Rajinder Khazanchi et al. v. Justin Carlson et al. (2010)

MEMORANDUM OF DECISION

FACTS

In 2008, the Defendant, Justin Carlson, was the record owner of property located at 683 Old Stratfield Road, Fairfield.   He acquired title to the real estate via a quitclaim deed from his grandmother, Mary Carlson, in 2000, as part of an estate planning process (TR, 6-4-10, p. 98-99.)

On June 24, 2008, Justin Carlson entered into an agreement (Ex. A) to sell 683 Old Stratfield Road to the Plaintiffs, Rajinder and Kamini Khazanchi, for the consideration of $525,000.   William Raveis accepted a deposit of $5,250 one percent of the agreed purchase price.

Formal contracts (Ex. 1) were executed on or about July 23, 2008, at which time the Plaintiffs paid an additional $15,000 to be held in escrow by Attorney Brian Lyman-Askew, Justin Carlson's attorney.   The contract provided that the inability of the prospective buyers to obtain “an unconditional written commitment ․” for a $448,500, mortgage on or before August 8, 2008, would enable them to void the agreement, and secure a return of all monies held on deposit.  (Ex. 1, p. 7, par. 16.)

On July 8, 2008, Rajinder and Kamini Khazanchi, the owners of a home at 49 Norwood Avenue, Milford, obtained a conditional mortgage approval from The Milford Bank (Ex. 2).   The commitment was conditioned upon the following:  “A copy of a fully executed rental lease, in an amount not less than $2,500, per month, for property located at 49 Norwood Avenue, Milford, must be submitted to the bank 10 days prior to the closing.”  (Ex. 2, p. 4.)

On July 11, 2008, at the request of the Plaintiffs, a revised commitment letter (Ex. 3) was issued.   The revised commitment letter reduced the required monthly rental from $2,500 to $2,000 per month.  (Ex. 3, p. 3.)

Justin Carlson was made aware of the condition, at the time formal contracts were signed.   With his letter of July 21, 2008 (Ex. 6), Attorney Joseph Mager sent the formal contracts (Ex. 1) and $15,000, to Attorney Lyman-Askew.   The letter of transmittal stated:

As an aside, my clients have indicated to me that if they are unable to obtain a tenant for their property by August 1, 2008, they will be terminating the Contract, due to the fact that they have not received an unconditional mortgage commitment.   Their position is based on the fact that they have young children who are in school and want to have the children settled before the closing date.   Please pass this information to your client before he proceeds with signing these Contracts ․

The Plaintiffs, in an attempt to secure a tenant for 49 Norwood Avenue, authorized their realtor, Babita Singh of William Raveis, to list the property for rent, pursuant to the realtor's Multiple Listing Service (MLS) (Ex 11).   The listing agreement was signed on April 30, 2008.   Babita Singh showed the property to numerous prospective tenants, and also fielded inquiries from various real estate agents (TR. 6-4-2010, P. 36-37;  Ex. 13.)

By the end of July 2008, the Plaintiffs, despite the use of the MLS and a personal realtor, had been unsuccessful in leasing the property.   They requested an extension to the mortgage contingency date until August 8, 2008, a request which Attorney Lyman-Askew granted.  (Ex. 7.)

At the same time the extension to August 8 was being requested, Edward Carlson, Justin Carlson's father, made an attempt to keep the sale of 683 Old Stratfield Road viable, and to satisfy the outstanding mortgage contingency.

On July 30, 2008, Edward Carlson, who acted on behalf of his son, telephoned Attorney Lyman-Askew.   He stated that Amable Colon, his son-in-law, was willing to sign a lease for the Plaintiff's Milford home.   The terms of the proposed agreement were $2,000 per month for nine months, September 2008 through May 2009, with a right to sublease (TR. 6-4-2010, p. 7446.)   This information was communicated to Geraldine Grucci, a paralegel employed by Attorney Mager's office.

Also on July 30, 2008, the Plaintiffs requested an extension until August 8, 2008, in order to obtain an unconditional mortgage commitment (Ex. 7).   This extension was granted, as was a subsequent request to extend the date to August 15, 2008 (ex. 8).

The August 8 communication, Ex. 8, stated:  “We have not heard from our clients, who are in India, to discuss the lease issues.”

Another proposal made by Edward Carlson at the end of July 2008, was a reduction in the purchase price by $12,000.   This money, according to Edward Carlson, would be available to the Plaintiffs as a subsidy, concerning any lease arrangement (TR. 64-2010, p. 87.)

In July of 2008 Justin Carlson, the record owner of 683 Old Stratfield Road, was residing at 266 Hawthorne Avenue, Derby.   Amable Colon and Justin Carlson's sister April, were also residing at the Hawthorne Avenue address.   Amable Colon and April Carlson had been married in May of 2008.

