Thompson v. Whitestone Sav. and Loan Ass'n

• Decision Date: 22 June 1987
• Citation: 516 N.Y.S.2d 963,131 A.D.2d 749
• Parties: Patrick A. THOMPSON, et al., etc., Respondents, v. WHITESTONE SAVINGS AND LOAN ASSOCIATION, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 963

516 N.Y.S.2d 963

131 A.D.2d 749

Patrick A. THOMPSON, et al., etc., Respondents, v. WHITESTONE SAVINGS AND LOAN ASSOCIATION, Appellant.

Supreme Court, Appellate Division Second Department.

June 22, 1987.

Munley, Meade, Burns & Nielsen, P.C., Great Neck (William J. Nielsen and James G. Meade, of counsel), and Siff, Newman Rosen & Parker, P.C., New York City (Louis G. Corsi, David M. Pollack and Ann Bickford, of counsel), for appellant (one brief filed).

Before MANGANO, J.P., and NIEHOFF, SPATT and HARWOOD, JJ.

MEMORANDUM BY THE COURT.

In a class action, inter alia, for a judgment declaring illegal the defendant's method of amortizing mortgage principal balances prior to January 1, 1972, and to recover damages for fraud and conversion, the defendant appeals, as limited by its brief, from so much of an order of the Supreme Court, Nassau County (McCaffrey, J.), dated November 1, 1985, as failed to grant in its entirety its motion for summary judgment dismissing the complaint on the ground that it was barred by the Statute of Limitations.

ORDERED that the order is modified, on the law, by (1) deleting the first decretal paragraph thereof, and substituting therefor a provision granting the defendant summary judgment dismissing the first cause of action with respect to the claims of all of the members of the class, except the plaintiffs whose mortgage balances were increased after May 11, 1976 by virtue of late payment penalties or annual service charges, and (2) deleting from the second and third decretal paragraphs thereof all references to the date "May 11, 1976" and substituting therefor the date "May 11, 1980". As so modified, the order is affirmed insofar as appealed from, without costs or disbursements.

The plaintiffs herein are a certified class of persons who had or still have mortgages with the defendant savings and loan association which were executed prior to January 1, 1972, and which obligated them to pay, in addition to monthly principal and interest, a monthly amount set by the defendant, equivalent to approximately one-twelfth (1/12) of the estimated annual taxes on the mortgaged real property (see, Thompson v. Whitestone Savings and Loan Assn., 101 A.D.2d 833, 475 N.Y.S.2d 491, appeal dismissed 65 N.Y.2d 636). The action, which was commenced on May 11, 1982, is based upon the method of accounting utilized by the defendant prior to 1972. Under this method, upon receipt of monthly mortgage payments, the defendant would apply the entire amount received to reduce the mortgage balance and accrued interest. When the defendant received the quarterly or semi-annual tax bill for the property in question, it would pay the bill and add the amount paid to the balance of the mortgage. According to the plaintiffs, this caused their mortgage balances to be wrongfully and erroneously overstated, since the real estate tax obligations almost always exceeded the amount the defendant required the plaintiffs to pay by way of twelve (12) monthly payments. In addition, according to the plaintiffs, the defendant wrongfully added annual service charges and late payment penalties to their mortgage balances, causing them to be further overstated. The defendant discontinued most of these allegedly improper practices in 1972, when it adopted a computerized system whereby the monthly tax payments were kept in a separate escrow account. At that time the defendant advanced each mortgagor a fixed amount to fund the escrow account. Upon information and belief, the defendant's practice of adding the annual service charges and late payment penalties to the mortgage balance exists at present.

The plaintiffs' first cause of action, characterized as one to recover damages for breach of contract, has a six-year Statute of Limitations (see, CPLR 213[2] ). The alleged breaches occurred each time the defendant, utilizing its pre-1972 method of accounting, failed to keep separate accounts for the payment of principal and interest and for monthly tax payments, and each time the defendant added a late payment penalty or service charge to the plaintiffs' mortgage balances. Thus, only those claims based upon allegations that late payment penalties or service charges were added to the mortgage balance of a plaintiff class member after May 11, 1976 are not time-barred, since the action was not commenced until May 11, 1982. The court's determination that the mortgage accounts constituted mutual, open and current accounts between the parties was erroneous (see, Green v. Disbrow, 79 N.Y. 1; Donahue-Halverson, Inc. v. Wissing Constr. & Bldg. Servs. Corp., 95 A.D.2d 953, 464 N.Y.S.2d 268; Sanger & Jordan v. Duncan, 196 App.Div. 55, 187 N.Y.S. 604). Therefore, CPLR 206(d) has no application at bar.

The plaintiffs' second cause of action is based upon actual fraud. "When...