In this action by plaintiff Alexander Zemnovich (plaintiff) against defendant 2729 Coney Island Ave., LLC (defendant) and Michael F. Kelly, Esq., as escrowee, for the return of a down payment given pursuant to a contract for the sale of real property, defendant moves for summary judgment dismissing plaintiff's complaint and for summary judgment in its favor on its first, second, and third counterclaims, which seek a judgment that it is entitled to retain the down payment as liquidated damages under the contract. Plaintiff cross-moves for summary judgment in his favor, dismissing all of defendant's counterclaims, and awarding him the return of his down payment in the sum of $105,000 with interest thereon from August 23, 2007, together with the costs and [*2]disbursements of this action. Notwithstanding defendant's counsel's argument that issues of fact preclude a summary disposition, the operative facts are undisputed.

By a written contract dated May 25, 2007, defendant agreed to sell and plaintiff agreed to purchase commercial property located at 2729 Coney Island Avenue, in Brooklyn, New York, for the purchase price of $2,100,000. Pursuant to paragraph 3 of the contract, plaintiff, upon the execution of the contract, made a down payment of $105,000. Pursuant to paragraph 6 of the contract, the down payment was to be held in escrow by defendant's attorney, Michael F. Kelly, Esq., until the closing or the termination of the contract. The balance of the purchase price due at the closing was $1,995,000. The closing date stated in paragraph 15 of the contract was "on or about June 1, 2007," a closing date that was virtually impossible under the terms of the contract.

Subparagraph 8 (a) of the contract contained a mortgage contingency clause, which, in pertinent part, provided that:

"(a) The obligation of Purchaser to purchase under this

contract is conditioned upon issuance, on or before 45

days after a fully executed copy of this contract is given

to Purchaser or Purchaser's attorney in the manner set

forth in paragraph 25 or subparagraph 8 (j) [which pertained

to the mailing of the contract and notices] (the Commitment

Date'), of a written commitment from an Institutional Lender,

pursuant to which such Institutional Lender agrees to make

a first mortgage loan . . . to Purchaser, at Purchaser's sole

cost and expense of $1,575,000 for a term of at least 25/30

years (or such lesser sum or shorter term as Purchaser shall

be willing to accept) at the prevailing fixed or adjustable rate

of interest and on other customary commitment terms (the

Commitment') . . .

"Purchaser's obligations hereunder are conditioned only

on issuance of a firm, unconditional Commitment."

Subparagraph 8 (b) of the contract contained standard mortgage language requiring plaintiff, as the Purchaser, to make prompt application to one, or at Purchaser's election, more than one institutional lender for the mortgage loan, furnish accurate information, pay all fees, pursue such application with diligence, cooperate in good faith with the institutional lender, and furnish Seller with a copy of the mortgage commitment promptly after the receipt thereof. There is a handwritten bracket enclosing subparagraph 8 (b) and underneath it, "*See Mortgage Rider" is handwritten.

The Mortgage Assumption Rider (the Rider), which is dated April 27, 2007 and is executed by plaintiff and defendant, provided that "Seller represents that the existing mortgage [on the property] is assumable upon qualification of purchaser by the lender [which was Washington Mutual Bank]." The Rider further provided that "[t]he application to be made in Clause 8 shall be for this assumption approval and this application shall replace the application to an institutional lender referred to in 8 (b)." The Rider also set forth that the "Seller represents that the principal balance owing upon this mortgage is $1,420,000, interest rate 6.47%, 25 year payment, 20 year balloon." [*3]The Rider additionally stated that "[i]f purchaser is denied for the Assumption, purchaser will make application to a 2nd institutional lender."

Subparagraph 8 (e) stated that:

"If no Commitment is issued by the Institutional Lender on

or before the Commitment Date, then, unless Purchaser has

accepted a written commitment from an Institutional Lender

that does not conform to the terms set forth in subparagraph

8 (a), Purchaser may cancel this contract by giving Notice to

Seller ___ after the Commitment Date, provided that such

Notice includes the name and address of the Institutional

Lender(s) to whom application was made and that Purchaser

has complied with all its obligations under this paragraph 8."

