Alfeo v. Dinsmore
| Decision Date | 16 February 2007 |
| Docket Number | No. 05-P-1678.,05-P-1678. |
| Citation | 861 N.E.2d 491,68 Mass. App. Ct. 249 |
| Parties | Gina ALFEO v. Mark T. DINSMORE & another.<SMALL><SUP>1</SUP></SMALL> |
| Court | Appeals Court of Massachusetts |
Joel A. Kozol, Boston, for the defendants.
Brooke K. Richter for the plaintiff.
Present: KAFKER, GRAHAM, & KATZMANN, JJ.
This case, arising from a dispute over the return of the plaintiff buyer's deposit under a residential real estate purchase and sale agreement, centers on whether the plaintiff had met her obligation under the mortgage contingency clause to "apply for a conventional bank or other institutional mortgage loan." A Superior Court judge determined that the plaintiff had done so. We conclude that the judge was correct as matter of law on the summary judgment record, and also properly rejected various attendant claims.
Background. In late 2002, the plaintiff, Gina Alfeo, and her fiancé were looking to purchase a home in Sudbury. On November 22, 2002, the plaintiff entered into a purchase and sale agreement with third parties respecting a home located on Hudson Road in Sudbury (Hudson Road property), with the closing scheduled for January 15, 2003. To finance the purchase, the plaintiff2 applied for mortgage financing from Drew Mortgage Associates, Inc. (Drew). Drew is licensed in Massachusetts as a mortgage lender and as a mortgage broker, and is also an approved FHA (Federal Housing Administration) loan correspondent. As described in the uncontroverted affidavit of its general counsel, Drew does its business as follows. Drew closes more than 2,000 residential mortgage loans per year, utilizing a mechanism known as "table funding," which is common in the residential mortgage lending industry.3 Drew takes loan applications from customers, underwrites loans based on Federal National Mortgage Association and mortgage investor guidelines, and makes credit determinations (subject to review and acceptance by the mortgage servicers with whom Drew works). At the time of a mortgage closing, Drew sells the mortgage note and mortgage instrument securing the note to the participating mortgage servicer, simultaneously with the provision of the loan amount by the mortgage servicer.
On December 12, 2002, three weeks after entering the agreement on the Hudson Road property, the plaintiff submitted an offer to purchase a second property, owned by the defendant sellers, located on Horsepond Road in Sudbury (Horsepond Road property).4 The plaintiff and her fiancé had decided to purchase both homes, apparently intending to improve and sell the Hudson Road property while living in the Horsepond Road property, but they did not inform the defendant sellers of their intent to purchase or apply for financing for two homes. On December 16, 2002, the plaintiff applied for mortgage financing from Drew for the Horsepond Road property, and Drew issued a preapproval letter for the loan, which was provided to the defendant sellers. The preapproval letter, signed by a Drew vice-president, stated that "we have pre-approved you for a mortgage loan . . . based on a purchase price of $365,000." On December 23, 2002, the plaintiff entered into a purchase and sale agreement with the defendant sellers for the Horsepond Road property for $364,500, paying $18,250 as a total deposit held by the sellers' broker, and setting the closing for January 16, 2003 (one day after the scheduled closing on the Hudson Road property). Paragraph 26 of the purchase and sale agreement contained a mortgage contingency clause, which provides as follows:
5
(Emphases added.)
On December 30, 2002, the defendant sellers were informed that the plaintiff had submitted an application for financing but that more time was needed for it to be processed. The purchase and sale agreement was extended in writing several times to accommodate the plaintiff while her loan application was pending. On January 15, 2003, the plaintiff closed on and took title to the Hudson Road property, for which she paid $285,000, having obtained a mortgage through Drew that was funded by Ohio Savings Bank. The next day, the parties executed a fifth and final extension of the Horsepond Road agreement, extending the time for giving notice of termination for failure to obtain mortgage financing to January 22, 2003, and postponing the closing date to February 4, 2003. On January 22, 2003, after learning that Drew had denied the plaintiff's application for financing, plaintiff's counsel sent a letter timely notifying the defendant sellers that the plaintiff had been unable to obtain financing, and requesting the return of the deposit. The sellers responded by requesting proof of the plaintiff's diligent efforts to obtain financing under paragraph 26. The plaintiff provided the defendants' attorney with a copy of a rejection letter dated January 24, 2003, from Drew's operations manager to the plaintiff, stating that her "loan request . . . was not approved by the Loan Committee of our company" for the reason that the "[r]atio of housing expense to verified income [was] too high." The sellers refused to return the deposit and this action ensued.6
The plaintiff brought a complaint seeking a declaration that she was entitled to the return of her deposit on the Horsepond Road property. The defendants filed counterclaims for declaratory relief and breach of contract, breach of the covenant of good faith and fair dealing, and fraud. On cross motions for summary judgment, the judge allowed the plaintiff's motion and denied the defendants' motion, concluding, among other things, that the plaintiff had made "diligent efforts" to obtain financing because her application to Drew constituted an application to an "institutional lender" under paragraph 26 of the purchase and sale agreement. A final judgment entered, declaring that the plaintiff is entitled to a refund of her deposit and accumulated interest, and dismissing the defendants' counterclaims. The defendants appealed.
Discussion. a. Mortgage contingency clause. The construction of an unambiguous contract provision is a question of law appropriate for summary judgment. Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 779, 761 N.E.2d 946 (2002). As with any contract, our aim in interpreting a real estate purchase and sale agreement is to achieve the intent of the parties. See Shapiro v. Grinspoon, 27 Mass.App.Ct. 596, 600-601, 541 N.E.2d 359 (1989). Our decisions remind us that it is the buyer who is the usual proponent and primary beneficiary of a mortgage contingency clause, which serves as a safety valve when she is unable to obtain financing. See Tremouliaris v. Pina, 23 Mass.App.Ct. 722, 726, 505 N.E.2d 225 (1987); Churgin v. Hobbie, 39 Mass.App.Ct. 302, 305, 655 N.E.2d 1280 (1995). The clause incidentally benefits the seller by setting a certain date by which the deal may fail or after which the seller knows the buyer is bound to perform. See ibid.
The typical clause also protects the seller by requiring that the buyer direct her borrowing efforts toward an appropriate entity engaged in the business of mortgage lending (as opposed to, for example, the proverbial rich uncle or aunt). The clause here thus imposes as its basic requirement that the plaintiff "apply for a conventional bank or other institutional mortgage loan . . . at prevailing rates, terms and conditions" and use "diligent efforts [to obtain] a commitment for such loan." Additionally, in language tacked on to the standard form clause (see note 5, supra), the parties specified that "[a]pplication to one institutional lender shall satisfy Buyer's diligent efforts." The evident purpose of this language is to protect the plaintiff from the possibility that "diligent efforts" require multiple applications for financing. The reasonable reading of the language in its context and in conjunction with the basic requirement above is simply that the plaintiff need only once "apply for a conventional bank or other institutional mortgage loan . . . at prevailing rates, terms and conditions."7
The question before us distills to whether, in submitting her application to Drew, the plaintiff in fact "appl[ied] for a conventional bank or other institutional mortgage loan." The defendants argue that Drew is not an "institutional mortgage [lender]" because it does not use its own funds to finance mortgages, but rather table funds them using outside lenders,8 and that Drew does nothing more than act as a "broker" who brings borrowers and lenders together. We disagree.
First, the very fact that Drew is a licensed mortgage lender under G.L. c. 255E in the...
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