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Davis v. Strazza

October 4, 2005


On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-11159-01.

The opinion of the court was delivered by: Yannotti, J.A.D.



Argued September 19, 2005

Before Judges Alley, C. S. Fisher and Yannotti.

Plaintiffs Charles B. Davis and Barbara Davis appeal from an order entered May 24, 2002 denying their motion for partial summary judgment and an order entered November 22, 2002 granting summary judgment in favor of defendants Eileen Strazza, Nora Bernesby and Christopher Bernesby. We affirm.

The facts relevant to the issues raised on this appeal are essentially undisputed. On May 31, 2001, plaintiffs and defendants entered into a contract under which plaintiffs agreed to sell and defendants agreed to buy certain real property in South Orange, New Jersey. The contract provided in pertinent part that:

[t]his agreement is contingent upon the purchaser obtaining a conventional mortgage at a prevailing rate of interest for 30 years with monthly payments based upon a 30 year payment schedule. The purchaser agrees to make immediate written application for such financing and to pay applicable original fees or points. If a written mortgage commitment is not received in thirty (30) days, or any agreed upon extensions, either party may cancel this contract.

The agreement required defendants to make a deposit of $25,000, which would be held in the trust account of defendants' attorney until closing of title. In addition, the agreement provided that, if the contract is "legally and rightfully" cancelled, the deposit would be returned to defendants and the parties will be free of liability to each other. The contract established a closing date of August 10, 2001. Pursuant to the terms of the agreement, defendants deposited $25,000 in the trust account of their attorney.

Defendants applied for mortgage financing and, on June 18, 2001, New Century Mortgage Company issued a written mortgage commitment. The first page of the commitment stated that the loan would be funded if defendants meet all of the terms and conditions in the commitment, "and any and all attached riders indicated, which comprise an integral part of this commitment." The attached rider consisted of three pages setting forth certain terms and conditions, including the requirement that defendants verify the funds available for closing and provide an executed HUD-1, or equivalent closing statement, respecting the sale of any property that is a source of such funds. The Bernesbys owned property in West Orange, New Jersey, and Strazza owned property in Montclair, New Jersey. The sale of both properties was necessary to provide funds to close.

On June 21, 2001, defendants' attorney provided a copy of the first page of the mortgage commitment to plaintiff's attorney. Defendants undertook to have plaintiffs' home inspected and, on August 1, 2001, requested that the closing date be extended to September 28, 2001. Plaintiffs in turn demanded $1,000 to extend the closing date and also sought agreement by defendants to a liquidated damages clause.

On August 6, 2001, before defendants had responded to plaintiffs' demands, New Century advised defendants by letter that the mortgage commitment was cancelled because it was unable to verify account balances. The letter stated that properties "required to be sold will not be sold" and sufficient assets were not available for closing. By letter dated August 7, 2001, defendants advised plaintiffs that their mortgage application had been denied and they were terminating the contract. Plaintiffs refused to consent to the termination of the agreement. Efforts to resolve the matter failed, and plaintiffs filed this action, in which they asserted claims against defendants for breach of contract, negligent misrepresentation and fraud.*fn1

On April 2, 2002, plaintiffs filed a motion for partial summary judgment on liability. Defendants filed a cross- motion for summary judgment. The judge denied the motions without prejudice by order entered May 24, 2002. In a decision set forth on the record, the judge determined that because the contract was contingent upon the defendants' obtaining a 30-year conventional mortgage and because the defendants did not obtain such a mortgage, they had the right to cancel the contract and to the return of their deposit with interest. The judge added, however, that before the matter could be resolved, it was essential for the court to know what steps defendants had taken to sell their homes. The judge said that if defendants acted in good faith, in endeavoring to comply with the condition of the mortgage commitment, defendants would be entitled to prevail.

Defendants again moved on September 23, 2002 for summary judgment. Plaintiffs filed a cross-motion for reconsideration of the judge's May 24, 2002 order and renewed their earlier motion for partial summary judgment. Based on the submissions, which detailed defendants' efforts to sell their properties, the judge found that defendants acted in good faith in endeavoring to comply with the condition imposed in the mortgage commitment. The judge therefore entered an order on November 22, 2002 denying plaintiffs' motions, granting ...

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