Opinion
CV145034810
01-23-2020
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UNPUBLISHED OPINION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.
MEMORANDUM OF DECISION
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: "Buyer’s obligation is contingent upon Buyer obtaining financing as specified in this paragraph. Buyer agrees to apply for such financing immediately and diligently pursue a written mortgage commitment on or before the Commitment Date ... If Buyer is unable to obtain a written commitment and notifies Seller in writing by 5:00pm on said Commitment Date, this Agreement shall be null and void and any Deposits shall be immediately returned to Buyer. Otherwise, the Financing Contingency shall be deemed satisfied and this Agreement shall continue in full force and effect." 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: "If the Buyer fails to comply with any Terms of this Agreement by the time set forth for compliance and seller is not in default, seller shall be entitled to all initial and additional deposit funds provided for in section 4, whether or not Buyer has paid the same, as liquidated damages and both parties shall be relieved of further liability under this Agreement. If legal action is brought to enforce any provision of this Agreement, the prevailing party shall be entitled to reasonable attorneys fees."
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 purchaser may be expressly given the privilege or option to rescind the contract and recover any payments made by him or her where the contract of sale provides for the cancellation of the contract" in the event that the purchaser is unable to obtain a mortgage or loan within a specified time. Accordingly, when a contract for the sale of real property contains a mortgage contingency clause ... they are entitled to recover their down payment if the mortgage is not in fact approved through no fault of their own ... On the other hand, where the purchaser disregards the terms of a financing contingency contained in a contract for sale ... the purchaser would not be entitled to invoke the contractual contingency contained in a contract for sale ... the purchaser would not be entitled to invoke the contractual contingency and recover his or her down payment." [footnotes added and omitted]). The condition is "meant to protect the buyer. It is a condition of the buyer’s duty, not a condition of the seller’s duty under the contract. Upon the nonoccurrence of the condition, i.e., the buyer’s obtaining financing, the buyer is ipso facto excused from performance." (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: "If buyer is unable to obtain a written commitment and notifies seller in writing by 5:00 p.m. on said commitment date, this Agreement shall be null and void and any deposits shall be immediately returned to buyer. The agreement specified 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." 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.
1
Diligent Pursuit of Written Mortgage Commitment on or Before Commitment Date
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 return of his deposit money. The court noted he was denied a mortgage at one bank and then went to five other banks where his efforts were also unsuccessful. He was told Hartford banks were not interested in placing loans on outlying property and although he was a veteran his income did not meet FHA requirements for a guaranteed loan, id. p. 420.
But loan applications to several banks are not a prerequisite to finding reasonable effort. In Aubin et al. v. Miller et al., 64 Conn.App. 781 (2001), the husband and wife plaintiffs sued for return of a down payment they made for purchase of a residence. The court found the plaintiffs made reasonable attempts to secure a mortgage. The husband sent a fully executed copy of the sales agreement "to People’s Bank, a recognized lending institution." People’s Bank was the only bank the plaintiff sought the mortgage commitment from. He also submitted additional documents requested by the bank including credit and employment release authorization forms as requested by the bank. He disclosed assets and debts to the bank including the fact that his wife had no income. The bank ultimately did not approve the mortgage, apparently because the plaintiff was fired from his job. The court also rejected the defendants’ argument that reasonable effort requirement was not met because the plaintiff’s wife did not apply for a mortgage. She had no income and a party is not required to perform a useless act to meet reasonable effort criteria. The sales agreement was entered into on July 23, 1996 and the plaintiffs had until August 16th to obtain a mortgage commitment. The documents were sent to the bank on July 30, 2016, see discussion at pp. 784-88.
Other cases also have held that a person making a claim for return of a deposit made under a mortgage contingency clause need not necessarily apply to more than one bank where for example it would have been useless to do so. Thus in Barber v. Jacobs, 58 Conn.App. 330 (2000) a wetlands problem on the property was an obstacle to obtaining a loan and thus complying with a mortgage contingency clause. Quick resolution of the problem was not possible so loans from any other bank would present an insurmountable problem in complying with the dates in the mortgage contingency clause, id., pp. 335-36, see also Luttinger v. Rosen, 164 Conn. 45, 45-47 (1972).
From all of this one can conclude that the issue of whether a party has made a reasonable and diligent effort to procure a mortgage, thus entitling him or her to recover a deposit under a mortgage contingency clause, depends on a variety of factors offering no definitive guidelines in a particular case.
It is helpful to examine cases from other jurisdictions on this question since the considerations used to decide this reasonable and diligent effort issue are the same. There is an A.L.R. article entitled appropriately enough "Sufficiency of Real Estate Buyer’s Efforts to Secure Financing Upon which Sale is Contingent." The annotation appears in 78 A.L.R.3d 880 which was published in 1977. A supplement was issued in 2011. Both the original annotation and the supplement cite several Connecticut cases, which the court has already discussed. The court will now review cases cited in the 2011 Supplement from other jurisdictions.
In Fallah v. Hux, 702 N.Y.S.2d 352 (2000), the court found the prospective purchaser’s actions satisfied their contractual obligations to make a "diligent, truthful, and proper" application for a mortgage. The court noted: "There is no evidence that the documentation provided by plaintiff was inadequate or that the lender’s decision to disapprove the plaintiff’s mortgage application based on insufficient income was due in any way to a lack of information. Moreover, and contrary to the defendant’s contention, the contract did not require the plaintiff to apply to more than one lender," id., page 353.
In Gardner v. Padro, 164 Ill.App.3d 449 (1987), the court found that the purchaser made a good faith effort to obtain financing and thus was entitled to the return of the earnest money he put down pursuant to the mortgage contingency clause. The court held that the purchaser presented uncontested evidence that he applied for the loan very shortly after the contract was signed, that he had not received his loan commitment within the required 90 days, and that his loan was ultimately approved is sufficient to show a good faith effort on his part to obtain financing." The loan application was at no point rejected by the lender so it would have served no purpose to seek another lender. The plaintiff could do little to expedite a mortgage commitment since "the loan approval process is in the exclusive control of the lender," id., pp. 450-51.
In Ruggeri v. Brenner, 589 NUS 2d 23 (1992), the court held the plaintiff purchaser was entitled to recover his deposit. The court reasoned that "when the lender of plaintiff’s choice rejected his application, plaintiff was not required to pursue other alternatives before recovering his deposit ... It is not disputed that plaintiff twice sought financing, provided all required documents, and was unsuccessful for reasons not of his own making." Chao v. Chang, 597 N.Y.S.2d 81 (1993), emphasizes that where a prospective buyer makes attempts to obtain a mortgage but is unable to qualify for one, the buyer’s efforts would be sufficient to permit the buyer to recover a deposit made under a mortgage contingency clause, id., pp. 82-83. As noted in Schultz v. Topakyan, 475 A.2d 91, (N.J. 1984), one of the basic purposes of these clauses allowing return of deposits- if good faith efforts are made to secure a mortgage but the effort is unsuccessful- is "the protection of the buyers from the consequences of financial incapacity," cited in Northeast Custom Homes, Inc. v. Howell, 553 A.2d 387, 391 (1988, N.J).
