Fraud: Elements of a Cause of Action for Fraud

Illustration from "The Russian Story Book" by Richard Wilson, illustrated by Frank C. Papé, 1916, here illustrating a blog entry by Richard Klass about fraud.

In order to sustain an action for actual fraud the plaintiff must prove…

“In order to sustain an action for actual fraud the plaintiff must prove: (1) that the defendant made a representation, (2) as to a material fact, (3) which was false, (4) and known to be false by the defendant, (5) that the representation was made for the purpose of inducing the other party to rely upon it, (6) that the other party rightfully did so rely, (7) in ignorance of its falsity (8) to his injury (24 N.Y.Jur., Fraud and Deceit, s 14; 37 C.J.S. Fraud s 3).” Brown v. Lockwood, 76 AD2d 721, 730 [2d Dept 1980].

In order to recover damages for fraud…

“In order to recover damages for fraud, a plaintiff is required to prove, by clear and convincing evidence, a misrepresentation, which was false and known by the defendant to be false, made for the purpose of inducing the plaintiff to rely upon it, justifiable reliance and injury (see Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996]; Gizzi v. Hall, 300 A.D.2d 879, 880, 754 N.Y.S.2d 373 [2002]; McGovern v. Best Bldg. & Remodeling, 245 A.D.2d 925, 926, 666 N.Y.S.2d 854 [1997] ). As to the element of reliance, “[w]here a party has the means to discover the true nature of the transaction by the exercise of ordinary intelligence, and fails to make use of those means, he [or she] cannot claim justifiable reliance on [the] defendant’s misrepresentations” (Stuart Silver Assoc. v. Baco Dev. Corp., 245 A.D.2d 96, 98–99, 665 N.Y.S.2d 415 [1997]; see Cohen v. Colistra, 233 A.D.2d 542, 542–543, 649 N.Y.S.2d 540 [1996]; Pinney v. Beckwith, 202 A.D.2d 767, 768, 608 N.Y.S.2d 738 [1994] ).” Tanzman v. La Pietra, 8 AD3d 706, 707 [3d Dept 2004].

“A present expression of the intent to perform a future act is actionable as fraud only if “actually made with a preconceived and undisclosed intention of not performing it” (Sabo v. Delman, 3 N.Y.2d 155, 160, 164 N.Y.S.2d 714, 143 N.E.2d 906 [1957]; see Rudman v. Cowles Communications, 30 N.Y.2d 1, 9, 330 N.Y.S.2d 33, 280 N.E.2d 867 [1972]; Hewlett v. Staff, 235 A.D.2d 696, 697, 652 N.Y.S.2d 350 [1997] ). Absent a showing of a present intent to deceive, such a statement is insufficient to establish a cause of action for fraud (see Cornock v. Murnighan, 285 A.D.2d 874, 874, 727 N.Y.S.2d 803 [2001]). “Stated another way, ‘[t]he mere fact that the expected performance was not realized is insufficient to demonstrate that [the] defendant falsely stated its intentions’” (McGovern v. Best Bldg. & Remodeling, supra at 927, 666 N.Y.S.2d 854, quoting Laing Logging v. International Paper Co., 228 A.D.2d 843, 845, 644 N.Y.S.2d 91 [1996]).” Tanzman v. La Pietra, 8 AD3d 706, 708 [3d Dept 2004].

In order to prevail at a claim of fraud in the inducement, the claimant must allege a representation of a present fact rather than a future intent collateral thereto. Section 29:237. Fraud in inducement, 5 Carmody-Wait 2d Section 29:237

CPLR 3016(b) provides, in pertinent part, “Where a cause of action or defense is based upon misrepresentation, fraud, mistake, willful default, breach of trust or undue influence, the circumstances constituting the wrong shall be stated in detail.” Mere “conclusory” allegations of fraud will not satisfy CPLR 3016(b). The party pleading fraud must at least state all of the elements of the claim, even if specificity might not be attainable. Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 883 N.Y.S.2d 147 (2009).

R. A. Klass
Your Court Street Lawyer

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