| M Entertainment, Inc. v Leydier |
| 2010 NY Slip Op 02026 [71 AD3d 517] |
| March 16, 2010 |
| Appellate Division, First Department |
| M Entertainment, Inc., et al., Appellants, v LaurenceLeydier et al., Respondents. |
—[*1] Satterlee, Stephens, Burke & Burke, LLP, New York (Christopher R. Belmonte of counsel),for Laurence Leydier, respondent. Gogick, Byrne & O'Neill, LLP, New York (John M. Rondello, Jr. of counsel), for WardropEngineering Inc. and J.C. "Cam" Thompson, respondents.
Upon remittitur from the Court of Appeals (13 NY3d 827 [2009]), judgment, SupremeCourt, New York County (Karen S. Smith, J.), entered November 27, 2007, dismissing thecomplaint, and bringing up for review an amended order, same court and Justice, entered on orabout October 17, 2007, which, after a nonjury trial, directed entry of the judgment, unanimouslymodified, on the law, plaintiffs granted judgment on the issue of liability on that portion of theirclaim for fraudulent inducement as against defendant Leydier based on the August 19, 2000memorandum of understanding (MOU), the matter remanded for a hearing on the issue ofdamages with respect to that claim, plaintiffs' motion to amend the pleadings to conform to theevidence granted to the extent of permitting reference to the Haptek/Character EntertainmentAddendum, and otherwise affirmed, without costs. Appeal from the amended order, unanimouslydismissed, without costs, as subsumed in the appeal from the judgment.
The Court of Appeals has ruled (13 NY3d 827 [2009]) that this Court has jurisdiction toentertain the appeal notwithstanding mail service of the notice of appeal on defendants' attorneysin contravention of CPLR 2103 (f) (1), by depositing said notice in an official depository underthe exclusive care and custody of the United States Postal Service outside the state.Leydier does not dispute that plaintiffs filed the notice with the County Clerk or that defensecounsel received the notice well within the 30-day statutory time period set forth in CPLR 5513(a). Therefore, defendants have not been prejudiced as a result of the mailing from without thestate, and we exercise our discretion to disregard the irregularity (CPLR 2001, 5520 [a]; seePeople ex rel. Di Leo v Edwards, 247 App Div 331, 334 [1936]).
The record demonstrates that plaintiffs are entitled to judgment on the issue of liability onthat portion of their claim of fraudulent inducement against Leydier based on the MOU. Clearand convincing evidence (see e.g. Chopp v Welbourne & Purdy Agency, 135 AD2d 958,959 [1987]) shows that Leydier misrepresented or omitted a material fact in connection with theMOU when he represented to plaintiffs that he owned or possessed the exclusive, worldwide[*2]rights to the subject software when in fact he did not, thatplaintiffs relied on that misrepresentation or omission to their detriment, and that plaintiffs weredamaged as a result of paying Leydier $150,000 for the right to exercise an option to acquirerights that he did not own (see Lama Holding Co. v Smith Barney, 88 NY2d 413, 421[1996]).
However, plaintiffs failed to prove by clear and convincing evidence that Leydierfraudulently induced them to enter into the October 22, 2000 license agreement because, by thetime they entered into that agreement, plaintiffs had discovered that Leydier did not possess thefull extent of the rights that he represented. Plaintiffs thus had "hints of falsity" in their businessdealings with Leydier, imposing upon them a heightened degree of diligence (see Global Mins. & Metals Corp. vHolme, 35 AD3d 93, 100 [2006], lv denied 8 NY3d 804 [2007]). Furthermore,plaintiffs were advised by counsel not to go forward with the transaction without conductingfurther diligence, yet proceeded with the transaction without contacting Haptek, the third partyfrom whom plaintiffs discovered Leydier had acquired the rights, to determine the nature andextent of those rights under the various agreements between them. Nor did plaintiffs insist onmore protective language in the license agreement to account for the possibility that Leydier'srepresentations concerning his interests in the subject technology might prove to be false (see Permasteelisa, S.p.A. v LincolnshireMgt., Inc., 16 AD3d 352 [2005]; Abrahami v UPC Constr. Co., 224 AD2d 231,234 [1996]; Rodas v Manitaras, 159 AD2d 341, 343 [1990]).
The credible evidence supports the trial court's finding that defendants Wardrop Engineeringand J.C. "Cam" Thompson did not fraudulently induce plaintiffs to enter into either the August19, 2000 MOU or the October 22, 2000 license agreement. These defendants were not parties toeither agreement, nor did they receive any money in connection with the subject transaction. Therecord shows that their involvement was limited to the presence of Thompson and the CEO ofWardrop's affiliate at two meetings between plaintiffs and Leydier, at which Leydierdemonstrated the subject technology; Leydier's use of Wardrop's board room for one of thosemeetings; and Thompson's presentation of his business cards to plaintiffs, identifying himself asa principal of the Wardrop affiliate. Contrary to plaintiffs' contentions, Wardrop did nothing togive rise to the appearance and belief that Leydier or Thompson possessed authority to enter intoa transaction with plaintiffs on its behalf. In any event, to the extent that Leydier, Thompson, orboth, made such representations, the words or conduct of a putative agent are insufficient tocreate apparent authority (Ford v Unity Hosp., 32 NY2d 464, 473 [1973]).
Plaintiffs' motion pursuant to CPLR 3025 (c) to amend the pleadings to conform to theevidence is granted to the extent of permitting reference to the Haptek/Character EntertainmentAddendum between Leydier and Haptek pursuant to which Haptek supposedly curtailed thenature and extent of Leydier's rights to the subject technology. The document was received intoevidence by the trial court. It was considered by the court in rendering its decision and is part ofthe record on appeal. Therefore, there can be no prejudice to Leydier in permitting theamendment (see Matter of Denton,6 AD3d 531, 532-533 [2004], lv dismissed 3 NY3d 656 [2004]). We decline toexercise our discretion, however, to permit an amendment with respect to the evidencepurporting to show the full extent of Wardrop's negligence in allowing its name, offices,reputation and agents to be used by Leydier. Such an amendment is potentially prejudicial toWardrop, and the application, as it pertains to the evidence against Wardrop, was improperlyinterposed for the first time on appeal (see Matter of Ga Young Lee v Charl-Ho Park, 16 AD3d 986, 988[2005]).[*3]
We have considered plaintiffs' remaining contentions andfind them unavailing. Concur—Tom, J.P., Andrias, Buckley, DeGrasse and Richter, JJ.