Hong Qin Jiang v. Li Wan Wu

• Decision Date: 29 January 2020
• Docket Number: Index No. 705838/14,2018–00055
• Citation: Hong Qin Jiang v. Li Wan Wu, 179 A.D.3d 1041, 118 N.Y.S.3d 205 (N.Y. App. Div. 2020)
• Parties: HONG QIN JIANG, etc., et al., respondents, v. LI WAN WU, et al., appellants.
• Court: New York Supreme Court — Appellate Division

179 A.D.3d 1041

118 N.Y.S.3d 205

HONG QIN JIANG, etc., et al., respondents,

v.LI WAN WU, et al., appellants.

2018–00055

Index No. 705838/14

Supreme Court, Appellate Division, Second Department, New York.

Submitted - October 31, 2019

January 29, 2020

White, Cirrito & Nally, LLP, Hempstead, N.Y. (Christopher M. Lynch of counsel), for appellants.

REINALDO E. RIVERA, J.P., LEONARD B. AUSTIN, ROBERT J. MILLER, COLLEEN D. DUFFY, JJ.

DECISION & ORDER

In a shareholder derivative action, the defendants appeal from an order of the Supreme Court, Queens County(Denis J. Butler, J.), entered October 16, 2017.The order granted the plaintiffs' motion for leave to amend the complaint.

ORDERED that the order is reversed, on the law, with costs, and the plaintiffs' motion for leave to amend the complaint is denied.

The background facts relating to this action are set forth in this Court's decision and order in a related appeal (Hong Qin Jiang v. Li Wan Wu , 179 A.D.3d 1035[Appellate Division Docket No. 2017–00641; decided herewith] ).

As relevant to this appeal, Liu's Family, LLC(hereinafter Family), of which the plaintiffHong Qin Jiang was a member, owned certain real property in Queens (hereinafter the subject property).On January 25, 2013, Hong Qin Jiang, and the defendantsLi Wan Wu, Qi Tan Lin, and Ji Juan Lin(hereinafter collectively the individual defendants), among others, entered into a shareholder agreement (hereinafter the shareholder agreement) with respect to 37 81 Realty, Inc.(hereinafter Realty), whereby, inter alia, the parties agreed that Realty would acquire the subject property from Family with the intention of completing a condominium project on it and Hong Qin Jiang would receive 25% of Realty's shares.On March 15, 2013, Family conveyed title to the subject property to Realty.

In August 2014, the plaintiffs commenced this action, and Hong Qin Jiang asserted, inter alia, a cause of action alleging fraudulent inducement.In June 2017, the plaintiffs moved for leave to amend the complaint.The proposed material amendments to the complaint related to the cause of action alleging fraudulent inducement.The plaintiffs sought to add Family as a plaintiff and allege damages in the amount of $11 million with respect to that cause of action.In support of their motion, the plaintiffs submitted, inter alia, Hong Qin Jiang's affidavit and her separate reply affidavit.In opposition to the motion, the defendants submitted, inter alia, a copy of the shareholder agreement.By order entered October 16, 2017, the Supreme Court granted the plaintiffs' motion for leave to amend the complaint.The defendants appeal.

" ‘Applications for leave to amend pleadings under CPLR 3025(b) should be freely granted unless the proposed amendment (1) would unfairly prejudice or surprise the opposing party, or (2) is palpably insufficient or patently devoid of merit’ "( Edwards v. 1234 Pac. Mgt., LLC,139 A.D.3d 658, 659, 30 N.Y.S.3d 675, quotingMaldonado v. Newport Gardens, Inc.,91 A.D.3d 731, 731–732, 937 N.Y.S.2d 260 )." ‘[A]court shall not examine the legal sufficiency or merits of a pleading unless such insufficiency or lack of merit is clear and free from doubt’ "( Favia v. Harley–Davidson Motor Co., Inc.,119 A.D.3d 836, 836, 990 N.Y.S.2d 540, quotingUnited Fairness, Inc. v. Town of Woodbury,113 A.D.3d 754, 755, 979 N.Y.S.2d 365;seeLucido v. Mancuso,49 A.D.3d 220, 229, 851 N.Y.S.2d 238 )."Whether to grant such leave is within the motion court's discretion, the exercise of which will not be lightly disturbed"( Hofstra Univ. v. Nassau County, N.Y.,166 A.D.3d 861, 863, 89 N.Y.S.3d 1[internal quotation marks omitted];seeKimso Apts., LLC v. Gandhi,24 N.Y.3d 403, 411, 998 N.Y.S.2d 740, 23 N.E.3d 1008 ).

"The elements of a cause of action to recover damages for fraud are ‘a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury’ "( Tsinias Enters. Ltd. v. Taza Grocery, Inc.,172 A.D.3d 1271, 1272, 101 N.Y.S.3d 138, quotingLama Holding Co. v. Smith Barney,88 N.Y.2d 413, 421, 646 N.Y.S.2d 76, 668 N.E.2d 1370 )."[T]he plaintiff must show not only that he or she actually relied on the misrepresentation, but also that such reliance was reasonable"( McMorrow v. Dime Sav. Bank of Williamsburgh,48 A.D.3d 646, 647–648, 852 N.Y.S.2d 345 ).

Here, the plaintiffs' motion for leave to amend the complaint should have been denied because the proposed amended fraudulent inducement cause of action was palpably insufficient (seeHofstra Univ. v. Nassau County, N.Y.,166 A.D.3d at 863, 87 N.Y.S.3d 248;Lasner v....