The facts of this matter have been stated in prior decisions and will be discussed only as necessary. The amended complaint largely concerns a mortgage, in the amount of $3.6 million (the Mortgage), on plaintiff Decana Inc.'s (Decana) principal asset, a luxury apartment building located at 10 East 62nd Street in New York, New York (the Property), held by defendant North Fork Bank (NFB), in exchange for a loan from NFB in the same amount (the Loan). In 2004, NFB assigned all of its interest in the Loan and Mortgage to Eastside Holdings, LLC (Eastside). [*2]

Decana is a subsidiary of Prestige Holdings Inc. (PHI)^[FN1], and PHI is owned by plaintiff Changole International B.V. (Changole). In 1996, Decana was directly owned by Changole. At that time, PHI was formed, and ownership of Decana and other United States corporations controlled by the family of third-party defendant Vassilios Manios was transferred to PHI. Defendant Spyro C. Contogouris (Contogouris) was appointed President and Secretary of PHI. Attorney Mark Krassner (Krassner), who had been working with the Manios family prior to 1996, was retained by Contogouris, and named sole Director.

In August of 2000, Krassner resigned as Director of PHI and Decana, and Contogouris was named Director of both corporations. In early 2002, Christos Contogouris, Contogouris's father, brought suit against the plaintiff corporations. Changole decided, by resolution of April 5, 2002, that Contogouris should be removed from his positions as Director of Decana and PHI to avoid any conflict of interest that might arise in his defending a law suit brought by his father.

When Contogouris refused to resign, PHI and Decana brought suit to confirm his removal. His removal from Decana was confirmed by the New York State Supreme Court, New York County, in September of 2002 (Index No. 108965/2002), and his removal from PHI was also allegedly confirmed by the Delaware Chancery Court several days later. After acquiring some of the books and records of Decana, the new principals of Decana purportedly discovered, for the first time, that Contogouris had executed two mortgages on the Property, including the Mortgage given to NFB.

The Loan and Mortgage were executed on April 4, 2001. According to the complaint, the transactions were made without the due authorization of Decana or PHI, and Contogouris utilized both a fraudulent corporate resolution of Decana, dated April 3, 2001, authorizing him to enter into the transaction with NFB (the Resolution), and an opinion letter prepared by NFB counsel and signed by Krassner without change, as the bases for the transactions. Contogouris signed the Resolution as holder of all shares of PHI, as Director of Decana, and, although he was not the Secretary, as Secretary of Decana.

The Loan proceeds were deposited in an NFB account, and diverted from that account to his own use. According to the complaint, Contogouris made payments on the Loan to NFB out of Decana funds before he was removed as an officer of Decana. Since his removal, as this court did not issue a temporary restraining order against NFB, Decana has continued to pay interest and principal on the Loan, totaling $1,104,277.09, as of the date of the complaint.

NFB and Eastside (as assignee of the Mortgage and Loan) now move for summary judgment dismissing the complaint, as against them, in its entirety. The primary target of the motion is the eighth cause of action that originally sought recovery for unjust enrichment, a declaration that the Loan is not payable by Decana, and return of all amounts previously paid to NFB under the Loan. Upon prior motion, the portion of the eighth cause of action that seeks recovery from NFB for unjust enrichment has been dismissed. See Decision and Order, March 9, 2005, Index No. 604247/02, J. Lowe III, Sequence No. 16 (herein, the Prior Decision).

Upon their own motion to for summary judgment, neither NFB nor Eastside have addressed any of the allegations made in the ninth (assisting and participating in Contogouris's breach of [*3]fiduciary duty to Decana and Prestige), tenth (assisting and participating in Contogouris's fraud and conversion of assets and properties of Decana and Prestige), or eleventh (commercial bad faith) causes of action. As a result, summary judgment on those causes of action, which requires the movant to demonstrate entitlement to judgment as a matter of law (CPLR 3212), must be denied.

The twelfth cause of action, relying on the validity of the eighth through eleventh causes of action, seeks an order: (I) enjoining NFB from encumbering or foreclosing on the Property; (ii) enjoining NFB from charging any interest rate penalties; (iii) ordering NFB to establish an escrow fund that will preserve payments made on the Loan pending resolution of the litigation; and (iv) enjoining NFB from taking any action on the Loan or the Mortgage until such time as the litigation is resolved.

With regard to the remaining prongs of the eighth cause of action, it is beyond cavil that Contogouris was a principal of Decana, with actual authority to bind Decana. Ripley v Storer, 1 Misc 2d 281, 289 (Sup Ct, NY County), affd 286 App Div 844 (1955) (corporate directors are not agents of the stockholders, but have original and undelegated powers that are conferred upon them by law). Here, as stated in the Prior Decision, plaintiffs brought an action in this court to enforce their decision to remove him as Director and President of Decana (Stavrou v Contogouris, Index No. 108965/02, Sup Ct, NY County, at 3). They cannot be heard to now say that he was not the Director or President of Decana. Moreover, Contogouris's actual authority is underscored by: (I) the Resolution, executed by Contogouris as Director, to engage in the Mortgage and Loan transactions; and (ii) a separate authorization executed on behalf of Decana directors to enter the transactions. Savino Affirmation, Exhibits A and H.

