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Riccio v. Ahmad


December 18, 2007


On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-6521-04.

Per curiam.


Submitted September 24, 2007

Before Judges Parrillo, Graves and Alvarez.

This case involves a residential real estate transaction. Plaintiffs Ronald J. Riccio and his brother, Richard A. Riccio, entered into a written contract to sell their residence located at 382 Virginia Avenue, Jersey City (the property), to defendant, Iftikhar Ahmad, for the sum of $295,000. In their complaint, plaintiffs contend that defendant breached the contract when he did not appear for a time-of-the-essence closing scheduled for November 17, 2004. On the other hand, defendant claims that he had the right to cancel the contract because his mortgage company revoked his mortgage commitment based on an appraisal report, which initially valued the property at only $260,000.

Defendant appeals from three orders: (1) an order dated January 24, 2006, granting plaintiffs' motion for summary judgment as to liability only; (2) an order denying defendant's motion for reconsideration and cross-motion for summary judgment filed March 17, 2006; and (3) an order for judgment in favor of plaintiffs in the total amount of $44,285.21 entered on June 9, 2006. After reviewing the record and the applicable law in light of the contentions advanced on appeal, we conclude that the proofs presented in the Law Division were not sufficient to justify summary disposition in favor of either party. The judgment in favor of plaintiffs is therefore reversed, and the matter is remanded to the Law Division.

Because the trial court granted plaintiffs' motion for summary judgment, we set forth the facts in the light most favorable to defendant. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). In late September 2004, the parties entered into a written contract of sale for the property. The contract was for $295,000, and it was contingent upon defendant obtaining a mortgage loan in the amount of $236,000 (eighty percent of the purchase price), on or before October 15, 2004. The mortgage contingency provision included the following language in bold capital letters:


Thus, the mortgage contingency clause did not require either party to cancel the contract by a specific date or within a designated time period.

On September 28, 2004, plaintiffs' counsel wrote a letter to defendant's attorney disapproving the contract and requesting certain changes, including sellers' "right to continue to occupy the property pursuant to a Use and Occupancy Agreement until November 15, 2004," following the closing, which was scheduled to "take place on or before October 27, 2004." Plaintiffs also requested the following paragraph be added to the contract:

7. Paragraph 31. Additional Contractual Provisions. Add: For the purpose of this Contract, the "Contract Date" shall be the date when the Contract of Sale and all amendments, including this Letter Rider, are fully signed and initialed by all parties, or the parties' agents. All contingency periods shall commence on the Contract Date.

In a letter dated October 13, 2004, defendant's attorney advised that the contract was approved subject to eleven specific changes, including a reduction in the sale price from $295,000 to "$280,000 per appraisal report." At the end of his letter, defendant's attorney wrote: "If the foregoing meets with your client's approval, please sign below and return to me, so we can consider the attorney review period closed." Plaintiffs agree that their attorney authorized the changes proposed by defendant's attorney and that the attorney review period ended "on or about October 22, 2004."

According to defendant, he was eager to purchase the property, and he applied for a mortgage through United Home Mortgage Company "on or about September 29th, 2004." United Home Mortgage then ordered an appraisal of the property from Lou Gomez Appraisal Services. On or about October 6, 2004, Mr. Gomez submitted his initial appraisal report indicating that the value of the property was $260,000, based on the sale price of comparable properties. When the appraisal report was submitted to United Home Mortgage, Mr. Amer Mir, defendant's mortgage representative and real estate agent, communicated this information to the listing broker. At his deposition, Mr. Mir testified that when Mr. Riccio learned of the appraisal value, "he apparently was upset and he wanted to speak to the appraiser." Mr. Mir also produced a letter from Mr. Gomez, which confirmed that he increased the value of the property from $260,000 to $280,000 after he was contacted by one of the plaintiffs. In his letter, Mr. Gomez states:

I Lou Gomez, a New Jersey state licensed Real Estate Appraiser, License #RA 03031 was hired by United Home Mortgage Company, to inspect and complete a summary appraisal report on a property located at 382 Virginia Avenue, Jersey City, New Jersey. Block # 01763 Lot # 00024 A. The evaluation was as of October 5[,] 2004.

