Conford, Freund and Sullivan. The opinion of the court was delivered by Freund, J.A.D.
This is an appeal by plaintiffs from a denial of their motion for summary judgment, and from the final judgment entered in favor of defendant following the granting of its cross-motion for summary judgment.
In April 1960 Villa Fina Development Corporation (Villa Fina), a corporation of Puerto Rico, planned to develop a large tract of land in San Juan, Puerto Rico, upon which it intended to construct many one-family dwellings. To further that purpose Villa Fina on April 20, 1960 entered into a written purchase commitment agreement with defendant whereby defendant obligated itself, for a period of one year, to hold $1,000,000 available to purchase mortgages which Villa Fina intended to obtain from purchasers of the homes it anticipated building.
Plaintiffs are assignees of Villa Fina's interest in the foregoing agreement.
Under the terms of the purchase commitment defendant agreed to accept from Villa Fina
"* * * by assignment to us $1,000,000. par amount of FHA mortgage loans insured by the Federal Housing Commissioner pursuant to the provisions of Title II, Section 203b of the National Housing Act, as amended, bearing interest at 5 3/4% per annum, with such maturity dates and such minimum down payments as may be provided in said Title II, Section 203b of the National Housing Act and the regulations of the Federal Housing Administration."
The agreement set forth further conditions with which the mortgages would be required to comply before defendant would be obligated to purchase them. Defendant was to purchase these mortgage loans at discounts of 5 to 7% of the unpaid principal balances, depending upon the interest rate and time period over which the principal would be paid.
Villa Fina had contemplated that the possession of such a commitment would enable it to secure local short-term loans with which it could finance the construction of the homes. Villa Fina paid $10,000 as consideration for the obligation
which defendant undertook under the terms of the purchase commitment, as follows:
"You [Villa Fina] are to pay us [defendant] on acceptance of this commitment a non refundable fee equal to one percent (1%) of the amount of this commitment as stated in paragraph 1 above, which shall be ours as the consideration for our making this commitment. It shall constitute absolute and unconditional payment to us, without right or claim against the same, and without right of recovery of the whole or any part thereof, in any event whatsoever." (Emphasis added)
Villa Fina never launched the development project. As a result, no homes were built and, of course, no mortgages were offered to defendant. The purchase commitment expired on April 20, 1961, the present plaintiffs having unsuccessfully sought an extension of six months. There was no contradiction of defendant's assertion that it was ready at all times within the contract period to meet this obligation under the agreement.
On April 25, 1961 these plaintiffs filed a complaint against defendant, demanding judgment in the amount of $10,000 on the grounds that the purchase commitment was violative of the laws of New Jersey and Federal administrative regulations, was illusory and unenforceable, the $10,000 paid by Villa Fina was a usurious charge, and the retention of that money constituted unjust enrichment to defendant. As noted above, ...