30 Broad, LLC v. Charles Lawrence


(12 Misc.3d 1179(A), Supreme Court of the State of New York, New York County, July 10, 2006)

Personal guaranty by defendant of lease does not bind him, as he signed the lease on behalf of his company only, and not on his personal behalf. Reformation based on unilateral mistake requires a showing that the parties have reached agreement and, unknown to one party but known to the other (who has misled the first), the subsequent writing does not properly express that agreement. Unilateral mistake involves fraud. The only fraud alleged here is that defendant did not inform plaintiff that the lease, which plaintiff prepared, did not have a place for a guarantor’s signature. Defendant’s conduct, as alleged here, was not fraudulent. The fraudulent inducement cause of action appears to be based on alternative theories: that defendant made a guaranty or that he did not make a guaranty. Plaintiff alleges that defendant induced plaintiff into leasing the premises to tenant by falsely promising to guaranty the lease. Defendant then made the guaranty, but did not perform it. To state a claim of being fraudulently induced to enter a contract, a plaintiff must allege that the misrepresentation was one of then-present fact, which was extraneous to the contract and involved a duty separate from or in addition to that imposed by the contract. An allegation that defendant lied about his or her intention to perform the contract does not state a cause of action for fraud. It states a cause of action for breach of contract. Plaintiff’s pleadings run afoul of all of these principles. Plaintiff alleges no more than that defendant did not intend to perform the guaranty when he made it. Nor does plaintiff state a fraud claim to the extent that it is alleging that defendant did not enter into a guaranty, but that defendant used the promise of entering into a guaranty to induce plaintiff to enter into the lease. An action for fraud will lie if the promisor did not intend to keep his promise when he made it. However, a party may not establish fraudulent intent solely from the non-performance of the future event. The defrauded party must allege specific facts showing that the promisor intended not to honor his obligations at the time the promise was made. The complaint is totally devoid of any such allegations. Neither does equitable or promissory estoppel preclude defendant from invoking the statute of frauds because Defendant’s assertion that he would guaranty the lease is not a false representation of a fact, and the alleged injury, the loss of rent, is not unconscionable. Also, contrary to plaintiff’s argument, the doctrine of part performance does not apply. An agreement that would otherwise be unenforceable, because of the statute of frauds, may become enforceable if the party seeking enforcement has performed part of the agreement. For part performance to bar the defense of the statute of frauds, plaintiff’s actions must be “unequivocally referable” to the agreement alleged. It is not enough that the oral agreement gives significance to plaintiff’s actions. Rather, the actions alone must be unintelligible or at least extraordinary, explainable only with reference to the alleged agreement. Plaintiff’s lease of the space to tenant is not unequivocally referable to the promised guaranty. Defendant is not estopped from raising the statute of frauds.  Link to Full Text of Decision