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FRAUD CAUSE OF ACTION, AS ALLEGED, IS NOT DUPLICATIVE OF THE ACTION FOR BREACH OF A LOAN GUARANTEE AND SHOULD NOT HAVE BEEN DISMISSED ON THAT GROUND (FIRST DEPT).

The First Department, reversing Supreme Court, determined plaintiff’s fraud cause of action was not duplicative on the action for breach of a loan guarantee and should not have been dismissed:

Plaintiff alleges that, as CEO of nonparty Karmaloop, Inc., defendant Gregory Selkoe solicited from plaintiff a bridge loan in the amount of $2,040,000. Plaintiff agreed, on condition that Selkoe personally guarantee the loan. Selkoe provided the personal guarantee, and also represented to plaintiff that he had previously given only one other personal guarantee, and that Karmaloop had never defaulted on any loan payment. Both of these representations were false, in that, unbeknownst to plaintiff, Selkoe had previously guaranteed a loan issued to another Karmaloop executive, and Karmaloop had defaulted on that loan.

The foregoing states a claim for fraudulent inducement, which is not duplicative of plaintiff’s claim for breach of the guarantee. Plaintiff does not allege that Selkoe misrepresented the intent to perform on the guarantee and underlying promissory note, which would render the fraud claim duplicative, but rather alleges that Selkoe misrepresented his and Karmaloop’s ability to perform … .

At this early juncture, we find that plaintiff should be “permitted to plead in the alternative (see CPLR 3014),” and its claim “for fraud, should not be dismissed as duplicative of the breach-of-contract cause of action” … . Man Advisors, Inc. v Selkoe, 2019 NY Slip Op 05483, First Dept 7-9-19

 

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