Vanderpool v Porter's Concrete Serv., Inc.

[*1] Vanderpool v Porter's Concrete Serv., Inc. 2006 NY Slip Op 51573(U) [12 Misc 3d 1194(A)] Decided on August 11, 2006 Supreme Court, Tioga County Lebous, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on August 11, 2006
Supreme Court, Tioga County

Eli Vanderpool and PATRICIA VANDERPOOL and HIDDEN LAKE DEVELOPMENT CORP. Plaintiffs

against

Porter's Concrete Service, Inc., RALPH PORTER, BEVERLY D. PORTER, DAVID M. BROWN and BROWN & CIARAVINO, Defendants and PORTER'S CONCRETE SERVICE, INC. Plaintiff ELI VANDERPOOL, PATRICIA E. VANDERPOOL, HIDDEN LAKE DEVELOPMENT CORPORATION and JOHN DOE Defendants



Porter's Concrete Service, Inc. Plaintiff v

against

Eli Vanderpool, PATRICIA E. VANDERPOOL, HIDDEN LAKE DEVELOPMENT CORPORATION and JOHN DOE Defendants



30847



APPEARANCES:

COUNSEL FOR VANDERPOOLS:

WIGGINS AND MASSON, LLP

WALTER J. WIGGINS, ESQ., OF COUNSEL

OFFICE & POST OFFICE ADDRESS: 308 N. TIOGA STREET

P.O. BOX 399

ITHACA, NY 14851

COUNSEL FOR PORTERS:

HINMAN, HOWARD & KATTELL, LLP

THOMAS W. CUSIMANO, JR., ESQ., OF COUNSEL

OFFICE & POST OFFICE ADDRESS:

700 SECURITY MUTUAL BUILDING

P.O. BOX 5250

BINGHAMTON, NY 13902

Ferris D. Lebous, J.

The subject of these consolidated actions is real property (hereinafter the property) located in the Town of Barton, Tioga County. Defendants Eli Vanderpool and Patricia Vanderpool (hereinafter the Vanderpools) are the sole owners of defendant Hidden Lake Development Corp. (hereinafter Hidden Lake)[FN1]. In December 1997, Howard Jachters and Kathy Jachters conveyed the Upper portion of the property (approximately 17 acres and hereinafter referred to as the upper portion) to Hidden Lake. In June 1999, the Jachters conveyed the lower [*2]portion of the property (approximately 30 acres and hereinafter referred to as the lower portion) to the Vanderpools.[FN2] Defendants assumed responsibility for the Jachters' obligations under a note and mortgage executed in favor of IBM Endicott/Owego Employees Federal Credit Union, now known as Visions Federal Credit Union. In July 1999, the note and mortgage were assigned to plaintiff and the parties entered into a license agreement and a mortgage modification agreement (hereinafter referred to as the license agreement and the modification agreement, respectively). The balance due under the note was $102,629.93 and defendants were to make monthly payments of $735.27 from August 30, 1999 until July 30, 2004 when the entire unpaid principal balance, together with accrued interest, was to be due and payable. The modification agreement also provides that "[p]ayments under this agreement shall not be required at any time when [plaintiff] is not mining the mortgaged premises".

Defendants commenced an action with Tioga County Index No. 30847 for, inter alia, reformation and/or breach of contract based upon plaintiff's alleged failure to mine the property. Thereafter, plaintiff commenced an action with Tioga County Index No. 30889 for foreclosure alleging that defendants had not made payments under the mortgage agreement. Supreme Court (Rumsey, J.) found that because plaintiff was not mining the property at that time, defendants were not required to make payments and, thus, were not in default. The court dismissed plaintiff's action for foreclosure.[FN3]

Thereafter, plaintiff notified defendants that it was terminating the license agreement and commenced a second action for foreclosure (Tioga County Index No. 31773). Plaintiff again moved for summary judgment. Supreme Court (Hester Jr., J.) specifically found that because plaintiff had never applied for a mining permit, it could not terminate the license agreement. The court held that the absence of mining relieved defendants of making monthly payments under the mortgage agreement. Given that the balloon payment would be due within weeks, the court denied the motion for summary judgment, without prejudice, and consolidated the two actions. When defendants failed to make the balloon payment due July 30, 2004, plaintiff again moved for summary judgment. Supreme Court found that there were questions of fact as to whether defendants entered into both agreements with the assurance that the mining royalties from the license agreement would be sufficient to pay the entire balance of the mortgage within the first five years. In lieu of addressing plaintiff's motion for a receiver and, upon agreement of the parties, this court held a non-jury trial solely on the cause of action for foreclosure of the mortgage.

