Nassau Trust Co. v. Montrose Concrete Products Corp.

• Decision Date: 13 May 1982
• Citation: 451 N.Y.S.2d 663,436 N.E.2d 1265,56 N.Y.2d 175
• Parties: , 436 N.E.2d 1265 NASSAU TRUST COMPANY, Respondent, v. MONTROSE CONCRETE PRODUCTS CORP., Appellant, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

Page 663

451 N.Y.S.2d 663

56 N.Y.2d 175, 436 N.E.2d 1265

NASSAU TRUST COMPANY, Respondent, v. MONTROSE CONCRETE PRODUCTS CORP., Appellant, et al., Defendants.

Court of Appeals of New York.

May 13, 1982.

Carter B. Simpson and Terence F. Gilheany, New York City, for appellants.

Charles M. Schutzman, New York City, for respondent.

OPINION OF THE COURT

MEYER, Judge.

In a foreclosure action based upon nonpayment, the mortgagee's oral waiver of the right to accelerate the principal and foreclose in order to give the delinquent mortgagor a reasonable opportunity to negotiate an unforced sale of the mortgaged premises constitutes a valid affirmative defense to foreclosure, absent withdrawal of the waiver upon reasonable notice to the mortgagor. Accordingly, because the pleadings and affidavits in this foreclosure action create a triable issue of fact concerning waiver by plaintiff mortgagee and present nothing other than the commencement of the foreclosure action to suggest that plaintiff gave notice of withdrawal, it was error for the Appellate Division, 75 A.D.2d 866, 428 N.Y.S.2d 40, to strike from defendant mortgagor's answer the affirmative defense of waiver and to grant plaintiff summary judgment of foreclosure. It was likewise error to strike defendant Montrose's counterclaim. The judgment appealed from and the nonfinal order of the Appellate Division brought up for review should, therefore, be reversed and the order of Special Term should be reinstated.

I

In February, 1976, defendant Montrose Concrete Products Corporation mortgaged certain property to plaintiff Nassau Trust Company as security for a $300,000 loan. Louis G. Imperato, president of Montrose, and Edna Imperato, his wife, guaranteed the loan. The loan documents required quarterly amortization payments of $3,000 plus interest and gave Nassau Trust the option to accelerate the entire principal upon failure to make payments required by the mortgage within 30 days after the due date.

In February, 1977, Montrose was delinquent in its scheduled payments. Rather than declare a default, however, Nassau Trust entered into a written extension agreement with Montrose which established a new payment schedule. Neither the mortgage nor the note prohibited oral modification of the terms of either, but the extension agreement, which modified the note and mortgage, included a provision that "This agreement may not be changed or terminated orally." Montrose was unable to honor even the new payment schedule, and in March, 1979, default was declared and foreclosure begun against Montrose and the Imperatos.

Nassau Trust's complaint relied quite simply upon Montrose's delinquency under the payment terms of the February, 1977 extension agreement. Montrose and the Imperatos each admitted nonpayment and pleaded affirmative defenses of waiver, unconscionability and unclean hands. Montrose's answer additionally pleaded a counterclaim for damages equal to the difference between the fair market value of the mortgaged premises at the time the action was commenced and the sale price ultimately received for the premises based upon the facts set forth in the affirmative defenses. The Imperatos' answer contained no counterclaim but asserted a fourth affirmative defense of release by reason of the extension agreement of February, 1977.

Essentially, the three affirmative defenses common to both answers rested on alleged oral representations made by Nassau Trust officers at three meetings held in June, October and December, 1978. According to Montrose and the Imperatos, Nassau Trust agreed at those meetings to waive any default in payment. In addition, as a result of those meetings, Nassau Trust allegedly knew or should have known that the subsequently initiated foreclosure action would prevent Montrose from concluding a sale of the mortgaged property at a fair market price sufficient to satisfy the balance due on the loan.

Nassau Trust moved to strike the answers of Montrose and the Imperatos as "sham and frivolous," "demonstrably untrue," as "constitutno defense" and for summary judgment of foreclosure. Montrose and the Imperatos jointly opposed the motion with an affidavit by Louis Imperato. That affidavit expanded considerably upon the oral representations allegedly made at the June, October and December, 1978 meetings referred to in the answers. Names of the bank officers present were given. In addition, the affidavit introduced into the litigation a letter dated January 12, 1979 from Nassau Trust Vice-President Stuart C. Saxton to Mr. Imperato. The letter granted Montrose an extension of payment until January 31, 1979 "to our conversation this afternoon." In the letter, Saxton also agreed to consider granting Montrose an additional extension for a "period of time necessary to complete a closing" on the mortgaged property to Imperia Brothers, Incorporated, a competitor of Montrose, if two conditions were met by January 31--payment of one year's worth of delinquent real estate taxes and receipt of a signed contract for the sale of all or a portion of the mortgaged property.

