Opinion
No. 12100190.
2012-12-5
Erisbel Garcia MARTINEZ, Plaintiff v. Laurie SCARANTINO, Defendant.
Derick A. Spatorico, Esq., attorney for plaintiff. Richard T. Ciaccio, Esq., attorney for defendant.
Derick A. Spatorico, Esq., attorney for plaintiff. Richard T. Ciaccio, Esq., attorney for defendant.
THOMAS J. DiSALVO, J.
Facts of the Case.
This matter regularly came on to be heard on the court's small claims calender. The parties appeared with their respective attorneys, who appeared in their capacities as attorneys and as witnesses. As a result, the attorneys were sworn in as witnesses along with the parties herein. That since the plaintiff spoke Spanish as his primary language, the court arranged to have a Spanish interpreter, Natali Reyes, interpret for the plaintiff. The presence of the interpreter for said plaintiff was put on the record.
The plaintiff's claim for Two Thousand Dollars ($2,000.00) was set out as follows:
“Good faith deposit for purchase of property at 1505 Clifford Ave. Property found to have unmarketable title, and unable to acquire conventional mortgage, therefore purchase contract cancelled .”
Although the subject property is located in the City of Rochester, the defendant resides in the Town of Webster.
Upon the testimony offered by the parties and their witnesses, the court makes the following findings of fact:
1. The parties entered into a form real estate contract entitled “Purchase and Sale Contract For Residential Property”, dated August 13, 2012, for the purchase of 1505 Clifford Avenue, Rochester, New York;
2. The plaintiff was the buyer and the defendant was the seller in that contract, wherein plaintiff paid $2,000.00 as a down payment, held by seller's realtor Hunt Real Estate ERA/Columbus;
3. The sale price of said property was Thirty Five Thousand Dollars ($35,000.00), established by seller's counter offer that was accepted by the buyer/plaintiff;
The Purchase and Sale Contract was entered into evidence as Plaintiff's Exhibit 1.
4. That item “4” of said counter-offer stated “seller will provide insurable title”;
5. That item “5” of said counter-offer stated “buyer shall have until September 14, 2012 to obtain & accept a written mortgage commitment”;
6. The plaintiff obtained a commercial mortgage commitment from Canandaigua National Bank, dated September 4, 2012 in the amount of $26,250.00;
The mortgage commitment letter was entered into evidence as Plaintiff's Exhibit 2.
7. The mortgage commitment was labeled in the regarding of said letter as “Commercial Mortgage, 1505 Clifford Avenue, City of Rochester, County of Monroe, New York”;
8. The mortgage contingency as set out in paragraph 5(a) of the contract makes the offer subject to buyer obtaining a “conventional mortgage” in an amount not to exceed 75% LTV at an interest rate not to exceed 5% for a term of 30 years;
9. The mortgage commitment was provided to both attorneys by plaintiff's realtor, to wit: Nothnagle Realtors, via a fax dated September 6, 2012 attached to Plaintiff's Exhibit 2.
10. The plaintiff alleges that he refused to close this transaction because the defendant was unable to provide marketable title but only insurable title and because plaintiff was only able to obtain a commercial mortgage commitment instead of a conventional residential mortgage;
11. There is no argument that the defendant would be able to provide insurable title to the property to the plaintiff at closing;
12. Paragraph 12 of the Purchase and Sale Contract entitled “Objections to Title” states as follows:
“If Buyer raises a valid written objection to Seller's title which indicates that title to the property is unmarketable, then Seller may cancel this Contract upon written notice to Buyer, and the deposit shall be returned to Buyer. However, if Seller (a) is able to cure the objection on or before the closing or (b) is able to insure the title objection and Buyer is willing to accept insurable title, then this Contract shall continue, subject to the Seller curing the title objection and/or providing insurable title at Seller's expense. If Seller fails to cure the title objection on or before the closing, or if Buyer is unwilling to accept insurable title, Buyer may cancel this Contract upon written notice to Seller and the deposit shall be returned to Buyer.”
13. Plaintiff agreed to accept insurable title by virtue of his acceptance of the counter offer of the defendant;
14. Despite the fact that the contract in question was titled as “Purchase and Sale Contract For Residential Property” there does not appear to be a controversy as to the fact that the property was not residential property, but was in fact commercial property.
15. The choice of which form of contract to use was presumably that of the plaintiff's realtor;
16. It is not clear simply from reading the contract whether the contingency making the contract subject to the plaintiff obtaining a conventional mortgage was meant to refer to a conventional residential mortgage or a conventional commercial mortgage, other than the fact that the form contract utilized is meant for residential real estate transactions;
17. No pictures of the property were submitted by the plaintiff to establish that the property was residential rather than commercial;
18. The mortgage commitment received by the plaintiff provided two options; “Option 1” provided for a fixed rate of 5.79% for the first three years; “Option 2” provided for a floating interest rate based on the Wall Street Journal prime lending rate plus 1.29%; Regardless of which option chosen by the plaintiff, the mortgage was to be amortized over a fifteen (15) years, rather than thirty (30) years as set out in the contract.
