Opinion
21344/10
03-13-2012
Carver Federal Savings Bank, Plaintiff, v. Word Aflame Community Church Inc., et al., Defendants.
Plaintiff Attorney: Jaspan Schlesinger: Defendants Attorney: Jeffrey Pomerantz.
Plaintiff Attorney: Jaspan Schlesinger:
Defendants Attorney: Jeffrey Pomerantz.
David Schmidt, J.
The following papers numbered 1 to 13 read herein:
Papers Numbered
Notice of Motion/Order to Show Cause/
Petition/Cross Motion and
Affidavits (Affirmations) Annexed1-3, 4-8, 9-10
Opposing Affidavits (Affirmations)
Reply Affidavits (Affirmations)11-12, 13
Affidavit (Affirmation)
Other Papers
Upon the foregoing papers, plaintiff Carver Federal Savings Bank moves for an order 1) pursuant to CPLR 3212, granting summary judgment in favor of plaintiff and dismissing the counterclaims asserted against plaintiff, 2) pursuant to Real Property Actions and Proceedings Law § 1321, appointing a referee to compute and 3) amending the caption to strike the "John Doe" defendants. Defendants Word Aflame Community Church Inc. (Word Aflame), Mavis Mitchener, Deon Mitchell, Rudolph Mitchell and Kareem A. Williamson (collectively the "church defendants") cross-move for an order, pursuant to CPLR 3212, granting summary judgment on their counterclaim for breach of contract. Defendants Bruce S. Reznick, P.C., Defined Benefit Pension Plan, Carl Osrof and Regina Osrof (hereinafter "Reznick defendants") cross-move for an order, pursuant to CPLR 3212, granting them summary judgment on their counterclaim for breach of contract.
Plaintiff commenced this action to foreclose a mortgage encumbering the property at 9502-9506 Glenwood Road in Brooklyn. The mortgage was executed by Word Aflame on August 8, 2008 to secure a note from plaintiff in the amount of $975,000.00. Proceeds from the loan were utilized toward the purchase of the property. As additional security for the loan, a personal guaranty of repayment was signed by Rudolph Mitchell, Deon Mitchell, Mavis Mitchener and Kareem A. Williamson. Under the terms of the note, Word Aflame was obligated to make monthly payments of interest until the maturity date of March 1, 2009, when all outstanding indebtedness would become due and payable. By agreement dated December 29, 2009, the maturity date was extended to May 31, 2010.
Following the execution of the mortgage, note and guaranty, Word Aflame applied to plaintiff for a construction loan to be used in renovating the structure improving the property for use as a church sanctuary. By letter dated February 17, 2009 (the "Commitment Letter"), plaintiff notified Word Aflame that it had approved a construction loan in the amount of up to $2,500,000.00 subject to certain terms and conditions as set forth in section "15" of the Commitment Letter. This section provides, in part:
15. Terms and Conditions:
Notwithstanding anything contained herein to the contrary, the Bank shall be under no obligation to close the Loan until the following conditions are satisfied:
* * *
n.Prior to the Closing or the first advance for the cost of construction, at the discretion of the Bank, Bank and its counsel shall have received and/or approved each of the following:
* * *
(v) two (2) final sets of detailed plans and specifications for all construction, designating the manufacturer and model number of all building system equipment, examined and approved by Bank's consulting engineer or architect and the NYC Building Department, accompanied by a certification by Borrower's engineer or architect that the plans and specifications meet all applicable zoning, building and other pertinent requirements of the public authorities having jurisdiction, that the construction covered thereby is sound, of good design and satisfactory for the purpose intended, and, on a basis of personal inspection, with supporting data, that what is planned and specified will be adequate (any and all changes from the approved plan and specification must be approved by the Bank);
(vi) a detailed cost breakdown showing all hard and soft costs of the proposed construction (including a sum for contingencies equal to ten percent (10.00%) of the contract price), all approved by Bank's consulting engineer or architect;
(vii) evidence of the infusion by the Borrower of equity of not less than that amount which is equal to the total project cost less the maximum principal amount of the Construction Loan, in any event not less than twenty-five percent (25.00%) of the Bank-approved total project costs, which amount shall be fully expended against approved "soft" and "hard" costs incurred by Borrower in connection with the construction of the improvements prior to the first advance under the Loan or otherwise at times and in a manner reasonably acceptable to Bank, and evidence that, in general, sufficient funds have been made available by Borrower in a manner satisfactory to Bank (including the depositing of such funds with Bank) for purpose of completing the improvements;
The Commitment Letter was accepted and signed by Rudolph Mitchell on behalf of Word Aflame on February 23, 2009. On July 8, 2009, Word Aflame borrowed the sum of $250,000.00 from the Reznick defendants. This loan, which was intended to supplement the construction funding, was secured by a junior mortgage on the property dated July 8, 2009 and recorded September 1, 2009.