In Garsee v. Bowie, 852 So.2d 1156 (La., 2003), the court said, referring to an earlier case, that a single verbal application for a loan was not a good faith attempt or reasonable compliance with the terms of the agreement between the parties allowing the purchaser to recover his or her deposit. The court pointed out that in that earlier case there was evidence that another lending institution would have lent money to the buyer if she had made a written application. The Garsee court went on to cite numerous Louisiana cases, however, holding a buyer need only make one good faith effort to secure financing to fulfill the condition of securing financing. Thus case law did not support the contention that a buyer must make loan applications with numerous lending institutions," pp. 1161-62; see also Plaisted v. Fuhr, 367 N.W.2d 541, 545 (Minn.App., 19851, Gallah v. Hix, supra, cf Cone v. Daus, 501 N.Y.S.2d 523, 525 (1986).
But merely making some contact with a lender does not dictate that a court can find a reasonable effort was made to secure financing under a mortgage contingency clause. Thus in Ray v. Peoples, 387 So.2d 1303 (La., 1980), vendors were entitled to retain the purchaser’s deposit where trial court could not find reasonable effort to obtain financing because insufficient information was submitted to lender, id., p. 1305.
On the other hand courts are not reluctant to take a common sense rather than a completely technical approach in deciding whether a purchaser is entitled to recover earnest money deposit under a mortgage contingency clause.
Thus in Case v. Forlorni, 639 N.E.2d 576 (Ill.App. 1993), vendors appealed the trial court’s decision that purchasers were entitled to deposit or earnest money deposited pursuant to a real estate sales contract. The vendors argued the purchasers did not make reasonable efforts to obtain financing in the prescribed thirty-day period because they were required to submit a written loan application for the mortgage amount specified in the contingency clause. Agreeing with the trial court the appellate court found reasonable efforts had been made despite the fact that a written mortgage application was not submitted. The court noted that nine lenders were contacted orally or in writing during the thirty-day period. In his answer to interrogatories the purchaser listed the persons contacted at the financial institutions, the numerous contacts and dates thereof. He also testified he submitted personal and financial information to various lenders. All of this was sufficient to make a finding of reasonable effort to comply with the mortgage contingency clause despite the absence of a formal written application.
An interesting case is Grossman v. Lowel l, 703 F.Supp. 282 (1989). It is not strictly analogous to the plaintiffs’ claim here since the dispute was not precisely over a demand that deposit money be returned to the prospective purchaser under a mortgage contingency clause. In Grossman the vendor sued Lowell with whom he had entered into a contract to sell real estate. Lowell was to use her best efforts to secure financing within 60 days. The contract was operative as of September 24, 1986 and only two days later Lowell demanded her deposit money back and said she was canceling the contract. The vendor sued Lowell and the court held the vendors were entitled to damages for breach of contract in the amount of the difference between the contract price and the price for which the property was sold. The court held Lowell violated her obligation of good faith and fair dealing. The court held that the vendor should prevail because "Lowell failed to use her best efforts to obtain a mortgage in this case. Three telephone calls and the submission of one application, which is denied several days after the signing of the contract, does not constitute ‘best efforts’ when at least 50 days remained to obtain a mortgage, and there were many other avenues that were easily explorable, such as mortgage brokers and banks situated within a reasonable distance from the property."
More concisely and citing numerous cases Section 531 of the "Vendor and Purchaser" article in 77 Am.Jur.2d page 581 says: "Accordingly, when a contract for the sale of real property contains a mortgage contingency clause, as long as purchasers exert a genuine effort to secure mortgage financing, and act in good faith, they are entitled to recover their down payment, if in fact the mortgage is not in fact approved through no fault of their own," Aubin v. Miller, 64 Conn.App. 78 (2001), and McCoy v. Brown, 130 Conn.App. 702 (2011), are two of the six cases from other jurisdictions cited for this proposition.
The court will now discuss factors which support the position that the plaintiffs used due diligence in applying for financing prior to the commitment various dates.
First it should be noted that the plaintiffs engaged the services of three professionals in their attempt to acquire the residence at 45 Wickford Place. They had a real estate agent named Blake Ruchti, a mortgage broker named George Wang and an attorney, James Tsui, Esq. Mr. Wang was the individual the plaintiffs relied upon to secure a mortgage before the commitment date. The real estate contract was signed October 26, 2012. But Mr. Wang had procured a preapproval letter for a loan of $650,000 on the Wickford Place property on October 12, 2012. He was in communication with the plaintiffs before the date of contract signing and testified that he told Mr. Li and his wife that they should consider adding their son Andy Li to the contract since as it was later explained his income added to that of Mr. Li would be helpful in getting bank approval for any loan. On October 20, 2012 Mr. Li emailed Mr. Li that Andy Li should be included in any sale contract. All of this was before the contract was signed on October 26, 2012 but can be said to be a pattern of involvement by the plaintiffs in securing a mortgage that began before October 26. Securing the preapproval letter according to Mr. Wang required getting verbal information from the plaintiffs such as their income and place of employment.
Understandably, however, the defendant makes much of the fact that the plaintiffs had thirty days from the October 26 contract signing until the commitment date of November 26, 2012 to secure a mortgage commitment. A signed loan application was not sent to Mr. Wang until November 7, 2012 eleven days out of the thirty. But the court looked at a 2012 calendar (U.S.) and October 26, 2012 is on a Friday which arguably would mean little could be done on that weekend to complete the application. In Binks v. Farooq, 578 N.Y.S.2d 335, 336 (1991), the plaintiff vendor brought a suit for money damages. The plaintiff claimed the defendant did not comply with the obligation of a mortgage contingency clause in a real estate mortgage contract to make efforts to secure a mortgage the plaintiff alleged as a result of this the home had to be sold for a lower price. The facts of the case indicated the parties entered into a real estate contract in December of 1981; the defendant was to attempt to secure a mortgage by December 20. The contract language did not state the prospective purchaser had to act promptly and in good faith. The court held that every contract imposed a good faith obligation. The court found that the vendor was entitled to prevail on the damage claim, however. This was because for a period of seven days from December 11 to December 18 the real estate agent on each day, contracted the defendant to fill out a loan application. The defendant on each occasion declined to do so.
