Geller v. Fairmont Associates

• Decision Date: 04 April 1991
• Citation: 568 N.Y.S.2d 202,172 A.D.2d 915
• Parties: James A. GELLER, doing business as Fairmont Estates, Appellant, v. FAIRMONT ASSOCIATES, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 202

568 N.Y.S.2d 202

172 A.D.2d 915

James A. GELLER, doing business as Fairmont Estates, Appellant, v. FAIRMONT ASSOCIATES, Respondent.

Supreme Court, Appellate Division,

Third Department.

April 4, 1991.

Heller, Horowitz & Feit, P.C. (Richard F. Horowitz, of counsel), New York City, and Howard S. John, Kingston, for appellant.

Siller, Wilk & Mencher (Peter T. Shapiro, of counsel), New York City, and Rusk, Wadlin, Heppner & Martuscello, Kingston, for respondent.

Before MAHONEY, P.J., and WEISS, MIKOLL, YESAWICH and CREW, JJ.

YESAWICH, Justice.

Appeal from an order of the Supreme Court (Bradley, J.), entered June 26, 1990 in Ulster County, which, inter alia, granted defendant's cross motion for summary judgment and declared that plaintiff's mortgage debt was subject to prepayment.

Plaintiff holds a purchase money mortgage on a 74-unit garden apartment complex located in the City of Kingston, Ulster County. Paragraph 11(a) of the rider to the contract of sale specifically provides that the "[m]ortgagor shall have the right to prepay any principal balance, in whole or in part, at any time or from time to time, without penalty". The mortgage, however, contains no similar provision.

Defendant, as the mortgagor, decided to sell its interest in the property and requested a payoff figure from plaintiff. The latter responded that the mortgage was not prepayable. After defendant failed to make several mortgage payments, plaintiff commenced this action seeking their recovery, ¹ a declaration that the mortgage was not prepayable, and counsel fees. After issue was joined, both parties moved for summary judgment; Supreme Court granted defendant's cross motion and declared the mortgage prepayable.

At issue is whether a mortgagor may satisfy his payment obligation prior to its stated maturity date when the contract of sale includes a prepayment provision, but the mortgage itself does not. It is settled law that unless either the mortgage instrument or the parties' conduct permit prepayment, the mortgagor has no such right (Matter of Arthur v. Burkich, 131 A.D.2d 105, 106, 520 N.Y.S.2d 638).

While it is generally true, as plaintiff suggests, that because the contract of sale merged into the deed and did not survive the closing, it is inadmissible in evidence. That is not the case when the parties manifest an intent to have the contract's provisions survive (see, Summit Lake Assocs. v. Johnson, 158 A.D.2d 764, 766, 551 N.Y.S.2d 357; Davis v. Weg, 104 A.D.2d 617, 619, 479 N.Y.S.2d 553). Here, paragraph 7 of the rider to the contract explicitly provided that "[a]ll representations of Seller set forth in the Contract and the Rider, except those representations set forth as paragraph 7, 8, 9, 10 and 11 of the Contract will survive the closing" (emphasis supplied). Because the prepayment provision, paragraph 11(a) of the rider, is not listed among those provisions excluded, it was obviously meant to survive. We do not subscribe to plaintiff's argument that paragraph 11(a) of the rider is not a "representation" and therefore was not intended to survive. But irrespective of whether the prepayment option may be considered a representation, it is apparent from the above-quoted language that the parties used the term interchangably with the term paragraph.

It is also urged by plaintiff that the contract of sale is inadmissible...