Court Opinion

ID: 5940329
Source: CourtListenerOpinion
Date Created: 2022-01-13 05:43:11.03936+00
Date Added: 2024-06-11T08:47:11.331282
License: Public Domain

Kunzeman, J.,
concurs in part and dissents in part, and *235votes to affirm the order appealed from, with the following memorandum: While I concur with the majority to the extent of denying the plaintiff leave to amend the second cause of action of the complaint, I disagree with their conclusion that the defendant is entitled to summary judgment dismissing the complaint in its entirety.
The essence of the plaintiff’s first cause of action is that the defendant’s President and Chief Executive Officer defrauded him over a period of time, commencing in September 1986 and ending June 29, 1987, by promising to sell to the plaintiff a substantial stock interest in the defendant corporation and to employ the plaintiff within that corporation, thereby extracting valuable business information from him. On or about June 16, 1987, the defendant represented to the plaintiff that he should put off his plans for purchasing an interest in the defendant corporation in an effort to get started as soon as possible and to concentrate on working for the defendant as an employee. The defendant’s agent allegedly confirmed at that time that the plaintiff would become Chief Executive Officer of the defendant corporation at a Salary of $12,000 per month for a two-year period, along with a bonus equal to 50% of a "positive swing in the defendant’s anticipated monetary losses for the years 1987 and 1988”.
The plaintiff alleges that the aforesaid statements and representations were known by the defendant and its agent to be false at the time they were made, and the defendant never intended to convey any interest in the corporation or to employ the plaintiff. Rather, the subject statements were made "for the purpose and with the intent of deceiving and defrauding the plaintiff and to induce the plaintiff, in reliance thereon, to prepared [sic] and to give to defendant a detailed business plan for three years which, among other things, included details on the possible franchising of defendant’s stores, how to run the stores, the wholesale division, major accounts, manufacturing and distribution”. The plaintiff relied upon the defendant’s representations to his detriment and was induced to expend a substantial amount of his own time and money in formulating a business plan for the defendant, including extensive traveling, attending meetings and obtaining expert tax and legal advice.
Contrary to the defendant’s contention on appeal, the plaintiff’s pleadings sufficiently establish a triable issue of fact with regard to his first cause of action sounding in fraud (see, Zuckerman v City of New York, 49 NY2d 557, 562). It is well settled that no cause of action lies to recover damages for *236fraud when the only fraud relates to a breach of contract (see, Mastropieri v Solmar Constr. Co., 159 AD2d 698, 700; Roldan v Allstate Ins. Co., 149 AD2d 20, 39; Edwil Indus. v Stroba Instruments Corp., 131 AD2d 425; Spellman v Columbia Manicure Mfg. Co., 111 AD2d 320; Gould v Community Health Plan, 99 AD2d 479). In the instant action, however, the plaintiff has set forth a prima facie case of fraud by alleging a representation of a material existing fact, which was false and known to be false by the defendant, which representation was made for the purpose of inducing the plaintiff to rely upon it, and which was rightfully relied upon by the plaintiff, who was ignorant of its falsity, to the plaintiff’s detriment (see, Reno v Bull, 226 NY 546, 550; Brown v Lockwood, 76 AD2d 721, 730). The plaintiff did not allege that the defendant’s failure to perform the purported contract constituted fraud. He claims, rather, that the defendant fraudulently misrepresented that it would sell a substantial stock interest in the corporation to him and that it would employ him with the intent of inducing him to give the defendant valuable business information.
The record reveals that the plaintiff has alleged sufficient facts to rebut the defendant’s assertion that a letter from the plaintiff dated April 15, 1987, which confirms the substance of the parties’ negotiations, established that the defendant did not make any misrepresentations to the plaintiff. The plaintiff alleged that, subsequent to the April 15, 1987, letter, he had spoken with defendant’s representative confirming the terms of employment. He was, thereafter, asked to attend a Board meeting on June 28, 1987, during which he presented several proposals for franchising in response to the defendant’s request for a precise business plan for 1987, 1988 and 1989. The defendant’s alleged conduct subsequent to April 15, 1987, would give rise to a reasonable belief on the plaintiff’s part that he would be appointed. These allegations of conduct which led the plaintiff to believe that he would be employed, along with the uncontroverted evidence on the record that the defendant was suffering severe financial losses due to its direct ownership and management of retail stores which were doing poorly, that the plaintiff, an expert in franchising, provided detailed business information to it, and the abrupt termination of the negotiations after the plaintiff provided a detailed plan, were sufficient to create a triable issue of fact with respect to whether there was a misrepresentation by the defendant in order to induce the plaintiff to provide further information. This scenario was sufficiently distinct from the breach of contract cause of action.
*237Thus, there exist issues of fact with respect to whether the plaintiff was defrauded or was merely providing information that is normally given during the course of negotiations between parties to a contract, and whether his reliance on the defendant’s misrepresentations was justifiable. Under the circumstances, summary judgment was not warranted with respect to the plaintiff’s first cause of action.
Throughout the pleadings, the plaintiff consistently alleged that the purported term of employment was for a period of two years. Accordingly, the court properly exercised its discretion in denying the plaintiff leave to amend its second cause of action to assert a term of employment which the plaintiff urges would not come within the Statute of Frauds.
I have considered the parties’ remaining contentions and find them to be without merit.