This case is not the Binks case. Mr. Li appears to have cooperated with Mr. Wang in sending him requested documents and asked if anything else was required to execute a loan application.
In any event Mr. Wang, the plaintiff’s mortgage broker started working on the loan application when he received the October 26, 2012 contract from the plaintiffs and then requested more documents. Mr. Wang started working on the loan application as soon as he received the October 26, 2012 contract. It usually takes five to seven days for him to complete an application he testified he has hundreds of files to work on.
Mr. Wang apparently filled out the loan application based on documents supplied by the plaintiffs. Exhibit 9 indicates from the email record contained therein that Mr. Li sent the "required" documents to fill out the application to Mr. Wang on November 3, 2012. This would suggest Wang sent to Mr. Li the list of required documents on or before that date. The son’s tax return for 2011 was not included because he was "trapped" in New York but lived in Boston at the time. The Uniform Loan Application contains information Mr. Wang, who is identified as the "Loan Originator," could only have received from Mr. Li and his son Andy Li. Exhibit 9 which is the Uniform Loan Application has several attached redacted documents apparently used to fill out the application.
The application itself lists on the first page personal information such as marital status, location of property under contract, dependents, Andy Li is identified as a "co-borrower," along with Mr. Li. The second page lists the proposed monthly income of both borrowers and the prospective "combined" monthly housing expenses. The third page lists assets and liabilities for both borrowers. The final page lists details of the transaction such as cost of the home sought to be purchased and the loan amount. Another section is entitled declarations and requests personal information from Mr. Li and his son Andy. The document is signed by both Winston Li and Andy Li and is dated 11/4/12.
The application also includes a document entitled "Borrower Signature Authorization." There are two such documents with the same wording. One is signed by Winston Li, the other by Andy Li. The documents authorized the "Lender/Broker" to verify "my past and present employment earning records, bank accounts, stock holdings, and any other asset balances that are needed to process my mortgage loan application. I further authorize the Lender/Broker to order a consumer credit report and verify other credit information, including past and present mortgage and landlord references." Another document signed by Mr. Li, and his son Andy Li and like the previous documents dated November 4, 2012, has a section entitled "Authorization to Release Information." The information is to be released to Woodbridge Mortgage, LLC.
The latter is apparently the agent for the first and only bank the plaintiff went to for a mortgage commitment prior to the November 26, 2012 commitment date in the mortgage contingency clause of the real estate contract between the parties.
The second paragraph of this document under the title: "Authorization to release information" reads as follows:
"2. I/We authorize you to provide to Woodbridge Mortgage, LLC and to any investor to whom Woodbridge Mortgage, LLC may sell my mortgage, any and all information and documentation they may request. Such information includes but is not limited to, employment history and income; bank, money market and similar account balances, credit history, and copies of income tax returns."
As noted Mr. Wang testified he completed the loan application on documents sent to him. Documentation was not produced to verify this at trial- seven years after the events in question. Mr. Wang said such documents would be retained by the bank for only two years Mr. Wang was given enough information to complete the loan application. The denial letter from the first bank (Exhibit 16, dated 12/13/2012) does not seem to indicate that insufficient documentation was provided but rather indicates that from what was provided the prospective lender concluded Andy Li had credit issues. In any event Mr. Wang said the credit issues had been resolved and the residency question was the real and sole reason for the denial. Admittedly as to this issue the testimony was confusing in that at one point Mr. Wang seemed to agree the June 19, 2019 trial date that Andy Li’s credit situation was still a problem since the parents paid some debt obligations and the lender and the possibly the bank "was not going to accept that as evidence on behalf of Andy Li having sufficient credit history"- Mr. Wang agreed with that observation. The point is that the plaintiffs on this score were not hiding anything from the bank so insufficient or incorrect information cannot be used to establish a lack of diligence claim.
Also it could be suggested that problems with Andy Li’s credit history and the residence issue would have been avoided if Mr. Li’s wife Mrs. Yang was added on the loan application as a borrower and failure to do so established a lack of diligence. But Mr. Li said she could not be listed as a borrower because she had marginal income and the broker said it was necessary to add the son as a co-borrower. Later on in cross examination Mr. Li said the wife did not have consistent income, she had a home business but the broker (Mr. Wang) did not believe that would help and felt her income was not reliable. Mr. Li agreed with that assessment. The court accepts this testimony. Both Mr. Li and his wife testified and obviously attached to their son. They did not seem capable of putting their son in a situation where there would possible be future financial risk for him as a co-borrower if the terms of the loan were not met so they could buy a comfortable home for themselves.
On November 10, 2012 an Addendum to the Purchase and Sale Agreement of October 26, 2012 was signed by the Yaggis, the plaintiffs and their son Andy Li. The addendum added Andy Li as a buyer to the real estate contract. Mr. Li testified that the lender required a co-borrower on the loan application also be a buyer on the real estate contract. The loan application represented Andy Li’s primary residence would be Wickford Place although he lived in Boston at the time he and his father signed the loan application. Common sense seems to indicate that if a co-borrower lived in the residence that was subject to the mortgage application, he or she would have an added personal interest in complying with the terms of any loan application. In the next part of the opinion the court will discuss how the representations regarding Andy Li’s residence might suggest a failure to meet the due diligence standard. However, from a mechanical processing perspective the November 10, 2012 addendum reflect a serious effort to secure financing.
The foregoing is supportive of the plaintiff’s claim that they used due diligence and made reasonable efforts to secure a mortgage between October 26, 2012 and November 26, 2012, thus meeting the requirements of the contingency agreement set forth in the October real estate contract.
B. It is also argued that the agreement between the parties called for a maximum loan rate of 5% but the plaintiffs never sought a rate up to that amount. The highest rate applied for was 3.875%. As discussed the case law demands an objective not a subjective inquiry in determining the due diligence issue. There is no evidence that failure to go up to the 5% limit would have made any difference in securing the financing or whether under "The up to" language, it is common practice in many cases not to go "up to" 5%. C. The defendants argue that the plaintiffs hid the fact that their loan applications were being denied. Could not the defendants surmise this because of the repeated (4) requests for extensions of the commitment and closing date. It was obvious they were having problems with securing a loan. It appears that the residency issue was not raised as an issue by the first bank prior to the commitment date. It is also unclear to the court at least, when in the days prior to the notice of denial from the first bank on December 13, 2012, the underwriter first raised the issue of the residency of Andy Li in the Wickford Place property. The requirement for the mortgage was that Andy Li and the plaintiffs had to live at Wickford Place as their primary residence. The Notice of denial by the first bank does not even refer to the residency issue. It mentions problems with Cindy Li’s credit situation. This is despite the fact that Mr. Wang said that he had cleared up Andy Li’s credit problems with the bank after the commitment date but could not resolve the residency issue which became the ultimate reason for denial of the mortgage. A. The defendants cite the case of Union Carbide Corp. v. City of Danbury, 257 Conn. 865 (2001), for the doctrine of equitable estoppel. The claim is that Liping Wang, Mr. Li’s wife, never pursued financing although they led the defendants and their agents to believe otherwise. This led the defendants to keep their house off the market selling it for a lower price resulting in a loss to the defendants of $135,000.00. As discussed Liping Wang did not have a steady and reliable source of income. Mr. Li and his son Andi Li were the only parties on the Loan Application. Andy Li was added because Mr. Li’s income was not sufficient to ensure the possibility of a loan application. Under those circumstances justifiable reliance is not established.
