Opinion
020698/2009
06-18-2018
Alexander SKLAVOS, as Executor of the Estate of Edward Sklavos, Prime Real Estate Ventures, LLC, Lindsey Leigh, LLC, 401K Plan, Christina Swirni a/k/a Christini Smirni, Mark Styczen and Eve Styczen, Plaintiffs, v. OKI–DO LTD., and "John Doe No.1" through "Jane Doe #10, the last 10 names being fictitious and unknown to the Plaintiffs, the persons or parties intended being the occupants, tenants, persons or entities, if any, having or claiming an interest in or lien upon the mortgaged premises described in the verifies complaint, Defendants.
SIEGEL & REINER, LLP, Attorneys for Plaintiffs, By: Richard H. Del Valle, Esq., 900 Third Avenue, New York, NY 10022 SOLOMON & SIRIS, PC, Co–Counsel to Plaintiffs, By: Michael J. Siris, Esq., Garden City Center, 100 Quentin Roosevelt Boulevard, Suite 504, Garden City, NY 11530 ROSENBERG FELDMAN SMITH, LLP, Attorneys for Defendant, By: Michael H. Smith, Esq., Richard B. Feldman, Esq., 551 Fifth avenue, 24th Floor, New York, NY 10176
SIEGEL & REINER, LLP, Attorneys for Plaintiffs, By: Richard H. Del Valle, Esq., 900 Third Avenue, New York, NY 10022
SOLOMON & SIRIS, PC, Co–Counsel to Plaintiffs, By: Michael J. Siris, Esq., Garden City Center, 100 Quentin Roosevelt Boulevard, Suite 504, Garden City, NY 11530
ROSENBERG FELDMAN SMITH, LLP, Attorneys for Defendant, By: Michael H. Smith, Esq., Richard B. Feldman, Esq., 551 Fifth avenue, 24th Floor, New York, NY 10176
James Hudson, J.
As English society evolved, businesses grew beyond that of a sole proprietor such as the village smith or the itinerant weaver plying their trade in solitude. From the time some enterprising innkeeper employed the first ostler, the law was required to address the rights and responsibilities of the relationship between principal, employee and third parties. The Law of Agency was born. In contrast with Roman law, agency, as we understand it, was a product of the English Common law. It was a necessary component and support of a commercial system which, after a genesis of village to village trade, presumed to grow and fling itself across the seas (see Dalley, A Theory Of Agency Law , University of Pittsburgh Law Review, 2011, Vol.72 p.495). As the discussion below demonstrates, The Law of Agency has grown and adapted to changing conditions in the world of commerce. Its doctrines govern us to this day and decide the case at bar. Judge Learned Hand, of happy memory, best described the transition of this Law as society evolved:
"The responsibility of a master for his servant's act is not at bottom a matter of consent to the express act, or of an estoppel to deny that consent, but it is a survival from ideas of status, and the imputed responsibility congenial to earlier times, preserved now from motives of policy. While we have substituted for the archaic status a test based upon consent, i.e. , the general scope of the business, within that sphere the master is held by principles quite independent of his actual consent, and indeed in the face of his own instructions" ( Kidd v. Thomas A. Edison, Inc. , 239 F. 405, 407 [S.D.NY], aft, 242 F. 923 [2d Cir. 1917] ).
Initially the Court must thank Counsel, Mr. Siris and Mr. Del Valle for the Plaintiffs and Mr. Smith for the Defense for their eloquence on behalf of their respective clients. Such advocates honor the Court.
The Defendant OKI–DO Ltd. (hereinafter referred to as "OKI") is possessed in fee simple of a parcel of realty located at 2835 Shipyard Lane, East Marion, New York (hereinafter referred to as "The Property"). In 2007 the Plaintiffs loaned the Defendant a total of one million dollars which was secured by two mortgages for $500,000.00 each. The mortgages were originally executed on October 8th, 2007 and October 15th, 2007. They were consolidated into a single note and mortgage on the latter date via a Consolidation, Extension and Modification Agreement "CEMA" (Plaintiffs' Exhibit "6"). OKI's sole shareholder, officer and director, Dr. Kazuko Hillyer, did not appear at either of the closing dates. Instead the documents encumbering the property were executed by a Mr. Edward Stein acting as Attorney-in-fact pursuant to a Power of Attorney, purportedly given to him by Dr. Hillyer on behalf of OKI. The CEMA was not paid as per its terms and Plaintiffs commenced this action to foreclose upon the mortgage. In its defense, OKI contends that Mr. Stein did not have authority to mortgage the property on OKI's behalf and that the Power of Attorney dated October 4th, 2007 was forged. The Parties made successive motions for summary judgment which were denied by the Court on April 8th, 2010, April 23rd, 2010 (Whelan J) and April 26th, 2014 (Gazzillo J).
