Matter of Withinvestors St. Marks, LLC v. KJY Inv. LLC
46 N.Y.S.3d 69
N.Y. App. Div.2017Background
- Petitioner Withinvestors St. Marks, LLC sought a declaration that it owed no prepayment penalty under a January 7, 2009 mortgage note as modified by a December 19, 2012 debt modification agreement with respondent KJY Investment LLC.
- The 2009 note contained a section titled "Refinance and Prepayment Penalties if Mortgage Amount is paid before Amortization Period," including a sentence excepting bona fide third‑party sales from prepayment penalties.
- The 2012 modification replaced the note's payment table (paragraph 3(5)) and otherwise preserved prior terms (paragraph 4), and acknowledged that JSC Financial Investment, LLC made a $500,000 unsecured loan to respondent as part of the transaction.
- Supreme Court denied the petition, found petitioner liable for a $197,803.98 prepayment penalty, and denied respondent's request for attorneys' fees; this appeal followed.
- The Appellate Division analyzed whether the modification superseded the entire refinance/prepayment section or only the payment table, and whether there was consideration for the modification.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2012 modification eliminated the note's exception for bona fide third‑party sales from prepayment penalties | The modification only replaced the payment table; the original exception survives under the modification's savings clause | The modification replaced the entire refinance/prepayment provision, eliminating the exception | Held for petitioner: modification replaced only the table; the bona fide sale exception survives under the "Except as specifically amended" clause |
| Whether petitioner owes a prepayment penalty for payoff via a bona fide third‑party sale | Petitioner argues no penalty due because the sale fits the saved exception | Respondent argues the exception was removed so penalty applies | Held for petitioner: no prepayment penalty owed |
| Whether the modification lacks consideration if the exception survived | Petitioner asserts consideration existed because JSC made a $500,000 unsecured loan to respondent to obtain the modification | Respondent contends elimination of the exception was essential consideration and its survival voids consideration | Held for petitioner: consideration requirement is satisfied because the modification was a bargained‑for exchange, and benefit to/consideration via a third party is valid under governing law |
| Whether respondent is entitled to attorneys' fees and costs of collection | Petitioner argues no default and thus no fees | Respondent claims fees and costs due to alleged default and penalty entitlement | Held for petitioner: no payment default shown and respondent did not declare default; attorneys' fees and collection costs denied |
Key Cases Cited
- Continental Bank of Pa. v. Barclay Riding Academy, Inc., 93 N.J. 153, 459 A.2d 1163 (N.J. 1983) (a contract bargained for by the promisee may confer benefit to a third‑party; third‑party benefit does not defeat consideration)
- Martindale v. Sandvik, Inc., 173 N.J. 76, 800 A.2d 872 (N.J. 2002) (consideration requires a bargained‑for exchange; no separate requirement of promisor gain or equivalence of value)
- Novack v. Cities Service Oil Co., 149 N.J. Super. 542, 374 A.2d 89 (N.J. Super. Ct. Law Div. 1977) (describing detriment/benefit framing of consideration doctrine)