Luttinger v. Rosen

Facts

The Luttingers contracted to buy premises in Stamford from the Rosens for $85,000 and paid a deposit of $8500. The contract was subject to and conditional upon the buyers getting first mortgage financing from a bank or other lending institution. The loan had to be $45,000, for a term of not less than twenty (20) years, at an interest rate that did not exceed a stated maximum. The buyers agreed to use due diligence in trying to get that financing. If they failed and gave timely notice, the deposit would be refunded and the contract would end. The buyers relied on their attorney, who applied for a $45,000 loan over twenty-five years at a New Haven lending institution. The attorney knew it was the only institution then willing to lend as much as $45,000 on a mortgage for a single-family dwelling. The institution issued a commitment for $45,000 with interest at the prevailing rate at the time of closing, but not below a stated minimum rate. The commitment failed to meet the contract requirement. The buyers gave timely notice and demanded their deposit back. The sellers' counsel then offered to make up the interest difference for the whole twenty-five years through a funding arrangement whose exact terms were not defined. The buyers did not accept. The sellers refused to return the deposit.

Issues

1. Did the buyers use due diligence in seeking mortgage financing when they applied only to the one lending institution that might meet the contract's terms?
2. Where the mortgage contingency, a condition precedent, was not met, were the buyers entitled to the return of their deposit despite the sellers' offer to make up the interest difference?

Holding

The unattacked findings supported the trial court's conclusion that the buyers used due diligence by applying to the only institution that might meet the contract's terms. The trial court could reasonably conclude that they could not get the mortgage the contract specified, so the condition precedent was not met and they were entitled to their deposit back. They could reject the sellers' offer.