In support of their contention that the mortgage was properly executed and that Mr. Stein was authorized to act as OKI's agent, Plaintiffs cite to the authority found in: 212 Inv. Corp. v. Kaplan , 16 Misc 3d 1125 (a), *4, 847 NYS2d 905 [Sup Ct.NY Co.2007] ; ABN AMRO Mortgage Group, Inc. v. Stephens, et al. , 91 AD3d 801 [2nd Dept.2012] ; DeTata v. Tress , 4 AD2d 748 [2nd Dept.1957, app. dismissed 3 NY2d 920 [1957] ; George H.G. Heine v. Colton, Hartnick, Yamin & Sheresky, et al. , 786 F. Supp.360,[SDNY 1992]; Greenpoint Bank v. Nazzal , 287 AD2d 485 [2nd Dept.2001] affirming 2000 WL 36722476 [Sup.Ct Westchester Co.2000] ; In Re Mendelsohn , 2013 WL 3555690 [Surr. Ct. NY Co.2013] aft 116 AD3d 477 [1st Dept.2014], leave to appeal denied 24 NY3d 907 [2014] ; Leslie, Semple & Garrison, Inc. v. Gavit & Co., Inc. , 81 AD2d 950 [3rd Dept.1981] ; Matter of Estate of Charles White , 11 Misc 3d 1054 [A], 815 NYS2d 496 [Supt. Ct. Broome Co.2006] ; Matter of Simon , 44 AD2d 570 [2nd Dept.1974] ; Moffett v. Gerardi , 75 AD3d 496 [2nd Dept.2010] ; Morales v. Yaghoobian , 13 AD3d 424 [2nd Dept.2004] ; News Syndicate Co. v. Gatti Paper Stock Corporation , 256 NY 211 [1931] ; Pimpinello v. Swift & Co. , 253 NY 159 [1930] ; Pink, et al. v. Rome Youth Hockey Association, Inc., et al. , 41 NY3d 994 [2016]; Provident Bay Road, LLC v. NYSARC, Inc. 117 AD3d 1356 [3rd Dept. 2014] ; Rosen v. Rosen , 243 AD2d 618 [2nd Dept.1997] ; Rothschild v. Title Guarantee & Trust Co. 204 NY 458 [1912] ; Sack v. Drew Mortgage Associates, Inc. 1999 WL 1327906 [Mass Superior Court 1999] ; Sofio v. Hughs , 162 AD2d 518 [2nd Dept.1990] leave to appeal denied, 76 NY2d 712 [1990] ; Sorenson v. Bridge Capital Corp., et al. , 52 AD3d 265 [1st Dept.2008] ; Thomson v. Rubenstein , 31 AD3d 434 [2nd Dept.2006] ; Torres v. Ashmawy, MD, et al. , 24 Misc 3d 506 [Sup. Ct. Orange Co.2009] ; Woody's Lumber Co., Inc., v. Jayram , 2005 WL 6052930 [Sup. Ct. Nassau Co.2005], reargument denied, 2005 WL 6052928, aff'd 30 AD3d 590 [2nd Dept.2006] ; WWW Associates, Inc. v. Giancontieri , 77 NY2d 157 [1990] ; Young v. Lacy , 120 AD3d 1561 [4th Dept.2014].
