Kuldeep Bhargava et al. v. Daniel Arnould et al. (2010)

MEMORANDUM OF DECISION

FACTUAL AND PROCEDURAL BACKGROUND

The plaintiffs, Kuldeep Bhargava, Sanjeev Gupta, Aswin Shah and Dipti Shah, commenced an action by writ, summons, three-count complaint and an application for a prejudgment remedy dated March 31, 2008.   The parties stipulated to a prejudgment remedy in the amount of $197,500 and a $50,000 attachment.   The named defendants are Daniel Arnould and Eunha Kim. Thereafter, on May 10, 2010, the plaintiffs amended the complaint to include only one count for a breach of contract based upon the failure of the defendants to return a deposit of $197,500.00 for the prospective purchase of two lots located at 26 Sachem Road, Greenwich, known as Lot 1 and Lot 3. The plaintiffs contend they were unable to secure a mortgage in accordance with the mortgage contingency clause of the purchase agreement and requested a return of the deposit pursuant to Paragraph 24 of the Purchase Agreement.   The defendants are the owners of the property at 26 Sachem Road and entered into an agreement for the sale of two separate lots on or about December 28, 2007.   The property was originally one site that was subdivided by the defendants and marketed for sale.   Two of the lots were vacant land and the third lot contains a house.   The defendants have submitted an amended answer, affirmative defenses and a counterclaim dated May 14, 2010.   The defendants' first affirmative defense is a claim of unclean hands, the second affirmative defense is equitable estoppel and the third affirmative defense is a waiver by the plaintiffs.   In addition, the defendants have filed a counterclaim for breach of contract and enforcement of Paragraph 11 for liquidated damages based upon the failure to make and pursue an application for a mortgage pursuant to paragraph 24 of the purchase agreement.

The parties appeared before the court for a trial in this matter on three separate dates, April 20, 2010, April 21, 2010 and April 27, 2010.   At the conclusion of the testimony, the court permitted the parties to submit simultaneous post-trial memorandum by May 21, 2010.   The defendants submitted a letter to the court and requested to file a reply memorandum.   The court heard argument regarding this request and permitted a reply by the defendants on or before June 22, 2010 and for the plaintiffs by June 28, 2010.   The parties have submitted memorandum in accordance with the order.   Additionally, the parties have submitted briefs and exhibits that address the defendants' motion to strike the testimony of Michael Cordelli.   The court has addressed this motion in a separate decision but for purposes of this decision the court has denied the motion and does consider portions of the testimony while weighing the credibility of the testimony of Mr. Cordelli.

