LINDENBAUM v. Annsville Properties, Ltd., et al., Respondents, et al., Defendants.

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Supreme Court, Appellate Division, Second Department, New York.

Bruce J. LINDENBAUM, Appellant-Respondent, v. ALBANY POST PROPERTY ASSOCIATES, INC., Respondent-Appellant, Annsville Properties, Ltd., et al., Respondents, et al., Defendants.

Decided: September 16, 2002

GLORIA GOLDSTEIN, J.P., LEO F. McGINITY, THOMAS A. ADAMS and SANDRA L. TOWNES, JJ. Welby, Brady & Greenblatt, LLP, White Plains, N.Y. (Lester Gulitz of counsel), for appellant-respondent. DelBello Donnellan Weingarten Tartaglia Wise & Wiederkehr, LLP, White Plains, N.Y. (William E. Dumke of counsel), for respondent-appellant. Saidel & Saidel, Yorktown Heights, N.Y. (Marc L. Saidel of counsel), for respondents.

In an action, inter alia, to foreclose a mortgage on real property, the plaintiff appeals, as limited by his brief, from so much of a judgment of the Supreme Court, Westchester County (Colabella, J.), entered January 12, 2001, as, after a nonjury trial, (a) dismissed the complaint insofar as asserted against the defendants Albany Post Property Associates, Inc., Annsville Properties, Ltd., and Kenneth G. Shaw, (b) canceled and discharged a note, mortgage, and notice of pendency, (c) is in favor of the defendant Albany Post Property Associates, Inc., and against him in the amount of $483.34, representing statutory costs and disbursements, and (d) is in favor of the defendants Annsville Properties Ltd. and Kenneth G. Shaw and against him in the amount of $926.68, representing statutory costs and disbursements, and the defendant Albany Post Property Associates, Inc., cross-appeals from the same judgment.

ORDERED that the cross appeal is dismissed as abandoned;  and it is further,

ORDERED that the judgment is affirmed insofar as appealed from;  and it is further,

ORDERED that one bill of costs is awarded to the defendants Albany Post Property Associates, Inc., Annsville Properties Ltd., and Kenneth G. Shaw payable by the plaintiff.

 Contrary to the plaintiff's contention, the Supreme Court properly canceled and discharged the 1990 note and mortgage executed by Steven Shaw, the then-president of the defendant Annsville Properties, Ltd. (hereafter Annsville).   The evidence adduced at trial established that the subject note and mortgage represented a gratuitous guarantee by Annsville of Steven Shaw's personal debt, a transaction which was not part of Annsville's ordinary course of business (see Collision Plan Unlimited v. Bankers Trust Co., 63 N.Y.2d 827, 830-831, 482 N.Y.S.2d 252, 472 N.E.2d 28).   Consequently, the transaction required the consent of two-thirds of Annsville's then-shareholders (see Business Corporation Law § 908).   However, there is no evidence that the requisite consent was obtained, beyond Steven Shaw's representation to the plaintiff that the shareholders approved of the transaction.   This was insufficient to establish Steven Shaw's actual authority to bind Annsville in a transaction that was not part of its ordinary course of business (see Collision Plan Unlimited v. Bankers Trust Co., supra;  U.O.M. Trading Corp. v. 85 S. Ocean Realty Corp., 251 A.D.2d 652, 676 N.Y.S.2d 481).   Annsville's then-remaining shareholders, Kenneth J. Shaw and the defendant Kenneth G. Shaw, testified that they never consented to the note and mortgage, and did not know about the transaction until February 1994.

 The Supreme Court also properly determined that Steven Shaw lacked apparent authority to execute the subject note and mortgage.   There is no evidence of words or conduct of the principal corporation, namely Annsville, communicated to the plaintiff as a third-party, which gave rise to the appearance and reasonable belief that Steven Shaw possessed authority to enter into the transaction (see Fleet Bank v. Consola, Riccitelli, Squadere Post No. 17, 268 A.D.2d 627, 629, 701 N.Y.S.2d 182;  Ben-Reuven v. Kidder, Peabody & Co., Inc., 241 A.D.2d 504, 661 N.Y.S.2d 28).   An “agent cannot by his own acts imbue himself with apparent authority” (Fleet Bank v. Consola, Riccitelli, Squadere Post No. 17, supra at 630, 701 N.Y.S.2d 182, quoting Hallock v. State of New York, 64 N.Y.2d 224, 231, 485 N.Y.S.2d 510, 474 N.E.2d 1178;  see also Skyline Agency v. Coppotelli, Inc., 117 A.D.2d 135, 502 N.Y.S.2d 479).  “This is especially true where, as here, the [plaintiff] failed to make reasonable inquires into the ostensible agent's actual authority” (Morgold, Inc. v. ACA Galleries, 283 A.D.2d 407, 408, 724 N.Y.S.2d 447).   Further, the evidence failed to demonstrate that Annsville ratified the transaction by conduct on its part either before or thereafter (cf.  Radnay v. Charge & Ride, 266 A.D.2d 194, 697 N.Y.S.2d 664).

Accordingly, the determination of the Supreme Court that Steven Shaw lacked actual and apparent authority to execute the subject note and mortgage, was reached upon a fair interpretation of the evidence, and, therefore, will not be disturbed (see Binns v. Billhimer, 271 A.D.2d 562, 706 N.Y.S.2d 706).

The plaintiff's remaining contentions are without merit.

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