The Defendant, however, argues that controlling authority serves to bar the Plaintiffs' claim and cites to the holdings ( ABN Amro Mortgage Group, Inc. v. Stephens , 91 AD3d 801 [2nd Dept.2012] ; American Motorists Insurance Co. v. Keep Services, Inc. , 63 AD3d 865 [2nd Dept.2009] ; Bayview Loan Servicing, LLC v. Sulyman , 130 AD3d 1197 [3d Dept.2015] ; CitiMortgage, Inc. v. Finocchiaro , 2013 WL 138541 [Sup. Ct. Richmond Co.2013] ; Collision Plan Unlimited v. Bankers Trust Co. , 63 NY2d 827 [1984] ; Craighead v. Peterson , 72 NY 279 [1878] ; Davis v. Dunnet , 239 NY 338 [1925, Pound J.]; Farmer v. National Life Ass'ns of Hartford, Conn. , 50 F. 829 [EDNY 1892] ; First National Bank of Nevada v. Williams , 74 AD3d 740 [2nd Dept.2010] ; Ford v. Unity Hospital , 32 NY2d 464 [1973] ; Goldstein v. Block , 288 AD2d 182 [2nd Dept. 2001] ; Grasso v. Fiumara , 167 AD2d 510 [2nd Dept.1990] ; Greenpoint Bank v. Nazzal , 2000 WL 36722476 [Sup Ct. Westchester Co. 2000] aff'd 287 AD2d 485 [2nd Dept.2001] ; Greenpoint v. Parissi , 256 AD2d 548 [2nd Dept.1998] ; Hudson Enterprises, Ltd v. Wasserman , 56 AD2d 550 [2nd Dept.1998] ; Hoffman v. Kraus , 260 AD2d 435 [2nd Dept.1999] ; In the Matter of Batlas , 144 AD3d 791 [2nd Dept.2016] ; In Re Conklin , 48 Misc 3d 291 [Surr. Ct. Nass. Co.2015] ; In the Matter of Goetz , 8 Misc 3d 200 [Surr. Ct Westchester Co. 2005] ; In Re Kislak , 7 Misc 3d 889 [Surr. Ct NY Co.2004] ; In Re McArthur , 173 AD 517 [3rd Dept.1916] ; In Re Mendelsohn , supra ; Kluge v. Fugazy 145 AD2d 537 [2nd Dept.1988] ; Morgold, Inc. v. ACA Galleries, Inc. , 283 AD2d 407 [2nd Dept.2001] ; Neildan Construction Corp. v. Angona , 209 AD2d 389 [2nd Dept.1994] ; Pebble Realty v. Estate of Darren Bryant , 11/20/2014 NYLJ 14, Col 5 [Surr. Ct. Queens Co.]; Porges v. United States Mortgage & Trust Co. , 203 NY 181 [1911] ; Renzi v. Aleszczyk , 44 AD2d 648 [4th Dept.1974] ; Taylor v. Commercial Bank , 174 NY 181 [1903] ; US v. Campola , 554 F. Supp. 20 [NDNY 1982] ; WWW Associates, Inc. v. Giancontieri , supra ] ). All of the above mentioned case law were of guidance to the Court as it made its determination. It was not necessary, however, to discuss all of these cases in this decision.
This Court conducted a non-jury trial to resolve the issues of fact.
Initially, Plaintiffs offered the testimony of Ms. Anna Maria Curella, the Deputy County Clerk of Suffolk County. Ms. Curella is the Supervisor of the Recording Department and described the methods used in recording Powers of Attorney. She also indicated that the regular course of business was for the Suffolk County Clerk to mail a copy of a filed Power of Attorney to the Principal. There was nothing asked in cross-examination to dispute that the October 4th, 2007 Power of Attorney (Plaintiffs' Exhibit "2") was mailed to Dr. Hillyer at her home address.
Plaintiffs called Dr. Hillyer to the stand. She stated, inter alia , that she had been OKI's sole shareholder and officer for many years, including the time period in which OKI purchased 2835 Shipyard Lane, Greenport, New York. OKI purchased the property on March 15th,1999 (Plaintiffs' Exhibit "1"). Dr. Hillyer described her various properties and business interests which demonstrated that she is a sophisticated businessperson. During the course of running her businesses, Dr. Hillyer employed a financial advisor, Mr. Ed Stein. Dr. Hillyer admitted that she had given Mr. Stein a Power of Attorney in July of 2007 (Plaintiffs' Exhibit "15").
There was some confusion as to the date of the document since it was marked 2008. Testimony revealed this to be a typographical error (or a change after the fact) and the actual date was 2007. This document was entitled "Durable General Power of Attorney."
Dr. Hillyer's familiarity with Powers of Attorney was manifested by a series of prior Power of Attorneys' that she had executed over the years in the course of running her businesses. (Plaintiffs' Exhibits "11" and "12").
Dr. Hillyer was questioned regarding the mortgages for 2835 Shipyard Lane. She categorically denied having authorized Mr. Stein to obtain a mortgage for the locus in quo . When shown what purported to be the Power of Attorney she gave to Mr. Stein for the transactions of October 8th and October 15th (Plaintiffs' Exhibit "2"), Dr. Hillyer denied executing it. Indeed, she claimed that she knew nothing of the transaction at all and that she had never received the million dollars or any portion thereof. Dr. Hillyer declared that she became aware of the CEMA's existence only when foreclosure proceedings were commenced against OKI in 2009.