The court finds the following facts in reviewing the claims of the parties.   The plaintiffs as a group became interested in purchasing the property to develop and sell new residential construction.   The plaintiff Kuldeep Bhargava was the only one of the group that had developed any property prior to this plan.   He, along with the other plaintiffs, made an offer to purchase the property in November 2007.   However, the property was still involved in some subdivision issues including the construction of a road.   In December, the plaintiffs were still negotiating the terms of a purchase.   During the month of December and before they entered into a contract for either of the two parcels the plaintiffs engaged the services of Michael Cordelli as a mortgage broker to address the financing issues.   Mr. Cordelli had worked on at least one prior development project and residential financing with Kuldeep Bhargava.   None of the other plaintiffs had development experience and they were engaged in employment that was not related to real estate development.   Before the parties entered into a contract with the defendants, Mr. Cordelli began to obtain information to aid in the financing applications.   As early as December 17, 2007, he received financial statements from some of the plaintiffs.  (Tr., April 27, 2010, p. 16, Joint Exhs. 8 and 9.) On December 24, 2007, the plaintiffs entered into two separate contracts with the defendants for two separate lots for construction development.   The agreed upon price for each of the lots was $987,500.   Each of the contracts is identical with the exception of the description of the property.  (Joint.  Exhs. 1 and 2.) The contracts each contained a mortgage contingency with a date of January 23, 2008, a default provision, and a closing date of twenty-one days after the start of road construction.   The mortgage contingency provided that the plaintiffs “obtain a mortgage loan in the amount of $691,250.00 from a recognized lending institution which loan shall be for a period of 30 years and shall bear interest at the prevailing rates.”   The mortgage contingency clause also provided that the plaintiffs “were to make prompt application for the loan ․ and ․ pursue the application with diligence.”   The plaintiffs ultimately gave a deposit of $197,500 for the two properties.   The defendants signed the contract sometime around December 28, 2007.   Mr. Cordelli had contacted financing institutions prior to the final signing of the contracts.   Mr. Cordelli contacted four banks to obtain a mortgage, M and T Bank, People's Bank, Washington Mutual and lastly Patriot National Bank. (Tr., April 27, 2010, p. 18.)   The first three banks were not interested in giving a mortgage for the land.   Patriot National Bank sent an email to Mr. Cordelli on January 4, 2008 that indicated, “for the land purchase, we will do 65% ltv.”  (Defendants' Exh. I.) ¹ The plaintiffs continued to provide information to the bank after receipt of this email and did not indicate to Mr. Cordelli that they were rejecting this approach.   Thereafter, plaintiffs submitted what they call applications on January 13, 2008 and credit reports of each of the plaintiffs were submitted in January.   By letter dated January 18, 2008, addressed to the plaintiffs, Patriot National Bank offered a loan acquisition for the purpose of purchasing the two lots for $1,283,750, which was 65% of the cost to acquire the land.   Additionally, the letter indicates that the term of the loan was twelve months and a commitment fee of $12,837 was necessary.   The letter also required an interest reserve of $100,000.   The interest rate was prime interest rate and 1% floating.  (Joint Exh. 3.) In accordance with the purchase agreement the plaintiffs through counsel sent a letter dated January 22, 2008, indicating that were exercising their rights under paragraph 24 of the agreement and declared each contract “null and void.”   The plaintiffs requested a return of their deposit.  (Joint Exh. 4.) The defendants did not return the deposit.   The plaintiffs contend that this is a violation of Paragraph 24 of the Purchase Agreement.

The defendants argue that the plaintiffs did not satisfy their obligation to apply for a mortgage for the property nor did they diligently pursue any application process for a mortgage.   The defendants also contend in their counterclaim that by these acts, the plaintiffs breached the contract and pursuant to paragraph 11 of the agreement they are entitled to retain the entire deposit as liquidated damages.   Additionally, both parties seek attorney fees and costs as the prevailing party.

DISCUSSION

BREACH OF CONTRACT CLAIMS

The plaintiffs are seeking the return of deposits for two parcels of property because they contend that they could not obtain the financing as noted in the mortgage contingency clause of the purchase agreements for each of the properties.   They contend that the failure to return the deposits is a breach of Paragraph 24 of the agreements.   Paragraph 24 of the contracts provides:  “It is expressly understood and agreed by the parties hereto that this Agreement is conditioned on the Purchaser being able to obtain a mortgage loan in the amount of $691,250.00 from a recognized lending institution, which loan shall be for a period of 30 years and shall bear interest at the prevailing rates.   Purchaser shall make prompt application for the loan above described and shall pursue such application with diligence.   If having done so, Purchaser so notifies Seller in writing in care of Heagney, Lennon and Slane, Attorneys at Law, 248 Greenwich Avenue, Greenwich, Connecticut, on or before January 23, 2008 at 5:00 P.M., then this Agreement shall be null and void and the Agreement, except $250.00 to cover the cost for preparing the Agreement.   Should the Purchaser fail to comply with the foregoing requirements, this Agreement shall continue in full force and effect, and the rights and obligations of the parties shall be as if this paragraph did not appear in this Agreement ․”