Legal Analysis.
Insurable Title. Certainly that portion of plaintiff's argument that the contract in question was voidable because the defendant was able to provide only insurable and not marketable title is without merit. The issue of insurable title was not the result of boilerplate printed terms of a form contract. The parties specifically contracted that the defendant would provide and that the plaintiff would accept insurable title in a typed counter offer. Both parties had their own separate real estate brokers, who prepared or presented both the offer and counteroffer. In addition, the contract was subject to the approval of both parties' independent attorneys. “A party who executes a contract is presumed to know its terms and agree to same” ( Winter Bros. Recycling Corp. Vs. Barry Imports East Corp. 23 Misc.3d 1115A, 885 N.Y.S.2d 714, 2009 N.Y. Slip Op 50758U, * * *4 [2009] ). The plaintiff did not rebut this presumption.
The attorneys appearing herein also represented the parties in the real estate matter which is the subject of this case.
Mortgage Contingency. The mortgage contingency provision of the contract is more problematic. The phrase “conventional mortgage” is somewhat vague. A conventional mortgage has been defined as “... a mortgage loan made by a lending institution without government guarantees, and therefore not subject to the specific requirements and regulations appertaining to government-guaranteed mortgages....' “ (Kim Hung Tsang v. Romano, 31 Misc.3d 1202A, 929 N.Y.S.2d 200, 2011 N.Y. SLIP Op 50468[U], * * *17 [2003] ).Such a definition does not eliminate the possibility of a conventional commercial mortgage. Thus the phrase “conventional mortgage” in and of itself does not indicate if the parties intended the plaintiff to obtain commercial conventional mortgage commitment or a residential conventional mortgage commitment. One is left to speculate if the author of the contract ultimately knew that a commercial mortgage was required, but used the phrase “conventional mortgage” without giving it much thought. In any event, the plaintiff maintained that he was always attempting to obtain a conventional residential mortgage commitment.
A simple internet inquiry reveals that there are various sources of government guaranteed commercial mortgages.
“When the term conventional mortgage' is used in a clause such as the instant one, there should also be set forth the term of the mortgage and at what interest rate the mortgage shall be....” (Neiss v. Franze 101 Misc.2d 871,872, 422 N.Y.S.2d 345, 347 [1979] ). In the Purchase and Sale contract herein there were specific terms set out as to the interest rate and length of the mortgage loan, i.e. “at an interest rate not to exceed 5% for a term of 30 years”. Those were not the terms of the commercial mortgage commitment obtained from Canandaigua National Bank.
Nevertheless, the last sentence of paragraph 5(a) of the Purchase and Sale Contract entitled “Mortgage Contingency” states that “Acceptance of a written mortgage commitment by buyer shall be deemed a waiver and satisfaction of this contingency.” There was no testimony that the plaintiff refused to sign the mortgage commitment. The evidence presented indicated only that the plaintiff refused to close the deal. In fact defense counsel entered into evidence a fax cover sheet dated October 2, 2012 from seller/defendant's attorney stating that “Contract provides for insurable title only”. That fax was sent almost a month after the mortgage commitment was issued. Attached to that fax sheet was an e-mail, dated September 6, 2012, from plaintiff's attorney's office indicating that a copy of plaintiff's mortgage commitment was attached thereto and providing defendant/seller's attorney with the instrument survey certifications. In fact, the fax sheet indicates that the only outstanding issue between the parties at that time was that the contract provided for the transfer of insurable title to the plaintiff. As such it would appear that the plaintiff waived the mortgage contingency provision.
Defendant's Exhibit B was a copy of the “Closing Agenda”, dated October 10, 2012, from the lender's attorney's office.
Defendant's Exhibit C.
Conclusion.
The defendant breached the real estate contract in question. His failure to close on the sale based on the defendant's ability to provide only insurable title or because he did not obtain a mortgage commitment as originally set out in the in contract was not justified for the reasons set out herein. “In the event of a default by the purchaser or a repudiation of the contract of purchase, upon which a down payment has been made, the law is clear that the purchaser may not recover his down payment. This is the rule even in instances where the premises are sold for a sum equal to or greater than the contract price.” (Johnson v. Werner, 63 A.D.2d 422, 424, 407 N.Y.S.2d 28, 30 [1978] ). Thus the claim of the plaintiff is hereby dismissed. This constitutes the decision and order of this Court.