On appeal from the Superior Court of New Jersey, Law Division, Warren County, Docket No. L-361-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Lihotz and King.
Plaintiff appeals from a summary judgment in favor of defendant, the denial of his motion for summary judgment, and the denial of his motion for reconsideration. We affirm and conclude that defendant properly prevailed on the cross-motions for summary judgment.
Plaintiff desired to buy defendant's house. He placed a deposit of $11,000 with the defendant's attorney. The agreement of sale, entered into in early March 2006, prepared by the listing real estate broker, contained a mortgage contingency clause as follows:
C. MORTGAGE CONTINGENCY: If performance by Buyer is contingent upon obtaining a mortgage. The Buyer agrees to make immediate written application for such financing and to cooperate actively in good faith with due diligence with the brokers and the Seller to obtain such mortgage financing. The amount of the mortgage loan required by the Buyer is and will be what is commonly known as the 30 year conv. year direct reduction plan with interest at the prevailing rate of interest per annum. Either Buyer or Seller may void this Agreement by written notice to the other party if the written mortgage loan commitment has not been received (or if Buyer has not notified Seller of his decision to complete the purchase transaction without his obtaining a mortgage commitment) on or before April 25, 2006.
The closing date was specified as May 2, 2006. The problem in this case arises because the plaintiff did not cancel until May 4, 2006. The agreement provides for two conditions to occur by April 25, 2006 to void the obligation to purchase: (1) buyer not receiving the written mortgage loan commitment and (2) a written notice to terminate -- both conditions must occur "on or before April 25, 2006." The plaintiff did not satisfy the "written notice" condition in a timely manner. The judge correctly observed at the initial argument on the motion:
"Buyer or seller may void this contract by written notice to the other party if the written mortgage commitment has not been received or buyer is not notified." And you are supposed to do that on or before April 25th. So you have [until] April 25th to pull the rug on this agreement.
Plaintiff's counsel urges there was no time limitation "after the 25th" to give notice of the voiding or termination for the contract. We think the agreement clearly states to the contrary, especially where the notice to terminate was given two days after the closing date.
We cannot fault Judge Coyle's reasoning expressed this way:
Two primary issues of contention arise out of the parties' interpretation of this clause. First, the plaintiff contends that he did not obtain a conventional mortgage at the prevailing interest rate and, therefore, rightfully cancelled the contract. Second, the defendant asserts that the plaintiff waived or otherwise failed to invoke the mortgage contingency clause in a timely fashion.
At the onset, the Court finds that the mortgage contingency clause is primarily for the purchaser's benefit. One of the basic purposes of the clause is to protect buyers from the consequences of financial incapacity. Northeast Custom Homes, Incorporate versus Howell, 230 New Jersey Super. 296, a 1988 Appellate Division case.
In this instance, the plaintiffs qualified for a 30 year conventional mortgage with an interest rate in excess of 11 percent. That's pretty hefty. Plaintiff on their own volition concluded this rate was beyond their financial capacity and, as a result, sought to invoke the mortgage contingency clause to cancel the contract. The plaintiff relied upon the provision in the contract which provided that the buyer would obtain a conventional mortgage at the prevailing rate. Having failed to obtain a loan at a lower interest rate, the plaintiffs contend they rightfully cancelled the contract. The ambiguity of the language in the contract, however, leaves this Court incapable of defining prevailing interest rate for the parties. As averred in brief, this phrase can be interpreted as either the rate which ...