Subparagraph 8 (f) provided that if the contract was cancelled by plaintiff pursuant to paragraph 8 (e), the down payment would be promptly refunded to him. Subparagraph 23 (a) provided:

"(a) If Purchaser willfully defaults hereunder, Seller's sole remedy shall be to receive and retain the Downpayment as liquidated damages, it being agreed that Seller's damages in case of Purchaser's default might be impossible to ascertain and that the Downpayment constitutes a fair and reasonable amount

of damages under the circumstances and is not a penalty."

On May 29, 2007, defendant personally delivered to plaintiff a fully executed copy of the contract. Thus, pursuant to subparagraph 8 (d) of the contract, the Commitment Date (i.e., 45 days after May 29, 2007) was July 13, 2007.

In accordance with the Rider, plaintiff submitted an application executed on May 31, 2007 to Washington Mutual Bank, along with a check for $750 and other documents, which had been requested by Washington Mutual Bank in a letter dated May 4, 2007 that enclosed a loan assumption package. The May 4, 2007 letter from Washington Mutual Bank stated that the evaluation/approval process would take approximately 30 days from the date of receipt of all required information and fees.

Plaintiff concedes that "sometime in July 2007," he verbally learned that Washington Mutual Bank had approved his application for assumption of defendant's loan, but written confirmation was not provided on or before July 13. Plaintiff asserts that, while waiting for the written commitment letter from Washington Mutual Bank, he attempted to secure additional financing from other lenders for the purchase of the property. It is undisputed (as evidenced by a letter from Washington Mutual Bank confirming this) that Washington Mutual Bank approved plaintiff's assumption of the loan on July 25, 2007, 12 days after the Commitment Date of July 13, 2007.

By letter dated August 23, 2007 (41 days after the July 13, 2007 Commitment Date had passed and 29 days after receiving the written commitment from Washington Mutual Bank), plaintiff's attorney notified defendant's attorney that plaintiff "could not obtain a Loan from the Lender Institution." In the August 23, 2007 letter, counsel stated that a copy of "the denial statement from Exoro Funding Group" was enclosed for defendant's attorney's review and requested the return [*4]of plaintiff's $105,000 down payment. Exoro Funding Group is a mortgage broker, not an institutional lender. Defendant asserts (and plaintiff does not deny) that Dinara Maylov, Esq., the attorney who had been representing plaintiff with respect to the purchase of the property, is the owner of Exoro Funding Group.

The Statement of Credit Denial issued to plaintiff on August 22, 2007 on behalf of Exoro Funding Group is a form, which states that the application for a $155,000 loan was denied for reasons of "Unacceptable property," "Insufficient data-property," and "Unacceptable appraisal." No lending institution is identified in the notice. Counsel's August 23, 2007 letter did not refer to any denial by Washington Mutual Bank; however, a letter dated August 28, 2007, from attorney Maylov indicates that plaintiff had sought to obtain the additional $155,000 necessary to conclude the purchase, initially through a "Money Mortgage" from defendant seller, and then by application to Washington Mutual, both of which were denied. In the August 28 letter to defendant's attorney, Michael Kelly, Ms. Maylov indicates her client's willingness to proceed if defendant will finance the necessary additional funds. In response to these letters, defendant has refused to return plaintiff's down payment.

On March 10, 2008, plaintiff filed this action against defendant, seeking the return of his down payment of $105,000 and to impress and foreclose a vendee's lien of $105,000 on the property. Plaintiff's complaint alleges that his obligation under the contract was conditioned upon the issuance of a written commitment from an institutional lender, and that the institutional lender had denied his application. Defendant has interposed an answer to plaintiff's complaint, asserting a first counterclaim for breach of contract, a second counterclaim for breach of the implied covenant of good faith and fair dealing, and a third counterclaim for a declaratory judgment. All three counterclaims seek a judgment that defendant is entitled to retain the down payment of $105,000, plus all accrued interest as liquidated damages under the contract.