Plaintiffs and the Defendants also presented the testimony of Mr. Ronald Eletto, Dr. Hillyer's Accountant for the past fifteen years. When shown the Power of Attorney used by Mr. Stein at the closing (Plaintiffs' Exhibit "2") he denounced his purported notarized signature as a forgery. He did, however, identify the notary stamp used on this document as belonging to him. When asked: "Did anyone else have access to your notary stamp?"... he answered "No" (Transcript pp.95–96). Mr. Eletto also testified that on October 3rd, 2007 he met with Dr. Hillyer and notarized another Power of Attorney (Defendant's Exhibit "J") which revoked all previous authorizations from OKI to any purported agents.
Plaintiffs also called Mr. John Steinberg. He stated that he was the owner of Prime Real Estate Ventures LLC. After being shown Court Exhibits I and II, the Pleadings in this case, Mr. Steinberg demonstrated a familiarity with the two loans which are the subject of the Plaintiffs' claims. The terms provided for the loan to be for a period of one year. When the CEMA note became due, the interest had been paid but the principal was not remitted as per the terms of the note.
Mr. Stuart Adler then testified on Plaintiffs' behalf. In 2007 he took part in the closing for OKI regarding the mortgage for 2835 Shipyard Lane. The signing took place at Mr. Adler's office in Carle Place. The documents executed included: Plaintiffs' Exhibit "4", a mortgage by OKI in favor of Plaintiffs; Plaintiffs' Exhibits "3" and "5", notes in the amount of $500,000.00 each secured by a mortgage; and Plaintiffs' Exhibit "6", the Consolidated Extension and Modification Agreement (CEMA) which combined two mortgages into one for the purpose of minimizing the mortgage tax. The closings took place on October 8th and October 15th of 2007. The terms of the CEMA obliged OKI to pay 14% (fourteen percent) interest for a one year term. The money was wired by Mr. Adler to a bank account whose number was provided by Mr. Stein.
Mr. Adler stated that Mr. Stein signed all the requisite documents using the same Power of Attorney form (Plaintiffs' Exhibit "2") on both dates. The reason for the separate dates was that not all of the Plaintiffs had appropriated the total sum agreed upon for the loan by October 8th. On cross-examination it was revealed that the witness had signed the various documents on behalf of the Plaintiffs' despite the absence of notarized authorizations for some of those individuals. Additionally, Mr. Adler recalled that the closing was originally set for October 4th but was rescheduled because the Power of Attorney was not specific to the transaction. Mr. Adler also indicated that he had not seen, nor was even aware of, the Power of Attorney from July 3rd 2017.
Other than the testimony of Dr. Hillyer and Mr. Eletto, the Defendant did not call any witnesses and chose to rely on certain documentary exhibits as well as the evidence elicited during cross-examination.
In assessing the credibility of the witnesses, the Court is obliged to apply the same criteria as a lay person jury of six. This includes the physical demeanor of the witness on the stand ( People v. Ya-ko Chi , 72 AD3d 709, 710, 898 N.Y.S.2d 619, 621 [2nd Dept. 2010]; see People v. Mateo , 2 NY3d 383, 410, 779 N.Y.S.2d 399, 811 N.E.2d 1053, cert. denied 542 U.S. 946, 124 S.Ct. 2929, 159 L.Ed.2d 828 ; People v. Bleakley , 69 NY2d 490, 495, 515 N.Y.S.2d 761, 508 N.E.2d 672 ] ).
Applying this criteria, the Court found the demeanor of Dr. Hillyer and Mr. Eletto to be very poor. Their answers were evasive, inconsistent with each other, illogical, and colored by self-interest. By way of example, Dr. Hillyer testified at trial that she had not read the July 3rd, 2007 Power of Attorney prior to signing it (March 13th, 2017 Transcript p. 47). This was at a variance with her deposition testimony. Such a statement also was belied by her established business acumen. In short the testimony Dr. Hillyer and Mr. Eletto provided was of little utility. The Court shall speak plainly. As to the execution of the July 3rd 2007 (Plaintiffs' Exhibit "15"), October 3rd, 2007 (Defendant's Exhibit "J") and October 4th, 2007 (Plaintiffs' Exhibit "2") Power of Attorney, this Court finds that Dr. Hillyer and Mr. Eletto testified falsely. Under the doctrine of falsus in uno , their testimony, inasmuch as it favored the Defendant's claim, is discarded ( Washington Mut. Bank v. Holt , 113 AD3d 755, 979 N.Y.S.2d 612 [2nd Dept. 2014] ). By contrast, the testimony of Ms. Curella, Mr. Steinberg and Mr. Adler was presented in a forthright, consistent and hence credible manner. The issue then is whether the testimony of the Plaintiffs' witnesses, coupled with the documentary evidence, sustains the Plaintiffs' claims.
