Imposing Penal Sanctions for Breach of Home Improvement Contract, in the Absence of Fraud, Is Involuntary Servitude

also sought the interest they were required to pay on the back taxes. The two actions were combined for consideration by the Supreme Court, New York County. The lower court dismissed the claims of Alpert and Wolfman for back taxes but allowed recovery of the interest paid on the deficient taxes. Further, the court allowed the investors to amend their complaints to assert an additional claim of breach of fiduciary duty but denied them leave to amend their complaints to include an additional cause of action in fraud. On appeal, the court first rejected the damage claims of Alpert and Wolfman for back taxes. The court stated that the recovery of damages for fraud is limited to that which is necessary to restore a party to the position occupied before commission of the fraud. The court noted that the victim of fraud may not recover the benefit of an alternative agreement overlooked in favor of the fraudulent one. Therefore, the court denied Alpert and Wolf-son recovery of back taxes in this case because such recovery would place the investors in a far better position than had they never invested in Logan. Additionally, the court denied Alpert and Wolfman leave to amend their complaints to assert an additional cause of action in fraud against the Esanu firm which had structured Logan. The original complaint alleged only that the Esanu firm's opinion was knowingly false, while the proposed amended complaint alleged that the facts in the Logan offering memorandum were false. The court denied leave to amend because the original complaint did not give the proper notice necessary to enable the Esanu firm to prepare a defense since the complaint did not sufficiently state the circumstances surrounding the amended fraud claim. In addition, such an amendment would require supplemental discovery that would result in prej-udicial delay of the case. Therefore , the court denied leave to amend to include a second cause of action in fraud. As to the issue of recovery of interest paid on the deficient taxes, the court held that recovery of interest must be denied. The court cited a case in which the United States Court of Appeals for the Second Circuit found that a defrauded investor in a coal mine tax shelter was not allowed to recover interest paid to the I.R.S. upon disallowance of tax deductions. That court reasoned that such interest did not constitute damages …