Arthur v. Burkich
| Decision Date | 22 October 1987 |
| Parties | In the Matter of Edwin J. ARTHUR, et al., Respondents, v. Loretta M. BURKICH, Appellant. |
| Court | New York Supreme Court — Appellate Division |
Williams & Du Brin (Frank J. Williams, of counsel), Albany, for appellant.
Keith M. Ferrara (Robert M. Cohen, of counsel), Saratoga Springs, for respondents.
Before KANE, J.P., and MAIN, WEISS, YESAWICH and LEVINE, JJ.
Petitioners purchased a 12-unit apartment building in the City of Saratoga Springs, Saratoga County, from respondent under an installment sales contract entered into in 1984. As dictated by the agreement, upon passage of title the balance due on the transaction, $123,631.38, was secured by a purchase money mortgage. The mortgage, dated January 11, 1986, provided for the payment of $25,000 in varying amounts on June 1 of 1986, 1987 and 1988, together with 36 monthly payments of $1,053.22 commencing June 1, 1986 and a balloon payment on June 1, 1989 at the end of the term, all with an annual interest rate of 12%. Approximately three months after the mortgage was executed, petitioners, desiring to transfer title to the property, sought to satisfy the mortgage and tendered a check in an amount calculated to cover the outstanding principal and interest due thereon as of that date. Respondent refused the tendered payment, explaining that reinvesting the proceeds elsewhere would only yield a return of 7 1/2%.
Petitioners then made this application pursuant to RPAPL 1921 to compel respondent to accept payment in satisfaction of the mortgage and to execute a satisfaction of the mortgage in recordable form. County Court denied respondent's motion to dismiss and granted petitioners the relief they sought. In doing so, the court refused to consider parol evidence indicating in unmistakable terms that before the mortgage was executed, respondent was unamenable to the inclusion of any provision in the mortgage instrument allowing for prepayment of the mortgage. Respondent appeals.
It has been settled law since the early 19th century that a mortgagor has no right to pay off his obligation prior to its stated maturity date in the absence of a prepayment clause in the mortgage or contrary statutory authority (Missouri, K. & T. Ry. Co. v. Union Trust Co., 156 N.Y. 592, 599, 51 N.E. 309; Lisman v. Michigan Peninsular Car Co., 50 App.Div. 311, 315, 63 N.Y.S. 999; see, Annotation, Construction and Effect as to Interest Due of Real Estate Mortgage Clause Authorizing Mortgagor to Prepay Principal Debt, 86 ALR3d 599 § 2[a] ). Unless the right to prepay is readily discernible from the mortgage instrument (see, Matter of Davlick Constr. Corp. v. Krohn Assoc., 40 Misc.2d 96, 242 N.Y.S.2d 647) or from the parties' conduct (see, Lyons v. National Sav. Bank of City of Albany, 280 App.Div. 339, 113 N.Y.S.2d 695; Feldman v. Kings Highway Sav. Bank, 278 App.Div. 589, 102 N.Y.S.2d 306, affd. 303 N.Y. 675, 102 N.E.2d 835), the payment schedule is to be enforced as agreed upon.
The mortgage and installment sales contract in issue, neither of which contains a prepayment clause, explicitly set out when and at what rate the indebtedness is to be paid. Even if the payment schedule is not considered an enforceable term of the contract, consistent with the intent of the parties not to allow prepayment, the parol evidence disclosing that respondent rejected a mortgage instrument proferred by petitioners on the single ground that it permitted prepayment of the mortgage should have been resorted to for it explains away any ambiguity (see, Matter of Surrey Strathmore Corp. v. Dollar Sav. Bank of N.Y., 36 N.Y.2d 173, 176, 366 N.Y.S.2d 107, 325 N.E.2d 527).
To allow prepayment where, as here, that right has not been reserved works an unprincipled contract law result in that it condones a unilateral change in the terms of the contract (see, ...
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