Defendant contends that the action must be dismissed for failing to join necessary parties, citing to RPAPL Sec.1311, and Bayview Loan Servicing, LLC v. Sulyman , 130 AD3d 1197, 14 N.Y.S.3d 188 (3d Dept.2015).
In that case the Court held:
"In an action to foreclose a mortgage, all parties having an interest, including persons holding title to the subject premises, must be made a ‘party ... to the action’ " ( Home Sav. of Am. v. Gkanios , 233 AD2d 422, 422 [1996], quoting RPAPL 1311 [1 ]; see Polish Natl. Alliance of Brooklyn v. White Eagle Hall Co . , 98 AD2d 400, 403–404 [1983] ).
Although the Defendant in Sulyman did not specifically raise the argument that Decedent's Estate was a necessary party to the instant action..."the absence of a necessary party may be raised at any stage of the proceedings, by any party or by the court on its own motion" ( Matter of Estate of Prospect v. New York State Teachers' Retirement Sys. , 13 AD3d 699, 700 [2004] [internal quotation marks and citation omitted]; see Matter of Lezette v. Board of Educ., Hudson City School Dist. , 35 NY2d 272, 282 [1974] )." ( Id. at 1198). The Sulyman decision is clearly distinguishable from the facts before us. In the case at bar, the named Plaintiffs' alleged a series of assignments which resulted in the named Plaintiffs' being less in number than the original Mortgagees. Other than the post trial argument, the Defendant has not produced a scintilla of evidence to demonstrate that the original note holders were necessary parties.
Defendant also contend that Plaintiffs, particularly Mark and Eve Styczen, have failed to prove standing, and that there is a gap in the chain of title, citing to Kluge v. Fugazy 145 AD2d 537 (2nd Dept.1988), CitiMortgage, Inc. v. Finocchiaro , 2013 WL 138541 [Sup. Ct. Richmond Co.2013] ).
The Plaintiffs have satisfied their burden of demonstrating standing. As far as the Styczens are concerned, the Defendant's fourth affirmative defense states that "Mark and Eve Styczen were on notice that the mortgage assigned to them was a fraudulent transaction." Based on this language in the answer, the Defendant cannot question the Styczen standing as holders of the note and mortgage. Moreover, the facts in Kluge and Finocchiaro are so different from those in the instant matter as to render those cases inapplicable. Instead, the Court is guided by the holding in Citigroup v. Kopelowitz , 147 AD3d 1014, 48 N.Y.S.3d 223 (2nd Dept. 2017) wherein the Appellate Court stated:
"by failing to raise the issue of the plaintiff's standing to commence this action in their answer (see CPLR 3018 [b] ), or make a pre-answer motion to dismiss based on lack of standing [see CPLR 3211[e], [defendant] waived the issue [see JP Morgan Chase Bank, N.A. v. Butler , 129 AD3d 777, 780, 12 N.Y.S.3d 145 ; Wells Fargo Bank Minn., N.A. v. Mastropaolo , 42 AD3d 239, 244–245, 837 N.Y.S.2d 247 ] ). Under such circumstances, the plaintiff was not required to establish its standing in order to demonstrate its prima facie entitlement to judgment as a matter of law (see Deutsche Bank Natl. Trust Co. v. Islar , 122 AD3d 566, 567, 996 N.Y.S.2d 130 )." ( Id. at 1015 ).
Based on the rule in the Kopelowitz case, the Court finds that Defendant's argument concerning standing has been waived.
The resolution of this case turns on the question of whether Mr. Stein was an agent of OKI at the time of the October 2007 closings and whether he possessed authority to bind OKI by his actions. This requires a discussion of the Law of Agency.
Agency can be created in various ways, by actual authority, inherent authority, apparent authority or by ratification ( Restatement of Agency 2nd §§ 7,8,8A and 82, 84). Once agency comes into exist, the powers of the agent must be determined. "The scope of any authority must, of course, in the first place, be measured, not alone by the words in which it is created, but by the whole setting in which those words are used, including the customary powers of such agents" ( Kidd v. Thomas A. Edison, Inc. supra , at 406 citing Lowenstein v. Lombard, Ayres & Co., 164 NY 324 ; Lamon v. Speer Hardware Co., 198 Fed. 453, 119 C.C.A.1.).
