Opinion ID: 2180190
Heading Depth: 1
Heading Rank: 6

Heading: The Alleged Fraudulent or Material Misrepresentation

Text: There are two problems with the trial court's conclusions pertaining to the alleged fraudulent misrepresentation. First, appellee did not plead fraud, either as an affirmative defense to appellants' complaint, or in its counterclaim. We have said previously that fraud is never presumed, and must be alleged with particularity and proved by clear and convincing evidence. Hercules & Co. v. Shama Rest., 566 A.2d 31, 39 n. 16 (D.C.1989) (citing Bennett v. Kiggins, 377 A.2d 57, 59 (D.C.1977), cert. denied, 434 U.S. 1034, 98 S.Ct. 768, 54 L.Ed.2d 782 (1978)). Super. Ct. Civ. R. 8(c) requires that fraud be pled as an affirmative defense. [7] Moreover, to be fraudulent, a misrepresentation must not only be consciously false but must also be intended to mislead another. RESTATEMENT (SECOND) OF CONTRACTS (RESTATEMENT) § 162, Comment (a). [8] A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so. Id. § 162(2). We discern no factual finding that appellants consciously lied to Ms. Myers about the effective date of the asset sale, or intended to mislead her regarding the effective date. Nor is there any certainty on this record that the purchase of the assets of the Cafe Tango by appellants had been completed prior to November 24, 1998, the date of the Assignment of Lease. A misrepresentation is an assertion that is not in accord with the facts. RESTATEMENT, Introductory Note and § 159. Given this definition, we conclude that appellants made no fraudulent misrepresentation in the Assignment of Lease regarding their purchase of assets relating to the Cafe Tango. Indeed, and this is the second problem with the trial court's conclusion, the court's factual findings are ambiguous as to the effective date of the asset sale, or the date on which the purchase was completed. The trial court found that the Bill of Sale was executed and signed by Mr. Gebremedhin, Ms. Touelde and Mr. Samuel on August 14, 1998; that the assets had been purchased by November 24, 1998; and that in February 1999, the [s]ettlement [s]heet [was] signed by Mr. Gebremedhin, Ms. Touelde, and Mr. Samuel indicating all payments for the sale [had been] made to Mr. Gebremedhin. Consequently, appellants, as Mr. Samuel testified, and the court did not discredit, pinpointed February 1999 as the date on which closing on the asset sale was completed. Not only was no fraudulent misrepresentation affirmatively pled or set forth in the counterclaim, but even assuming that the trial court could conform the pleadings to the evidence produced at trial, as appellee argues, there was no proof of a fraudulent misrepresentation as defined by the RESTATEMENT. Nor was there proof of a material misrepresentation. The evidence shows that Ms. Myers, as General Partner of U Street insisted that Sarete purchase the assets of Cafe Tango to protect herself. She had not previously heard of Sarete and was nervous about Sarete's financial stability and whether it had the capital to operate Cafe Tango. In addition, she had had no experience with either Mr. Samuel or Ms. Touelde, and was not certain that they had the expertise or the experience to run the restaurant. The testimony of Ms. Myers reveals that section 6 of the Assignment of Lease, requiring Sarete to purchase the assets of Cafe Tango, was inserted at her instance to ensure that U Street would at least have a landlord's lien on the assets of Sarete in the event that Sarete or Mr. Samuel or Ms. Touelde defaulted on the lease. In that respect, it cannot be said that appellants made a misrepresentation designed to induce Ms. Myers to sign the Assignment of Lease. Simply put, there was no evidence of a material misrepresentation by appellants. Hence, appellants were entitled to judgment on Count I (breach of contract) of their complaint.