Opinion
2014-05-15
Frederick B. WHITTEMORE, Plaintiff–Respondent, v. Edwin H. YEO, III, Defendant–Appellant, Endurance Capital Management Company, L.P., et al., Defendants.
Kasowitz, Benson, Torres & Friedman LLP, New York (Olga L. Fuentes–Skinner of counsel), for appellant. Bushell, Sovak, Ozer & Gulmi, LLP, New York (Christopher J. Sovak of counsel), for respondent.
Kasowitz, Benson, Torres & Friedman LLP, New York (Olga L. Fuentes–Skinner of counsel), for appellant. Bushell, Sovak, Ozer & Gulmi, LLP, New York (Christopher J. Sovak of counsel), for respondent.
MAZZARELLI, J.P., ANDRIAS, DeGRASSE, MANZANET–DANIELS, FEINMAN, JJ.
Judgment, Supreme Court, New York County (Ira Gammerman, J.H.O.), entered April 4, 2013, awarding plaintiff the total sum of $11,900,345.18 as against defendant Edwin H. Yeo, III (defendant) on his fraudulent inducement cause of action, unanimously affirmed, with costs. Appeal from order, same court and Justice, entered December 20, 2012, unanimously dismissed, without costs, as subsumed in the appeal from the judgment.
Plaintiff established a prima facie fraud claim in support of the default judgment. Although his complaint was not verified by him, a review of the record shows that the affidavit he submitted on his motion for a default judgment provided “first hand confirmation” of the facts alleged ( Joosten v. Gale, 129 A.D.2d 531, 535, 514 N.Y.S.2d 729 [1st Dept.1987];see Feffer v. Malpeso, 210 A.D.2d 60, 61, 619 N.Y.S.2d 46 [1st Dept.1994];Mullins v. DiLorenzo, 199 A.D.2d 218, 219–220, 606 N.Y.S.2d 161 [1st Dept.1993] ), which sufficiently states a claim for fraudulent inducement ( see Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 [1996] ). Defendant's contention that plaintiff could not claim justifiable reliance as a sophisticated investor who could have conducted due diligence is unavailing. As this Court has previously noted in this matter, plaintiff “was not precluded from reasonably relying on defendants' misrepresentations in light of the alleged failure to disclose certain diversions and defendants' failure to provide requested information regarding the allocation of plaintiff's investment in the limited partnership” (99 A.D.3d 496, 497, 952 N.Y.S.2d 136 [1st Dept.2012] ). To the extent defendant contends that the evidence presented during inquest showed no misrepresentation made by him, by defaulting, he is deemed to have admitted all traversable allegations in the complaint and “will not be allowed to introduce evidence tending to defeat the plaintiff's cause of action” during inquest ( Rokina Opt. Co. v. Camera King, 63 N.Y.2d 728, 730, 480 N.Y.S.2d 197, 469 N.E.2d 518 [1984];Conteh v. Hand, 234 A.D.2d 96, 650 N.Y.S.2d 723 [1st Dept.1996] ).
Plaintiff also established a sum certain on damages owed by showing “out-of-pocket” losses in the amount awarded as a result of defendant's conduct ( see Lama Holding Co., 88 N.Y.2d at 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370). Defendant's contention that some of plaintiff's capital contributions had in fact been used for legitimate business purposes overlooks that fact that plaintiff made all his contributions in reliance on defendant's misrepresentations and that any use of the funds was a part of the overall fraud scheme. As plaintiff had no knowledge of defendant's diversion of funds, he could not have mitigated damages ( see LaSalle Bank N.A. v. Nomura Asset Capital Corp., 47 A.D.3d 103, 108–109, 846 N.Y.S.2d 95 [1st Dept.2007] ). The court properly awarded prejudgment interest ( CPLR 5001[a] ), as defendant had the advantage of using the money that plaintiff was fraudulently induced to contribute ( Manufacturer's & Traders Trust Co. v. Reliance Ins. Co., 8 N.Y.3d 583, 589, 838 N.Y.S.2d 806, 870 N.E.2d 124 [2007] ) and plaintiff was deprived of his use thereof ( J. D'Addario & Co., Inc. v. Embassy Indus., Inc., 20 N.Y.3d 113, 117–118, 957 N.Y.S.2d 275, 980 N.E.2d 940 [2012] ).