The license agreement grants plaintiff "the exclusive right and privilege * * * to enter upon, produce, excavate, screen, and remove sand and gravel" from the property during a 10-year [*3]term. The license agreement provides that plaintiff "may terminate this [a]greement upon giving [defendants] 30 days advance written notice if [plaintiff] is not granted a permit, satisfactory to [plaintiff], to mine sand and gravel on the [p]roperty". The mortgage agreement requires defendants "to pay the principal amount of $102,629.93 with interest at the rate of 6% per year upon unpaid balances [by paying] the sum of $735.27 on the 30th of each month beginning August 30, 1999 and continuing on the 30th day of each month until July 30, 2004 when the entire unpaid principal balance together with accrued interest shall be due and payable". The mortgage agreement provides that "[p]ayments under this agreement shall not be required at any time when [plaintiff] is not mining the mortgaged premises".

Eli Vanderpool testified that he and Howard Jachters agreed to be 50-50 partners and develop the upper portion into a mobile home park. Vanderpool testified that he contributed start-up money of $110,000. Vanderpool testified that unbeknownst to him, the upper portion was encumbered by the Visions note and mortgage and they were unable to obtain any financing for the project. Vanderpool testified that plaintiff offered to purchase the Visions note and mortgage in exchange for allowing plaintiff to mine gravel from the property. Vanderpool testified that as a result of the negotiations among the parties and the Jachters, the modification and license agreements were prepared and executed. Vanderpool testified that shortly thereafter, plaintiff began mowing and grading the upper portion. Vanderpool testified that although he left several messages stating that plaintiff was working on the wrong lot, Ralph Porter indicated that plaintiff had a 10-year right to remove gravel anywhere on the property. Vanderpool admitted that he accepted the proceeds even though the gravel was taken from the wrong area because such gravel had already been removed and he needed the money. Vanderpool testified that the objective of the agreements was for plaintiff to mine the property and, using a portion of the royalties payable to defendants, satisfy the debt in a relatively short period time.

Ralph Porter, plaintiff's principal, testified that he met defendant Eli Vanderpool in 1999 while mining property adjacent to defendants' property. Porter testified that Vanderpool wanted to grade and fill the upper portion consistent with the plan to develop it as a mobile home park and that he and Vanderpool had discussions concerning plaintiff mining the property. Porter testified that after execution of the license and modification agreements, plaintiff entered the upper portion and began to remove gravel, grade and fill the land, and provide general clean-up of the property. Porter testified that each truckload of gravel contained approximately 2½ buckets and that plaintiff recorded the number of trucks filled in order to calculate the amount of gravel removed each day. Porter testified that he did not realize that the license agreement allowed mining only on the lower portion of the property and that plaintiff worked on the upper portion for months without any complaint from Vanderpool. Porter testified that Vanderpool wasn't concerned with whether the gravel came from the upper or lower portion as long as he received the proceeds. Porter testified that plaintiff did not mine the property for approximately 29 months, but returned in May 2002 to mine the lower portion. Porter testified that Vanderpool made a complaint to the DEC and in July 2002, plaintiff was cited for mining more than 750 cubic yards without a permit. Porter testified that he told Vanderpool that because of his complaint, it was too much of a hassle to continue mining. Porter testified that plaintiff ceased [*4]mining, but returned to stabilize the property which caused Vanderpool to file another complaint. Porter testified that if plaintiff had applied for a mining permit, it would have obtained one in approximately 30 days.