The first issue before this court is whether the plaintiffs satisfied the requirements of Paragraph 24.   The second issue involves the counterclaim of the defendants that they are entitled to retain the entire deposit provided by the plaintiffs in accordance with paragraph 11 as liquidated damages.   Paragraph 11 provides:  “In the event that the Purchaser is in default by reason of failure or refusal to comply with any of the terms of this Contract, the Seller shall have the option to terminate this Contract, in which event the purchaser shall forfeit all claims to the premises described herein and all payments received by the Seller shall be retained as full liquidated damages to the Seller.   The Purchaser agrees that the deposit shall be considered as liquidated damages by reason of the fact that the actual damages to the Seller would be substantial but difficult to ascertain and the amount retained is reasonable, considering the purchase price, the withdrawal of the property from the market, and the actual potential losses and expenses which the Seller would bear as a result of such default ․”

“[W]hether there was a breach of contract is ordinarily a question of fact.”   Benedetto v. Wanat, 79 Conn.App. 139, 152, 822 A.2d 438 (2003).  “We construe a contract in accordance with what we conclude to be the understanding and intention of the parties as determined from the language used by them interpreted in the light of the situation of the parties and the circumstances connected with the transaction ․ The intention of the parties manifested by their words and acts is essential to determine the meaning and terms of the contract and that intention may be gathered from all such permissible, pertinent facts and circumstances ․” (Internal quotation marks omitted.)   Poole v. Waterbury, 266 Conn. 68, 97, 831 A.2d 211 (2003).  “[I]ntention is to be determined from the language used, the circumstances, the motives of the parties and the purposes which they sought to accomplish ․ A determination of contractual intent ordinarily presents a question of fact for the ultimate fact finder, although where the language is clear and unambiguous it becomes a question of law for the court ․” (Citation omitted;  internal quotation marks omitted) Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 276, 709 A.2d 558 (1998).   The contract clearly sets forth three criteria as part of the mortgage contingency, that is, a mortgage amount of $691,250.00 for each of the properties, a loan for a period of 30 years and a loan at the prevailing interest rates.   In addition, the contingency requires the plaintiff to make a prompt application and pursue the application with diligence.

