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Glenpointe Associates, III v. Regency Savings Bank

2006 WL 2786885(U.S. Dist. Ct. D. N.J. 2006) (Unpublished)

MORTGAGES; PREPAYMENT — Even though a mortgage provides a window just before its maturity date within which the borrower may prepay the loan without penalty, when the borrower prepays before the beginning of that window, the waiver of the prepayment penalty during the window is not entered into the calculations used to determine the prepayment penalty actually due.

In 1996, a borrower executed a mortgage note, with the balance due on December 1, 2006. The note included a provision governing early repayment. The provision stated that the borrower did not have the right to make early payments on the mortgage note before December, 2001, but that it could prepay the note in full, without paying a premium, “on any installment payment date beginning with October 1, 2006.” For the time between December, 2001 and October, 2006, the note allowed the borrower to prepay the note in full, upon payment of a specified premium based on the amount of the outstanding balance.

In October, 2005 the borrower sought to pay off the note in full. Since the note was to be paid off before October, 2006, the mortgagee calculated the premium based on the formula in the contract. The premium included a certain percent of the balance for each installment payment that the borrower would have made if it had used the full period of the loan. The borrower paid the premium calculated by the mortgagee, but then demanded reimbursement for the portion of the premium that covered the installments that would have been made from October, 2006 to December, 2006. When the mortgagee refused to reimburse the borrower, the borrower filed an action against the mortgagee for breach of contract.

The mortgagee moved for summary judgment, claiming that there was no genuine issue of fact because the note’s language was plain and unambiguous. According to the mortgagee, the note could only be interpreted one way. The borrower maintained that the language was capable of more than one interpretation, and that the mortgagee’s interpretation was not consistent with the customary interpretation of such terms. According to the borrower, the provision that stated that the note could be paid in full “without payment of a premium, on any installment payment date, beginning with October 1, 2006,” and this required that the calculation of the prepayment premium exclude the period beginning with October 1, 2006.

The District Court explained that a court may interpret a contract as a matter of law as long as its meaning is clear. Regarding the prepayment provision, the Court found that the contract’s language was clear and unambiguous. The borrower claimed that the correct interpretation of the prepayment provision was that no premium would be due for any installment payment date, beginning October 1, 2006. It asserted that “October 1, 2006” did not refer to time, but rather to that month’s payment. The Court rejected the borrower’s argument, finding that the plain meaning of the language clearly referred to time. The Court noted that the other dates stated throughout the provision referred to time, and the borrower offered no evidence that the parties intended this date to carry a different meaning. Therefore, it found that the contract was clear on its face and was only susceptible to one interpretation. The Court granted the mortgagee’s motion for summary judgment and dismissed the borrower’s complaint.

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