Facts of the Case.

Thomas J. DiSalvo, J. This matter regularly came on to be heard on the court's small

claims calender. The parties appeared with their respective attorneys, who appeared in their

capacities as attorneys and as witnesses. As a result, the attorneys were sworn in as witnesses

along with the parties herein. That since the plaintiff spoke Spanish as his primary language, the

court arranged to have a Spanish interpreter, Natali Reyes, interpret for the plaintiff. The

presence of the interpreter for said plaintiff was put on the record.

The plaintiff's claim for Two Thousand Dollars ($2,000.00) was set out as follows:

"Good faith deposit for purchase of property at 1505 Clifford Ave. Property found

to have unmarketable title, and unable to acquire conventional mortgage, therefore

purchase contract cancelled."^[FN1]

Upon the testimony offered by the parties and their witnesses, the court makes the

following findings of fact: [*2]

1. The parties entered into a form real estate contract entitled "Purchase and Sale Contract For Residential Property", dated August 13, 2012, for the purchase of 1505 Clifford

Avenue, Rochester, New York;

2. The plaintiff was the buyer and the defendant was the seller in that contract, wherein

plaintiff paid $2,000.00 as a down payment, held by seller's realtor Hunt Real Estate

ERA/Columbus;

3. The sale price of said property was Thirty Five Thousand Dollars ($35,000.00),

established by seller's counter offer that was accepted by the buyer/plaintiff;^[FN2]

4. That item "4" of said counter-offer stated "seller will provide insurable title";

5. That item "5 of said counter-offer stated "buyer shall have until September 14, 2012

to obtain & accept a written mortgage commitment";

6. The plaintiff obtained a commercial mortgage commitment from Canandaigua

National Bank, dated September 4, 2012 in the amount of $26,250.00;^[FN3]

7. The mortgage commitment was labeled in the regarding of said letter as "Commercial

Mortgage, 1505 Clifford Avenue, City of Rochester, County of Monroe, New York";

8. The mortgage contingency as set out in paragraph 5(a) of the contract makes the offer

subject to buyer obtaining a "conventional mortgage" in an amount not to exceed 75% LTV at an

interest rate not to exceed 5% for a term of 30 years;

9. The mortgage commitment was provided to both attorneys by plaintiff's realtor, to

wit: Nothnagle Realtors, via a fax dated September 6, 2012 attached to Plaintiff's Exhibit 2. [*3]

10. The plaintiff alleges that he refused to close this transaction because the defendant

was unable to provide marketable title but only insurable title and because plaintiff was only able to obtain a commercial mortgage commitment instead of a conventional residential mortgage;

11. There is no argument that the defendant would be able to provide insurable title to

the property to the plaintiff at closing;

12. Paragraph 12 of the Purchase and Sale Contract entitled "Objections to Title" states

as follows:

"If Buyer raises a valid written objection to Seller's title which indicates that title to

the property is unmarketable, then Seller may cancel this Contract upon written notice

to Buyer, and the deposit shall be returned to Buyer. However, if Seller (a) is able to

cure the objection on or before the closing or (b) is able to insure the title objection

and Buyer is willing to accept insurable title, then this Contract shall continue, subject

to the Seller curing the title objection and/or providing insurable title at Seller's expense.

If Seller fails to cure the title objection on or before the closing, or if Buyer is unwilling

to accept insurable title, Buyer may cancel this Contract upon written notice to Seller

and the deposit shall be returned to Buyer."

13. Plaintiff agreed to accept insurable title by virtue of his acceptance of the counter

offer of the defendant;

14. Despite the fact that the contract in question was titled as "Purchase and Sale

Contract For Residential Property" there does not appear to be a controversy as to the fact that

the property was not residential property, but was in fact commercial property.

15. The choice of which form of contract to use was presumably that of the plaintiff's

realtor;

16. It is not clear simply from reading the contract whether the contingency making the

contract subject to the plaintiff obtaining a conventional mortgage was meant to refer to a

conventional residential mortgage or a conventional commercial mortgage, other than the fact [*4]

that the form contract utilized is meant for residential real estate transactions;

17. No pictures of the property were submitted by the plaintiff to establish that the

property was residential rather than commercial;

18. The mortgage commitment received by the plaintiff provided two options; "Option

1" provided for a fixed rate of 5.79% for the first three years; "Option 2" provided for a floating

interest rate based on the Wall Street Journal prime lending rate plus 1.29%; Regardless of which

option chosen by the plaintiff, the mortgage was to be amortized over a fifteen (15) years, rather

than thirty (30) years as set out in the contract.

