Court Opinion

ID: 5902811
Source: CourtListenerOpinion
Date Created: 2022-01-13 03:26:40.960868+00
Date Added: 2024-06-11T08:45:44.142202
License: Public Domain

Kane and Levine, JJ.,
dissent and vote to modify in a memorandum by Levine, J. Levine, J. (dissenting). In our view, Supreme Court erred in granting plaintiffs summary judgment. The mortgage contingency clause stated in pertinent part: "[t]his contingency shall be deemed waived unless purchaser shall notify contractor by registered mail, return receipt requested, no later than 45 days of his inability to obtain said [mortgage] approval” (emphasis supplied). The conclusion seems unescapable to us that the 45-day time limit in that clause has to be referable to a period commencing with the execution of the contract. Otherwise, the time limit would be free-floating and essentially meaningless. Therefore, by the literal terms of the clause, plaintiffs were "deemed [to have] waived” the mortgage contingency, which would otherwise have discharged their obligation to perform the agreement, well before the February 9, 1984 modifications adding extras and extending the time to complete construction and close title.
The majority apparently agrees that the mortgage contingency clause was completely unaffected by the February 9, 1984 addenda, since the modifications neither expressly nor impliedly impinged upon that clause. This conclusion conforms to settled law. As stated in Beacon Term. Corp. v Chemprene, Inc. (75 AD2d 350, 354, lv denied 51 NY2d 706), "[t]he modification of a contract results in the establishment of a new agreement between the parties which pro tanto supplants the affected provisions of the original agreement while leaving the balance of it intact” (emphasis supplied). Nevertheless, the majority holds that the 45-day period "began running anew on February 9, 1984 when the contract was *904modified”. Thus, the majority concludes that, somehow, the parties in entering into the February 9, 1984 modification, agreed to "unwaive” the waiver they stipulated would take place after the first 45 days in the mortgage contingency clause. Simple logic dictates that plaintiffs’ waiver of the right to rescind, exercisable only within the first 45 days after execution of the contract, as provided by the express terms of the mortgage contingency clause, cannot be both intact and yet "unwaived” as a result of the February 9, 1984 changes in the agreement. Not only logic, but fairness and policy dictate a contrary result to that reached by the majority. Plaintiffs knew on December 13, 1983, prior to the expiration of the 45-day period, that the mortgage commitment they had obtained was unsatisfactory since its expiration date was well before the closing date under the contract. At that point, they had two options, to promptly cancel the contract by invoking the mortgage contingency clause or to seek an extension of the contingency period. They did neither.
Time restrictions in mortgage contingency clauses of real estate contracts are common and important. Through such demarcations, the seller’s risk of the loss of a sale because of the buyer’s inability to obtain financing is placed within defined and predictive limits. They represent a reasonable, bargained-for accommodation of the competing interests of buyers and sellers concerning financing risks. Under the majority’s decision, a time limit for rescission under a mortgage contingency clause becomes ineffective upon any modification of the agreement, even when, as here, there is no indication whatsoever of the parties’ mutual assent to renewal or extension of the contingency period.
On the basis of the foregoing, we would not only reverse, but also grant summary judgment in favor of defendants except for the existence of a question of fact as to whether plaintiffs may be entitled to equitable rescission. Plaintiffs aver that they notified defendants in late December 1983 of the problem with their original mortgage commitment and their continued need for financing, and that they believed the February 9, 1984 modifications had the effect of renewing the 45-day period. This would support the inference that defendants were aware of plaintiffs’ mistaken belief regarding the effect of the February 9, 1984 modifications as a renewal of the mortgage clause, but unfairly refrained to correct that mistaken belief, entitling plaintiffs to relief on the basis of unilateral mistake (see, Sheridan Drive-In v State of New York, 16 AD2d 400, 405; see generally, Restatement [Second] of *905Contracts §§ 153, 201, 376 [1979]). Since defendants controvert plaintiffs’ averments as to such notice and awareness, a triable issue exists precluding summary judgment. Accordingly, we would modify Supreme Court’s order by reversing so much thereof as granted plaintiffs’ motion for summary judgment.