“A mortgage contingency clause implies a promise that the prospective purchaser will make reasonable efforts to secure a suitable mortgage.”  Lach v. Cahill, 138 Conn. 418, 85 A.2d 481 (1951).  “The standard is an objective one, involving an analysis of what a person with ordinary prudence would do given the circumstances.”  Phillipe v. Thomas, 3 Conn.App. 471, 489 A.2d 1056 (1985).  “What constitutes reasonable efforts is a question of fact for the trier.”  (Citations omitted;  Internal quotation marks omitted.)   Rokalor v. Connecticut Eating Enterprises, 18 Conn.App. 384, 390, 558 A.2d 265 (1989).   The question as to the breach of contract by the defendants is contingent upon a finding by the court as to whether the plaintiffs reasonably applied and pursued a mortgage and in part whether the letter of intent from Patriot National Bank provided a mortgage consistent with the agreement.   Therefore, although there are different claims by the parties, they are intertwined with the same facts, and a finding as to whether the plaintiffs acted reasonably and promptly in the application phase has an impact of the claims of both parties.   An examination of all of the evidence and testimony leaves the court with the opinion that the plaintiffs acted promptly in applying and reasonably in pursuing the mortgage.   The evidence clearly shows that the plaintiffs began efforts to obtain financing before the parties had completed negotiations for the purchase.  (Plaintiffs' Exhs. 8 and 9.) The plaintiffs were not sophisticated in the world of financing and they agreed to hire a consultant at a fee to obtain the financing that would satisfy the mortgage contingency.   Although none of the plaintiffs personally did the ground work for bank financing, it was done through their experienced agent, Mr. Cordelli.   Dr. Gupta testified that:  “We felt Mr. Cordelli was experienced.   He had delivered in the past, and in my discussions with him, he was well-he came across as being well-informed about all the applicable rules and regulations for getting loans, and we felt confident that he would do the job.   In discussions with him intermittently, I did recognize that he made a number of inquiries with a number of lending institutions and so we felt confident in his having done the job.”  (Tr., April 20, 2010, p. 171.)   In fact, when asked about the documents that were provided to the bank, Dr. Gupta was not certain which documents went but assumed they all would go.  (Tr., April 20, 2010, p. 178.)   This was not an unreasonable assumption given the experience and position of Mr. Cordelli.   Mr. Shah and Mr. Bhargava provided all of the information that was asked for by Mr. Cordelli.  (Tr., April 20, 2010, p. 193, Tr., April 21, 2010, pgs. 13, 23.)   Mr. Cordelli began his work of contacting banks to open the lines of communication for this loan before the defendant had even signed the Purchase Agreement.   He discovered that three banks were no longer giving loans for purchases such as this.   Mr. Cordelli then contacted a more local bank and began a dialogue with Mr. Zavattaro.   Mr. Cordelli engaged in conversations and explained the purchase and needs for a loan.   Patriot National Bank was the only bank that responded with any financing for the purchase.   The plaintiffs did not immediately reject the terms from Patriot Bank and after the January 18, 2008 letter with terms, the plaintiffs met to discuss the financing offered.   All four plaintiffs and Mr. Cordelli were present to discuss the letter of intent.  (Tr., April 20, 2010, pgs. 166-67, 183, 195.)   Dr. Gupta attended the meeting and was concerned that as he read the term letter, it varied in many respects including only providing 65% for the loan, the draw schedule which requires a $100,000 advance would leave the loan amount to somewhat less than 60%, and the term of the loan was only one year as opposed to the thirty years in the mortgage contingency.   (Tr., April 20, 2010 p. 168.)   Dipti Shah testified that she attended a meeting after January 18, 2008 with the other partners of the group to purchase the property.   She stated that she understood that they could not get the full amount of the loan that we requested from the bank and she would need more money to put into the project.   Her husband, Ashwin Shah, testified that when they became involved in the plan to buy the property, they first started with the thought they would need 20% but this soon change to 25% and then when they negotiated the terms they agree to 30% although they were stretched to provide that sum.  (Tr., April 20, 2010, pgs. 195-97.)   It was clear that Mr. Shah had a clear cap of thirty percent to make the deal.   But it was obvious from the testimony of each of the plaintiffs that the reality of being able to obtain a loan of 70% equaling $691,250.00 for each lot and a term for the mortgage of a period of thirty years was virtually nonexistent.   Dr. Gupta testified that he became aware that the banks had recently begun to enforce a regulation that would allow only 65% of the value for land and after January 18 when the plaintiffs asked Mr. Cordelli about getting more he said “that there's a directive which prevents most institutions to do that.”  (Tr., April 20, 2010, pgs. 180-81.)   Dipti Shah indicated that at the meeting after January 18, the partners decided not to move forward after learning about the 65% and the twelve-month term.  (Tr., April 20, 2010, p. 190.)   The efforts of the plaintiffs in the less than one month period from the signing of the purchase agreement were based upon the advice of their mortgage broker.   The defendants' position that the plaintiffs were not diligent in applying and pursuing the mortgage is nothing more than speculation on his part based on what he believes the plaintiffs should have done.   Given the nature of the loan, the revisions of the regulations in January of 2008, 12 C.F.R. § 34.45 and the testimony that plaintiffs had stretched themselves to the thirty percent with a thirty-year loan term which was not available from at least four banks that were contacted by the mortgage broker, the action of deciding not to pursue the purchase was consistent with the mortgage contingency clause.²  The defendant argues that what was submitted by the plaintiffs was not an application but this is contradicted by the ultimate fact that Patriot National Bank sent a letter of intent that clearly recognizes the cost of the purchase and the intent of the purchase.   The defendants would certainly have accepted the plaintiffs pursuing the purchase at the varied terms of 65% and a twelve-month loan if they chose to ignore the terms in the contingency.   The defendants' contention that the plaintiffs did not submit an application is contrary to a position that there was a loan that would allow them to purchase.   The letter of intent simply put, contradicts the defendants' argument that the plaintiffs had not made an application that included the loan amount or the purpose.   Additionally, there was testimony from Michael Cordelli that he gave the plaintiffs documents to fill out which are the applications then given to Patriot Bank. (Tr., April 27, 2010, p. 52.)   He specifically referred to Exhibits 6, 7, 8 and 9 as part of the application to the bank.   (Tr., April 27, 2010, pgs. 60-61.)   