Appeal from an order of the County Court, Suffolk County (Martin J. Kerins, J.), dated July 8, 2004, deemed an appeal from the judgment of the same court, entered on April 19, 2005. The judgment, after a nonjury trial, insofar as appealed from, dismissed plaintiffs' complaint.

Judgment, insofar as appealed from, unanimously reversed without costs and matter remanded for a new trial in accordance with the decision herein.

Plaintiffs commenced this action in Supreme Court, Suffolk County, for specific performance of a real estate contract in which defendant, a developer of single family homes, agreed to convey to plaintiffs a specific lot following construction of a dwelling thereon in accordance with the specifications and plans provided by plaintiffs. Prior to trial, defendant moved for summary judgment. The Supreme Court, by order entered December 13, 2001, denied defendant's motion. On appeal, the Appellate Division affirmed the order (2 AD3d 420 [2003]). While holding that plaintiffs' two mortgage commitments did not satisfy the mortgage contingency clause of the contract of sale, as they were not firm, the Appellate Division noted that a triable issue of fact existed as to whether defendant's conduct evinced an intent to waive its right to cancel the contract based upon plaintiffs' failure to satisfy the mortgage contingency clause. The matter was thereafter removed from the Supreme Court, Suffolk County, to the County Court, Suffolk County, pursuant to CPLR 325 (d). Following the trial, the court concluded that defendant did not waive its right to terminate the contract based on plaintiffs' non-compliance with the mortgage contingency clause. [*2]

The contract of sale, dated April 21, 2000, allowed plaintiffs 45 days from the date of the contract to obtain a firm mortgage commitment. If plaintiffs were unable to obtain a firm commitment, either party had the right to cancel the contract by providing written notice to the other. In accordance with the terms of the contract, defendant agreed to commence construction within seven days of plaintiffs' notice of satisfaction of the mortgage contingency clause or its waiver. Plaintiffs thereafter provided sellers with a copy of a mortgage commitment that was not firm and consequently did not satisfy the mortgage contingency clause. Defendant presented testimony at trial that it was aware of the fact that the commitment was not firm. Nevertheless, defendant commenced construction of a home which was not of its architect's design and was more in accordance with the plans submitted by plaintiffs. Defendant's witnesses testified that defendant commenced construction since only two or three lots in the development remained unsold, it had building permits and intended to complete construction of the remaining lots including the erection of a model home and that the subject premises would be able to be sold to another purchaser. In view of the foregoing, and in accordance with the question of fact, to wit, waiver, which the Appellate Division determined existed, we find that defendant waived its right to cancel the contract pursuant to the terms thereof. A waiver may be accomplished by express agreement or by such conduct or failure to act as to evince an intent not to claim the purported advantage (see Hadden v Consolidated Edison Co. of N.Y., 45 NY2d 466, 469 [1978]).

Notwithstanding its waiver of its right to cancel the contract, as construction neared completion, defendant instructed its attorney to cancel the contract and return plaintiffs' deposit together with the funds paid for "extras." Under the circumstances, a new trial is required as to the lone unresolved issue of fact, i.e. whether plaintiffs cashed the check forwarded to them by defendant, thereby constituting acceptance of defendant's offer to rescind the contract.
Decision Date: February 09, 2006