DELTA DALLAS OMEGA CORP. v. WAIR ASSOCIATES

To the extent Wair Associates asserts that the Delta Dallas Omega Corp. counterclaim defendants failed to keep their promises as represented prior to execution of the written contract, overbilled or double-billed for labor and materials, used inferior materials, and failed to pay subcontractors, the IAS Court correctly determined that such claims relate to a breach of contract and do not amount to a cause of action for fraud (Gordon v. Dino De Laurentiis Corp., 141 A.D.2d 435, 436). However, to the extent that it is alleged that the corporation or its principals embezzled or diverted funds for their own use or for purposes unrelated to the project, and that they acted to conceal this purported diversion, the second counterclaim adequately states a cause of action for fraud, and we modify to reinstate accordingly. (See, Apple Records v. Capitol Records, 137 A.D.2d 50, 55.)

Concur — Sullivan, J.P., Carro, Kupferman and Rubin, JJ.