The owner of the now-closed Cafe de los Muertos was sued for fraud by a former employee whose mother loaned $100,000 to the cafe, according to a lawsuit filed in Wake County Superior Court.
Mac Cady, owner of the popular downtown Raleigh coffee house and roaster, has been sued by Nathan Phillips, a former employee, and Phillips’ mother, Evelyn Gay Niday, according to the lawsuit filed Dec. 21.
The cafe, which opened in 2014, abruptly closed Monday. It was known for roasting its own coffee beans, supporting other local coffee roasters and its Day of the Dead decor.
A statement posted Monday on the cafe’s Facebook page read: “Cady is excited to pass the baton to a new owner and allow them to place their own personal stamp on the community.”
The statement then quoted Cady: “It is difficult to have to close this place, a space that began as an empty shell with no walls or stairs, no plumbing, no electricity, no artwork, no smiling faces, and definitely no heart. In three years of business, I watched this cafe grow into a hub of human electricity, entrepreneur to investor, biker to skater, student to teacher, meetings (and) meaningful conversations were going on every day, morning till night.”
Efforts to reach Cady via phone and email this week were unsuccessful. He had not filed a response to the lawsuit as of 2 p.m. Tuesday.
It is unclear who are the cafe’s new owners.
According to the lawsuit, here’s what led to the dispute:
In December 2015, Cady hired Phillips to work at Cafe de los Muertos. On Jan. 27, 2016, the N.C. Department of Revenue shut down the cafe for unpaid taxes. At the time, the cafe’s owner cheekily shared the news on Facebook by saying that state officials encouraged “a little remodeling.”
Other court records show the N.C. Department of Revenue had filed a certificate of tax liability on Sept. 11, 2015 that says the cafe owed $43,792 for back taxes, fees and interest.
Within days of being shut down, the lawsuit says, Cady approached Phillips about making an investment in the cafe in exchange for becoming a business partner; the purpose was to “induce” Niday to make a loan. At the time, the lawsuit says, Cady shared documents showing the cafe owed $8,000 to the Internal Revenue Service and $31,000 to the state Department of Revenue.
In exchange for the loan, the lawsuit says, Phillips would receive a 50 percent stake in the business and have a controlling interest until the loan was repaid. On Feb. 2, 2016, Phillips and Cady signed a promissory note. As a result of that agreement, Niday took money out of her retirement account and gave $100,000 to Cady with plans to invest another $100,000.
Phillips and Niday later learned that the cafe owed $80,000 to the IRS, the lawsuit says.
On March 24, Cady fired Phillips from his job and has not repaid any of the loan, according to the lawsuit.
Phillips and Niday sued Cady for breach of contract, unjust enrichment, fraud, negligent misrepresentation, unfair and deceptive trade practices and other claims. Their lawyer, Jeffrey Monroe of Miller Monroe law firm in Raleigh, couldn’t be reached for comment.