Lam alleges that on March 12, 2004, he entered into an Agreement with the Defendants to purchase five ATM cash dispenser machines for the total purchase price of $40,000. Thereafter, on October 22, 2004, Lam entered into another agreement with the Defendants to purchase an additional eight ATM cash dispenser machines for the total price of $64,000.

Lam made full payment of the total price of $104,000 to Defendants pursuant to the agreement and addendum executed subsequently. The agreement provides that Lam would be the owner of the thirteen ATM cash dispenser machines and would receive 80 cents of each fee collected for each transaction on the thirteen machines.

Despite Lam having fully performed the agreement, Defendants breached the Agreement by failing to transfer ownership of the thirteen ATM cash dispenser machines to Lam.

Lam claims, in his second and third causes of action, that Defendants committed fraud because they did not intend to perform the agreement. Lam asserts that absent Defendants' fraud and misrepresentations he would not have executed the agreement and addendum, or made the full payment of $104,000. Thus, Lam seeks to recover damages caused by the breach of the agreement in sum of $104,000 as well as punitive damages in the sum of $150,000.

This action was commenced by filing on May 17, 2007. The notice of summons and complaint were served pursuant to CPLR 308(2) with regard to Perez.^[FN1] A further notice pursuant to CPLR 3125 (g) was served on Perez on July 6, 2007.

DISCUSSION

Pursuant to CPLR 3215(a), a party may obtain a default judgment against a defendant who defaults in appearing and answering. On application for a default judgment, a party must furnish proof of service of summons and complaint; proof of the claim by a person with knowledge, including the amount due; and proof of the default. See, Woodson v. Mendon Leasing Corp., 100 NY2d 62, 70 (2003). See also, Seigel, New York Practice 4th §295; and 7 Weinstein-Korn-Miller, NY Civ Prac ¶ 3215.24, at 32-326. The party seeking a default judgment must establish the existence of a prima facie cause of action against the defaulting party. Joosten v. Gale, 129 AD2d 531 (1st Dept. 1987).

When a defendant has failed to appear, the plaintiff does not have the benefit of [*2]discovery. Thus, "the affidavit (of merit) or verified complaint need only allege enough facts to enable a court to determine that a viable cause of action exists." Woodson v. Mendon Leasing Corp., supra at 70. Moreover, "defaulters are deemed to have admitted all factual allegations contained in the complaint and all reasonable inference that flow from them." Id. See also, Rokina Optical Co. v. Camera King, 63 NY2d 728, 730 (1984).

Plaintiff has established this Court's jurisdiction over Perez but not ATMS. The affidavit of services establishes service upon Perez pursuant to CPLR 308(2). Moreover, Plaintiff's motion for default judgment is supported by an affidavit made by LAM, a person who has first hand knowledge of the facts constituting the cause of action. See, Zelnick v. Biderman Industries U.S.A., Inc., 242 AD2d 227 (1 st Dept. 1987); and Adkins v. Lipner, Gordon & Co., 10 Misc 3d 1062(A) (Sup. Co. Nassau. Co. 2005).

No merit as to a claim against ATMS can be established since the agreement between the parties never recites a true corporate identity. Perez executed the agreement as "director". Such designation does not insulate Perez for personal liability. Although a person who signs an agreement on behalf of a corporation that has neither de jure or de facto existence is personally liable for those obligations, (Brandes Meat Corp. v. Cromer, 146 AD2d 666 [2nd Dept. 1989]), a corporation that does not exist cannot enter into a contract. See, Kiamesha Development Corp. v. Guild properties, Inc., 4 NY2d 378 (1958); and 183 Holding Corp. v. 183 Lorraine Street Assocs., 251 AD2d 386 (2nd Dept. 1998). A corporation's existence begins when its certificate of incorporation is filed by the Department of State. Business Corporation Law §403. This Court was unable to find that ATMS has filed a certificate of incorporation with the New York Department of State. Thus, Perez will be held liable individually for breach of the agreement.

