89 Misc. 2d 290 | N.Y. Sup. Ct. | 1977
The question for determination is
Thereafter a default occurred and the within mortgage foreclosure action was instituted. As an affirmative defense in its answer, defendant Lyndon claims that the lien of its mortgage is superior to the lien of the mortgages held by plaintiff, to the extent of advances made after the recording of the purchase-money bond and mortgage to Lyndon. Upon the trial of the issues Lyndon conceded that the amount in controversy totaled $60,000, representing advances made by plaintiff in excess of $1,440,000 after the sale of the premises to Graney, which amount, Lyndon claims, plaintiff fixed as the maximum sum it would advance under the mortgages.
From the proof adduced upon the trial of the issues it is further found as follows: Lyndon had knowledge that Graneys were handling their own financing and that they had discussed with plaintiff the assumption of its mortgages; Graney agreed to pay a higher interest rate to plaintiff with a longer time to repay the principal of the mortgages; Lyndon had no other knowledge of Graney’s financial arrangements with plaintiff; plaintiff limited the amount it would advance on the $1,650,000 commitment to Lyndon to $1,440,000, and the number of the units in the project to 96, and had knowledge of
The law is clear that if the holder of a mortgage to secure future advances is contractually bound to make the advances in any event, the lien of his mortgage has priority as to advances made after, as well as before, the junior encumbrance attaches. But, if it is optional with the mortgagee to make or to refuse to make advances, and where it appears from an inspection of the instrument that it may decline to make the advances at its pleasure, without taking the risk of subjecting itself to damages for loss, the prior mortgage will be protected by the security of the mortgage, only as to advances made before the attaching of the junior encumbrance. Where the obligation to make advances exists or where the right to decline depends upon facts outside the instrument and which may be the subject of dispute or contention, the obligation is not optional and the holder of the mortgage is warranted in making advances in reliance upon it. The obligation to make future advances, however, is not required to be mentioned in the mortgage, but may be contained in the collateral building loan agreement. (38 NY Jur, Mortgages and Deed of Trust, § 169; Hyman v Hauff, 138 NY 48; 2 Rasch, Real Property Law and Practice, § 1703; 29 NY Univ L Rev 733.)
Here plaintiff had the option to make or refuse to make advances for various reasons as described in the building loan contracts and plaintiff did exactly what it had the right to do —it chose not to waive but to take advantage of the optional provisions — and refused to make further advances to Lyndon in excess of $1,440,000. By this action it took no risk of subjecting itself to damages by reason of the larger commitment. (Cf. Hyman v Hauff, 138 NY 48, supra.) Further, plaintiff agreed, without disclosure to Lyndon, to advance the Graneys a total of $1,500,000, some $60,000 in excess of its reduced commitment to Lyndon. Plaintiff with actual notice of the subsequent mortgage was not warranted in making this further advance in reliance on the consolidated mortgages executed by Lyndon. Lyndon’s agreement with Graney was for a fixed price for the premises, to be paid partly in cash, partly by the assumption of mortgages to the extent of the advances then made and the balance by a purchase-money bond and
Section 15-301 of the General Obligations Law has no application to the facts and circumstances of this case and in view of the holding of the court it is unnecessary to pass on other contentions advanced by the parties.
Request for findings submitted by plaintiff Nos. 1 through 8, 10, 14 and 16 and proposed findings of fact submitted by Lyndon Nos. 1 through 5, 7 and 8 are specifically found and adopted by the court and requested findings inconsistent with this decision are refused.
Accordingly, it is held that the advances made by plaintiff in excess of $1,440,000 were optional and voluntary, that the lien of plaintiff’s mortgages to the extent of $1,440,000 is prior and superior to Lyndon’s purchase-money mortgage and the said purchase-money mortgage is prior and superior to the remainder of the lien of plaintiff’s mortgages.