Tremouliaris v. Pina

• Decision Date: 27 March 1987
• Citation: 23 Mass.App.Ct. 722,505 N.E.2d 225
• Parties: Taki TREMOULIARIS et al. 1 v. Joseph D. PINA et al. 2
• Court: Appeals Court of Massachusetts

Page 225

505 N.E.2d 225

23 Mass.App.Ct. 722

Taki TREMOULIARIS et al. ¹ v. Joseph D. PINA et al. ²

Appeals Court of Massachusetts,

Bristol.

Argued Jan. 12, 1987.

Decided March 27, 1987.

Daniel E. Goldrick, Pamela E. Karmazine, Taunton, with him, for defendants.

Robert A. Delle, Hyannis, for plaintiffs.

Before BROWN, QUIRICO and FINE, JJ. FINE, Justice.

The Tremouliarises agreed to buy and the Pinas agreed to sell a single family dwelling in Assonet. A purchase and sale agreement, signed by the parties on April 13, 1985, included a mortgage contingency clause which provided: "This agreement is subject to the BUYERS obtaining approval for mortgage financing in the amount of $49,400. The BUYERS agree to apply promptly for said mortgage loan from an institutional lender at current interest rates. If the BUYERS having used due diligence fail in good faith to obtain a loan commitment within 30 days then this agreement shall become null and void and all deposits shall be returned." The agreement was silent as to any requirement of notice by the buyers whether a mortgage had been obtained, or by the sellers whether they were exercising their right to declare the agreement null and void, nor was there a provision in the agreement that time was of the essence. The agreement was on a printed form supplied by a real estate broker with blank spaces in which only signatures, dates, dollar amounts, and reference to certain items in the dwelling to be included in the sale were inserted. It was also signed by one Pacheco, an associate in the brokerage firm acknowledged in the agreement to be acting as agent for the sellers, the Pinas.

The Tremouliarises paid the broker a deposit in the amount of $2,000, as called for in the agreement. They made reasonably prompt application to the Bristol County Savings Bank for a mortgage in the specified amount. By the thirtieth day following the signing of the agreement, however, they had not yet received notice of a mortgage commitment. The Pinas made no inquiry of the Tremouliarises upon the expiration of the thirty-day period about their arrangements for financing. Notice of approval of the mortgage came on May 21, 1985, eight days after the thirty-day period referred to in the mortgage contingency clause had expired. On June 5, 1985, the Tremouliarises notified Pacheco that the mortgage had been approved and that they were prepared to proceed to a timely closing. Pacheco did not tell them at that time that they were delinquent.

The first communication indicating that anything was amiss occurred on June 13, 1985, when the Pinas' attorney wrote a letter to the real estate broker stating that the Pinas would not be selling the property to the Tremouliarises because they had not obtained a mortgage commitment within the thirty-day period. In the letter, the attorney indicated that he had obtained that information from the Bristol County Savings Bank. The Tremouliarises were then notified by the broker that the deal was off. Their deposit was not returned.

The Tremouliarises brought this action for specific performance. Both the Tremouliarises and the Pinas moved for summary judgment with supporting affidavits setting forth the facts essentially as they have been outlined above; those facts are not in dispute. The motion for summary judgment brought by the buyers, the Tremouliarises, was allowed.

On appeal from the ensuing judgment the Pinas contend that the contract language, specifically the mortgage contingency clause providing that once the thirty-day period for obtaining a mortgage expires the agreement is "null and void," eliminates any further rights the Tremouliarises might have to the property. See Miracle Revival Center Move of God Church v. Kindred, 615 S.W.2d 257 (Tex.Ct.App.1981). The Tremouliarises put forth a different interpretation of the agreement. ³ Neither the Pinas nor the Tremouliarises contend that the process of interpreting the agreement would be aided by a consideration of extrinsic evidence. Compare Cullinet Software, Inc. v. McCormack & Dodge Corp., 23 Mass.App. 231, 236, 500 N.E.2d 831 (1986).

Unfortunately the particular document before us is obscure and has within it at least latent inconsistencies. A literal reading of the language of the mortgage contingency clause might well support the Pinas' interpretation. That clause appears to conflict, however, with a separate clause in the agreement, also touching upon financing, which provides: "Good and sufficient deed, subject to restrictions if any, to be delivered on or before [June 13, 1985]. Reasonable extension granted, if needed to arrange financing or clear title." While this clause is not altogether free of ambiguity, it seems to allow a reasonable extension of the closing date if more time is needed for the Tremouliarises to arrange financing. Its presence is an indication that the parties contemplated that the agreement might remain alive as late as June 13, 1985, even if financing had not as yet been arranged by the Tremouliarises. This tends to undercut the Pinas' interpretation that the Tremouliarises' failure to obtain a mortgage by the thirtieth day caused the agreement automatically to become null and void.

