Chase Manhattan Bank, N. A. v. Edwards

Appeal from an order of the Supreme Court at Special Term (Miner, J.), entered July 10, 1981 in Albany County, which denied plaintiff’s motion for summary judgment dismissing the counterclaim. As the result of a foreclosure action, plaintiff was the owner of certain real property located in Ulster County. By a contract of sale dated October 16,1978, plaintiff agreed to sell the property to defendant for $3,400 in cash and a purchase-money mortgage in the amount of $48,600. Defendant alleges that at a luncheon prior to the signing of the contract,^[1] an officer of the plaintiff bank advised him that the bank had fire insurance coverage on the property and that defendant’s obligation to obtain insurance could be satisfied by transferring the policy to defendant, which the officer agreed to do if defendant was satisfied with the coverage afforded by the policy. Defendant further alleges that several weeks later he reviewed the policy, which had an expiration date in April 1979, and advised the officer that he was satisfied with its coverage. He took no further steps to obtain insurance or ascertain that the policy obtained by the bank had been transferred to him. In fact, the policy had been canceled shortly after the closing. In March, 1979, one of the buildings located on the property was destroyed by fire, and when defendant learned that his loss was not covered by insurance, he stopped paying on the note. Plaintiff then commenced an action to foreclose the mortgage. In response, defendant has alleged as a counterclaim that he sustained damages as a result of his reliance on the statements or representations made by plaintiff’s officer concerning fire insurance coverage for the property. By prior order not subject to this appeal, plaintiff’s motion for partial summary judgment foreclosing the mortgage was granted. The prior order did not involve the validity of defendant’s counterclaim. Plaintiff thereafter moved for summary judgment dismissing defendant’s counterclaim. The motion was denied and this appeal ensued. The contract of sale, which defendant signed after the representations were allegedly made, provides that the mortgage “shall be drawn on the standard forms of New York Board of Title Underwriters”, which, for the mortgage involved herein, contains a provision requiring the mortgagor to keep the buildings on the premises insured against loss by fire. The contract of sale further contains a merger