Order affirmed, with costs, for the reasons stated in the memorandum of the Appellate Division (222 A.D.2d 1087).
The majority holds that the defendant's actions constituted a good-faith effort to perform under the real property purchase agreement as a matter of law. Because I believe that on this record good faith is an issue of fact, I dissent.
On March 31, 1993, the parties entered into a contract for the purchase of real property which contained a "mortgage contingency clause" which obligated defendant to "make good faith application for" a $135,000 mortgage without delay. Specifically, the contract provided:
According to defendant, he contacted one bank during the "mid to later part of April 1993, to schedule an appointment to apply for a mortgage." Prior to his scheduled meeting, defendant submitted, at the bank's request, the purchase contract, renovation plans, and his prior year's income tax return. With less than two weeks remaining before the deadline to apply for the mortgage expired and over a month after signing the purchase contract, defendant met with a bank vice-president on May 3, 1993.
At the meeting, the bank's vice-president gave defendant a "preliminary opinion" that the bank would not approve a mortgage for $135,000 due to the "ratio of the residential and
After meeting with the bank vice-president, defendant contacted plaintiff and requested an extension of the mortgage deadline to May 31, 1993. Defendant did not, however, inform plaintiff that the sole pending mortgage application was for only $116,250, approximately $20,000 less than the amount specified under the purchase contract. Plaintiff granted the request. Defendant made no attempt to obtain additional financing or investigate other mortgage arrangements during this time.
When the bank finally issued a mortgage commitment for $116,250, defendant advised plaintiff that the contract was terminated "[b]ased on the bank's refusal to grant the mortgage specified by the contract." Plaintiff sued for specific performance and damages. The defendant counterclaimed for the return of the $1,000 deposit.
Supreme Court granted defendant's motion for summary judgment dismissing the complaint and awarded defendant his contract deposit. A majority of the Appellate Division affirmed Supreme Court's order stating, "Defendant submitted proof in evidentiary form establishing that he acted in good faith to obtain a mortgage" and that "it would have been futile for defendant * * * to apply for a mortgage" of $135,000 after being told that the bank would not grant it. Two Judges joined in a dissenting opinion which stated:
It is well settled that as "long as the purchasers exert a genuine effort to secure the mortgage financing and act in good faith, they are entitled to rely on the contract and may recover their down payment if the mortgage is not, in fact, approved"
In contrast, summary judgment may be entered against the buyer when it is demonstrated that the buyer's mortgage application was not made in conformance with the requirements of the purchase agreement. As noted in Silva v Celella (153 A.D.2d 847), the buyers "had no right to cancel the contract since they had applied for a mortgage in an amount which differed from the amount prescribed in the contract" (id., at 848 [summary judgment granted against buyer when mortgage application exceeded contract amount]; see also, Post v Mengoni, 198 A.D.2d 487 [plaintiff buyer not entitled to recover down payment where he applied for a mortgage $100,000 greater than that required by the mortgage contingency clause]).
In Tanney v Greaux (174 A.D.2d 728, mod 78 N.Y.2d 1117) the Court of Appeals determined that good faith was a factual issue to be resolved by a jury. In Tanney, the real property purchase contract provided that the closing would take place within 12 months after the issuance of a building permit by the New York City Department of Housing Preservation and Development. Following the defendants' application, the City Council enacted a statute which prevented the defendants from obtaining the necessary certification for 18 months. Despite the change in the law, the defendants continued their efforts to obtain certification. The City Council subsequently extended the moratorium for an additional five years. A majority of the Appellate Division determined that there was no factual issue of good faith in failing to cancel the contract immediately upon the decision to extend the moratorium for five years.
The dissenting opinion recognized that the defendants' continued performance in trying to obtain certification despite the change in the law was inconsistent with a sincere view
In fact, courts have continually denied summary judgment when factual issues were raised concerning the sufficiency of a party's performance under the purchase agreement at issue (see, e.g., Katz v Simon, 216 A.D.2d 270 [factual issues of good faith and diligence raised concerning reasons for delay in applying for mortgage]; Zwirn v Goodman, 206 A.D.2d 360 [factual issues raised concerning good faith in submitting incomplete mortgage application]; Wilson v City of Long Beach, 133 A.D.2d 684 [factual issues raised concerning good faith and due diligence in obtaining necessary permits and financing]; BTS, Inc. v Webny Corp., 157 A.D.2d 638 [factual issue raised concerning buyer's good faith when its deteriorated financial position was known to it at the time the agreement was executed]; Blask v Miller, 186 A.D.2d 958 [factual issue raised as to plaintiffs' good faith in contracting to purchase property which they possibly could not afford]).
Here, it is undisputed that defendant buyer did not perform as required under the plain language of the agreement. Indeed, defendant never made an application for a mortgage in the amount required by the contract. These facts alone create an issue of fact regarding defendant's good faith in performing his obligations under the purchase agreement. Moreover, defendant's actual application and subsequent request for an extension to apply for the mortgage are inconsistent with a finding of good faith as a matter of law. Finally, the defendant's reliance on a "preliminary opinion" of a bank officer is insufficient to establish a good-faith basis to excuse performance.
Moreover, while the majority of the Appellate Division concluded that it would have been futile for defendant to apply for a mortgage of $135,000 based upon this record, other courts that have examined the issue of "futility" have relied on far more evidence to demonstrate that the failure to obtain a mortgage was beyond the control of the mortgage applicant (see, e.g., Lunning v 10 Bleecker St. Owners Corp., 160 A.D.2d 178, lv denied 76 N.Y.2d 710 [mortgage revoked upon buyer's financial losses due to ill health and subsequent death]; Bobrowsky v Landes, 124 A.D.2d 618 [mortgage revoked upon buyers' financial losses due to circumstances beyond their control]; Cone v Daus, 120 A.D.2d 788, supra [mortgage revoked upon water
Here, defendant delayed in applying for a mortgage and his application was admittedly in "an amount which differed from the amount prescribed in the contract" (Silva, supra, 153 AD2d, at 848). Furthermore, defendant's continued attempts to perform by requesting an extension of the mortgage deadline without telling the seller about the "futile" circumstances raises a factual issue regarding good faith (Tanney, supra). Finally, the defendant's reliance on a "preliminary opinion" of a bank officer is insufficient to establish a good-faith basis to excuse performance summarily.
In sum, the language of the contract will govern whether a buyer is entitled to a return of his deposit. Here, defendant did not comply with the language of his purchase contract. Excusing the defendant's performance represents an inappropriate and extreme expansion of the definition of good faith as a matter of law. Accordingly, I respectfully dissent from the majority's affirmance of the Appellate Division's decision. The defendant's motion for summary judgment should have been denied.
Order affirmed, etc.