Pursuant to CPLR 3016(b), where a cause of action is based on misrepresentation or fraud, the detail factual circumstances constituting the wrong are required to be set forth in the pleading. Foley v. D'Agostino, 21 AD2d 60, 248 NYS2d 121 (1st Dept. 1964). Despite Perez' default, Lam's motion for default judgment with respect to his claim for fraud must be denied because it is not supported by the detailed factual circumstances constituting the wrong that are required to be set forth in a verified pleading or an affidavit. Foley v. D'Agostino, 21 AD2d 60, 248 NYS2d 121 (1st Dept. 1964).

Moreover, where the alleged fraud is based upon a statement of future intention, the plaintiff must plead specific facts sufficient to establish that the promisor never intended to act upon the promise when the promise was made. Pope v. New York Property Ins. Underwriters Assoc., 112 AD2d 983 (1st Dept.), aff'd., 66 NY2d 857 (1985); and Fink v. Citizens Mortgage Banking Ltd., 148 AD2d 578 (2nd Dept. 1989). The court may not infer that the statement was false when made simply because the contract was not performed. Abelman v. Shoratlantic Development Co, Inc., 153 AD2d 821 (2nd Dept. 1989). Put another way, a cause of action for fraud cannot be based [*3]upon a breach of contract unless the plaintiff pleads sufficient facts to establish that defendant did not intend to fulfill its contractual obligations when it entered into the contract. Affiliated Credit Adjustors, Inc. v. Carlucci & Legum, 139 AD2d 611 (2nd Dept. 1988).

A cause of action for breach of contract cannot be converted into an action for fraud by alleging that defendant did not intend to perform the contract. Bamira v. Greenberg, 256 AD2d 237 (1st Dept. 1998); and Bencivenga & Co. v. Phyfe, 210 AD2d 22 (1st Dept. 1994).

While Perez failed to perform under the agreement by failing to deliver the thirteen ATM cash dispenser machines, Lam has neither alleged nor placed before this Court any facts from which the Court could find or infer that Perez did not intend to transfer the ownership of the ATM cash dispenser machines. Lam wants this Court to infer that Perez's statements were fraudulent simply because it did not perform the contract. The Court cannot draw such an inference. Abelman v. Shoratlantic Development Co. Inc., supra . Thus, the Plaintiff's claim for fraud must be dismissed. Consequently, the Plaintiff cannot recover the punitive damages because the cause of action for fraud has been dismissed. Arent, Fox, Kinter Plotkin & Kahn PLLC v. Lurzer GmbH, 297 AD2d 590 (1st Dept. 2002).

The agreement provides for an award of counsel fees in the event of a breach of the agreement. Such provisions are valid and will be enforced. Id.

Legal fees are awarded on a quantum merit basis and cannot be determined summarily. See, Simoni v. Time-Line, Ltd., 272 AD2d 537 (2nd Dept. 2000); and Borg v. Belair Ridged Developments Corp., 270 AD2d 377 (2nd Dept. 2000). Therefore, the matter must be referred to a Special Referee to hear and determine the reasonable attorney's fees for Plaintiff's attorney in regard to this matter.

Accordingly, it is,

ORDERED, that Plaintiff's motion for a leave to enter a default judgment against the Defendant Richard Perez is granted; and it is further,

ORDERED, that Plaintiff's motion for leave to enter a default judgment against Defendant ATM Services Inc. is denied and, on the Court's own motion, the action against Defendant ATM Service, Inc. is hereby dismissed; and it is further,

ORDERED, that this action is respectfully referred to Special Referee Frank Schellace on May 28, 2008 at 9:30 a.m to hear and determine all issues relating to reasonable counsel fees; and it is further, [*4]

ORDERED, that counsel for the Plaintiff shall serve upon counsel for Defendants, and file with the Clerk of this Court, a copy of this Order with Notice of Entry, a Note of Issue and pay all appropriate fees on or before May 14, 2008; and it is further,

ORDERED, that Plaintiff is hereby granted leave to enter a clerk's judgment in his favor and against Defendant Rick Perez in the sum of $104,000 together with interest from March 12, 2004 and costs and disbursements as taxed by the Clerk and the counsel fee awarded by the Special Referee.

This constitutes the decision and Order of the Court.

Dated: Mineola, NY_____________________________

April 29, 2008Hon. Leonard B. Austin, J.S.C.