Sawyer Sav. Bank v. Kent
Decision Date | 22 July 1993 |
Citation | 600 N.Y.S.2d 807,195 A.D.2d 844 |
Parties | SAWYER SAVINGS BANK, Formerly Known as Saugerties Savings Bank, Plaintiff, v. Fred KENT et al., Defendants, Chase Manhattan Bank N.A., Respondent, and Selma Kent, Appellant. |
Court | New York Supreme Court — Appellate Division |
Klein & Klein (Aaron E. Klein, of counsel), Kingston, for appellant.
Warren N. Stone, New York City, for respondent.
Before WEISS, P.J., and LEVINE, CREW, MAHONEY and CASEY, JJ.
Appeal from an order of the County Court of Ulster County (Vogt, J.), entered November 16, 1992, which granted defendant Chase Manhattan Bank N.A.'s application for surplus moneys in a mortgage foreclosure action.
At issue in this appeal is the priority between a mortgagee and a judgment lien creditor to the surplus moneys arising from a foreclosure sale. A review of the record establishes that during the 1970s and 1980s, defendant Fred Kent acquired title to three tracts of land in the Town of Woodstock, Ulster County, that were 45 acres, 35 acres and 23 acres. Plaintiff held a first mortgage on the 45-acre and 35-acre tracts. Between 1980 and 1982, defendant Chase Manhattan Bank N.A. (hereinafter Chase) loaned a total of $550,000 to Kent individually and to 10 of Kent's corporations for which Kent was a guarantor. Of the $550,000 in loans, $100,000 was secured by a second mortgage on the 45-acre and 35-acre tracts recorded in 1982. In 1984 Kent's mother, defendant Selma Kent (hereinafter defendant), obtained a $408,060 judgment by confession against him which was docketed as a third lien against the 45-acre and 35-acre tracts.
Thereafter, Kent and his corporations experienced financial difficulties and by 1988 had defaulted on the Chase loans. As a result Chase commenced legal action against them to collect payment. During pendency of the action, Kent and Chase entered into a loan workout agreement. The agreement, which spelled out the particulars of a debt restructuring plan and provided for Chase's discontinuance of its action "without prejudice" for as long as Kent complied with the restructured payment terms, was expressly conditioned upon Kent granting Chase a mortgage on all three tracts as additional security for the guaranteed loans (which at the time totaled $458,132.62 inclusive of interest) and his obtaining an unconditional subordination of defendant's $408,060 judgment lien to the newly created Chase mortgage. The agreement further stated that "[n]on-payment by [Kent] as the same comes due under Paragraph '4' herein shall terminate this Agreement as well as [Chase's] obligation to discontinue its actions for collection". Defendant agreed to subordinate her lien and on May 9, 1988 executed a subordination agreement. The document expressly provided that it was "a continuing irrevocable agreement and shall remain in full force and effect until all of [Chase's] said claims shall have been paid in full". Thereafter, Kent executed the mortgage and the parties signed the workout agreement. The mortgage was recorded on June 1, 1988. By July 1989, Kent and his corporations had fallen into default under the workout agreement and Chase notified Kent that as a result, the agreement had, by its terms, become null and void.
Around this time, Kent had also defaulted on plaintiff's mortgage, thus prompting it to commence the instant action to foreclose. Chase, defendant and Kent were among those named as party defendants. During pendency of this action, Kent moved to discharge Chase's 1988 mortgage as well as the subordination agreement on the theory that Chase's July 1989 letter declaring the workout agreement to be null and void amounted to a rescission with the result that the mortgage and subordination agreement were no longer of any legal effect. Supreme Court rejected this argument and denied the motion.
Ultimately, plaintiff obtained a judgment of foreclosure and the property was sold. After...
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