In an attempt to reconcile the conflicting parts, we must ask "what the writing means as a whole." See Clark v. State Street Trust Co., 270 Mass. 140, 151, 169 N.E. 897 (1930). Our analysis leads us to an interpretation which gives some effect to the "null and void" language, but not the critical significance which the Pinas attribute to it. Based upon that analysis, we agree with the Superior Court judge that the Tremouliarises were entitled to summary judgment.

We must construe the agreement according to the familiar principles stated in Clark v. State Street Trust Co., 270 Mass. at 151-153, 169 N.E. 897, by Chief Justice Rugg:

"The aim of all interpretation of writings is to ascertain the meaning intended to be attached to the words by the parties who used them, and to effectuate the true purpose of the parties as thus ascertained. All rules are ancillary to that dominating aim.... The construction of a written instrument to be adopted is the one which appears to be in accord with justice and common sense and the probable intention of the parties. It is to be interpreted as a business transaction entered into by practical men to accomplish an honest and straightforward end [citations omitted]. Equity looks through the form to the substance and purpose of the agreement and moulds its decree in accordance with what the parties may fairly be presumed to have intended. Every contract implies good faith and fair dealing between the parties to it. The courts always avoid, if possible, any construction of a contract that is unreasonable or inequitable" (citation omitted).

See also Waldo Bros. Co. v. Platt Contracting Co., 305 Mass. 349, 355-356, 25 N.E.2d 770 (1940); Fay, Spofford & Thorndike, Inc. v. Massachusetts Port Authy., 7 Mass.App.Ct. 336, 342, 387 N.E.2d 206 (1979).

We recognize, first, that the essence of the agreement was the effectuation of the sale of the property for $54,900. See deFreitas v. Cote, 342 Mass. 474, 477, 174 N.E.2d 371 (1961). The mortgage contingency clause served subsidiary purposes. Such a clause in a real estate purchase and sale agreement is usually included at the request, and for the benefit, of the buyer. By conditioning the agreement on the buyer's ability to obtain financing in a stated amount and on stated terms, such a provision enables the buyer to escape liability and to assure the return of his deposit should he be unable to obtain financing. See deFreitas v. Cote, 342 Mass. at 477, 174 N.E.2d 371; Bossi v. Whalen, 19 Mass.App.Ct. 966, 967, 473 N.E.2d 1167 (1985). Such a clause may be of incidental benefit to the seller as well. By imposing a deadline, a mortgage contingency clause "provide[s] him with a date by which he could know whether the buyers would have financing and would be bound to go through with the purchase." Bossi v. Whalen, 19 Mass.App.Ct. at 967, 473 N.E.2d 1167.

We think the only way the agreement can be interpreted as a rational instrument, satisfying the primary intent of the parties that the property be sold, as well as their subsidiary interests reflected in the mortgage contingency clause, is to recognize, even in the absence of a formal notice requirement, an implicit requirement that, to bring into play the "null and void" provision, one party communicate to the other some form of notice.

The buyer, we think, ought to give prompt notice to the seller if, within the time allowed, and, after diligent effort, he has been unable to obtain financing and he wishes, therefore, to terminate the agreement. If he gives timely notice, the agreement becomes null and void, and he is entitled to the return of his deposit. If he does not communicate his intention to terminate the agreement and does not request an extension, ⁴ he runs the risk of losing his deposit and being compelled to perform. Such a construction protects the buyer's interest in being released from the contract if he should be unsuccessful in obtaining a mortgage. If the buyer neither exercises his power to terminate by giving notice, nor requests an extension, the seller has the right to declare the agreement null and void. If he pursues that avenue, however, he ought reasonably to make some inquiry of the buyer about financing. Inquiry, to be meaningful, must be made of the buyer rather than of a particular lending institution since it would be of no importance to the seller what the source of the financial assistance arranged by the buyer was so long as the buyer would be able to tender the full purchase price. See deFreitas v. Cote, 342 Mass. at 477, 174 N.E.2d 371. Contrast Herrin v. Bouzianis, 12 Mass.App.Ct. 904, 906, 422 N.E.2d 488 (1981). If the seller is reasonably dissatisfied with the buyer's financial arrangements and chooses not to go...