Fleet Bank v. Consola, Riccitelli, Squadere Post No. 17 Inc.

• Decision Date: 06 January 2000
• Citation: 701 N.Y.S.2d 182
• Parties: 2000 N.Y. Slip Op. 102 FLEET BANK, Appellant, v. CONSOLA, RICCITELLI, SQUADERE POST NO. 17 INC., et al., Respondents.
• Court: New York Supreme Court — Appellate Division

Page 182

701 N.Y.S.2d 182

2000 N.Y. Slip Op. 102

FLEET BANK, Appellant, v. CONSOLA, RICCITELLI, SQUADERE POST NO. 17 INC., et al., Respondents.

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

Jan. 6, 2000.

Roche, Corrigan, McCoy & Bush (Scott W. Bush of counsel), Albany, for appellant.

Joseph A. Skavina, Cohoes, for respondents.

Before: CARDONA, P.J., MERCURE, SPAIN, CARPINELLO and GRAFFEO, JJ.

SPAIN, J.

Appeal from a judgment of the Supreme Court (Hughes, J.), entered April 1, 1999 in Albany County, upon a decision of the court in favor of defendants.

In the instant mortgage foreclosure action plaintiff seeks a declaration, inter alia, that it is entitled to sell defendant's real property and that plaintiff is due certain moneys from defendant for certain notes, mortgages and loan agreements executed in 1995. Defendant, a not-for-profit corporation which operates a war veterans' club in the City of Watervliet, Albany County, had a checking account with plaintiff dating back to the early 1950s. Frank Mastan was a member of defendant's club and from 1993 through 1995 held several leadership positions therein, including commander and president of the board of directors. This action arises from the criminal conduct of Mastan, who is not a party to this action, in repeatedly borrowing money from plaintiff in defendant's name by falsely representing that he was acting on behalf of, and with authorization from, defendant. Notably, Mastan was convicted in Federal court in February 1997 upon his plea of guilty of the crime of robbery (18 USC § 2113[b] ), for which he was sentenced to a term of imprisonment and probation and ordered to pay $63,478 in restitution to plaintiff.

As background, in May 1993 Mastan successfully applied to plaintiff for a commercial loan in the amount of $35,000, designating defendant as the borrower. Mastan executed a note as defendant's senior vice commander. In making that loan application, Mastan wrote and submitted a letter on defendant's letterhead which stated that defendant's members had voted to borrow up to $47,000 secured by a mortgage on their real property to renovate their facility which was located thereon. It was signed by Mastan as general chairman and also by defendant's treasurer as co-chairman, and provided that an account be set up requiring both of their signatures on all checks.

As relevant to this action, in January 1995 plaintiff granted Mastan's application, again made in defendant's name as its commander and president, for a second loan of $55,000 to pay off the outstanding balance (approximately $28,000) on the original loan and to complete additional renovations. Mastan also submitted to plaintiff updated financial statements regarding defendant's financial condition prepared by his personal bookkeeper. This loan was memorialized in an agreement signed by Mastan as defendant's general chairman, and secured by a mortgage in that amount on defendant's real property signed by Mastan as defendant's president. Mastan submitted in support a resolution, purportedly of defendant's board of directors, authorizing the loan, signed by Mastan as defendant's president and accompanied by a certification also signed by Mastan as defendant's secretary. The proceeds of the second loan were deposited in a new, separate account from defendant's existing account with plaintiff.

In March 1995, Mastan submitted a third loan application in defendant's name which plaintiff granted, loaning defendant an additional $9,000. The loan was secured by an additional mortgage on defendant's property, signed by Mastan as defendant's president. In support, Mastan submitted a resolution--signed by him as defendant's president--ostensibly authorizing this loan and mortgage. Plaintiff and Mastan, acting as defendant's president, executed an extension/consolidation agreement dated March 30, 1995 consolidating into one obligation the outstanding balances of $54,478 and $9,000 (totaling $63,478) due on the second and third loans.

Notably, while the balance on the original $35,000 was paid off with proceeds of the second loan, by Mastan's own admission the bulk of the loans' proceeds were used by him for his personal expenses rather than being expended for defendant's benefit. Mastan testified that approximately $9,000 of the proceeds obtained in 1995 were paid in cash for labor and materials used to create an apartment in defendant's club for himself which he claimed defendant's members authorized. Defendant's treasurer disputed that Mastan was authorized to spend defendant's funds on the apartment and there was no documentary proof of such expenditures.

In May 1997, plaintiff notified defendant by letter that it was in default on the 1995 obligations. When no payments were made, plaintiff instituted this action seeking, inter alia, authority to sell defendant's mortgaged real property and declaring the amount due on the outstanding notes and mortgages. In its answer defendant asserted as an affirmative defense, inter alia, that Mastan had never been authorized to mortgage defendant's property or borrow money on defendant's behalf, that the corporate resolutions...