The question remains how could it be said in this case that diligent efforts were made when in the foregoing time period only one bank was approached to secure a mortgage. But Mr. Wang testified that he was not aware of any problems about final approval of the plaintiff’s application to the first bank for a mortgage until November 28, 2012, a date two days after the November 26, 2012 commitment date under the contract. On that date he received an email from a Dorothy Murphy, apparently an agent of the lender who brought up concerns the lender had with the credit situation of Andy Li, see Exhibit 49 (3-24). The very next day Mr. Li emailed his real estate agent and said to Ms. Ruchti "There was a little bump on the mortgage," Exhibit 49 (3-22). On November 21, 2012, before the commitment date, Blake Ruchti said, referring to Mr. Wang with whom she apparently just communicated, "George may not be able to get the commitment letter today. With consideration of the holiday please work with Lorey (seller’s real estate agent) on the closing extension. George (sic) expect the letter next week." (Exhibit 10) thus, there is no indication that there were any difficulties about securing the commitment as to financing. On November 24, 2012 Ruchti sent another email to Mr. Wang saying: "Hopefully We’ll have a conditional commitment letter on Monday."
Mr. Wang testified and he said he was in contact with the lenders, i.e. the first bank, during November 2012 and the lender issued no denial of the loan application prior to November 25 but wanted additional documents concerning Andy Li’s payments on his auto loan and his credit score. Andy Li’s credit situation was "the major issue of this file" according to Wang.
In the decision on the appeal the court made clear that in order for the plaintiffs to recover their deposit money the central questions were whether the plaintiffs diligently pursued a written mortgage commitment before the commitment date and whether, if they were unable to obtain a written commitment by the commitment, they so informed the defendant in writing by 5 p.m. on that date.
Perhaps more to the point Mr. Wang did not apply to a second bank for a mortgage until after the commitment date when he first had some concerns about his ability to get a mortgage with the first bank. He made the application at the end of November 2012. The point is that Mr. Wang is a professional mortgage broker who made a decision not to apply to a second bank because he concluded the mortgage would come from the first bank prior to the November 26, 2012 commitment date requirement. What reason would he have not to apply to a second bank other than it would be unnecessary and why could not the plaintiff’s rely on his decision in this regard?
But the diligent and reasonable effort question is more complicated than the foregoing would suggest. The court will examine certain issues in this regard.
The defendants argue that the plaintiffs cannot be found to have made a diligent and reasonable effort to get a finance commitment by November 26, 2012 for a very basic reason. It is argued that the type of loan that was applied for at the first bank required a buyer and co-borrower to live at the property that is the subject of the loan application. The common sense reason for this is that the lender is thereby assured that both borrowers have a strong incentive to repay the monies loaned, thus avoiding a foreclosure. The loan application filed in this matter indicates that at the time of the application Mr. Li lived at 42 Bittersweet Circle in Guilford but Andy Li, his son, lived at Watertown Street in Watertown, Massachusetts. These addresses are described for both as a "Present Address." Andy Li is listed as renting his apartment in Massachusetts. However, on the first page of the application just above the present addresses category for each one of them it says the "purpose of the loan" would be to purchase 45 Wickford Place in Madison and the "Property will be" their "Primary Residence." An acknowledgment section on page 4 of the loan application at paragraph 5 says: "(5) the property will be occupied as indicated in this application." The section also states any negligent or intentional misrepresentation "may result in civil penalties ... and/or in criminal penalties ..." Both Mr. Li and his son signed the document on the same date in November 2012.
These are two highly intelligent individuals and must be presumed to have read what they signed, 84 Lumber Co. v. Smith, 256 S.W.3d 380, 383 (2011, Tenn.), Pianpinello v. Swiff & Co., 253 N.Y.159 (1933).
The defendants argues that the representation that the Wickford Place home would be the primary residence of the Li’s and their son was knowingly false and therefore could not be said to constitute a diligent effort to secure financing under Section 6 of the Uniform Loan Application. The defendant introduced into evidence a portion of the plaintiffs’ brief filed in the Appellate Court to contest the prior decision in this case. It said that "The co-borrower (Andy Li) was 23 years old at the time, he had a car loan just had 23 months of installments at November 2012 but bank requires 24 months ... even we solved the credit history issue but the bank brought up another one- the occupancy as the co-borrower did not live together with the plaintiffs. We couldn’t ask the co-borrower (Andy Li) to quit his job in Boston and move to Connecticut. It was not reasonable to do that." The defendant argues that this is a judicial admission.
But when Mr. Wang testified the following occurred when he was cross examined:
Q. And yet, even though Andy Li was not a buyer on the contract on November 7th when you got this application as determined earlier.
A. Yeah.
Q. And even though he lived in another state.
A. Yep.
Q. - You submitted this application indicating on pages one and four-
A. Yeah.
Q. - that both Winston Li and Andy Li would make this property their primary residence.
A. Yes.
Q. Andy Li never told you that that was true; did he?
A. Andy Li’s position he was a consultant and yeah, he can remotely working from the home, that’s number one. And Number two, Andy Li by that time it don’t know now, by that time he does not own any properties so this could be his primary home.
Mr. Wang said first that this information came from Andy Li or Mr. Li and then said he got it from Mr. Li, at another point he said he could not remember whether he got the information from Mr. Li or his son.
Also the plaintiffs testified that their son Andy Li had the type of job where he could work from their residence at Wickford Place if they were able to purchase it and would not be living in Boston on a full-time basis, so perhaps it could be said the evidence is equivocal on whether the plaintiffs made a false claim that Andy Li would make Wickford Place his primary residence if they were able to purchase that home.