Defense Counsel raises the specter of fraud on the part of Mr. Stein in an attempt to shield OKI from agency liability. This argument is chimerical. A principal can still be obliged to answer for the "the fraudulent acts of its agent if the agent is acting within the scope of his actual or apparent authority" ( Heine v. Colton, Hartnick, Yamin & Sheresky , 786 F. Supp. 360, 368 (S.D.N.Y.1992) ; citing Herbert Constr. Co. v. Continental Ins. Co. , 931 F.2d 989, 993 (2d Cir.1991) ; Citibank, N.A. v. Nyland (CF8) Ltd. , 878 F.2d 620, 623–24 (2d Cir.1989).
We must answer the question of whether Mr. Stein was possessed of apparent authority. Mr. Smith skillfully attempts to persuade the Court that Mr. Stein's lack of a properly executed Power of Attorney at the October 8th and October 15th closings demonstrates a lack same.
In the case of Hallock v. State , 64 NY2d 224, 485 N.Y.S.2d 510 (1984), the Court described the prerequisites necessary for apparent authority to come about:
"Essential to the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction. The agent cannot by his own acts imbue himself with apparent authority. Rather, the existence of 'apparent authority' depends upon a factual showing that the third party relied upon the misrepresentation of the agent because of some misleading conduct on the part of the principal-not the agent ( Ford v. Unity Hosp. , 32 NY2d 464, 473, 346 N.Y.S.2d 238, 299 N.E.2d 659 ; see also , Restatement, Agency 2d, § 27 ). Moreover, a third party with whom the agent deals may rely on an appearance of authority only to the extent that such reliance is reasonable (see Wen Kroy Realty Co. v. Public Nat. Bank & Trust Co. , 260 NY 84, 92–93, 183 N.E. 73 ; Restatement, Agency 2d , § 8, Comment c; Conant, Objective Theory of Agency: Apparent Authority and the Estoppel of Apparent Ownership , 47 Neb. L. Rev. 678, 681).'" ( Id. at 231 ).
In relying on the apparent authority of an agent to bind a principal, a third party must remember the admonition that "One who deals with an agent does so at his [or her] peril, and must make the necessary effort to discover the actual scope of authority" ( ER Holdings, LLC v. 122 W.P.R. Corp. , 65 AD3d 1275, 1277, 887 N.Y.S.2d 138, 139[2nd Dept. 2009] citing Fitzgibbon v. Abatelli Real Estate , 214 AD2d 642, 644, 625 N.Y.S.2d 276, quoting Ford v. Unity Hosp., supra at 472] ).
In making this contention, Defense Counsel points out the errors in the October 4th 2007 Power of Attorney (Plaintiffs' Exhibit "2") such as the incorrect property address and the incomplete notary information. The Court agrees that General Obligations Law § 5–1501(1) should be strictly construed and that a Power of Attorney not prepared in accordance with its terms should be rendered invalid, (see In re Marriott , 86 AD3d 943, 927 N.Y.S.2d 269 [4thDept.2011] ). Additionally, the Defense argues that the circumstances surrounding the mortgage transaction created a duty to inquire as to Mr. Stein's authority to act on OKI's behalf. It is beyond cavil that when a party relies upon "the doctrine of apparent authority to justify the propriety of its actions [that party] concomitantly assumed a duty of reasonable inquiry as to [the agent's] actual perimeter of authority" ( Collision Plan Unlimited, Inc. v. Bankers Tr. Co., 63 NY2d 827, 830–31, 482 N.Y.S.2d 252 [1984] ).
Based upon the forgoing, the Court agrees with the Defense's position that the Plaintiffs have failed to prove Mr. Stein's apparent authority under the October 4th 2007 Power of Attorney. Standing alone, this document (Plaintiffs' Exhibit "2") provides no succour for the Plaintiffs.
The Defense's success on this one point, however, does not result in a favorable outcome for its cause. Regardless of Mr. Stein's lack of apparent authority under the October 4th 2007 Power of Attorney, the Plaintiffs have proven that his powers as OKI's agent at the time of the October closing already existed as a result of actual authority. This principal-agent relationship came into being as a result of the execution of the July 3rd 2007 Power of Attorney.