Porter testified that plaintiff anticipated removing enough gravel from the property to pay the balance on the note and mortgage. Porter also admitted that pursuant to the agreements, plaintiff never asked defendants for payment on the mortgage during the 29 months that it was not mining the property. Porter testified that plaintiff had a unilateral right to stop mining and that once the license agreement was terminated, defendants were required to make the mortgage payments.

The sole issue before this court in this limited trial is whether defendants are in default for failing to remit the balloon payment of $86,383.20 due July 30, 2004. The original mortgage was a 30-year mortgage requiring monthly payments through October 1, 2017 and, thus, the modification agreement substantially reduced the remaining repayment schedule from 18 years to 5 years. Although the license agreement is not specifically mentioned in the modification agreement, the modification agreement suspends payment during any time that mining was not taking place on the property; tacitly acknowledging the existence of another agreement. The modification and license agreements also were executed simultaneously. In addition to authorizing the removal of gravel, the license agreement provided that plaintiff would pay $0.50 per cubic yard of material removed from above the water table ($0.375 per cubic yard being retained by plaintiff and credited against the mortgage debt) and $0.40 per cubic yard for material removed below the water table ($0.34 per cubic yard being retained by plaintiff and credited against the mortgage debt).[FN4] The license agreement requires plaintiff to provide monthly reports of the quantities of materials removed from the property and remit monthly payments of royalties based upon such quantities. Significantly, such reports and payments are due on the 30th day of each month, precisely when the monthly mortgage payments are due and payable. Based upon the above, the license agreement and modification agreement must be interpreted together (Estate of Hatch v NYCO Minerals, 245 AD2d 746, 747).

"The most fundamental canon of contract interpretation * * * is that primary attention be given to the purpose of the parties in making the contract" (Massachusetts Mut. Life Ins. Co. v Thorpe, 260 AD2d 706, 709, lv denied 93 NY2d 814). The court must glean the intention of the parties from the clear and unambiguous contract language, giving the words and phrases their plain meaning (see, Estate of Hatch v NYCO Minerals, supra; H.K.S. Hunt Club v Town of Claverack, 222 AD2d 769, lv denied 89 NY2d 804). Initially, both the license and modification agreements at issue are unambiguous. The license agreement gave plaintiff the exclusive right to remove gravel for period of 10 years unless terminated by plaintiff, if plaintiff was "not granted a permit, satisfactory to [it], to mine sand and gravel on the [p]roperty". Such language clearly conditions plaintiff's ability to terminate the license agreement on plaintiff's failure to obtain a [*5]satisfactory mining permit. It is undisputed that plaintiff never applied for a mining permit and, as a result, the court finds that plaintiff's purported termination of the license agreement is without force. The license agreement remains valid for the remainder of its initial 10-year period.

The modification agreement did not specifically use the term "payment", but required that defendants "pay the sum of" $735.27 each month and provided that "the entire unpaid principal balance * * * be due and payable" on July 30, 2004. Notwithstanding the parties' characterization of the final amount due as a balloon payment, the court finds that such payment was in essence another "sum" that was to be paid (see e.g., 1300 Avenue Realty Corp. v Stratigakis, 186 Misc 2d 745, 746-748). The requirement to pay such sum was suspended given the lack of any mining activity on the property and, as a result, defendants are not in default under the modification agreement. The cause of action asserting foreclosure is dismissed as premature and the pending motion for appointment of a receiver is dismissed as moot.

This constitutes the decision of the court.

Dated: August , 2006

Binghamton, New YorkFERRIS D. LEBOUS

JUSTICE, SUPREME COURT

OCA e-submission: no Judge E-Mail Footnotes

Footnote 1: In order to maintain consistency with the prior decisions in these actions, Porter's Concrete Service Inc. et al. will be referred to as plaintiffs and Eli Vanderpool et al will be referred to as defendants.

Footnote 2: The Vanderpools and Hidden Lake Development Corp. will be collectively referred to as defendants.

Footnote 3: Simultaneously, the court denied defendants' motion for summary judgment to declare the mortgage satisfied as a result of plaintiff's failure to mine the property.

Footnote 4: Notwithstanding that plaintiff only performed a limited amount of mining, the royalties reduced the principal balance by approximately $16,000.