Opinion
September 15, 1997
Appeal from the Supreme Court, Kings County (I. Aronin, J.).
Ordered that the order is modified by deleting therefrom the provision denying those branches of the defendants' motion which were for summary judgment dismissing the second and fourth causes of action, and substituting therefor a provision granting those branches of the motion; as so modified, the order is affirmed insofar as appealed from, without costs or disbursements.
On May 6, 1985, the plaintiff entered into an agreement to purchase all of the outstanding stock of Enterprise Bell and Intercom, Inc. from its sole shareholders, the defendants Yuri Leshchinsky and Roman Katsnelson. The contract of sale contained a restrictive covenant which prohibited the defendants from, inter alia, accepting or performing intercom installation work within the City of New York for a period of five years. Three years after the sale, the plaintiff commenced this action against the defendants alleging that they had breached the restrictive covenant by accepting electrical contracts within the City of New York which included the performance of intercom installation work.
Contrary to the defendants' contention, the Supreme Court did not err in denying their motion for summary judgment dismissing the plaintiff's first and third causes of action, which seek damages and an accounting for their alleged breach of the restrictive covenant. Where the shareholders of a commercial enterprise sell their interest in the business for consideration, which includes payment for the good will of the business, a covenant restricting the sellers' right to compete with the purchaser is enforceable ( see, Mohawk Maintenance Co. v. Kessler, 52 N.Y.2d 276; Meteor Indus. v. Metalloy Indus., 104 A.D.2d 440). The sole limitation on the enforceability of such a covenant is that its duration and scope be reasonably necessary to protect the buyer's legitimate interest in the purchased asset ( see, Purchasing Assocs. v. Weitz, 13 N.Y.2d 267; Slomin's Inc. v. Gray, 176 A.D.2d 934; Meteor Indus. v. Metalloy Indus., supra). At bar, the record discloses sharply disputed factual issues as to whether the restrictive covenant was reasonable in scope, and whether the defendants breached the terms of the covenant by accepting electrical contracts which required the performance of intercom installation work. Under these circumstances, the Supreme Court properly denied the defendants' motion for summary judgment dismissing the breach of contract and accounting causes of action ( see, Tender Loving Care v. Franzese, 131 A.D.2d 747).
However, the second cause of action, which seeks to recover damages for fraud, must be dismissed. A cause of action for fraud cannot stand where, as here, the only fraud alleged relates to a breach of contract ( see, Sisters of Divine Compassion v. Pace Univ., 230 A.D.2d 904; Jackson Hgts. Med. Group v. Complex Corp., 222 A.D.2d 409). Moreover, "`[a breach of] contract action may not be converted into one for fraud by the mere additional allegation that the contracting party did not intend to meet his contractual obligation'" ( Hudson v. Greenwich I Assocs., 226 A.D.2d 119; see also, Meehan v. Meehan, 227 A.D.2d 268). Similarly, the fourth cause of action, which seeks rescission of the contract on the theory that it was induced by a promise not to compete which the defendants never intended to keep, also must fail ( see, Channel Master Corp. v. Aluminum Ltd. Sales, 4 N.Y.2d 403, 406-407; Almap Holdings v. Bank Leumi Trust Co., 196 A.D.2d 518).
Sullivan, J.P., Pizzuto, Friedmann and Krausman, JJ., concur.