State by Lefkowitz v. South Haven Houses Housing Development Fund Co., Inc.

• Decision Date: 15 June 1978
• Citation: 406 N.Y.S.2d 296,63 A.D.2d 904
• Parties: Application of the STATE of New York by Louis J. LEFKOWITZ, etc., Petitioner-Respondent, for an order enjoining and restraining SOUTH HAVEN HOUSES HOUSING DEVELOPMENT FUND COMPANY, INC., et al., Respondents, from carrying on, conducting and transacting their business in a persistently fraudulent and illegal manner, etc., and requiring, The National Bank of North America, Respondent-Appellant, to turn over money to the Attorney General, etc.
• Court: New York Supreme Court — Appellate Division

Page 296

406 N.Y.S.2d 296

63 A.D.2d 904

Application of the STATE of New York by Louis J. LEFKOWITZ,

etc., Petitioner-Respondent, for an order enjoining and

restraining SOUTH HAVEN HOUSES HOUSING DEVELOPMENT FUND

COMPANY, INC., et al., Respondents, from carrying on,

conducting and transacting their business in a persistently

fraudulent and illegal manner, etc., and requiring, The

National Bank of North America, Respondent-Appellant, to

turn over money to the Attorney General, etc.

Supreme Court, Appellate Division,First Department.

June 15, 1978.

C. Goldstein, New York City, for petitioner-respondent.

J. A. DiBenedetto, New York City, for respondent-appellant.

Before MURPHY, P. J., and BIRNS, FEIN, MARKEWICH and YESAWICH, JJ.

MEMORANDUM DECISION.

Order and judgment (one paper), Supreme Court, New York County, entered July 13, 1977, insofar as it (1) granted petitioner summary judgment as against The National Bank of North America; (2) directed the Bank to make restitution in the sum of $10,950; (3) directed that any balance be turned over to the Attorney General under the Abandoned Property Law; (4) credited certain other respondents with the amount paid by the Bank; and (5) dismissed the Bank's cross-claim for indemnification, unanimously modified, on the law, by vacating (1) through (4) of the aforesaid provisions, by dismissing the petition as against the Bank, and as modified, otherwise affirmed, without costs and without disbursements.

Appeal from the order, Supreme Court, New York County entered September 23, 1977, denying reargument, unanimously dismissed as taken from a non-appealable order, without costs and without disbursements.

For purposes of this appeal, the evidence will be viewed most favorably to the petitioner, the Attorney General. Respondent South Haven Houses Housing Development Fund Company, Inc. (South Haven) was organized for the purpose of sponsoring and developing a low income housing project in the Bronx. South Haven retained respondents Pagnoni and Hany Management Corporation (Hany) as its agents to rent apartments in the development. The agents collected deposits of $100 from each prospective tenant to be applied toward the payment of the first month's rent. Respondent Pagnoni opened an account in the name of South Haven with a branch of the appellant, National Bank of North America (Bank) and deposited the funds in that account. Subsequently, Pagnoni converted $10,950 of those deposits. He did not have corporate authorization from South Haven either to open the account or to withdraw the funds.

The petitioner brought this proceeding on behalf of the defrauded tenants under Executive Law § 63 subd. (12) and General Obligations Law § 7-107. The Court at Special Term granted injunctive relief against South Haven and its principals; it also directed the Bank to make restitution of the full amount converted by the agents. The overriding question presented upon review is whether the petitioner had legal standing to maintain this proceeding against the appellant Bank.

The Courts have repeatedly held that Executive Law § 63 subd. (12) may not properly be used by the petitioner to enforce the provisions of Article 7 of the General Obligations Law (Matter of People v. Parkchester Apt's. Co., 61 Misc.2d 1020, 307 N.Y.S.2d 741, aff'd 34 A.D.2d 1106, 311 N.Y.S.2d 822, aff'd 28 N.Y.2d 842, 322 N.Y.S.2d 74, 270 N.E.2d 900; Matter of People v. Parker, 30 N.Y.2d 964, 335 N.Y.S.2d 827, 287 N.E.2d 618; Matter of People v. Parker, 47 A.D.2d 611, 364 N.Y.S.2d 5, aff'd 38...