185 Conn. App. 691
Conn. App. Ct.2018Background
- Plaintiffs (Li & Wang) entered a purchase and sale agreement to buy residential property for $810,000 and deposited $25,000; the mortgage commitment date was 30 days after contract (Nov. 26, 2012).
- Contract contained a mortgage contingency: buyer must apply immediately and "diligently pursue a written mortgage commitment on or before the Commitment Date," and if unable to obtain a commitment and notifies seller in writing by 5:00 p.m. on that date, the agreement is null and deposits returned.
- On Nov. 24, 2012 plaintiffs emailed the seller saying they could not obtain a mortgage commitment by 5 p.m. that day, requested an extension, and attached a signed change form proposing new dates; the seller declined to sign without bank verification.
- Plaintiffs later supplied December notices from two lenders (a denial and a suspense list) and, after unsuccessful attempts to extend, sought termination and return of deposits; seller retained deposits and sought attorney’s fees under the contract.
- Trial court held plaintiffs breached by failing to (1) give timely written termination notice and (2) diligently pursue financing, awarded seller retention of deposits as liquidated damages and later attorney’s fees; appellate court reversed and remanded for new trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs used reasonable diligence to obtain mortgage by commitment date | Plaintiffs provided necessary documents and applied to lenders; December notices show diligent efforts | Seller relied on denial/suspense notices to show applications incomplete and lack of diligence | Trial court's finding of lack of diligence was clearly erroneous because it relied solely on ambiguous December notices and did not assess efforts up to the commitment date; remand required |
| Whether Nov. 24 email satisfied contractual written-notice requirement under mortgage contingency | Email (taken as a whole) notified seller of inability to obtain financing by the commitment date and thus triggered return of deposits | Email was a request for extension (and plaintiffs’ attached change form indicates extension request), not a termination notice | Trial court misinterpreted contract: clause required notice of inability to obtain commitment, not an express termination; court failed to decide whether the Nov. 24 email sufficed — remand required |
| Validity/reasonableness of attorney’s fees award | Plaintiffs contended the $38,000 award was unreasonable | Seller asserted fees were supported and properly calculated | Court need not decide reasonableness because reversal of judgment requires vacatur of fee award; fees vacated on appeal |
| Whether seller may alternatively prevail on equitable estoppel grounds | Plaintiffs argued they did not intend termination and acted consistently; equitable estoppel not raised by plaintiffs | Seller argued plaintiffs’ post-deadline conduct estops them from claiming Nov. 24 terminated the contract and that seller relied to its detriment | Appellate court declined to consider estoppel because it was not raised or adjudicated at trial; record inadequate, but seller may raise estoppel on remand |
Key Cases Cited
- Luttinger v. Rosen, 164 Conn. 45 (Conn. 1972) (mortgage contingency as condition precedent; notice within time required for refund of payments)
- Barber v. Jacobs, 58 Conn. App. 330 (Conn. App. 2000) (buyer must make reasonable efforts to obtain mortgage where contingency requires prompt application and diligence)
- McCoy v. Brown, 130 Conn. App. 702 (Conn. App. 2011) (mortgage contingency requiring prompt application and diligence obliges buyer to use reasonable diligence; reasonableness is objective)
- Zullo v. Smith, 179 Conn. 596 (Conn. 1979) (entire written communication should be considered to determine sufficiency of notice under a contingency)
- Phillipe v. Thomas, 3 Conn. App. 471 (Conn. App. 1985) (remand required when trial court failed to make factual determination about reasonableness of buyer’s efforts)