| LIUS Group Intl. Endwell, LLC v HFS Intl., Inc. |
| 2012 NY Slip Op 01589 [92 AD3d 918] |
| February 28, 2012 |
| Appellate Division, Second Department |
| LIUS Group International Endwell, LLC, Appellant, v HFSInternational, Inc., et al., Respondents. |
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In an action, inter alia, to recover damages for breach of contract and fraud, the plaintiffappeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County(Driscoll, J.), dated September 16, 2010, as, in effect, upon renewal and reargument, adhered to aprior determination in an order dated June 2, 2010, denying its renewed motion for leave to entera default judgment against the defendants.
Ordered that the order dated September 16, 2010, is modified, on the law, (1) by deleting theprovision thereof, in effect, upon renewal and reargument, adhering to so much of the order datedJune 2, 2010, as denied that branch of the plaintiff's renewed motion which was for leave to entera default judgment against the defendant Xiangyun Zhang on the first cause of action, andsubstituting therefor a provision, upon renewal and reargument, vacating that portion of the orderdated June 2, 2010, and thereupon granting that branch of the plaintiff's renewed motion whichwas for leave to enter a default judgment against the defendant Xiangyun Zhang on the first causeof action, and (2) by deleting the provision thereof, in effect, upon renewal and reargument,adhering to so much of the order dated June 2, 2010, as denied that branch of the plaintiff'srenewed motion which was for leave to enter a default judgment against the defendant HFSInternational, Inc., on the third cause of action, and substituting therefor a provision, uponrenewal and reargument, vacating that portion of the order dated June 2, 2010, and thereupongranting that branch of the plaintiff's renewed motion which was for leave to enter a defaultjudgment against the defendant HFS International, Inc., on the third cause of action; as somodified, the order dated September 16, 2010, is affirmed insofar as appealed from, with costs tothe plaintiff.
The plaintiff entered into a contract with the defendant HFS International, Inc. (hereinafterHFS), to purchase certain commercial real property (hereinafter the premises). The plaintiffalleged that HFS and the defendant Xiangyun Zhang (hereinafter Zhang), HFS's president andsole shareholder, represented to the plaintiff in a pre-closing structural disclosure form thatZhang was not aware that the premises were located in a flood zone or that HFS had floodinsurance for the premises. After the closing, the premises flooded as a result of a rainstorm, andthe plaintiff learned that the premises were located in a 100-year flood plain.
The plaintiff commenced this action against the defendants to recover damages for breach ofcontract and fraud, and sought to pierce the corporate veil. After the defendants failed to appearor answer the complaint, the plaintiff moved pursuant to CPLR 3215 for leave to enter a [*2]default judgment against them. The Supreme Court denied theplaintiff's motion, with leave to renew "upon a more complete factual showing." Thereafter, theSupreme Court denied the plaintiff's unopposed renewed motion for leave to enter a defaultjudgment against the defendants and, after that, the plaintiff moved for leave to renew andreargue its renewed motion. In the order appealed from, the Supreme Court, inter alia, in effect,upon renewal and reargument, adhered to its prior determination denying the plaintiff's renewedmotion.
Upon renewal and reargument, the plaintiff demonstrated its entitlement to a defaultjudgment against HFS with respect to the third cause of action, which alleged breach of contract.The plaintiff submitted proof of service of the summons and the complaint, a factually detailedverified complaint, and an affidavit from its attorney regarding HFS's default in appearing oranswering (see CPLR 3215 [f]; Church of S. India Malayalam Congregation of Greater N.Y. v BryantInstallations, Inc., 85 AD3d 706 [2011]; Triangle Props. # 2, LLC v Narang, 73 AD3d 1030, 1032 [2010];Okeke v Ewool, 66 AD3d 978,979 [2009]; Giovanelli v Rivera, 23AD3d 616 [2005]).
Since "defaulters are deemed to have admitted all factual allegations contained in thecomplaint and all reasonable inferences that flow from them," the plaintiff made the requisiteshowing to be entitled to a default judgment on the breach of contract cause of action againstHFS (Woodson v Mendon Leasing Corp., 100 NY2d 62, 71 [2003]). Accordingly, theSupreme Court should have, upon renewal and reargument, vacated its prior determinationdenying that branch of the plaintiff's renewed motion which was for leave to enter a defaultjudgment against HFS on the third cause of action, which was to recover damages for breach ofcontract, and thereupon granted that branch of the renewed motion.
We agree that the Supreme Court properly, in effect, upon renewal and reargument, adheredto its prior determination denying that branch of the plaintiff's renewed motion which was forleave to enter a default judgment against HFS on the first cause of action, which alleged fraud,but for a reason different from that articulated by the Supreme Court. "Where a valid cause ofaction is not stated, the party moving for judgment is not entitled to the requested relief, even ondefault" (Green v Dolphy Constr. Co., 187 AD2d 635, 636 [1992]; see Church of S. India MalayalamCongregation of Greater N.Y. v Bryant Installations, Inc., 85 AD3d 706 [2011]). Here,the alleged misrepresentation set forth in the fraud cause of action, that HFS was not aware ofany flooding on or at the premises, is not sufficiently distinct from the breach of contract cause ofaction to constitute a separate cause of action (see Church of S. India MalayalamCongregation of Greater N.Y. v Bryant Installations, Inc., 85 AD3d at 707). Not only did thefraud cause of action arise out of identical circumstances as the cause of action alleging breach ofcontract, but it was based upon identical allegations, and did not allege that a misrepresentationresulted in any loss independent of the damages allegedly incurred for breach of contract; indeed,the damages sought were identical (seeHavell Capital Enhanced Mun. Income Fund, L.P. v Citibank, N.A., 84 AD3d 588[2011]). Accordingly, the plaintiff failed to establish its entitlement to a default judgment againstHFS with respect to the first cause of action, which was to recover damages for fraud.
However, the fraud cause of action, insofar as alleged against Zhang, was not duplicative ofthe breach of contract cause of action. The plaintiff alleged that Zhang made misrepresentationsto induce it to enter into the contract with HFS. Since Zhang was not a party to the contract, andthe plaintiff sought "compensatory damages which are not recoverable for breach of contract" (Introna v Huntington Learning Ctrs.,Inc., 78 AD3d 896, 899 [2010]), the fraud allegations, insofar as asserted against Zhang,were not duplicative of the breach of contract allegations against that defendant (see Selinger Enters., Inc. v Cassuto, 50AD3d 766, 768 [2008]). Accordingly, the Supreme Court should have, upon renewal andreargument, vacated its prior determination denying that branch of the plaintiff's renewed motionwhich was for leave to enter a default judgment against Zhang on the first cause of action, whichalleged fraud, and thereupon granted that branch of the renewed motion.
The plaintiff's remaining contentions are without merit. Skelos, J.P., Hall, Lott and Cohen,JJ., concur. [Prior Case History: 2010 NY Slip Op 32653(U).]