April Cannon was employed as a teacher by the New Canaan Board of Education, and Amable Colon was commuting to a job in Union Point, New Jersey.   On occasion, due to the difficult commute, Amable Colon would remain in New Jersey after work (TR. 6-11-2010, p. 40-42.)

On August 12, Attorney Mager wrote that the Plaintiffs were unwilling to accept the proposed lease arrangement, or the price reduction.   He communicated the Plaintiffs' desire to withdraw from the contract, based upon their inability to obtain an unconditional mortgage (Ex 9).   A return of the deposit monies was requested.

On August 15, 2008, Attorney Mager sent a copy of the Milford Bank's denial letter to Attorney Lyman-Askew (Ex. 10).

The Defendant, Justin Carlson, refused to return the Plaintiffs' $20,250 deposit.   He maintained that the offer to lease 49 Norwood Avenue, Milford satisfied the only remaining mortgage condition, and that the Plaintiffs were in breach of the contract of sale, Ex. 1.

Justin Carlson's refusal to authorize the return of the $20,250 deposit, precipitated this three-count complaint filed by Rajinder and Kamini Khazanchi.

Count one, which is directed against the Defendant Justin Carlson, claims that the failure to return the deposit represents a breach of the contract of sale (Ex. 1).   In Count two, the Plaintiffs allege that Justin Carlson engaged in unfair and deceptive practices, in the conduct of trade or commerce, in violation of the Connecticut Unfair Trade Practices Act (CUTPA), § 42a-110b(a),1 et seq. of the General Statutes.

Count three concerns the two stakeholders, William Raveis Real Estate and Attorney Brian Lyman-Askew, who have retained $5,250 and $15,000 respectively pending the outcome of this action.   Both have agreed to turn over all monies being held, as directed by the court.

THE MORTGAGE CONDITION CONCERNING A LEASE OF 49 NORWOOD AVENUE MILFORD WAS NOT SATISFIED, AND THE PLAINTIFFS ARE ENTITLED TO A RETURN OF ALL MONIES DEPOSITED

No “․ fully executed rental lease” was submitted by the Plaintiffs to The Milford Bank as required by the express terms of Ex. 2 and Ex. 3. Nor did Justin Carlson or his brother-in-law, Amable Colon, or anyone acting on their behalf, tender a signed lease agreement to the Plaintiffs, their attorney, or their real estate agent.

Justin Carlson contends, however, that the Plaintiffs breached the Residential Real Estate Sales Agreement (Ex. 1), because they failed to “pursue their application (for a mortgage) with diligence,” as required by paragraph 16 of the agreement.

A mortgage contingency clause in a real estate purchase and sale agreement implies a promise by the borrower, that he will make reasonable efforts to secure a mortgage.  Lach v. Cahill, 138 Conn. 418, 422 (1951);  Barber v. Jacobs, 58 Conn.App. 330, 335 (2000).   A mortgage contingency clause is a condition precedent.   That is, it is a fact or event which the parties intend must exist or take place, before there is a right of performance.  Luttinger v. Rosen, 164 Conn. 45, 47 (1972).   If the condition precedent is not fulfilled, then the contract is not enforceable.  Lach v. Cahill, supra, 421.

The standard to be applied is not whether the prospective mortgagee attempted to satisfy an outstanding condition in good faith.  Phillipe v. Thomas, 3 Conn.App. 471, 473 (1985).   Although good faith may have some relevance in determining the reasonableness of the prospective mortgagee's conduct, the standard to which a purchaser is held, is whether he exerted reasonable efforts to obtain the mortgage commitment.  Luttinger v. Rosen, supra, 47.   Whether a person acted reasonably, is measured against the conduct of a person of ordinary prudence, given all of the circumstances.  Murphy v. Soracco, 174 Conn. 165, 168 (1978);  Schribner v. O'Brien, Inc., 169 Conn. 389, 400 (1975).

It is found, based upon the evidence presented, that the Plaintiffs, Rajinder and Kamini Khazanchi, made seasonable efforts to secure a mortgage commitment in anticipation of purchasing 683 Old Stratfield Road, Fairfield.   Those reasonable efforts included an attempt to obtain a lease at no less than $2,000, for many months.

49 Norwood Avenue was listed with a real estate broker, and was the subject of an MLS listing which generated multiple inquiries.

The $2,500 monthly rental specified in Ex. 2, was reduced to $2,000 as part of a bona fide effort to secure an acceptable tenant (Ex. 3).

Although the need to lease 49 Norwood Avenue in order to obtain an unqualified mortgage commitment was known to Justin Carlson and his attorney when contracts for the sale of 683 Old Stratfield Road were signed, no interest in leasing the property was expressed by or on behalf of Amable Colon, prior to July 30, 2008.