But even if this is accepted another factor presents problems for the plaintiff’s position that due diligence was exercised in applying for financing before the commitment date of the contingency clause the fact that Andy Li listed a present address of Watertown, Massachusetts on the loan application. Mr. Wang at one point said, technically speaking, banks offering Jumbo loans need not require that at the time of application for the loan the borrower and co-borrower live together. The co-borrower can live out of state and if problems arise the lender can bring suit against the co-borrower. But the first and only bank applied to before the commitment date in this case had a requirement that at the time of the Jumbo loan application the borrower and co-borrower must live together according to Mr. Wang. Mr. Wang knew that each bank had different requirements in this regard. Mr. Wang was quite clear in his testimony that the first bank denied the loan application because of the residency issue- i.e. at the time of the loan application Andy Li and the plaintiffs represented that they were living at different addresses. This was apparently communicated to him by an underwriter for the first bank.
The point is that Mr. Wang from before the signing of the October 26, 2012 real estate contract up to the commitment date was the plaintiffs’ agent entrusted by them with pursuing financing with due diligence and reasonable effort. His actions or failure to act must therefore be taken into account in deciding the due diligence and reasonable effort issue as required by the contingency clause.
It has been held that in deciding the issue of due diligence, the actions taken in applying for financing under a contingency clause by the buyer and the mortgage broker may be considered by the court. In two cases, for example, the court allowed return of the deposit money to the seller. In Fallah v. Hux, 702 N.Y.S.2d 352, the court held the "actions taken by the plaintiff (buyer) and by the mortgage broker on her behalf, were sufficient ‘to satisfy the plaintiff’s contractual obligation to make a diligent, ’ truthful and proper application," also see Rather et al v. Elovitz, 604 N.Y.S.2d 82 (1993). If a mortgage broker’s efforts on behalf of a buyer were not diligent or reasonable it would also follow that due diligence cannot be established for the buyer. Otherwise these contingency clauses, admittedly created for the buyer’s benefit would be turned into a weapon to deprive the seller of its right to demand diligence and reasonable effort by the buyer to secure financing. This would be the result if the buyer can walk away from this obligation by simply saying my mortgage broker is the party who did not make reasonable efforts to secure financing.
Mr. Wang struck the court as an intelligent and candid witness. At the time of his activities in the plaintiffs’ behalf to secure financing he had worked as a mortgage broker for seven years and at the time of trial had been a mortgage broker for fourteen years. He was the party who prepared the loan application and must be held to be aware of its contents, for example, as to the present address information in the application for borrowers and co-borrowers.
Furthermore, he testified that banks taking Jumbo loan applications had different requirements particularly as regards whether a borrower and co-borrower must indicate that they live at the same address when a Jumbo loan is applied for apart from their residential intentions as to a house when that house is finally purchased. A simple request for information on this issue could have been made to the first bank when he submitted the loan application to the first bank. The inquiry was not made and this rendered the loan application null and void and as Mr. Wang said "Presented a problem that could not be solved." The point is that the other banks to whom applications were made were not applied to for financing until after the commitment date had passed. The court concludes that all of this was not the result of planned incorrectness or devious intent but presented a situation where weeks were lost because of this error in the pursuit of financing as a result of information in the loan application presenting a problem that could not be solved.
There is also nothing in the record to indicate Mr. Wang offered an explanation to the first bank or its underwriter to the effect that although the Watertown, Massachusetts was listed as Andy Li’s "present" address the Bittersweet Circle address where his parents lived at the time of the loan application was really his primary residence similar to the explanation given at trial that the Wickford Place residence would be Andy Li’s primary residence if that home was acquired.
Because of this residency issue the plaintiffs are not entitled to recover their deposit "under paragraph 6 of the real estate contract which requires the buyer to diligently pursue a written mortgage commitment. If a mortgage commitment was not pursued with due diligence the buyer will not be able to get the deposit money returned, see McCoy v. Brown, 130 Conn.App. 702, (2011), Barber v. Jacobs, 58 Conn.App. 330 (2000); Avbin v. Miller, 64 Conn.App. 781, (2001); Phillipe v. Thomas, 3 Conn.App. 471 (1985); Lach v. Cahill, 138 Conn. 418 (1951), also see "Purchaser’s Efforts to Secure Financing, " 78 A.L.R.3d, 880, subsection (b) page 885 and numerous cases cited in that article.
2
But the issue of whether the plaintiffs ever used the required diligence before the commitment date to pursue financing was difficult and a close question and the court could be held to be in error. Therefore the court will now try to examine whether if it was wrong in deciding the diligence issue against the plaintiff whether there was compliance with the second prerequisite for return of the deposit money- compliance that is with Paragraph 6(f) of the real estate mortgage.
Section 6(f) states "(f) if buyer is unable to obtain a written commitment and notifies the seller in writing by 5 p.m. on said commitment date, this agreement shall be null and void and any deposit shall be immediately returned to buyer. Otherwise the financing contingency shall be declared satisfied and this agreement shall continue in full force and effect."
On November 24, 2012, the plaintiffs sent an email to the defendant. It stated: "Attached is a request of mortgage extension. Due to the hurricane Sunday and Thanksgiving holiday, we won’t be able to obtain a mortgage commitment by 5 p.m. today. We request your approval of extension. We expect a commitment from a bank next week. Please sign and return to us ASAP." (Plaintiffs attached to the email proposed commitment date of December 3, 2012 and an amended closing date of December 14, 2012.)
In the trial of this case it was clear that although the plaintiffs sought on several occasions an extension of the commitment and closing dates no agreement was reached between the parties. The Appellate Court in reversing the first decision in this matter made the same observation. It also ruled that the first trial judge erred in holding that the mortgage contingency clause required notice of termination. The Appellate Court defined the task for any court subsequently trying this matter or this issue. That court ruled that the only question properly before the court "was whether the November 24 email, taken as a whole, also contained sufficient language to notify the defendant of the plaintiff’s inability to obtain financing by the commitment date as contemplated by the language contained in the mortgage contingency clause."3
If we concentrate just on the contract language in paragraph 6 of the October 26 agreement, it seems clear, at least to the court that the effect of the wording of the email is to state what is obvious by the request for an extension of the commitment date. The plaintiffs could not provide a written commitment from a lender (here the first bank) by 5 p.m. on the commitment date. The last sentence says "we expect a commitment from the bank next week." The email did not say we have a commitment from the bank but just cannot get it to you because of weather conditions and the holiday. For example, it also does not say the commitment was made verbally by the underwriter but we just cannot get it to you in time because it has to be sent to us in writing, then we have to forward it to you and we do not have enough time to see that is all done before 5pm on November 26. Perhaps more to the point the email says "we expect a commitment" next week. The plaintiff’s "expectations" do not satisfy the requirement for saying there in fact was a commitment from the bank which the plaintiffs and the defendants are a third party.
But even if the notice sent to the defendant can be construed as meeting the contract requirements of informing the sellers of the plaintiffs’ inability to obtain financing by the commitment date, under the circumstances of this case that would not entitle the plaintiffs to a return of their deposit.