Actual authority confers upon an agent the power "to do an act or to conduct a transaction on account of the principal which, with respect to the principal, he is privileged to do because of the principal's manifestation to him" ( Minskoff v. American Exp. Travel Related Servs. Co. , 98 F3d 703, 708 [1996] ; quoting Restatement of Agency 2d § 7 comment a [1958] ). As the Court stated in New York Community Bank v. Woodhaven Assocs., LLC , 137 AD3d 1231, 29 N.Y.S.3d 377 (2nd Dept. 2016) :
"Actual authority granted to an agent to bind his principal is created by direct manifestations from the principal to the agent, and the extent of the agent's actual authority is interpreted in the light of all the circumstances attending these manifestations, including the customs of business, the subject matter, any formal agreement between the parties, and the facts of which both parties are aware" ( Id. at 1233 ) citing Demarco v. Edens , 390 F.2d 836, 844 ; see Wen Kroy Realty Co. v. Public Natl. Bank & Trust Co. , supra at 89).
In the instant controversy, the actual authority for Mr. Stein to act on behalf of OKI is found in Plaintiffs' Exhibit "15", the July 3rd 2007 document entitled a "Durable Power of Attorney." Let us examine its specific wording:
"I Kazuko Tatsumura Hillyer, having an address at...hereby make, constitute and appoint Edward T. Stein as my attorney-in-fact TO ACT IN MY NAME, PLACE AND STEAD in any way which I myself could do, if I were personally present with respect to the following matters as each of them is defined in Article 5, Title 15 of the New York General Obligations Law, to the extent that I am permitted by law to act through an agent."
This section is followed by a paragraph labeled "DIRECTIONS" which inform the person executing document to initial the desired type of transaction that the principal wishes the agent to perform. The sole category initialed on Exhibit "15" is the category "real estate transactions." The document further authorizes Mr. Stein to"
"...sell, transfer, convey, or otherwise dispose, execute and sign on my behalf any and all agreements, documents and other instruments relating thereto, including without limitation contracts of sale, brokerage agreements, deeds, assignments, consents, releases, escrow agreements, affidavits and tax returns, and to take such other actions relating to said real property and the sale thereof as my attorney-in-fact may deem advisable and: Execute all Corporate transactions of OKI–DO LTD, a New York Corporation with, on my behalf, as President."
The document also relates that it may be revoked by Dr. Hillyer at any time. The Document was signed by Dr. Hillyer as President of "OKI–DO Ltd. and notarized by Ms. Jacqueline Olaso.
Both the Plaintiffs and the Defendant rely on the decision W.W.W. Assocs., Inc. v. Giancontieri , 77 NY2d 157, 565 N.Y.S.2d 440 (1990) to guide us in interpreting Plaintiffs' Exhibit "15." As to the issue of parole evidence, the Court stated:
"A familiar and eminently sensible proposition of law is that, when parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms. Evidence outside the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing (see, e.g., Mercury Bay Boating Club v. San Diego Yacht Club , 76 NY2d 256, 269–270 ; Judnick Realty Corp. v. 32 W. 32nd St. Corp. , 61 NY2d 819, 822 ; Long Is. R. R. Co. v. Northville Indus. Corp., 41 NY2d 455 ; Oxford Commercial Corp. v. Landau , 12 NY2d 362, 365 ). That rule imparts "stability to commercial transactions by safeguarding against fraudulent claims, perjury, death of witnesses ... infirmity of memory ... [and] the fear that the jury will improperly evaluate the extrinsic evidence" (Fisch, New York Evidence § 42, at 22 [2d ed]." ( Id. 162 ).
The Giancontieri decision prevents this Court from considering Dr. Hillyer's testimony that she believed the July 2007 Power of Attorney was only for a period of ninety days. Both the July and October 2007 Powers of Attorney are clear as written and require no extrinsic evidence to explain them. To hold otherwise would serve to allow parol evidence to create an ambiguity where none existed before. This is clearly impermissible under the rule in Giancontierri (at 1163) as well as the rule in Intercontinental Planning v. Daystrom, Inc., 24 NY2d 372, 300 N.Y.S.2d 817 [1969] ).
