A Tale of Two Claims: Contract Claim Survives, Duplicative Fraud Claim Does Not

By: Jeffrey M. Haber

New York law permits breach of contract and fraud claims to arise from the same transaction, but the claims cannot be duplicative. A breach of contract claim requires the existence of a contract, the plaintiff’s performance, the defendant’s breach, and resulting damages. A fraud claim, however, cannot rest on the same allegations underlying the alleged breach of contract.

In Dranovsky v. Bukh, 2026 N.Y. Slip Op. 0641 (2d Dept. Nov. 4, 2026), the Appellate Division, Second Department applied those principles to a dispute arising from an alleged agreement to file a UCC-1 financing statement to perfect a security interest connected with a $200,000 loan used to purchase a Brooklyn cooperative apartment. The plaintiff alleged that the defendants failed to make the necessary filing and asserted claims for both breach of contract and fraud.

The Court allowed the breach of contract claim to proceed, concluding that the defendants had not affirmatively demonstrated either that no contract existed requiring them to file the UCC-1 or that the plaintiff sustained no damages from the alleged breach. But the fraud claim met a different result. The plaintiff alleged that the defendants misrepresented that they were knowledgeable and capable regarding the UCC-1 filing and that they would complete it in a timely manner. The Second Department concluded that those allegations were the same as those underlying the contract claim and “amounted to nothing more than a failure to perform under the alleged contract.” It therefore dismissed the fraud claim.

Dranovsky arose from a dispute over a 2008 transaction involving a cooperative apartment located in Brooklyn, New York, and the alleged failure to perfect a security interest associated with the purchase of that apartment.

According to the plaintiff, he provided a $200,000 loan in August 2008 to finance the purchase of the apartment from the plaintiff’s aunt. The transaction closed on August 5, 2008, and the cooperative shares and proprietary lease were placed in the buyer’s name. Documents associated with the closing included a $200,000 bank check, a Loan Security Agreement, and a Mortgage Note.

The plaintiff contended that the loan was to be secured by an interest in the cooperative shares and proprietary lease. He alleged that the defendants agreed for a $200 fee to prepare and file the UCC-1 financing statements necessary to perfect that security interest. According to the plaintiff, the defendants filed a UCC-1 with the New York Secretary of State but failed to make the filing that he maintained was also required with the Kings County Register.

The defendants disputed the plaintiff’s characterization of their responsibilities.

The perfection issue eventually became financially significant. Cash 800 Inc., another creditor, later asserted a competing security interest involving the apartment. The plaintiff contended that because his own security interest had not been properly perfected, Cash 800 obtained priority. In 2013, the plaintiff paid Cash 800 $135,000 in connection with the resolution of the competing claims.

In 2014, the plaintiff commenced the action seeking damages for breach of contract and fraud. As the Second Department later summarized the case, the complaint alleged, among other things, that the defendants failed to file a UCC-1 financing statement against the cooperative apartment to perfect the plaintiff’s security interest in connection with the loan he had provided for its purchase.

The defendants moved for summary judgment dismissing the complaint. With respect to the breach of contract claim, they challenged whether an enforceable agreement obligated them to file the UCC-1 financing statement and whether the plaintiff could establish damages resulting from the alleged failure to do so.

In an order dated March 26, 2025, the Supreme Court, among other things, denied the defendants’ motion seeking summary judgment dismissing the complaint. Defendants appealed.

The Second Department modified the Supreme Court’s order by dismissing the fraud claim while allowing the breach of contract claim to proceed.

The Court found that “defendants failed to meet their burden of demonstrating their prima facie entitlement to judgment as a matter of law dismissing the cause of action alleging breach of contract.” The Court explained that “[c]ontrary to the defendants’ contention, they failed to affirmatively demonstrate that no contract existed between them and the plaintiff to file the UCC-1 financing statement or that the plaintiff did not sustain damages resulting from the alleged breach.”[1] “Accordingly,” concluded the Court, “that branch of the defendants’ motion which was for summary judgment dismissing the cause of action alleging breach of contract was properly denied without regard to the sufficiency of the plaintiff’s opposition papers.”[2]

Regarding the fraud claim, the Court held that “Supreme Court should have granted that branch of the defendants’ motion which was for summary judgment dismissing the cause of action alleging fraud.”[3] Noting that “[a] cause of action premised upon fraud cannot lie where it is based on the same allegations as the breach of contract claim,” the Court found that “the allegations that form the basis of the cause of action alleging fraud [were] the same as those underlying the cause of action alleging breach of contract.” [4] The Court concluded that defendants’ alleged misrepresentations “that they were knowledgeable and capable with regard to the filing of the UCC-1 financing statement and that they would do so in a timely fashion, . . . amounted to nothing more than a failure to perform under the alleged contract.”[5]

Takeaway

Dranovsky highlights the line between contract and fraud. A contract claim seeks redress for the failure to perform a bargained for obligation, while a fraud claim addresses deception that is distinct from the contractual obligation itself. The distinction, therefore, turns on the source and substance of the alleged wrongdoing, not simply on how the plaintiff labels the claim. A plaintiff may pursue both causes of action where the alleged fraud rests on a duty or misrepresentation independent of, or collateral to, the contract. But when the alleged misrepresentation is merely that the defendant could or would perform the very obligation the contract required, the claimed deception and the contractual breach are one-and-the- same, and the fraud claim is duplicative.

The decision also illustrates the substantive distinction between contract and fraud claims arising from the same facts. The contract claim concerned whether the parties had an enforceable agreement requiring the defendants to make the UCC-1 filing and whether the defendants failed to perform that obligation. The fraud claim presented a different question: whether the defendants’ alleged misrepresentations constituted wrongdoing separate from the obligations imposed by the agreement. Because those alleged misrepresentations concerned the defendants’ ability to make the very UCC-1 filing allegedly required by the agreement, they did not identify a wrong distinct from the alleged contractual breach.

Thus, the survival of a contract claim does not necessarily carry a related fraud claim with it. Where the alleged fraud is simply another way of saying that the defendant promised to perform a contractual obligation and failed to do so, the claim remains one for breach of contract, regardless of whether the plaintiff characterizes the failure to perform as a misrepresentation. That distinction explains the “tale of two claims” in Dranovsky. The contract claim survived summary judgment, while the fraud claim did not.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

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[1] Id., citing Chin v. Pacific 10, LLC, 245 A.D.3d 882, 884 (2d Dept. 2026); Feggins v. Marks, 229 A.D.3d 691, 692 (2d Dept. 2024).

[2] Id. (citation omitted).

[3] Id.

[4] Id., quoting Michael Davis Constr., Inc. v. 129 Parsonage Lane, LLC, 194 A.D.3d 805, 807 (2d Dept. 2021) (internal quotation marks omitted).

[5] Id. (citations omitted).