In addressing defendant's motion and plaintiff's cross motion, it is noted that a typewritten rider, which is drafted as a supplement to a preprinted contract, controls over any conflicting portions of the preprinted contract (see Home Fed. Sav. Bank v Sayegh, 250 AD2d 646, 647 [1998]). Here, there was a Rider, which, by its express terms, provided that "[t]he application to be made in Clause 8 shall be for the assumption approval and [such] application shall replace the application to an institutional lender referred to in 8 (b)." No mention is made in the Rider regarding an additional sum of $155,000 in mortgage proceeds over the $1,420,000 balance on the existing mortgage, nor is there a representation from either party that such additional funds were discussed as needed. A letter dated November 12, 2007 to buyer's attorney Maylov from seller's attorney Kelly recites that the original contract draft, without the Rider, was forwarded to plaintiff on April 4, 2007 and, at plaintiff buyer's request, the "financing contingency was replaced . . . by the terms of the mortgage assumption rider" which was expressly represented to be $1,420,000. Although the Rider predates the Contract of Sale, the handwriting under paragraph 8 (b) of the Contract of Sale expressly directed the reader to "*See Mortgage Rider" (see Platinum Estate, Inc. v Vestervelt Props. LLC, 16 Misc 3d 1115 [A], 2007 NY Slip Op 51434 [U], *1-2 [2007]). It is noted, however, that none of the standard terms in Paragraph 8 of the Contract of Sale, which describes the Mortgage Commitment Contingency and specifies (in 8(a)) that the required financing was a first mortgage of $1,575,000 for a term of at least 25/30 years, was stricken out. [*5]

Plaintiff concedes that the Rider was controlling and supplanted paragraph 8 (b) by requiring him to apply to Washington Mutual Bank for an assumption of defendant's loan in the amount of $1,420,000, but insists he had an absolute legal right to terminate the contract "due to the failure of Washington Mutual Bank to issue a written firm and unconditional loan commitment letter" by July 13, 2007. Plaintiff argues that the fact that Washington Mutual Bank's written commitment letter was dated after the expiration of the Commitment Date of July 13, 2007 and, since defendant did not extend his time within which to secure the written commitment letter and did not schedule a time of the essence closing, he had an absolute right to cancel the contract and have his down payment returned to him by defendant.

Plaintiff is correct. The fact that Washington Mutual ultimately confirmed the assumption of the existing mortgage subsequent to the July 13 date does not vitiate plaintiff's right to cancel under the contract. See Cerabino Custom Builders, Inc. v Rigoglioso, 135 AD2d 481, 483 [2d Dept 1987]. Nor does any verbal advice received by plaintiff prior to the Commitment Date, satisfy the condition of the Contract. "According the term mortgage commitment its ordinary meaning, a formal written communication setting forth the terms and conditions of the mortgage loan was required to satisfy the mortgage contingency clause" (Carpenito v Balint, 145 AD2d 458, 459 [2d Dept 1988]; See also, Ting v Dean, 156 AD2d 358 [2d Dept 1989]). Plaintiff's continued efforts to secure additional funding do not constitute a forfeiture of his right to cancel when the contractually-specified commitment was not forthcoming prior to July 13. See Tendler v Lazar, 141 AD2d 717, 719-720 [2d Dept 1988]; Young v Leger, 288 AD2d 857 [4th Dept 2001].