Plaintiffs urge the Court to adopt the reasoning found in In Re Mendelsohn , 2013 WL 3555690 [Surr.Ct. NY Co.2013] aff'd 116 AD3d 477 [1st Dept.2014], leave to appeal denied 24 NY3d 907 [2014]. In Re Mendelsohn was a turnover proceeding in which Petitioner sought to invalidate a Power of Attorney given to the Respondent by the decedent testator. In 2000 the Decedent had given the Respondent a Power of Attorney with broad powers relating to managing her financial affairs. In 2009 another Power of Attorney was given to the Respondent. The Petitioner argued that the execution of a subsequent Power of Attorney constituted a revocation of the prior instrument. The Court disagreed with this proposition and held that the first Power of Attorney remained valid so long as there was no revocation on the part of the principal. Revocation occurs when the principal expresses "...words or conduct which are inconsistent with the continuation of [the agent's] authority" ( Id. ) citing Zaubler v. Picone , 100 AD2d 620, 473 N.Y.S.2d 580 [2d Dept. 1984] ); Restatement, Agency 3d § 3.10 ). In cases where the second Power of Attorney "conferred like authority" the first document remained valid ( Id. ) citing Zaubler at 621).
Defense Counsel attempts to distinguish the Mendelsohn decision on the basis of his claim that the October 4th, 2007 Power of Attorney was forged. As noted above, however, this Court has specifically discounted the defendant's claim of forgery.
Plaintiffs also argue that OKI's liability has been established under the Doctrine of Ratification. We agree.
In the absence of actual or apparent authority, an agency by ratification will arise if it is proven that a principal "knew of its agent's practice [and] accepted the benefits" ( New York State Med. Transporters Ass'n, Inc. v. Perales , 77 NY2d 126, 131, 564 N.Y.S.2d 1007 [1990] citing 57 N.Y.Jur.2d , Estoppel, Ratification, and Waiver, § 76 ). As pointed out by Messrs. Siris and Del Valle in their Post–Trial Brief, this doctrine was best expressed in the case of Rothschild v. Title Guarantee & Tr. Co. , 204 NY 458, 97 N.E. 879 (1912) :
"A principle of law is: Where a person wronged is silent under a duty to speak, or by an act or declaration recognizes the wrong as an existing and valid transaction, and in some degree, at least, gives it effect so as to benefit himself or so as to affect the rights or relations created by it between the wrongdoer and a third person, he acquiesces in and assents to it and is equitably estopped from impeaching it" ( Id. at 461 ).
Applying these elements to our case, it becomes evident that the Defendant's position is untenable. The reliable proof adduced at trial demonstrates that Dr. Hillyer was aware of the Mortgage on the locus in quo by no later than February of 2008 and had discussed with Mr. Eletto a revocation of Mr. Stein's Power of Attorney. She remained silent. "Qui tacit consentire videtur " ( People ex rel. Niebuhr v. McAdoo , 184 NY 304, 307, 77 N.E. 260, 261 [1906], is an ancient doctrine that retains a modern voice ( Beutel v. Beutel , 55 NY2d 957, 449 N.Y.S.2d 180 [1982] ; Provident Bay Road, LLC v. NYSARC, Inc. 117 AD3d 1356, 987 NYS2d 124 [3d Dept.2014] ; Stacom v. Wunsch , 162 AD2d 170, 556 N.Y.S.2d 303 [1st Dept.1990] ). Having been aware of Mr. Stein's actions in mortgaging the Shipyard Lane property, Dr. Hillyer, as the sole owner of OKI, was obliged to speak out. In failing to do so, OKI ratified Mr. Stein's actions and became bound by it.
By his silence he condones
The Court has considered the remaining arguments and case law of the Defense. Although Mr. Smith has presented them with commendable zeal, they fail to persuade the Court.
Therefore, the Court finds that the Plaintiffs' have proven, by a fair preponderance of the credible evidence, that the Defendant, acting through its owner Dr. Hillyer, executed a valid Power of Attorney on July 3rd, 2007 which endowed Mr. Stein to act as its agent to engage in real estate transactions on its behalf, including the borrowing of money, and executing notes and mortgages to secure said indebtedness. Thereafter, Mr. Stein obtained the sum of One Million Dollars from the Plaintiffs (and their predecessors in interest) and secured this debt by mortgaging the realty which is the subject of this action, 2835 Shipyard Lane, Greenport, New York. This mortgage is witnessed by the document ("CEMA") executed on October 15th, 2007. The mortgage was not paid as per its terms and the Defendant is now in default of its obligation. Plaintiffs have proven that they are entitled to an Order of Reference directing a Referee to ascertain and compute the total sum due and owing. When the Referee's report is prepared and accepted, the Court will award Plaintiffs a Judgment of Foreclosure directing the premises be sold at public auction to satisfy the ultimate debt.
Submit Order of Reference on Notice.