130 Conn. App. 702
Conn. App. Ct.2011Background
- Plaintiffs bought defendants' Darien property for $1,325,000 under a mortgage contingency requiring a first mortgage commitment at prevailing rate with due diligence.
- Plaintiffs submitted a mortgage application; McCoy sought a salaried job at Provation to obtain a better rate and amended the application accordingly.
- Bank issued a 6.25% commitment; employment offer was withdrawn, but plaintiffs did not pursue alternative financing.
- Plaintiffs notified defendants of alleged ineligibility for the stated terms and demanded return of the $127,500 deposit.
- Trial court found plaintiffs lacked due diligence and that withdrawal of application was unreasonable; deposit retained as liquidated damages.
- Appellate court affirmed, holding plaintiffs failed to exercise due diligence after learning they were ineligible for the preferred rate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does 'prevailing rate' require rate-based criteria or income-verified criteria? | McCoy argues prevailing rate requires best available rate. | Brown contends clause not limited to prime rate; needs reasonable diligence. | Court did not adopt prime-rate interpretation; analysis shows not dispositive to due diligence. |
| Did plaintiffs breach the mortgage-contingency by withdrawing the application and not pursuing alternatives? | McCoy exercised due diligence but was thwarted by alternate options. | Plaintiffs failed to demonstrate reasonable diligence after withdrawal. | Yes, plaintiffs breached by failing to pursue other financing options; deposit retained. |
Key Cases Cited
- Phillipe v. Thomas, 3 Conn.App. 471 (1985) (mortgage contingency implies reasonable efforts to obtain a commitment)
- Aubin v. Miller, 64 Conn.App. 781 (2001) (denied mortgage denial is crucial; distinguishable facts)
- Luttinger v. Rosen, 164 Conn. 45 (1972) (no cap on interest rate; no automatic no-search assumption)
- Neubig v. Luanci Construction, LLC, 124 Conn.App. 425 (2010) (breach question is ordinarily fact intensive; clearly erroneous standard)
- Barber v. Jacobs, 58 Conn.App. 330 (2000) (reasonableness standard in due-diligence analysis)