On appeal from Superior Court, Law Division, Union County.
Pressler, Long and Gruccio. The opinion of the court was delivered by Gruccio, J.A.D.
The sole issue on this appeal is whether the issuance of a conditional mortgage commitment constitutes grounds for cancellation of a real estate contract containing a clause requiring the issuance of a firm written commitment for a 30-year conventional mortgage. We hold that it does and affirm.
On April 13, 1988, plaintiffs James and Alice McKenna (purchasers) entered into a contract to purchase a home in Scotch Plains, New Jersey, from defendants Barry and Ann Rosen (sellers). The contract purchase price was $245,000 upon which the purchasers paid the required deposit of $12,000. The contract contained the following clause:
This agreement is contingent upon obtaining, by or for the purchaser, a firm written commitment for a 30 year conventional mortgage in the amount of $140,000 at prevailing rates of interest for 30 years, with monthly payments
based on a 30 year payment schedule, secured by a first mortgage on the premises. The purchaser agrees to make immediate application for such financing, to pay prevailing origination fees, and to cooperate actively with the broker and the seller, to obtain such mortgage financing. If the mortgage commitment is not obtained by 5/31/88, this contract shall be null and void unless the purchasers immediately waive benefit of the mortgage contingency clause in writing, and consider the clause as having been fully satisfied. The sellers may also, in writing, extend the time within which the purchasers may obtain the required mortgage commitment. If there is no such written waiver or extension, this contract will have been voided by the mutual consent of both the purchaser and the seller as of June 7, 1988.
The mortgage commitment date was extended to June 6, 1988, on which date the purchasers requested an additional extension. Later that day, they received a mortgage commitment which contained the following provision:
APPLICANT/BORROWER TO PROVIDE:
A4. Evidence that the sale of borrower's previous residence . . . has been completed resulting in net proceeds of at least $90,000. These funds are necessary to consumate [ sic ] this transaction. * * * A bridge loan is not an acceptable alternative to our receipt of a HUD Form 1 on your prior residence unless specifically approved by Midlantic Home Mortgage Corporation. * * *
The purchasers' home had been on the market for three months without success notwithstanding the fact that its price had been reduced and that it was the lowest-priced residence in the area. Accordingly, the purchasers' attorney informed the sellers' attorney that the purchasers would not be able to accept the conditional commitment and thus were required to void the agreement of sale.
The sellers took the position that the contract did not allow for termination if the commitment was conditional and refused to return the purchasers' deposit. The purchasers filed suit for the return of their deposit and moved for summary judgment. In granting their motion, Judge Weiss found Judge Imbriani's reasoning in Farrell v. Janik, 225 N.J. Super. 282, 542 A.2d 59 (Law Div.1988), applicable and ...