Ward v. Walkley

• Decision Date: 19 September 1988
• Citation: Ward v. Walkley, 532 N.Y.S.2d 426, 143 A.D.2d 415 (N.Y. App. Div. 1988)
• Parties: Albert WARD, et al., Plaintiffs, v. Arthur R. WALKLEY, et al., Defendants, The First National Bank of Red Hook, Respondent, Berkshire Financial Corp., Appellant.
• Court: New York Supreme Court — Appellate Division

Page 426

532 N.Y.S.2d 426

143 A.D.2d 415

Albert WARD, et al., Plaintiffs, v. Arthur R. WALKLEY, et al., Defendants The First National Bank of Red Hook, Respondent Berkshire Financial Corp., Appellant.

Supreme Court, Appellate Division Second Department.

Sept. 19, 1988.

Stark, Elman, Amron, Barash & Narotsky, New York City (Howard C. Amron and Robert J. Smith, of counsel), for appellant.

Rusk, Wadlin, Heppner & Martuscello, Kingston (John J. Wadlin, of counsel), for respondent.

Before MANGANO, J.P., and BROWN, LAWRENCE and HARWOOD, JJ.

MEMORANDUM BY THE COURT.

In a mortgage foreclosure action, the defendant Berkshire Financial Corp. (hereinafter Berkshire) appeals from so much of an order of the Supreme Court, Dutchess County (King, J.), entered May 29, 1987, as denied its motion to reject a referee's report, dated March 27, 1987, in a surplus money proceeding.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs payable by the defendant First National Bank of Red Hook (now known as the Key Bank of Southeastern New York, N.A.), Berkshire's motion is granted, and the matter is remitted to the Supreme Court, Dutchess County, for further proceedings to recompute the interest due and owing to Berkshire in accordance herewith.

The defendant Berkshire is a junior mortgagee of a parcel of land in Hyde Park, Dutchess County, New York. Pursuant to a note executed simultaneously with that mortgage, (1) the obligor agreed to pay the principal amount of $150,000 with interest "at ten (10) percent per annum over the prime rate charged by the National Bank of North America each month", (2) interest payments were to commence on June 11, 1983, while the principal payments in the monthly amount of $4,166.66 were to commence on June 11, 1984, and (3) the principal balance, if any, and any unpaid interest were due and payable "four years from the date hereof", i.e., as of May 12, 1987. The note and the mortgage also contained an acceleration clause so that the whole debt secured thereby would become due and payable at the option of the junior mortgagee, if, inter alia: "the mortgagor fails to keep, observe and perform any of the other covenants, conditions or agreements contained in this mortgage; or * * * if the mortgagor fails to keep, observe and perform any of the covenants, conditions or agreements contained in any prior mortgage".

In March 1984, an action was commenced by the plaintiffs, who were the senior mortgagees of the subject premises, to foreclose their mortgage. A judgment of foreclosure and sale was entered on September 24, 1985, and a foreclosure sale was held on October 31, 1985. The proceeds of the sale were used to pay the entire debt owed to the plaintiffs. A sizeable surplus remained after payment was paid to the plaintiffs and both the defendant Berkshire and the defendant First National Bank of Red Hook (now known as Key Bank of Southeastern New York, N.A., hereinafter Key Bank), filed claims to the surplus money, in an attempt to obtain satisfaction of their respective liens.

After a hearing the referee determined, inter alia, that Berkshire had...