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Alikes v. Griffith: Fraud Lawsuit Dismissed for Lack of Harm

A New York court has examined a sellers’ lawsuit for fraud against a real estate professional who presented them with a fabricated purchase offer.

In 2006, Stephen and Janet Alikes (“Sellers”) entered into a listing agreement to sell their home.  The court noted that Stephen was a retired attorney who had practiced law for 45 years, while Janet was a retired paralegal who had specialized in real estate law and had also once held a real estate license.  The real estate professional who represented the Sellers was Shari Reals (“Salesperson”), whose license was eventually held by Andy Griffith Realty (“Brokerage”).

In February 2007, the Sellers allege that the Salesperson told them that an offer was coming for their property.  The Sellers then purchased a home in Arkansas and moved there.  The Sellers acknowledged that they had not received an enforceable offer prior to taking these actions.

In March 2007, the Salesperson brought the Sellers an offer for the property.  After an investigation by the New York Department of State, Division of Licensing Services, it was discovered that the Salesperson had fabricated the offer as well as a home inspection report.  The Sellers brought a lawsuit against the Salesperson and the Brokerage, alleging fraud and negligent hiring/supervision by the Brokerage.  The trial court ruled in favor of the Salesperson and the Brokerage, and the Sellers appealed.

The New York Supreme Court, Appellate Division, affirmed the trial court.  In order to allege fraud, a party must demonstrate that the other party made a statement about a material fact that was false and the statement was made with the intention to deceive, with the other party justifiably relying upon this statement to his/her detriment and suffering a monetary loss.  The Sellers argued that they would not have purchased the house in Arkansas except for the Salesperson’s misrepresentation, and owning two properties simultaneously caused them financial harm.

The court affirmed the dismissal of the lawsuit.  The Sellers had testified that they had purchased the home in Arkansas prior to receiving the fraudulent information from the Salesperson.  Because they had purchased the home in Arkansas prior to receiving the fraudulent offer, they had failed to demonstrate any monetary damages, necessary for fraud allegations. The decision to purchase the Arkansas home was not triggered by the fraudulent offer and so their claimed damages had no connection to the misrepresentation.  Therefore, the court affirmed the dismissal of the fraud allegations.

Next, the court examined the negligent hiring/supervision allegations.  These actions also require a party to demonstrate that the harm was caused by the alleged misconduct.  Once again, the court ruled that the Sellers had not suffered any harm because the Sellers had purchased the Arkansas home prior to receiving the fraudulent offer.  Therefore, the court affirmed the rulings of the lower court.

Alikes v. Griffith, 956 N.Y.S.2d 354 (N.Y. App. Div. 2012).