The Imperato affidavit, however, set forth in specific detail his version of the telephone conversation of January 12 to which Saxton's letter referred. According to Imperato, Saxton read him a draft of the letter and Imperato then informed Saxton that under no circumstances could the two conditions for an additional extension be met, and stated that the letter denied him adequate freedom to continue pending negotiations concerning the sale of the mortgaged premises and would require an immediate sale at a distress price. That the affidavit stated facts not conclusions is evident from the quotation following: "Mr. Saxton told me not to lower my asking price. Mr. Saxton said that I should not worry about the terms of the letter and that Nassau Trust would waive any default in meeting its terms until Montrose was able to close a sale to Imperia. I told Mr. Saxton that I would disregard his letter of January 12, 1979 and would contact him as soon as I had more details on the terms of the proposed sale to Imperia. Mr. Saxton agreed to this arrangement on behalf of Nassau Trust. I continued to negotiate with Imperia regarding the terms of the sale with the belief and understanding that Nassau Trust had waived any default during this period." It also alleged the filing of a lis pendens and the initiation of foreclosure proceedings in March, 1979 by Nassau Trust had caused Imperia to withdraw from then pending negotiations in the expectation that the mortgaged property could be acquired on foreclosure at a far lower price than through negotiation and ended with the accusation that Nassau Trust had breached its agreement "to waive any defaults until the end of 1979." No reply papers denying or disputing Mr. Imperato's allegations were submitted by Nassau Trust.

Special Term denied the motion in its entirety reasoning that summary judgment was inappropriate, Nassau Trust having failed to refute the allegations of the Imperato affidavit, which raised issues of fact "the most important of which is whether plaintiff waived the defaults of defendants and its right to commence this action, at least until defendant owners could negotiate an unforced sale of the property."

The Appellate Division modified the order of Special Term by striking the three common affirmative defenses as well as Montrose's separate counterclaim and granting summary judgment of foreclosure against Montrose. It reasoned that any waiver by oral representation was invalid for want of consideration and that though section 5-1103 of the General Obligations Law ¹ dispensed with the need for consideration to support a written waiver signed by the party to be charged, the only such writing was Saxton's January 12 letter which was subject to the conditions stated in it which concededly had not been complied with. As against the Imperatos it directed that the action be severed for trial of their fourth affirmative defense.

Final judgment of foreclosure having been entered by Special Term on remand to that court, Montrose appeals. The appeal brings up for our review the prior nonfinal Appellate Division order (CPLR 5601, subd. ). For the reasons which follow, we reverse and reinstate the Special Term order.

II

When a plaintiff moves for summary judgment, it is proper for the court to look beyond the defendant's answer and deny summary judgment if facts are alleged in opposition to the motion which, if true, constitute a meritorious defense (see Curry v. Mackenzie, 239 N.Y. 267, 146 N.E. 375; Gem Drywall Corp. v. Scialdo & Sons, 34 A.D.2d 1063, 312 N.Y.S.2d 737, app. dsmd. 27 N.Y.2d 739, 314 N.Y.S.2d 990, 263 N.E.2d 388; Alside Aluminum Supply Co. v. Berliner, 32 A.D.2d 731, 302 N.Y.S.2d 180; 4 Weinstein-Korn-Miller, N.Y.Civ.Prac., par. 3212.10, at n. 53).

Here, although the answers rest the first three affirmative defenses upon claimed meetings in June, October and December, 1978 and make no reference to the letter and telephone conversation of January 12, 1979, the unrefuted allegations of Louis Imperato's affidavit are sufficient to establish triable issues of fact concerning whether plaintiff's Vice-President Saxton orally assured Imperato that, notwithstanding the contrary written conditions contained in Saxton's January 12 extension letter, Montrose had up to one year to conclude an unforced sale of the mortgaged property, whether Montrose acted in justifiable reliance upon that assurance to its detriment and whether in consequence of the bank's withdrawal of that assurance without notice Montrose lost the opportunity to conclude a negotiated sale at a price more favorable than could be obtained in foreclosure. Because, as is hereafter developed, it cannot be said that these factual issues, if resolved in Montrose's favor, would nonetheless fail as a matter of law to constitute an affirmative defense to foreclosure, summary...