Price, Sullivan and Leonard. The opinion of the court was delivered by Sullivan, J.A.D.
Plaintiffs, Charles R. and Nadine K. Mathis, and defendant Anna Yarak, entered into a written contract for the purchase and sale respectively, for $25,000, of certain residential premises in Cliffside Park, N.J. The contract provided that it was subject to the purchasers' obtaining an "FHA" mortgage for $21,500, and that either party had the right "to void this agreement, by written notice to the other party, if the mortgage loan has not been arranged or this provision waived by the Purchaser by February 28 1960." Closing date was set for March 28, 1960.
Defendants Paul J. Ross and Charlotte Ross, individually and trading as Ross Agency (hereinafter referred to as the broker), negotiated the proposed sale and accepted a deposit of $2,500 from plaintiffs. The contract provided that the deposit was to be held in escrow by the broker "to be paid to the Seller less brokerage commission if mortgage contingency
is met or waived; or returned to the Purchaser if this agreement is voided as herein provided."
Plaintiffs applied for a Federal Housing Authority (F.H.A.) insured mortgage loan and in connection therewith Anna Yarak was asked to execute an "Amendatory Language" form required by F.H.A. regulations, the substance of which made the agreement contingent on the Federal Housing Commissioner's appraising the property for not less than $25,000. Mrs. Yarak refused to execute the form, the loan was never processed, and on February 29, 1960, Mrs. Yarak wrote to plaintiffs "I hereby exercise my right to terminate said contract by reason of failure of said purchasers to obtain a mortgage commitment." Thereafter plaintiffs tried to close on an all cash basis but Mrs. Yarak took the position that the contract had been terminated and refused to convey.
Plaintiffs filed suit against Anna Yarak for specific performance of the contract or damages. Thereafter on July 5, 1960 plaintiffs, through their attorney, wrote to the broker stating that they had decided "to discontinue their efforts to enforce the contract with Mrs. Yarak" and requested the return of the $2,500 deposit. The broker, on its part, claimed that it was entitled to its full commission of $1,500 out of the deposit money. It offered to return the balance of the deposit, but only if it received a general release as escrow agent from plaintiffs and Mrs. Yarak.
Plaintiffs then amended their complaint to add a count against the broker for wrongfully withholding the deposit money, and the broker, having been brought into the case, cross-claimed against Anna Yarak for its $1,500 commission.
At the pretrial conference plaintiffs formally abandoned their claim for specific performance of the contract.
The trial court, after hearing the proofs, ruled that Anna Yarak had breached the contract by refusing to sign the "Amendatory Language" form and was liable to plaintiffs for damages and to the broker for its commission. It also ruled that the broker, in holding the deposit money, was acting
as the agent of the seller. The judgment, which the trial court entered, included in plaintiffs' damages the amount of the deposit, interest thereon from March 28, 1960, and plaintiffs' legal expenses of $265.30 for a total judgment of $2,905.05 in favor of plaintiffs and against Anna Yarak.
It was further provided that the $2,500 was to be returned by the broker to plaintiffs to be credited against the amount of plaintiffs' judgment against Anna Yarak. Judgment was also entered in favor of the broker ...