Plaintiff commenced this action to foreclose on August 27, 2010. According to the complaint, Word Aflame defaulted under the terms if the note and mortgage by failing to make the payment due on March 1, 2010 and on the maturity date of May 31, 2010. The church defendants interposed an answer, dated September 15, 2010, which contained general denials and a counterclaim sounding in breach of contract (i.e. breach of the Commitment Letter). Specifically, the church defendants allege that plaintiff "wrongfully and without good cause failed to fulfil its obligations to finance construction." The Reznick defendants, who were joined in this action by reason of their status of junior mortgagees, interposed an answer, dated September 16, 2010, which also contained general denials and a counterclaim that plaintiff "wrongfully and without good cause failed to fulfil its obligations to finance construction."
As an initial matter, the counterclaim of the Reznick defendants for breach of contract is patently without merit and is dismissed accordingly. A nonparty to a contract has standing to sue for breach only where that nonparty is a third-party beneficiary (see Equitable Life Assur. Soc. of the U.S. v Nico Const. Co., Inc., 235 AD2d 222 [1997]). A party asserting rights as a third-party beneficiary must establish "(1) the existence of a valid and binding contract between other parties, (2) that the contract was intended for his benefit and (3) that the benefit to him is sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate him if the benefit is lost" (State of California Public Employees' Retirement System v Shearman & Sterling, 95 NY2d 427, 434—435 [2000], quoting Burns Jackson Miller Summit & Spitzer v Lindner, 59 NY2d 314, 336 [1983]). As the Commitment Letter was issued prior the Reznick defendants' mortgage, there could not have been an intent by plaintiff to benefit the Reznick defendants. Further, the benefit to the Reznick defendants ensuing from a construction loan— repayment of their junior loan from income or profits realized by the church defendants following construction— was only incidental.
A plaintiff establishes its prima facie right to judgment as a matter of law in a foreclosure action by producing the mortgage, the unpaid note, and undisputed evidence of default (see Washington Mut. Bank, F.A. v O'Connor, 63 AD3d 832, 833 [2009]; Daniel Perla Assoc., LP v 101 Kent Assoc., Inc., 40 AD3d 677, 677 [2007]; LPP Mtge., Ltd. v Card Corp., 17 AD3d 103, 104 [2005]; US Bank Trust N.A. Trustee v Butti, 16 AD3d 408, 408 [2005]; Republic Natl. Bank of NY v O'Kane, 308 AD2d 482, 482 [2003]; Hypo Holdings v Chalasani, 280 AD2d 386, 387 [2001]).
In support of its motion for summary judgment, plaintiff submits the affidavit of Anthony G. Hood, who identifies himself therein as an assistant vice president of plaintiff and attests to making the affidavit "based upon the records maintained by [p]laintiff in the ordinary course of business." Mr. Hood asserts that Word Aflame defaulted under the terms of the mortgage and note by failing to timely pay each and every installment of principal and interest which became due on March 1, 2010 and continuously thereafter. Mr. Hood states that since the default, Word Aflame made only a single payment of $5,600.00, which was insufficient to pay off the note. With respect to the Commitment Letter, Mr. Hood notes that according to its terms, a default under the note constitutes a cross default under the Commitment Letter, and that Word Aflame nonetheless failed to comply with the previously recited terms and conditions of the Commitment Letter regarding submission of plans and specifications, detailed cost breakdown and infusion of equity of not less than 25% of the approved project costs.
Plaintiff's submission of the note, mortgage and affidavit of Mr. Hood, who attests to being an officer of plaintiff and bases his knowledge of Word Aflame's default on plaintiff's business records, establishes its entitlement to summary judgment. Contrary to the contention of defendants, plaintiff is not required to submit an affidavit from the individual who originated or serviced the loan (see Charter One Bank, FSB v Leone, 45 AD3d 958 [2007]). At any rate, Word Aflame does not interpose any affirmative defense to the instant foreclosure action and does not otherwise dispute that it defaulted in its monthly payments and failed to pay the outstanding indebtedness on the maturity date of the note.
