530 Fifth Avenue v. LaSalle Bank

Contract in Mortgage Dispute Did Not Entitle Borrower to Prepay Prior to Lockout Date

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http://nycourts.law.com/CourtDocumentViewer.asp?view=Document&docID=48524

Justice Fried

PLAINTIFF SOUGHT a declaration that it was entitled to prepay a $70 million loan, to satisfy a commercial mortgage, prior to a specified lockout date. Defendant bank refused prepayment. In response to plaintiff’s claim that the note’s liquidated damages provision entitled prepayment of the mortgage through payment of certain liquidated damages, defendant bank argued that the liquidated damages provision did not provide an affirmative right to prepay. The court denied a declaratory judgment. Based on the language of certain provisions of the parties’ agreement with respect to voluntary prepayments, as well as §4 of the parties’ note, the court concluded that the parties intended that the borrower was not unilaterally permitted to prepay, with certain limited exceptions, until after the lockout date. The court also held that the parties did not express an intention to avoid prepayment limitations, but rather that if they agreed to prepayment, the borrower would still be obligated to pay liquidated damages.

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