Although defendant seller insists that plaintiff is in breach of his duty of good faith and fair dealing, there is no evidence to support such accusations. Plaintiff initiated his application to assume the Washington Mutual mortgage even prior to execution of the Contract of Sale, apparently upon seller's representation in the Mortgage Assumption Rider that the mortgage could be assumed, advancing $750 as a processing fee on May 3, 2007. That plaintiff required an additional $155,000 over the existing mortgage balance is suggested by the terms of the Mortgage Commitment Contingency set forth in the Contract of Sale reciting the need for $1,575,000 in funding. According to counsel, plaintiff made reasonable good faith efforts to obtain the additional sum from Washington Mutual and as a purchase money mortgage from defendant and, when these efforts proved unsuccessful, promptly exercised his right to cancel. Defendant takes issue with plaintiff's additional efforts to find an alternative source of funding through his attorney's brokerage, but there is little to support the suggestion that such efforts were a sham.

Paragraph 8(e) of the Contract of Sale does not restrict plaintiff's exercise of his right to cancel so long as it is "after the Commitment Date." Plaintiff thus had a reasonable period in which to exercise his right. See Big Apple Meat Mkt v Frankel, 276 AD2d 657, 658 [2d Dept 2000]. Given plaintiff's continuing efforts to obtain financing, evidencing his intention to perform, 41 days cannot be said to be an unreasonable period, particularly since defendant was apparently aware of plaintiff's efforts in that the additional financing had been requested of defendant. The name of the "Institutional Lender" to which application was made, was supplied to defendant's attorney by plaintiff's counsel (apparently also his mortgage broker) in her letter dated August 28. Since it was the same lender as that which held seller's existing mortgage, its address was presumably known to defendant. Thus, plaintiff had met the pre-conditions to his exercise of the right to cancel. [*6]

In this case, the equities are balanced on both sides. However, where a written contract specifies the conditions of the transaction, it is the responsibility of the Court to interpret the contract so as to effect the intent of the parties, giving fair meaning to all terms. T.M. Bier & Assoc., Inc. v Piraino, 16 AD3d 578 [2d Dept 2005]. As noted, the Rider clearly modified and superceded the provisions in the pre-printed Mortgage Commitment Contingency with respect to the buyer's obligation under paragraph 8(b) to make application to "an institutional lender" and "replace[d]" such duty to apply with an application to assume the existing mortgage. The Rider states that the outstanding balance is $1,420,000, but no mention is made therein as to the total financing required. The Rider does provide: "If purchaser is denied for the Assumption, purchaser will make application to a 2nd institutional lender." Since the "Assumption" was not denied, plaintiff was not obligated to make further application prior to cancelling. Moreover, none of the provisions in paragraph 8 of the pre-printed contract were stricken. The purchaser's obligation to purchase under the contract remains conditioned upon the "issuance," specifically on or before the Commitment Date, of a "written commitment" to a first mortgage of $1,575,000. The contract reiterates that the issuance of such "FIRM, unconditional" commitment is the only condition to purchaser's obligation. "FIRM" and "unconditional" are handwritten as an insertion to the pre-printed term.

Giving effect to all of these provisions, the Court finds that the parties intended and expected that financing in the sum of $1,575,000 would be a condition to plaintiff's obligation to purchase, at least part of which might be obtained through the assumption of the existing mortgage from Washington Mutual. The contract is further explicit in providing that the commitment must be issued "on or before" the Commitment Date. When that condition precedent did not occur, and the Commitment Date was not extended, nor had plaintiff accepted an alternative non-conforming "written" commitment for financing, plaintiff had the right to cancel "after" the Commitment Date (emphasis in original paragraph 8(e)) and is now entitled to the return of his deposit.

Accordingly, defendant's motion to dismiss the complaint and render judgment in its favor upon its counterclaims is denied. Plaintiff's motion to dismiss defendant's counterclaims and for summary judgment on its complaint is granted. Michael F. Kelly, Esq., as escrowee, is directed to return the down payment to plaintiff, together with accrued earned interest, if any.

This constitutes the decision, order, and judgment of the court.

E N T E R

J . S. C.