As said in Crabby’s, Inc. v. Hamilton, 244 S.W.3d 209, 214 (Mo., 2008);" ‘A provision in a real estate contract, that makes the contract contingent upon the buyer’s obtaining financing, is a condition ... Because such conditions are meant to protect the buyer, they are a condition of the buyer’s duty, but not a condition of the seller’s duty under the contract ... In a real estate contract containing a contingency clause, upon the non-occurrence of the condition (i.e. the buyers obtaining financing), the buyer is ‘ipso facto excused from performance.’ However, ‘the buyer can elect to waive the contingency and proceed with the contract under the rule that a party may waive any condition of a contract that is in the party’s favor," in Paciwest, Inc. v. Warner Allen Properties, LLC, 266 S.W.3d 559, 570 (Tex., 2008), the court said generally speaking waiver can be made by an express promise or by conduct Contracts, Perillo, 7th ed. § 11.31(a), page 421; Goldenberg v. Corporate Air, Inc., 189 Conn. 504, 510 (1983), citing Novella v. Hartford Accident & Indemnity Co., 163 Conn. 552, 562 (1972).
The November 24 email itself requested an extension of the commitment date and three more extensions were requested by the plaintiff. That is not indicative of a position that the plaintiffs adopted in litigation, that the contract was null and void on November 24, 2012.
Mr. Wang testified that after the commitment date of November 26, 2012 he had conversations with the first bank concerning Andy Li’s credit situation.
On November 29, three days after the commitment date Ms. Ruchti, buyers’ real estate agent, sent an email to Ms. Walz, sellers’ real estate agent, that the first bank was looking for 24 credit payments by Andy Li on his car debt-apparently after the commitment date Mr. Li paid this for his son. Ruchti said we can have a closing in December. Ms. Walz noted on January 11, 2013 the buyer’s attorney sent a notice that the real estate contract of October 26, 2012 was terminated. That would indicate that up until that point the plaintiffs believed the contract was still operative despite the fact that the contingency clause requirement was not met for the return of the deposit.
A review of the exhibits indicates both sides considered the contract to be in force after the commitment date, see Ex. 47 an email from Mr. Li to Ms. Ruchti, dated December 20, 2012, wherein he said there was some progress on getting a loan from the third bank. In Ex. 50; 3:43, Ms. Ruchti communicated to Ms. Walz that the same bank would accept a jumbo loan application even though the borrower and co-borrower lived at a different address. The sellers’ representatives communicated with the buyers’ representatives in such a way that indicates they too believed the October 26, 2012 contract was still operative. In Exhibit T on December 7, 2012 Attorney Segaloff requested information on the status of a mortgage application saying we need to move forward and close this transaction. The next day in Exhibit U Attorney Tsui, the buyers’ attorney, said to Attorney Segaloff the mortgage is in process and we expect a mortgage commitment next week.
In the month of December 2012, some weeks after the November 26th mortgage commitment date, several exhibits indicate the seller and buyer representatives were requesting and providing information to each other about the prospects of securing a mortgage commitment, see also Exhibits K, W, X, Z.
The trial testimony does not contradict the foregoing. Mr. Wang testified that he and the first bank were communicating about Andy Li’s credit situation and payments after the November 26, 2012 commitment date (first transcript). After difficulties were perceived with the application to the first bank applications were filed and purged with two other banks after the commitment date by Mr. Wang (third transcript). But he also said he was "waiting" for a final decision from the first bank from December 3 to December 13, 2012.
When Mr. Li testified he maintained post November 26, 2012 there was no contract at the time. He said he still had rights to return of the deposit under the October 26, 2012 contract. But in an email to Attorney Segaloff on February 17, 2012 he said he wanted his deposit to be returned and said "We noticed your clients have reactivated the listing in the market. Please note they are not entitled to sell the property to another buyer(s) without terminate the contract with us"- he apparently meant without returning our deposit. But in an email to Ms. Ruchti, his real estate, Mr. Li said on December 29, 2012 in part: "I understand the sellers want to sell the house and we do want to buy, we are working hard to get a loan. We will get a mortgage statement from the lender as soon as we can for the sellers to sign the extension and an affidavit on the roof."
The problem with the plaintiffs’ position is that it fails to recognize that the contingency clause was part of the October 26, 2012 contract which both parties have waived. There was never a demand for return of the deposit after the commitment date for several weeks. The very fact that numerous extensions of the commitment date were asked for, at a time the plaintiffs were represented by counsel, indicates they were attempting to modify the agreed-upon contract but there is not an iota of evidence that has been presented to indicate any other aspect of the contractual terms were sought to be modified, see Precision Mechanical Services, Inc. v. Shelton Yacht and Cabana Club, 97 Conn.App. 258, 263 (2006) or that new contract, in fact, came into being. It is true that these contingency clauses are put into real estate contracts to protect buyers. But sellers who have their property in the market which they have a strong desire to sell also have contractual rights. The Yaggis kept their property off the market for thirty days and continued to do so for several weeks thereafter. They ended up selling their property for substantially less than the contract price with the plaintiffs on March of 2012.
There was some dispute as to when the Wickford Place property was off the market and for how long. But perhaps more to the point the plaintiffs’ continuing postcommitment assertions that they were still under contract and their corroborating actions to this effect, made it difficult if not impossible for the plaintiffs to negotiate a sale of the property to another buyer without the possibility of being enmeshed in a contract dispute.
In effect the sellers, by not themselves declaring the October 26 contract null and void and on that date pocketing the deposit money on the failure of the plaintiffs to meet the requirements of the contingency clause and continuing to otherwise keeping the property available for sale to the plaintiffs, are being deprived of rights to the deposit that had accrued to them under the contract. Rights one might add, the plaintiffs seemed to recognize by the very act of asking for extensions of the commitment date after the commitment date.
This can hardly be characterized as grossly unfair because of the simple fact that the sellers by continuing to recognize the existing October 26 contractual relationship in effect would give the plaintiff buyer a credit of the deposit money if they managed to secure a mortgage which unfortunately they never did. The property sold well over a month after the agreed closing date they had with the seller.
For the foregoing reasons, the court concludes the plaintiffs are not entitled to a return of their deposit. But the court must address other issues raised by the plaintiff which have a bearing on the foregoing discussion and in any event require separate treatment.