Mr. Cordelli described the beginning of the process with Patriot National Bank when he stated:  “Well, the first thing I did was phone them, spoke to Marcus, you know, laid out the type of transaction we were dealing with, two properties, construction financing, building one property, parlaying it into the next.   Talked to him about the purchase price, how it was two separate lots, there had to have a road being built.   There was a lot of other little details that had to come into play to present it.”  (Tr., April 27, 2010, p. 21.)   Mr. Cordelli also indicates that “he presented a package of what I had at the time and physically brought it to his office.”   (Tr., April 27, 2010, p. 21.)   The defendant offered no evidence as to what is a proper loan application or why the information obviously conveyed to the bank did not satisfy the bank's criteria as to an application.   Each of the plaintiffs were asked whether there was a request for further information or whether they failed to submit information requested.   Each stated they provided everything requested and there were no further requests for financial information or otherwise before the bank sent the letter of intent.   The defendants also speculate that the plaintiffs would be able to satisfy the mortgage contingency with another bank but they offer no evidence other than a biased opinion.   The defendants next argue that the plaintiffs did not diligently pursue the application for the mortgage.   This argument cannot stand given the testimony of the plaintiffs.   Although the defendants offered testimony that the plaintiffs did not provide proper documentation and information to apply for the mortgage, there is no testimony or evidence that this in any way contributed to an inability to obtain the financing required in Paragraph 24.   In fact, the testimony shows that the time period for obtaining the mortgage commitment was very short because the defendants signed the agreement on December 28, 2007 and the date to satisfy Paragraph 24 was January 23, 2008.   This was a mere twenty-six days with intervening holidays and plaintiffs who were vacationing out of the country.   The plaintiffs hand delivered the contract to Mr. Cordelli on New Years Eve to give him the information to continue his efforts to obtain a mortgage that satisfied the agreement.   The defendants claim in defense and as part of their counterclaim, that the plaintiffs did not diligently pursue the application.   The testimony of Mr. Arnould is that, “I believe that the loan was a dollar amount.   I believe there were two contracts with two dollar amounts.   That there was no prompt application, because documents started to be filed not before two or three weeks after the contract was signed.   That there was no application at all in dollar amount that was made.   And that there was no application at all that was made.”  (Tr., April 27, 2010, p. 89.) ³  The defendants also point to the fact that after the January 4 email, the plaintiffs allowed the mortgage broker to continue efforts with Patriot National and did not at that point reject and request 70% as a basis for the lack of diligence.   The fallacy of these arguments is that the plaintiffs would not have received what was the beginning of the bank commitment on January 4, 2008 without some information being made available prior to January 4, 2008.   Additionally, although the defendants continue to state that there was no application with requested loan amounts this simply cannot be correct based upon the specific response by the bank noted in the January 18, 2008 letter of intent.   After January 4, 2008, the plaintiffs continued to supply additional documentation.   At least two of the plaintiffs never saw the January 4 email and were of the opinion that they were stretched at the 70% rate.   However, even with this the testimony of the plaintiffs, it was clear that after the January 18, 2008 letter of intent by the bank, all of the plaintiffs met and discussed the full implications of the loan.   It was not simply the 65% that caused consternation but it was the loan to value with the reduced term from 30 years to twelve months as well as the reserved interest of $100,000.   The plaintiffs testified that when considering the full impact of the mortgage, they believed this would create a ratio of 60% with the plaintiffs needing 40% to purchase the property.   These are not the terms negotiated for in the purchase agreement.   Although the plaintiffs were unclear as to where they received the information concerning the changes in federal regulations that would prevent them from receiving a greater percentage of a loan, it is clear that this information was conveyed to them during the course of their final decision making.   These plaintiffs, unlike the buyers in the cases cited by the defendants, made reasonable efforts to obtain a mortgage during the 25-day period between the defendants' signing of the contract and the mortgage contingency date.   For instance, the defendants cite the case of McCoy v. Brown, Superior Court, judicial district of Stamford/Norwalk at Stamford Docket No. CV 07 5004436 (February 23, 2010, D'Andrea, J.T.R.) in support of the failure to satisfy a mortgage contingency.   This action is distinguishable from the present set of facts.   In McCoy, the buyer knew when he signed the contract that he was not employed and in fact did not honestly respond to employment inquiries when he entered into the agreement.   The bank offered a loan which contained an interest rate at an amount higher than the buyer wanted.   The mortgage contingency did not specify an amount of interest other than prevailing rate.   Therefore, the offer at a rate slightly higher than preferred by the buyer was not a basis to negate the contract on the mortgage contingency clause.   In Lipton v. Cleveland, Superior Court, judicial district of Stamford/Norwalk, at Stamford, Docket No. CV-940141797 (September 23, 1996, Lewis, J.) [17 Conn. L. Rptr. 648], the plaintiff made an informal inquiry of three banks and never submitted an application because he decided he could not get a mortgage.   There was no rejection of an application or a modification permitting a mortgage under different terms.   The plaintiff did nothing and thus his actions were not reasonable.   In Moy v. McDermott, Superior Court, judicial district of New London, CV-075003147, (May 29, 2008, Leuba, J.T.R.), the buyer did not submit anything that could be deemed an application.   The buyer simply determined that he could not get an approval of the building plans and therefore, did nothing.   Here, the plaintiffs are not reneging on any portion of Paragraph 24 but have indicated that the mortgage offered does not comply with the 70% and the 30-year term.   There is no evidence or testimony that indicates that Mr. Cordelli was not zealous in his attempts to get financing for the property.⁴  In fact, based upon the fact that he would not get a commission if he was not able to get a loan secured for the plaintiffs it can be inferred that he was doing everything he could to make the deal work.  (Tr., April 27, 2010, p. 23.)   Mr. Cordelli testified about the process to put together a package for the bank approval.   He described his work for the mortgage from Patriot National as, “I wanted to put it in the best light possible.”  (Tr., April 27, 2010, p. 21.)

