Li v. Yaggi
| Decision Date | 23 January 2020 |
| Docket Number | CV145034810 |
| Court | Connecticut Superior Court |
| Parties | Winston Li et al. v. Valerie Yaggi et al. |
UNPUBLISHED OPINION
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Corradino, Thomas J., J.T.R.
Thomas Corradino, J.T.R.
In this case the plaintiffs had entered into a written agreement to purchase a residential property with the defendants. The property was eventually sold to another party and the plaintiffs brought this action seeking the return of contractual deposits pursuant to a mortgage contingency clause. The property was located at 45 Wickford Place in Madison.
The paragraphs relevant to the issue at hand are paragraphs 6 and 14 of the agreement between the parties.
The agreement contained a mortgage contingency clause in paragraph 6, which stated: The agreement specified that the commitment date was thirty days from the date of the October 26 agreement, which was November 25. Because November 25 was a Sunday, the commitment date was November 26. The closing date was set for December 3.
Paragraph 14 of the Agreement provided:
This case has been previously tried and judgment was entered in favor of the defendants. That decision was reversed by the Appellate Court in Li et al. v. Yaggi II I et al. 185 Conn.App. 691 (2018). In that decision the court concisely set forth the law to be applied to this case and the issues that must be decided upon remand. The court spoke of the purposes of these contingency provision in real estate contracts.
We begin by setting forth the general law applicable to mortgage contingency clauses. A mortgage contingency clause contained in a contract for the sale of real property generally allows a purchaser to recover his or her deposit if the purchaser is unable to secure a mortgage and has complied with the provisions of the contingency clause. See generally 77 Am.Jur.2d, Vendor and Purchaser § 531 (2016) . The condition is (Footnotes omitted.) 92 C. J. S., Vendor and Purchaser § 197 (2018); see also 2 Restatement (Second), Contracts § 225, illustration (8) (1981); id., § 226, illustration (4). 185 Conn.App., pages 699, 700.
In the present case, the plain language of the provision in question, states that the "Buyer’s obligation is contingent upon Buyer obtaining financing," which indicates the intent of the parties that the provision be a condition precedent to the plaintiffs’ obligation to perform their agreement to purchase. Our appellate courts have previously interpreted similar mortgage contingency clauses and determined them to be conditions precedent to the contract. See, e.g., Luttinger v. Rosen, 164 Conn. 45, 48, 316 A.2d 757 (1972).
In overturning the decision of the trial court in favor of the defendants see 185 Conn.App. 693 (2018), the court was quite explicit as to the issues that must be decided by a court upon retrial. First the court noted that the agreement between the parties as set forth in paragraph 6 of the real estate purchase contract is contingent on the buyer obtaining financing stating that "Buyer agrees to apply for such financing immediately and diligently pursue a written mortgage commitment on or before the commitment date." Then the court noted the same paragraph stated that: 185 Conn.App. at pp. 694-95.
The court added these instructive observations:
The parties do not dispute that the plaintiffs were "unable to obtain a written commitment" by the commitment date. They disagree, however, as to whether the plaintiffs diligently pursued such a written commitment before that date and whether they gave written notice of their inability to obtain a commitment in such a way as to entitle them to the return of their deposits. 185 Conn.App. at page 701.
The court will try to address these two questions (1) Did the plaintiffs exercise diligence and make reasonable efforts in trying to obtain a mortgage up to the commitment date and (2) Was written notice by the buyers of their inability to obtain financing (mortgage) given in such a way as to entitle the buyers to the return of their deposit.
This court will now try to deal with these two separate issues.
Mortgage contingency clauses in our state have been held to "imply a promise that the purchaser will exert reasonable efforts to obtaining mortgage commitment" Philipe Tomas, 3 Conn.App. 471, 473 (1985), Luttinger v. Rosen, 164 Conn. 45, 47 (1972), Barber v. Jacobs, 58 Conn.App. 330, 335 (2000) citing Lach v. Cahill, 138 Conn. 418, 422 (1951). These cases, like the one before the court, all involved claims that a prospective purchaser had a right to recover the deposit or earnest money he or she made because the claimant used reasonable efforts to secure financing. Here the clause states the plaintiff buyers agree to apply for financing "immediately and diligently pursue a written mortgage on or before the Commitment Date." Interestingly the case law conflates the reasonable effort and diligent effort obligation. In McCoy et al. v. Brown et al., 130 Conn.App. 702 (2011) prospective purchasers brought an action against vendors claiming their deposit under a mortgage contingency clause should be returned. There as here the clause required the prospective purchaser to apply for a mortgage commitment "and (to) pursue the same diligently," id., 703. The court said at page 708:
Any mortgage contingency clause implies "a promise that the purchaser will exert reasonable efforts to obtain a mortgage commitment." Phillipe v. Thomas, 3 Conn.App. 471, 473, 489 A.2d 1056 (1985); see also Barber v. Jacobs, 58 Conn.App. 330, 335, 753 A.2d 430, cert. denied, 254 Conn. 920, 759 A.2d 1023 (2000). In this case, the mortgage contingency clause expressly required the plaintiffs to exercise due diligence. As in Phillipe, the language of the contract obligated a mortgage commitment. "Reasonableness ... is an objective standard, involving an analysis of what a person with ordinary prudence would do given the circumstances, without accounting for any particular knowledge or skill ... Whether the plaintiff’s actions constituted reasonable efforts to satisfy the contractual condition is a factual determination the trial court." (Citations Omitted.) Phillipe v. Thomas, supra, at 475, 489 A.2d 1056.
It should also be noted that in Phillipe v. Thomas, 3 Conn.App. 471 (1985), the court rejected a subjective good faith standard as the test to be applied in these mortgage contingency cases and said our state uses an objective reasonable effort standard to determine if there has been compliance with a mortgage contingency clause.
There are several Connecticut cases discussing the criteria that should be applied in deciding whether, under a mortgage contingency clause, a prospective purchaser has used due diligence and/or made reasonable efforts to obtain a mortgage commitment.
In an early case, Lach v. Cahill, 138 Conn. 418 (1951) decided the plaintiff made a reasonable effort to obtain a mortgage and despite his failure to do so he was entitled to...
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