation of an existing fact, made with knowledge of the falsity, an intent to induce reliance thereon, justifiable reliance upon the misrepresentation, and damages” … . Where the gravamen of the alleged fraud does not arise from the mere failure of a promisor to perform his or her obligations under a contract, but arises from a promisor’s successful attempts to induce a promisee to enter into a contractual relationship despite the fact that the promisor harbored an undisclosed intention not to perform under the contract, a proper cause of action sounding in fraud may be stated. “[A]; false statement, promissory in nature, may be deemed the statement of a material existing fact, because it falsely represents the [declarant’s]; state of mind and the state of his [or her]; mind is a fact'” … . “There is no doubt that a misrepresented intention to perform a contract may constitute actionable fraud” … , and “a statement of present intention is deemed a statement of a material existing fact, sufficient to support a fraud action” … .

Here, viewing the complaint in the light most favorable to the plaintiff, the third cause of action alleged that the defendants made a promise to give the plaintiff an equity stake in the maple syrup venture if the plaintiff agreed to forego its normal fees and compensation for the subject work, that the defendants made that promise while harboring an undisclosed intention never to give the plaintiff such an equity stake, and that the plaintiff detrimentally relied on the defendants’ representation of intent by performing the subject work for them. These allegations were sufficient to state a cause of action sounding in fraud. Neckles Bldrs Inc v Turner, 2014 NY Slip Op 03668, 2nd Dept 5-21-14

 

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