In the exercise of ordinary prudence, it is found that Plaintiffs were justifiably leary about the prospect of renting their property for only nine months, to an individual who was employed in New Jersey, and whose wife was a teacher in a lower Fairfield County town.

Neither Amable Colon or April Carlson ever contacted the listing agent to arrange for an inspection of the property.   Furthermore, such issues as a reasonable security deposit maintenance and utility responsibilities, and the sub-leasing of the property, had not been resolved.

It is found that the Plaintiffs' unwillingness to be stampeded into a lease was both prudent, and understandable.

The Plaintiffs' concern for having their young children settled in a school prior to the closing date was communicated to the Defendant Justin Carlson (Ex. 6).   Their withdrawal from the contract, communicated on August 12 (Ex. 9) reflected an openly-expressed concern which was of long standing.

It is found that the failure of the Plaintiffs to satisfy the lease condition, despite reasonable efforts to do so, renders the purchase and sale agreement (Ex. 1) unenforceable.   It is therefore found that any deposit paid in contemplation of the sale of 683 Old Stratfield Road to the Plaintiffs ought to be returned to the Plaintiffs.  Feinberg v. Berglewicz, 32 Conn.App. 857, 860-61 (1993).

It is further found, that the refusal of the Defendant, Justin Carlson, to return the Plaintiffs' $20,250 deposit to them, represents a breach of the Residential Real Estate Sales Agreement (Ex. 1).

Paragraph 36 of Ex. 1 reads:

․ in the event of any litigation brought to enforce any material provision of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys fees and costs from the other party.

The “American Rule,” followed in Connecticut, requires each party to pay his own attorneys fees.   However, where there is a statutory or contractual provision authorizing attorneys fees, a successful litigant may recover those fees.   Mans v. McGrath, 58 Conn.App. 183, 185 (2000).

It is found that the Plaintiffs, Rajinder and Kamini Khazanchi, are the prevailing parties on the breach of contract claim contained in Count one, of their complaint, and they should recover reasonable attorneys fees from the Defendant, Justin Carlson.

It is found that the Plaintiffs incurred reasonable attorneys fees of $4,340 (Ex. 12) prior to trial, and should recover those expenses from the Defendant Justin Carlson.

It is further found, that the Plaintiffs incurred reasonable attorneys fees in the total amount of $5,740, for the actual trial of this case, and for the post-trial proceedings.   This represents 16.40 hours expended, at $350 per hour.

It is found that the Plaintiffs should recover attorneys fees in the total amount of $10,080 from the Defendant Justin Carlson.

THE PLAINTIFFS HAVE NOT PROVEN A VIOLATION OF THE CONNECTICUT UNFAIR TRADE PRACTICES ACT (CUTPA)

A party seeking to recover damages pursuant to the Connecticut Unfair Trade Practices Act (CUTPA) must meet two requirements:  1) he must establish that the conduct at issue constitutes an unfair or deceptive trade practice, and 2) he must prove that he sustained ascertainable loss as a result.  Reader v. Cassarino, 51 Conn.App. 292, 298-99 (1998).   Whether a practice violates CUTPA, is a question of fact.  DeMotses v. Leonard Schwartz Nissan, Inc., 22 Conn.App. 464, 466 (1990).

The Plaintiffs have not pressed this claim in their proposed findings of fact and conclusions of law, and it is found that the Plaintiffs have not established a CUTPA violation based upon the facts adduced at trial.

ORDERS

The “stakeholder” Defendants, William Raveis Real Estate and Attorney Brian Lyman-Askew, are ordered to return all monies being held in escrow, to the Plaintiffs, Rajinder and Kamini Khazanchi.

The Defendant, Attorney Brian Lyman-Askew shall pay over to the Plaintiffs, through their attorney, the sum of $15,000.

The Defendant, William Raveis Real Estate shall pay over to the Plaintiffs, through their attorney, the sum of $5,250.

The Plaintiffs are awarded $10,800 as reasonable attorneys fees, to be paid by the Defendant, Justin Carlson.

Costs are awarded to the Plaintiffs in the total amount of $760.60, as against the Defendant Justin Carlson.

Judgment may enter in favor of the Plaintiffs Rajinder and Kamini Khazanchi, against the Defendant Justin Carlson as to Count one, and in favor of the Plaintiffs and against the Defendants William Raveis Real Estate and Attorney Brian Lyman-Askew as to Count three.

Judgment may enter in favor of the Defendant Justin Carlson, as to Count two.

Radcliffe, J.

FOOTNOTES

FN1. Section 42a-110b(a), C.G.S.-No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce..  FN1. Section 42a-110b(a), C.G.S.-No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.

Radcliffe, Dale W., J.