Summary
In Mastro Inds. v CBS Records (50 A.D.2d 783), the plaintiff claimed to have been induced by false representations to enter into a less favorable contract with defendant than it would have entered into but for such false representations and sought to recover in essence the benefit of what would have been the more favorable contract.
Summary of this case from Kensington Pub. Corp. v. Kable News Co.Opinion
December 23, 1975
Order entered May 1, 1975, in the Supreme Court, New York County, unanimously modified, on the law, to the extent of granting defendants' motion for partial summary judgment and dismissing and severing Items (a), (b) and (e) of paragraph 27 of the fifth cause of action alleged in the amended complaint. As so modified the order is otherwise affirmed, without costs and without disbursements to either party. This is an action by plaintiff-respondent Mastro Industries, Inc. (Mastro) to recover damages for a claimed breach of an agreement by CBS Records (CBS) to purchase stereo tape cartridges from it. Mastro also seeks damages for alleged fraud and unjust enrichment. CBS's motion to dismiss the complaint was granted as to the first three causes of action for breach of contract insofar as they sought damages in excess of $15,693.83 and the fourth and sixth causes of action for services rendered and for unjust enrichment and denied as to the fifth cause of action for fraud. Treating the pertinent items of the fifth cause of action, in reverse order, we modify as indicated for the following reasons. Item (e) of paragraph 27 seeks recovery of $4,200,000 in lost profits which Mastro claims it would have made if it sold 60 million cartridges to CBS. It contends that, by reason of false and fraudulent promises of future purchases by CBS it agreed to furnish the cartridges at a price substantially lower than CBS would have been otherwise able to obtain without the false and fraudulent promises, representations and inducements. "The purpose of an action for deceit is to indemnify the party injured. All elements of profit are excluded. The true measure of damage is indemnity for the actual pecuniary loss sustained as the direct result of the wrong." (Reno v Bull, 226 N.Y. 546, 553; Sager v Friedman, 270 N.Y. 472, 481; Hanlon v MacFadden Pub., 302 N.Y. 502, 511). Its president's own testimony was that in 1970 Mastro began manufacturing for other customers cartridges of substantially the same design as those manufactured for CBS and that from 1970 to 1973 it realized a profit of approximately $700,000. Thus, Mastro seems to have profited rather than suffered as a result of its relationship with CBS. Item (b) of paragraph 27 represents a claimed loss of $235,000 sustained by Mastro in 1969, the year it delivered cartridges to CBS, as a result of allegedly devoting "substantially all its efforts, personnel and manufacturing facilities" to the design and production of the stereo cartridges. Again, in his examination before trial, Mastro's president testified that Mastro's business was declining, and at that time the main item of their business was the production of plastic wall tile. The machinery used to make the tile was used by Mastro to manufacture the cartridges. Mastro expected to continue its line of business and merely add on the CBS cartridge business. There was no request by CBS that Mastro terminate its other lines of business. On the cartridges ordered by CBS there was a profit to Mastro of approximately 50% above cost. If there was a loss on Item (b) of paragraph 27 as claimed, such loss was not caused by any action or direction of CBS, and Mastro has failed to show that the claimed damages were caused by the fraud alleged (Stern v Andrew, 249 App. Div. 171, 173). Finally, Item (a) of paragraph 27 seeks $20,000 in damages for "great technical skill, time, effort and money" expended by Mastro on its contracts with CBS in reliance upon allegedly fraudulent representations of CBS. This figure represents its president's estimate of the value of such skill, etc. However, this claim relates to and is essentially involved with the contracts upon which Mastro realized profits. Obviously, there was no pecuniary loss and that part of the claim based on fraud cannot be sustained. (Reno v Bull, supra.)
Concur — Stevens, P.J., Lupiano, Tilzer, Capozzoli and Yesawich, JJ.