Legal Analysis.

Insurable Title. Certainly that portion of plaintiff's argument that the contract in

question was voidable because the defendant was able to provide only insurable and not

marketable title is without merit. The issue of insurable title was not the result of boilerplate

printed terms of a form contract. The parties specifically contracted that the defendant would

provide and that the plaintiff would accept insurable title in a typed counter offer. Both parties

had their own separate real estate brokers, who prepared or presented both the offer and counter-

offer. In addition, the contract was subject to the approval of both parties' independent

attorneys.^[FN4] "A party who executes a contract is presumed to know its terms and agree to same"

(Winter Bros. Recylcing Corp. Vs. Barry Imports East Corp. 23 Misc 3d 1115A, 885 N.Y.S.2d

714, 2009 NY Slip Op 50758U, ***4 [2009]). The plaintiff did not rebut this presumption.

Mortgage Contingency. The mortgage contingency provision of the contract is more [*5]

problematic. The phrase "conventional mortgage" is somewhat vague. A conventional mortgage

has been defined as " ... a mortgage loan made by a lending institution without government

guarantees, and therefore not subject to the specific requirements and regulations appertaining to

government-guaranteed mortgages....'" (Kim Hung Tsang v. Romano, 31 Misc 3d 1202A, 929

N.Y.S.2d 200, 2011 NY SLIP Op 50468[U], ***17 [2003]).Such a definition does not

eliminate the possibility of a conventional commercial mortgage.^[FN5] Thus the phrase

"conventional mortgage" in and of itself does not indicate if the parties intended the plaintiff to

obtain commercial conventional mortgage commitment or a residential conventional mortgage

commitment. One is left to speculate if the author of the contract ultimately knew that a

commercial mortgage was required, but used the phrase "conventional mortgage" without giving

it much thought. In any event, the plaintiff maintained that he was always attempting to obtain a

conventional residential mortgage commitment.

"When the term conventional mortgage' is used in a clause such as the instant one, there

should also be set forth the term of the mortgage and at what interest rate the mortgage shall

be...." (Neiss v. Franze 101 Misc 2d 871,872, 422 N.Y.S.2d 345, 347 [1979]). In the Purchase

and Sale contract herein there were specific terms set out as to the interest rate and length of the

mortgage loan, i.e. "at an interest rate not to exceed 5% for a term of 30 years". Those were not

the terms of the commercial mortgage commitment obtained from Canandaigua National Bank.

Nevertheless, the last sentence of paragraph 5(a) of the Purchase and Sale Contract

entitled "Mortgage Contingency"states that "Acceptance of a written mortgage commitment by

buyer shall be deemed a waiver and satisfaction of this contingency." There was no testimony

that the plaintiff refused to sign the mortgage commitment. The evidence presented indicated [*6]

only that the plaintiff refused to close the deal.^[FN6] In fact defense counsel entered into evidence a

fax cover sheet dated October 2, 2012 from seller/defendant's attorney stating that "Contract

provides for insurable title only".^[FN7] That fax was sent almost a month after the mortgage

commitment was issued. Attached to that fax sheet was an e-mail, dated September 6, 2012,

from plaintiff's attorney's office indicating that a copy of plaintiff's mortgage commitment was

attached thereto and providing defendant/seller's attorney with the instrument survey

certifications. In fact, the fax sheet indicates that the only outstanding issue between the parties

at that time was that the contract provided for the transfer of insurable title to the plaintiff. As

such it would appear that the plaintiff waived the mortgage contingency provision.

Conclusion.

The defendant breached the real estate contract in question. His failure to close on the

sale based on the defendant's ability to provide only insurable title or because he did not obtain a

mortgage commitment as originally set out in the in contract was not justified for the reasons set

out herein. "In the event of a default by the purchaser or a repudiation of the contract of

purchase, upon which a down payment has been made, the law is clear that the purchaser may not

recover his down payment. This is the rule even in instances where the premises are sold for a

sum equal to or greater than the contract price." (Johnson v. Werner, 63 AD2d 422, 424, 407

N.Y.S.2d 28, 30 [1978]). Thus the claim of the plaintiff is hereby dismissed. This constitutes

the decision and order of this Court.

Dated: December 5, 2012

Webster, New York

________________________________________

Hon. Thomas J. DiSalvo

Webster Town Justice