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Regal Realty Services, LLC v. 2590 Frisby

May 14, 2009

REGAL REALTY SERVICES, LLC, PLAINTIFF-RESPONDENT-APPELLANT,
v.
2590 FRISBY, LLC, ET AL., DEFENDANTS-APPELLANTS-RESPONDENTS.



Order, Supreme Court, Bronx County (Kenneth L. Thompson, Jr., J.), entered October 16, 2008, which denied defendants' motion and plaintiff's cross motion for summary judgment, unanimously modified, on the law, defendants' motion granted, and otherwise affirmed, with costs. The Clerk is directed to enter judgment in defendants' favor dismissing the complaint.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and subject to revision before publication in the Official Reports.

Friedman, J.P., Sweeny, Catterson, Renwick, Freedman, JJ.

300132/08

Plaintiff entered into a contract on March 7, 2007 for the purchase of real property from defendant 2590 Frisby. The contract terms provided for a purchase price of $3,050,000, with a down payment of $152,500 to be held in escrow by Frisby's attorney, payment of which was timely made.

The balance of the purchase price was to be secured by plaintiff through a mortgage on the property. Section 16 of the contract required plaintiff to obtain, within 30 days, a written mortgage commitment in the amount of $2,182,500, or such lesser sum as plaintiff would be willing to accept. It further contained standard mortgage contingency language requiring plaintiff to make prompt application to an institutional lender, furnish accurate information, pay all fees, pursue such application with due diligence, and promptly identify the institutional lender to the seller. Frisby was obligated to provide plaintiff with any information needed for the application, and in the event the application was declined, plaintiff would provide Frisby with the consents necessary to obtain information concerning the application.

If plaintiff failed to secure the mortgage by the 30th day after the contract signing (the Commitment Date), both parties had a mutual option to cancel the contract on written notice, and in the event of such cancellation, the down payment was to be refunded. This mortgage contingency period would expire on the earlier of the date plaintiff received a mortgage commitment or five days after the Commitment Date, unless the parties agreed to an extension.

Section 17 of the contract provided that its terms could only be modified or changed in writing.

Plaintiff's initial mortgage application was to HSBC, and was rejected. Although the record is not clear as to the exact date that plaintiff's application was denied, the affidavit in support of plaintiff's cross motion for summary judgment states it was verbally advised of the denial "In the beginning of April, 2008." The reason for the denial had nothing to do with the marketability of title or condition of the premises. It was plaintiff that considered canceling the contract, suggesting that the denial took place before the mortgage contingency expiration date in the contract of sale. Plaintiff advised Frisby's attorney of the rejection and contends that upon Frisby's suggestion, it applied to Frisby's current mortgagee, Hudson Valley Bank, for financing.

In August 2007, the parties attempted to renegotiate the terms of sale and amend the contract. Although the initial draft prepared by Frisby noted that the mortgage contingency in section 16 of the original contract had expired on April 11, 2007, plaintiff objected to that provision and it was removed from the final rider to the contract. That rider, executed on August 23, raised the purchase price to $3,075,000 and added a payment option in the form of a purchase money note and second mortgage.

A mortgage commitment letter was issued by Hudson Valley Bank on August 20, 2007, three days prior to the execution of the rider. That commitment was in the amount of $2,135,000, which was less than plaintiff was willing to accept for purchasing the property. Plaintiff took the position that the mortgage commitment was less than that applied for because certain "issues" involving the property's parking lot and a claim of mold in the building had arisen. No proof of these claims appears in the record. In an attempt to resolve those issues, the commitment was extended to September 29.

On September 21, 2007, Frisby's attorney sent notice to plaintiff's counsel of record that plaintiff was in default of the contract and set a "time of the essence" closing for October 22. A different attorney representing plaintiff wrote to defendants' counsel on October 15, that it was terminating the contract, and demanded return of the down payment. The next day, another letter was sent, objecting to the October 22 closing date, and pointing out that the "condition precedent" of section 16 of the contract had not occurred, thus entitling plaintiff to a refund of the deposit.

Frisby's counsel responded on October 17, stating that the mortgage contingency provision had expired by its terms six months earlier, and as of April 13 the contract ceased to be conditioned upon the issuance of a mortgage commitment. This letter further objected to plaintiff's demand for a return of the down payment.

The October 22 "time of the essence" closing date passed without a closing taking place. Litigation commenced, and Frisby moved in March 2008 for summary judgment, arguing that the plain terms of the contract obligated plaintiff to obtain a written mortgage commitment within 30 days of the contract date, and if it failed to do so, the mortgage contingency would expire 5 days later. By having failed to meet this obligation or to cancel the contract or obtain a written extension, ...


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