3
A confusing aspect of this case, at least to the court, are the actual claims being made by the plaintiff. Perhaps a better way of putting it would be what are the actual claims for relief. In the complaint filed in this matter the plaintiffs made three claims (1) breach of a Purchase and Sale Agreement (2) common-law Breach of Contract and (3) unfair trade practices under the Connecticut Unfair Trade Practices Act. In their post-trial brief the plaintiff added a claim for Unjust Enrichment ending the argument for this allegation by saying if the defendants were allowed to retain the deposit they would be unjustly enriched. They also made a damage claim that argues in addition to the deposit money they should be awarded triple damages under CUTPA and liquidated damages. As to the latter claim it was said that because of the defendants’ fraudulent actions, breach of contract, unjust enrichment the buyers unlawfully failed to return the deposit money of $25,000 on November 24, 2012. Therefore, being deprived of this investment money the SLP500 must be turned to which closed at 1409 points on November 23, 2012 and has grown to 2960 today equivalent to a $27,519 gain for a $25,000 investment. Also they argue Amazon was priced at around 4220 a share in 2012, today it is $1,725 a share representing a gain of $171,022 for a $25,000 investment which amount would have been available to the buyers if the deposit had been returned to the buyers on November 24, 2012 date. Evidence of such market increases were not presented at trial.
The court will try to address each claim which even if they are not evidentially or legally supported present at times arguments raised by the plaintiffs for simply a return of the deposit money and in various respects are intertwined with the arguments made for return of the deposit money.
Unjust Enrichment
The unjust enrichment claim basically says the doctrine is applicability to their case entitles them to the return of the deposit money. Simply put under an older case, Monarch Accounting Supplies, Inc. v. Prezioso, 170 Conn. 659, 665-66 (1976), the court said: The doctrine of unjust enrichment "is based upon the principle that one should not be permitted unjustly to enrich himself at the expense of another but should be required to make restitution of or for the property received, retained or appropriated ... It is not necessary, in order to create an obligation to make restitution or to compensate, that the party unjustly enriched should have been guilty of any tortious or fraudulent act. The question is: Did he, to the detriment of someone else, obtain something of value to which he was not entitled," also see Levinson v. Lawrence, 162 Conn.App. 548, 558 (2016), and New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 433, 451-52 (2009). Unjust enrichment is an equitable doctrine that can be resorted to when no contract remedy is available. A party seeking to rely on the doctrine "must first come before the court with clean hands," Cohen v. Cohen, 182 Conn. 193, 201 (1980), but the party seeking to invoke the clean hands doctrine "must show that his opponent engaged in wilful misconduct with regard to the matter in litigation, DeCecco v. Beach, 174 Conn. 29, 35 (1977).
The first sentence of the Unjust Enrichment argument it is said "that the plaintiffs diligently pursued the mortgage and timely notified the defendants of their inability to obtain a mortgage prior to the mortgage commitment date." The court has rejected these arguments. But the plaintiffs’ argument goes beyond this. It is argued HUD policy was violated by the plaintiffs, they induced plaintiffs to continue working on the mortgage after the agreement was nullified when they knew no mortgage would be approved because of the roof conditions, thus trapping the plaintiffs in a closed loop so that they could retain the deposit. There are problems with the plaintiffs’ position.
(1) The plaintiffs knew very well of the roof conditions. On October 21, 2012 they signed a document referring to them that said "the roof needs to be replaced will be the buyers’ cost."
(2) Why would the sellers be more aware of the fact that no mortgage would be available given the roof conditions than the buyers?
(3) Would not the plaintiffs’ mortgage broker be aware of the difficulty of procuring a mortgage given the roof conditions?
(4) Wouldn’t common sense dictate to any buyer or seller that the roof condition would discourage a lender from giving a mortgage?
(5) The plaintiffs point to the fact numerous changed forms were filed but rejected apparently as part of a plot by the defendants to have the plaintiffs work on the mortgage- for the benefit of both parties?
(6) Mr. Wang said the roof issue could have been worked out between buyer and seller so as to satisfy a bank. Money for repair could have been put into an escrow account. Ms. Ruchti said she never heard of a loan not going through because of a roof problem. All of this in the context of Exhibit 7 which said the plaintiffs would bear the cost of roof replacement.
Fraud
The plaintiffs correctly cite Sturm v. Harb Development, LLC 298 Conn. 124, 142 (2012), to define fraud. That case said to establish fraud there were four requirement (1) false representation was made as a statement of fact (2) it was untrue and known to be untrue by the party making if (3) it made to induce the other party to rely upon it and (4) the other party did so act upon that false representation to his injury.
The plaintiffs argue that they hid the roof condition from the public in their glowing description of their Wickford Place home as an inducement to buyers. But the particular members of the public here were aware of the roof condition several days before they signed the roof addendum Exhibit 7- addendum dated October 21, 2012, real estate contract signed October 26, 2012. The plaintiffs claim the defendants induced the roof addendum but no explanation was given as to what that exactly means. They knew that no loan would be approved given the roof condition see previous discussion in Unjust Enrichment section. They induced the plaintiffs to continue on the mortgage so they could claim doctrines of estoppel, waiver, and laches etc. But the plaintiffs asked for a continuance of the commitment date before the arrival of that date. Besides who induced whom and how did they do that. They signed an addendum saying they would be responsible for the replacement of the roof- where is the evidence that their mortgage broker asked one of the last two banks applied to for a loan to set up an agreement or escrow account regarding roof repair? Did the plaintiffs ask or demand the defendants replace the roof or even tell them they did not agree that it was their responsibility to repair the roof. In Exhibit Y- an email from Mr. Li to his real estate agent, Ms. Ruchti, Mr. Li agrees that the contract provides that it is his responsibility to replace the roof. Why on earth would the defendants refuse to discuss the roof issue with the plaintiffs with an intention to make it impossible for the plaintiffs to fix the roof problem? He wanted to buy the house they wanted to sell it. Were they planning to deprive the plaintiffs of an opportunity to buy the house so they could retain the $25,000 deposit and then sell it for $135,000 less to another buyer in March? To ask the question provides the answer.
The final sentence of the plaintiff’s brief makes a broad claim that the defendants lied during the court proceedings and the lawyers made fraudulent claims in their pleadings. No specific references are made as to how these broad claims relate to the particular fraud claim as to pocketing the $25,000 deposit.