The gravamen of the church defendants' counterclaim is that plaintiff failed to comply with its promise to provide Word Aflame with a construction loan pursuant to the Commitment Letter. However, the clear terms of the Commitment Letter obligate plaintiff to provide the loan only where Word Aflame satisfied the conditions set forth in section 15. While the church defendants argue that they substantially complied, in good faith, with the provisions requiring the submission of construction plans/specifications and cost breakdown, there is no dispute that Word Aflame was not able to secure the required equity infusion. "Contract language which is clear and unambiguous must be enforced according to its terms" (Manzi Homes, Inc. v Mooney, 29 AD3d 748, 749 [2006]; see W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]). "The court's role is limited to interpretation and enforcement of the terms agreed to by the parties, and the court may not rewrite the contract or impose additional terms which the parties failed to insert" (131 Heartland Blvd. Corp. v C.J. Jon Corp., 82 AD3d 1188, 1189 [2011]). A defendant cannot invalidate a contract based merely on his or her failure to accurately, sufficiently, or comprehensively read its terms (see Florence v Merchants Cent. Alarm Co., 51 NY2d 793, 795 [1980]; Pimpinello v Swift & Co., 253 NY 159, 162—163 [1930]).
There is nothing in the record to substantiate the church defendants' bare contention that they were "deceived by plaintiff from the very beginning." The church defendants only establish that they did not anticipate an equity infusion provision to be included in plaintiff's commitment when they purchased the property and subsequently applied for the construction loan. The church defendants simply assumed that a construction loan offered to them would be similar in terms to construction loans offered by plaintiff to other churches, loans which did not require the equity infusion. However, there is nothing presented to show that at the time of purchase plaintiff made any representations concerning the terms of a future construction loan which were justifiably relied on by the church defendants. Notably absent is any correspondence to plaintiff from the church defendants wherein they complained that the terms contained in the Commitment Letter were not negotiated, not expected, unreasonable or otherwise should not have been included therein.
Because there is no recitation of misstatements or misrepresentations by plaintiff stated with particularity, any conceivable claim for fraudulent inducement must fail (CPLR 3016 [b]; Orchid Constr. Corp. v Gottbetter, 89 AD3d 708, 710-711 [2011]).
The church defendants argue that when plaintiff made the subject mortgage loan, it was aware of Word Aflame's limited resources and thus should have known that Word Aflame would not be able to comply with the equity infusion provision. While not completely clear, the church defendants seemingly argue that plaintiff engineered Word Aflame's default under the mortgage by denying it a construction loan. However, the subject mortgage is not a high cost or subprime home loan for which ability to repay must be considered by the lender (Banking Law §§ 6-l [2][k]), 6-m [4]) and there is no basis to infer that plaintiff is gaining any advantage by Word Aflame's default.
The church defendants also argue that plaintiff failed to act in good faith in that it did not"arrange a Hold Back' of the 25%." The covenant of good faith and fair dealing "is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement" (Jaffe v Paramount Communications, 222 AD2d 17, 22—23 [1996]). However, the mere unwillingness of plaintiff to modify agreed upon terms cannot be considered a breach of the good faith covenant as such refusal would not deprive Word Aflame of any of its rights under the Commitment Letter. There is no allegation that plaintiff is engaging in any conduct which is preventing or frustrating Word Aflame from seeking or obtaining an equity infusion or performing any of the other conditions to receiving the construction loan. Nor is there any indication that plaintiff is hindering Word Aflame from seeking a construction loan from another lender.
In short, Word Aflame signed a binding contract with plaintiff wherein it agreed that no construction funds would be forthcoming unless it complied with certain terms and conditions, including the equity infusion. Absent proof that it complied with all conditions precedent in the
Commitment Letter, the church defendants have no claim against plaintiff for breach of contract (see McFarland v Opera Owners, Inc., 92 AD3d 428 [2012]).As a result, plaintiff's motion is granted in all respects. The cross motions of the church defendants and the Reznick defendants are denied.
Settle order on notice.
ENTER,
J. S. C.