Trustco Bank New York v. 37 Clark Street, Inc.

• Decision Date: 24 February 1993
• Citation: Trustco Bank New York v. 37 Clark Street, Inc., 599 N.Y.S.2d 404, 157 Misc.2d 843 (N.Y. Sup. Ct. 1993)
• Parties: TRUSTCO BANK NEW YORK, Plaintiff, v. 37 CLARK STREET, INC. and Bruce J. Levinsky, Defendants.
• Court: New York Supreme Court

Page 404

599 N.Y.S.2d 404

157 Misc.2d 843

TRUSTCO BANK NEW YORK, Plaintiff, v. 37 CLARK STREET, INC. and Bruce J. Levinsky, Defendants.

Supreme Court, Saratoga County.

Feb. 24, 1993.

Overton, Russell & Doerr (Linda L. Donovan, of counsel), for plaintiff.

Ianniello, Anderson, Reilly, Luhn & Nichols (Van Zwisohn, of counsel), for defendants.

LOREN N. BROWN, Justice.

The plaintiff in this mortgage foreclosure action has moved for summary judgment, which includes an award of certain damages designated late charges. The defendant opposes the motion for summary judgment and disputes the late charges sought, contending that they are an impermissible penalty. The motion for summary judgment is granted, except that, for reasons to be stated, a late charge of $13,200.00 is disallowed.

Addressing the late charge sought, the note which the mortgage secured provides, in part, that a late charge of six cents for each dollar overdue could be assessed "for the purpose of defraying the expense incident to handling delinquent payment". ¹ The defendants failed to make a balloon payment of the entire amount due under the note, $220,000.00. Following that default, the plaintiff accelerated payment.

Citing what purports to be clear language, the plaintiff seeks late charges for the failure to make the balloon payment. The defendants describe the late charges sought as an oppressive forfeiture.

Initially, the Court finds that the fact that the late charges may or may not be a forfeiture is not dispositive. Even assuming the disputed clause is a forfeiture, a forfeiture is not, per se, unenforceable. Though the law does not favor forfeiture, courts will enforce it if the parties clearly agreed to it. (Winston Personnel Agency, Inc. v. Abcon Industries, Inc., 108 Misc.2d 695, 438 N.Y.S.2d 669). On the other hand, all contracts providing for forfeiture will be strictly interpreted to avoid the result. (Lyon v. Hersey, 103 N.Y....