CUTPA
Under Section 42-110b of the Connecticut Unfair Trade Practices Act "No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of trade or business." The plaintiff’s CUTPA count was stricken by the trial judge first assigned to this case. But the plaintiffs now point to U.S. Department of Housing and Urban Development HUD requirements for housing and attach those requirements to their post-trial brief. Appendix G is the Table of Contents prepared by HUD and the Department of Veteran Affairs. A foreword said the requirements define the minimum acceptable level of quality for existing properties. Section 2-12 is highlighted. It states in the first sentence: "Roof covering must prevent entrance of moisture and provide reasonable future utility, durability and economy of maintenance." The second sentence says that "when roof replacement is needed all old shingles must be removed." Appendix H attached to the brief is labeled "Archives," "US Department of Housing and Urban Development" and starts with the following "Chapter 1 Appraisal and Property Requirements." It then goes on to say:
1. Roofs: The covering must prevent moisture from entering and provide reasonable future utility, durability and economy of maintenance. The appraiser must visually examine the roof to determine whether deficiencies present a health and safety hazard or do not allow for reasonable future utility
2. Life Expectancy: The appraiser must exercise sound judgment when evaluating the roof condition. The roof should have a remaining physical life of at least four to two years. If the roof has less than two years remaining life, then the appraiser must report this condition in the appraisal report.
The plaintiffs argue that the defendants were well aware that the condition of the roof on the subject property would prevent them from getting financing through a conventional loan.
But the plaintiffs were well aware of the roof condition five days before they signed the October 26 real estate contract, see Exhibit 7, signed by the plaintiffs October 21, 2012. At the time they had a mortgage broker who must be held to have the same knowledge of HUD requirements as the plaintiffs. They also were represented by an attorney. Interestingly, the first bank that was applied to for a loan turned down the request without any mention of the roof conditions. Also there is no evidence they brought that subject to the attention of Mr. Wang before the commitment date. The only conversation before the denial revolved around the credit situation of Andy Li and the residency issue. It was only the two banks approached after the commitment date that problems with the roof condition.
Two exhibits are instructive on the issue being raised by the plaintiffs concerning the roof if they are compared with each other. On December 20, 2012 Mr. Li sent an email to his real estate agent, Ms. Ruchti, Exhibit Y. It says in part: "One item I will need sellers’ help is the roof repair. In our contract it says the roof replacement will be my responsibility but George (Mr. Wang) his mortgage broker needs a statement that it will be repaired before the closing, see below: write an affidavit letter indicating that the roof will be repaired before the closing and minimum life of 3 years. Obvious, I do not own the house so I won’t be able to repair the roof. I am worried about the roof won’t be able to pass the appraisal. George says the bank does not want to see a damaged roof."
The next day Mr. Li’s lawyer, Attorney Tsui sent a letter to the defendants’ lawyer Exhibit 18 Attorney Segaloff. In part Attorney Tsui says: "In addition there remains an inspection issue, which has been brought to your clients’ attention. Specifically, the roof needs to be repaired and/or replaced. Please let me know your clients’ intention with regard to this matter."
It is almost as if the plaintiffs’ attorney was not aware that the roof repair was his clients’ responsibility. Yes, it is true that Mr. Li did not own the property but the plaintiffs had a lawyer and a mortgage broker who could have advised the plaintiffs and could have solved this conundrum and still have the roof repaired by any closing date. Speaking of the roof problem in the June 18, 2019 transcript at lines 13 through 16, Ms. Walz the real estate agent of the sellers said concerning the roof repair: "you could put money in trust- in escrow for repair of it. It could have been repaired with a buyer paying for it at closing. There’s a lot of ways it could be done, yes."
The plaintiffs, for example, could have received an estimate for the cost of the roof repair, put money in escrow with the bank being asked to give a conditional commitment approving the loan with the only condition being that funds in the escrow account to pay for the roof repair be distributed to the roof repairer who would complete his work prior to the closing. It was not the sellers’ responsibility to give advice to the buyers on this subject- that was a task for the buyers’ lawyer and real estate broker. Why would the sellers have to respond to questions about the roof repair? As Mr. Li understood, that was his responsibility. It was the plaintiffs’ responsibility to get an estimate for the job of the roof repair, contact a contractor arranging for the job to be completed before a closing date and offer that information to the bank and the defendants so that armed with the information about a binding conditional approval coupled with information that a contractor had been hired, they could be permitted onto their property to do the job. Why would they not agree to that- they wanted to sell the house and the plaintiffs evinced an intention by their actions to buy the property? All this against an alternative background of the plaintiffs’ lawyer sending a letter to their lawyer which might suggest that the responsibility for roof repair is up for further negotiation.
Breach of Contract
The court has concluded that a contractual relationship existed between these parties after the commitment date. In light of the foregoing discussion on the plaintiffs’ claims of Fraud, Unjust Enrichment, and CUTPA violations which sometimes referred to post-commitment date activities by the defendants, the court concludes the contract was not breached by the defendants.
Also, the Restatement (2d) Contracts in Comment (a) defines the concept of good faith saying: "good faith performance or enforcement of the contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving ‘bad faith’ because they violate community standards of decency, fairness, or reasonableness."
The defendants were under no duty to grant any of the four change forms submitted by the plaintiffs. The only commitment date to obtain financing was contained in the October 26, 2012 contract. The second change form requested that any new commitment or closing date be accompanied by a time is of the essence clause which the plaintiffs did not sign off on. Under these real estate contracts a reasonable amount of time for performance by the buyer is understandable since a seller often has compelling reasons to sell their home, death, sickness, moving etc. Here the sellers kept the house off the market for several weeks after the originally agreed to commitment date and there was no obvious progress in securing a mortgage. The roof repair excuse, for the reasons stated cannot be relied upon by the buyers for delay in securing financing and thus completing the contract. What is reasonable in these contracts is not dictated by the fact that, for example, these contingency clauses often only give a few weeks or less for the buyer to comply with the clauses (see 78 A.L.R. 3880 article and cases discussed) but they offer some guidance as to whether the contractual relationship was in effect and reasonably terminated by the seller. There is no basis for a breach of contract claim on the basis offered.
Furthermore, the court refers to its discussion of the Fraud, Unjust Enrichment, and CUTPA claims to underline that no breach of contract claim can be based on the factual and legal assertions made by the plaintiffs under those claims.
Conclusion
For all the foregoing reasons, the court concludes the plaintiffs are not entitled to their deposit money of $25,000. Nor are the plaintiffs entitled to recovery on any claims they have made for fraud, unjust enrichment violation of the Connecticut Consumer Protection Act, or Breach of Contract. It is the court’s understanding that defense counsel is going to file a motion for counsel fees that the defendants believe they are entitled to under the October 26, 2012 agreement. However, on all issues of liability the court enters judgment for the defendants.
The amount of the liquidated damage claim, see Hanson Development Co., v. East Great Plains Shopping Center, 195 Conn. 60, 64-65 (1985), and opinion by Judge Brazzel Massaro in Parker v. Knauf, 2010 Conn.Super Lexis 533, 2010 WL 1375564, appears reasonable. The $25,000.00 liquidated damage amount is certainly not brought into question by the fact that the defendants sold the house in March 2012 for $135,000.00 less than the agreed-upon price for sale to the plaintiffs.