Plaintiffs rely, nonetheless, upon the unreported federal case, GMAC Mortgage Corp. of Pa. v Weisman (1998 WL 132791 [SD NY 1998]), to assert that because Contogouris did not believe he had actual authority, he did not. GMAC Mortgage Corp. of Pa. addresses the issue of a grant of authority by a principal to an agent. That matter is not at issue here. As stated above, and in the Prior Decision, Contogouris was not an agent of Decana. His belief, thus, is not relevant.

Similarly, plaintiffs' reliance on the decision in C.E. Towers Co. v Trinidad and Tobago (BWIA Intl.) Airways Corp. (903 F Supp 515, 523 [SD NY 1995]) is unwarranted. In that matter, the issue of implied authority was resolved by noting that "it is not a wild stretch of the imagination to believe the person who was in charge of North American Operations would be authorized to sign a lease extension relating to the North American headquarters, which he negotiated." Id. at 523. Similarly, here, is it not beyond reason that the Director and President of Decana could authorize the mortgaging of the Property.

Moreover, C.E. Towers Co. explicitly rejects the arguments set forth by plaintiffs here that NFB had an obligation to investigate Contogouris's background any further. Rather, the court in C.E. Towers Co. found (in the context of apparent authority) that "it is only when the transaction is extraordinary or so novel that it should alert the third party to the danger of fraud, that there is an additional duty to inquire into the agent's authority." Id. at 524. Here, not only is there actual authority established, but there is nothing extraordinary about the subject Mortgage on the property.

Plaintiffs also cite to Sardanis v Sumitomo Corp. (282 AD2d 322 [1st Dept 2001]) to argue that Contogouris was an "interested director" when he authorized the Loan and Mortgage transactions. Specifically, that case offers that "[u]nder Business Corporation Law §713, a self-dealing transaction not approved by the board of directors and the shareholders and not shown to be fair and reasonable' to the corporation is void." Id. at 324. Here, the transaction was not [*4]"self-dealing" as defined in BCL §713, because Contogouris was not a director, officer, employee, or beneficiary of NFB. An "interested" director has been defined as including a director who is an officer or director of another corporation "apparently involved in the questioned transaction." Rapoport v Schneider, 29 NY2d 396 (1972). Moreover, there is no allegation that the Loan or Mortgage were unfair in any way. See Sardanis, 282 AD2d at 324.

In essence, this matter involved two transactions. In the first, Contogouris executed the Mortgage and Loan on the Property with NFB. In the second, Contogouris allegedly elected to abscond with the Loan funds. The subsequent second transaction, though improper, cannot invalidate the prior first transaction. Indeed, it would be a dangerous marketplace if banks, having extended loans to customers, might face invalidation of transactions based on what the customers finally decided to do with the proceeds of a loan. Here, if Contogouris engaged, as alleged by plaintiffs, in waste or gift of corporate assets, plaintiffs' recovery lies against Contogouris. Plaintiffs' reliance on the rule that "waste or a gift of corporate assets are void acts and cannot be ratified by a majority of stockholders" (Aronoff v Albanese, 85 AD2d 3, 4 [2nd Dept 1982]) is unavailing vis-à-vis NFB or Eastside, as the Mortgage and Loan were not, in and of themselves, waste or gifting of Decana's assets; Contogouris could just as easily have used the funds for proper, as for improper, purposes.

As noted in the Prior Decision, "directors of a corporation have the power to do whatever is permitted by its certificate of incorporation or charter in the ordinary course of its business." Matter of Leventall, 241 App Div 277, 282 (1st Dept 1934) (citations omitted). Moreover, "there is a general presumption that the president of a corporation is clothed with the powers which, of necessity, inhere in the position of chief executive." Odell v 704 Broadway Condominium, 284 AD2d 52, 56 (1st Dept 2001); see also Prior Decision, at 6. Plaintiffs have made no valid showing that such power as normally inheres to a director and president did not inhere to Contogouris. There is, in essence, no genuine issue to be tried, and summary judgment dismissing the eighth cause of action should be granted. Di Sabato v Soffes, 9 AD2d 297, 300 (1st Dept 1959). In addition, as the twelfth cause of action relies directly on the validity of the eighth cause of action, it is also dismissed. I have considered plaintiffs' remaining arguments and find them to be without merit.

Accordingly, it is hereby

ORDERED that the motion of North Fork Bank and Eastside Holdings, pursuant to CPLR 3212, for summary judgment dismissing the Amended Complaint is granted to the extent that the eighth and twelfth causes of action are dismissed, and it is otherwise denied; and it is further

ORDERED that the action shall otherwise continue.