The fair market value at that time was determined to be $260,000. This appraisal was submitted to the client, I was subsequently contacted by the owner Mr[.] Riccio, who expressed his opinion that the appraised value was lower than anticipated and therefore he would not be able to proceed with the sale of the property. Mr[.] Riccio then asked me to reconsider the value derived in the appraisal report. Additional research prompted the appraiser to correct and make some minor changes to the appraisal report, thereafter submitting a revised report with an estimated value of $280,000. The Appraiser's opinion of value, submitted to the client, United Home Mortgage, was rejected on the basis that the higher value derived, was not supported by the current market and therefore refused the borrower financing.

The client [United Home Mortgage] utilizes an appraisal report while granting or denying financing, the client reserves the right to form their own opinion upon review of said report with no obligation to the borrower, seller or appraiser.

After the attorney review period closed on or about October 22, 2004, plaintiffs' attorney sent a letter to defendant's attorney dated November 4, 2004, scheduling a closing for November 17, 2004, and making time of the essence. On November 5, 2004, defendant's attorney sent a letter to plaintiffs' counsel, canceling the contract because "the contract price could not be justified by the appraisal." Defendant's attorney enclosed a copy of the statement from United Home Mortgage to defendant, indicating that defendant's mortgage loan application had been denied because of "inadequate collateral" and "unacceptable property."

In a letter dated November 8, 2004, plaintiffs' attorney advised defendant that plaintiffs had rejected defendant's attempt to cancel the contract "at this late date." Nevertheless, defendant did not appear at the closing scheduled for November 17, 2004, and the property was sold to a third-party purchaser on February 1, 2005, for $250,000.

Defendant certified that on October 12, 2004, he obtained a mortgage commitment for $224,000 (eighty percent of the reduced sale price), and he also certified:

There is no question that the mortgage application was denied due to no fault of mine. There is no question that I obtained a mortgage commitment. There is no question that the property allegedly ended up being sold for [an] amount similar to what it was originally appraised for at a time when property values are going up in Jersey City. There is no question that I was not obligated to produce a mortgage commitment on October 15, 2004, prior to the seller agreeing to my attorney's amendment of the contract.

I met all my obligations under the contract and should not be held responsible.

Seller has not provided to this court any proof that the property appraised for anything close to what they attempted to sell it for. [Indeed] they claim to have sold it for $250,000. If anyone is a victim in this matter, I am the one. They tried to sell the property to me at an inflated price.

Defendant's position was corroborated by (1) Amer Mir, who testified at his deposition that the underwriter rejected the appraisal for the property because "it was clear that the comparables were not strong enough to support the [sale price]"; (2) the underwriter, MGIC Investor Services Corporation, which confirmed that the property did "not meet the client's minimum underwriting standard due to nonsupport of value from comparables"; and (3) Remi Alabi, the owner of United Home Mortgage Company, who confirmed that defendant received a mortgage loan commitment on October 12, 2004, but defendant's mortgage loan application was ultimately denied because the underwriter was not satisfied that the appraisal report substantiated the sale price. Mr. Alabi's certification included the following:

Mr. Ahmad was qualified for the loan that he applied for because of his good credit record. He did everything we required him to do as far as the mortgage process. It is not his fault that the mortgage was denied. The property was certainly not worth what they were trying to sell it for. This [lawsuit] is the direct result of the seller trying to sell the property for an amount that is unreasonably inflated. Had he not interfered with the appraisal process, this case would not be before this court. That explains why they did not sell it for anything close to the $280,000 they were asking.

As a mortgage broker and lender I have experience in the real estate market. The fact that they sold the property for far less is conclusive proof that the lender's rejection was justified and it was not the borrower's fault. The seller personally interfered with the buyer's mortgage application process by strong-arming the appraiser to inflate the price of the property. Thus, he should not be allowed to benefit from this conduct against a buyer who did everything he was required to do.

The mortgage contingency clause in this case is similar to the mortgage contingency clause we reviewed in Davis v. Strazza, 380 N.J. Super. 476, 478 (App. Div. 2005), certif. denied, 186 N.J. 242 (2006) ("If a written mortgage commitment is not received in thirty (30) days, or any agreed upon extensions, either party may cancel this contract."). Thus, we conclude defendant was not foreclosed from canceling the contract after October 15, 2004. Moreover, we are satisfied that the evidence presented to the trial court was not so "one-sided" that plaintiffs must prevail as a matter of law. Brill, supra, 142 N.J. at 540 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed. 2d 202, 214 (1986)). In our view, when the competent evidential materials are viewed in a light most favorable to defendant, the evidence is sufficient to permit a rational factfinder to conclude that defendant did not breach his contractual obligations. We therefore reverse and remand to the Law Division.

Reversed and remanded.


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