DID IT COM LLC v. HALO GROUP INC (2019)

DECISION & ORDER

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and that branch of the defendants' motion which was pursuant to CPLR 3211(a) to dismiss the first cause of action is denied.

The defendant Linda Passante was the sole owner of the defendant The Halo Group, Inc. (hereinafter Halo).  In May 2017, the plaintiff and Halo entered into an asset purchase agreement (hereinafter the APA), under which the plaintiff agreed to purchase all of Halo's assets.  In June 2017, the plaintiff commenced this action.  In an amended complaint, the plaintiff asserted six causes of action, including the first cause of action, alleging fraudulent inducement, and the third cause of action, alleging breach of contract.  Prior to answering, the defendants moved pursuant to CPLR 3211(a) to dismiss the amended complaint.  The Supreme Court, inter alia, granted that branch of the motion which was to dismiss the first cause of action.  The plaintiff appeals.

“The essential elements of a cause of action for fraud are representation of a material existing fact, falsity, scienter, deception and injury” (New York Univ. v. Continental Ins. Co., 87 N.Y.2d 308, 318, 639 N.Y.S.2d 283, 662 N.E.2d 763 [internal quotation marks omitted] ).  “Mere unfulfilled promissory statements as to what will be done in the future are not actionable as fraud and the injured party's remedy is to sue for breach of contract” (Brown v. Lockwood, 76 A.D.2d 721, 731, 432 N.Y.S.2d 186 [citation omitted];  see Pugni v. Giannini, 163 A.D.3d 1018, 1020, 83 N.Y.S.3d 491).  Where, however, it is alleged that the defendant made misrepresentations of present facts that were collateral to the contract and served as an inducement to enter into the contract, a cause of action alleging fraudulent inducement is not duplicative of a breach of contract cause of action (see Greenberg v. Meyreles, 155 A.D.3d 1001, 1003, 66 N.Y.S.3d 297).

Here, contrary to the Supreme Court's conclusion, the cause of action alleging fraudulent inducement was not duplicative of the breach of contract cause of action.  The first cause of action alleges that the defendants knowingly made false representations in Halo's financial statements, which were collateral to the APA, that these false statements were made in order to induce the plaintiff to enter into the APA, that the plaintiff would not have entered into the APA but for these false statements, and that the plaintiff was injured by this fraudulent conduct (see New York Univ. v. Continental Ins. Co., 87 N.Y.2d at 318, 639 N.Y.S.2d 283, 662 N.E.2d 763;  Introna v. Huntington Learning Ctrs., Inc., 78 A.D.3d 896, 898, 911 N.Y.S.2d 442).  As the first cause of action alleges misrepresentations of present fact that were collateral to the APA and further alleges that these misrepresentations induced the plaintiff to enter into the APA, the court should have denied that branch of the defendants' motion which was to dismiss the first cause of action.

RIVERA, J.P., DILLON, AUSTIN and HINDS–RADIX, JJ., concur.