Kapur v. Stiefel

Order, Supreme Court, New York County (Louise Gruner Gans, J.), entered October 7, 1998, which denied plaintiff’s motion for summary judgment, granted defendants’ cross motion for summary judgment, and directed the escrow agent to pay the down payment to defendants, modified, on the law, to deny defendants’ cross motion for summary judgment and vacate the direction respecting the payment of the escrowed funds, and otherwise affirmed.

Inasmuch as plaintiffs mortgage commitment letter was revoked by the lender after the contingency period, the provision in the contract of sale conditioning plaintiffs right to the return of his escrowed down payment upon his cancellation of the contract within seven business days after the date specified for obtaining the commitment letter was inapplicable. Nor, under the circumstances at bar, involving a commitment revocation as opposed to the failure to obtain a commitment in the first instance, was plaintiffs cancellation of the contract otherwise governed by specific provisions of the parties’ contract. This being the case, plaintiff purchaser’s right to the return of his escrowed down payment turns instead upon whether the commitment revocation and consequent failure of the transaction was attributable to bad faith on plaintiffs part (see, Creighton v Milbauer, 191 AD2d 162; Lunning v 10 Bleecker St. Owners Corp., 160 AD2d 178, lv denied 76 NY2d 710; Lane v Elwood Estates, 31 AD2d 949, affd 28 NY2d 620). That, however, is not an issue properly resolved as a matter of summary adjudication since the record raises questions of fact as to whether the termination of plaintiffs employment leading to the commitment revocation was a circumstance of .plaintiffs making intended to bring about the failure of the subject real estate transaction (see, Creighton v Milbauer, 191 AD2d 162, supra).

Under the dissent’s interpretation, the last-minute revocation of a mortgage loan commitment by a lender, even a wholly arbitrary one, would put the purchaser in the unenviable position of either having to proceed to closing notwithstanding that its diligent and good faith efforts to secure alternative financing were unsuccessful, or to risk forfeiture of the down payment. This is not the law, nor should it be. As our cases have consistently held, “[w]hen a condition of a mortgage loan commitment is not fulfilled through no fault of the purchasers, their performance is excused, so long as they acted in good faith” (Lunning v 10 Bleecker St. Owners Corp., supra, at 178). As the subject agreement is completely silent as to the legal consequences of revocation of a mortgage commitment, we rely on the established principle that “[a] mortgage contingency clause is construed to create a, condition precedent to the contract of sale” (Creighton v Milbauer, supra, at 165), and find that the failure of the condition in this case provided plaintiff with the right to cancel, assuming he acted in good faith. Concur — Nardelli, J. P., Mazzarelli and Lerner, JJ.