Mathis v. Yondata Corp.
| Decision Date | 27 August 1984 |
| Citation | 125 Misc.2d 383,480 N.Y.S.2d 173 |
| Parties | Edward MATHIS, Regina Mathis, and Climate Equipment & Supply Co., Inc., Plaintiffs, v. YONDATA CORPORATION, Anthony Yonda, Marguerite Yonda, Lincoln Leaseway, Inc., Defendants. |
| Court | New York Supreme Court |
This case presents a novel issue which apparently has not been addressed by a court in this state, that is, whether an agent may be held personally liable for negligent misrepresentation to one who, in reliance upon such representations, enters into a contractual relationship with the agent's principal.
The plaintiffs, Edward Mathis and Regina Mathis, are officers of plaintiff Climate Equipment and Supply Company, Incorporated (hereafter Climate). The defendants, Anthony Yonda and Marguerite Yonda, are president and treasurer, respectively, of defendant, Yondata Corporation (hereafter Yondata). Defendant Lincoln Leaseway, Incorporated, is not a party to this motion.
Since 1969 Yondata has been in the business of furnishing computer systems to businesses. In June, 1976, Yondata agreed to provide data processing services to Climate on a time-sharing basis. A year later, Climate informed Yondata that it intended to cancel the time-sharing arrangement because of repeated failures by Yondata to provide service. In response, Anthony Yonda requested that Edward Mathis meet with him and other Yondata representatives to discuss and resolve their problems. At this meeting certain representations and promises, plaintiffs claim, were made to Edward Mathis by the Yondas.
Specifically, the complaint alleges that in order to induce the plaintiffs to purchase computer hardware and software from the defendants, and to continue their data processing arrangement with the defendants, the defendants promised and/or represented that Yondata was about to become a franchisee of Digital Equipment Corporation (hereafter D.E.C.), which would enable the defendants to sell the plaintiffs a new D.E.C. computer plus software to duplicate the existing time-sharing program for $38,000.00; that Yondata would retain the D.E.C. computer ordered for the plaintiffs for one year to permit the development by Yondata of the software necessary for plaintiffs' use and, that during the one year period Yondata retained the computer, Yondata would provide expanded data processing services without the problems the plaintiffs previously experienced, at no additional charge to the plaintiffs. The defendants represented that the offer they were making was far better and more advantageous for the plaintiffs than could be obtained elsewhere.
In reliance upon these representations, Climate says it entered into a contract with Yondata. Climate borrowed $38,000.00 from Lincoln Leaseway to pay Yondata for the computer and software, and Edward and Regina Mathis signed a personal guarantee for the loan. The plaintiffs, however, never received the computer and the problems in connection with the data processing arrangement persisted.
Thereafter, the plaintiffs commenced this action and asserted eight causes of action against the defendants arising out of this transaction.
The first cause of action is for fraud and is asserted against Yondata and the Yondas individually; the second and fourth are for breach of contract against Yondata only; the third is based upon negligent misrepresentation against all the defendants; the fifth and sixth are for tortious interference with contract rights against all the defendants; the seventh, for fraud, and the eighth for conversion and for failure to honor an oral agreement to assume the debt of the plaintiffs, are also brought against all defendants.
In this motion the defendants seek summary judgment against the plaintiffs. The Yondas' argument in support of their motion is that they acted solely as agents of Yondata and therefore assumed no personal liability. Yondata's position is that it was discharged in bankruptcy in April, 1980 and, therefore, the actions against it must also be dismissed. The defendants further attack that portion of the eighth cause of action which seeks to enforce the oral agreement to assume the plaintiffs' debt as being void under the statute of frauds. Marguerite Yonda seeks a dismissal as to her for failure of the complaint to set forth any wrongful conduct on her part. Alternatively, defendants move that in the event summary judgment is not granted, the claims of Edward and Regina Mathis be dismissed since no injury accrued to them.
At the argument of the motion, the actions against Yondata were dismissed. Also dismissed were the actions for tortious interference with contract rights, and that portion of the eighth cause of action seeking enforcement of the oral agreement by the defendants to assume the plaintiffs' debt. The defendants' motion for summary judgment was denied as to the first and seventh causes of action brought against the Yondas individually and based on fraud, and also as to the conversion action against the Yondas brought in the eighth cause of action. Decision was reserved as to the eighth cause of action. Decision was reserved as to the motion brought against the third cause of action for negligent misrepresentation. Lastly, the motion to dismiss the actions on behalf of Edward and Regina Mathis individually was denied, as was the motion to dismiss the actions brought against Marguerite Yonda.
The third cause of action, for negligent misrepresentation, alleges that the promises and representations made by the defendants "were the result of acts or failures to act constituting negligence and/or gross negligence." The complaint further alleges that the representations were made for the purpose of guiding the plaintiffs in certain aspects of their business in an area where they possessed less knowledge than the defendants, and that in making such representations the defendants neglected to exercise due care.
In the action for negligent misrepresentation, all of the allegations upon which the fraud causes of action are based are realleged. Most of those allegations are not applicable to the negligent misrepresentation action, however, because they allege intentional conduct on the part of the defendants. Nonetheless, it is claimed that the defendants were legally unable to deliver the computer to the plaintiffs because of contract restrictions imposed by D.E.C. From this it is inferred that the defendants were negligent by not ascertaining beforehand their ability to perform under the contract. There are also a number of allegations which suggest that the state of the defendants' business operations was such that they should have known of their own inability to perform their contract obligations. In this regard, the complaint alleges that the defendants did not have the necessary personnel, expertise or facilities to develop the software for the plaintiffs; that the defendants lacked sufficient capital to purchase a demonstrator computer without the plaintiffs' investment and that they needed the capital and computer to help operate their business and sell computer services to other customers.
In response, the Yondas contend that as agents they owed no duty to the plaintiffs who bore a contractual relationship with the Yondas' principal, Yondata. Before an agent may be answerable in negligence to a third party, they argue, there must be some duty owing to that third party by the agent.
The law is well settled that where an agent is guilty of active negligence or misfeasance, he is liable to the person injured, regardless of whether his conduct was committed within or outside the scope of his employment (Jones v. Archibald, 45 A.D.2d 532, 535, 360 N.Y.S.2d 119; Rhynders v. Greene, 255 App.Div. 401, 402, 8 N.Y.S.2d 143; Greco v. Levy, 257 App.Div. 209, 12 N.Y.S.2d 470, affd. 282 N.Y. 575, 24 N.E.2d 989; see generally, 3 N.Y.Jur.2d, ...
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