Unlike the factual background of the actions in which the buyers did not make reasonable efforts to obtain a mortgage, the court in the present action finds that the plaintiffs engaged in reasonable efforts to obtain a mortgage that would satisfy the contingency.   Therefore, the court finds for the plaintiffs on first count of the complaint for a breach of contract which requires a return of their deposit.   On the counterclaim filed by Daniel Arnould and Eunha Kim, for an award of liquidated damages pursuant to Paragraph 11, the court finds in favor of Kuldeep Bhargava, Sanjeev Gupta, Ashwin Shah and Dipti Shah.

SPECIAL DEFENSES

The defendants have set forth three special defenses as follows:

The first special defense is that the plaintiffs have unclean hands.   The testimony and evidence noted by the court above demonstrates that the plaintiffs were following for the most part the advice of their mortgage broker.   The testimony of the Shahs in particular was that they had a very emotional connection with the property and were very anxious to develop the property.   The Shahs as well as the other plaintiffs produced all documentation they believed was necessary as requested by the mortgage broker.   Interestingly when the letter of intent was sent dated January 18, 2008, two of the plaintiffs expressed their commitment to follow through by actually signing it before all four plaintiffs met to discuss the implications.   The plaintiffs were diligent in their efforts and interest to purchase the properties.   There was no testimony or evidence that would indicate unclean hands on the part of the plaintiffs.   Accordingly, the defendant has failed to prove this defense and it must fail.

The second special defense is that the plaintiffs are equitably estopped from receiving a return of the deposit.  “The party claiming estoppel ․ has the burden of proof ․” Blackwell v. Mahmood, 120 Conn.App. 690, 694, 992 A.2d 1219 (2010).   Whether that burden has been met is a question of fact that this court must determine.  “There are two elements to an estoppel the party must do or say something that is intended or calculated to induce another to believe in the existence of certain facts and to act upon that belief and the other party, influenced thereby, must actually change his position or do some act to his injury which he otherwise would not have done ․” Id., 694-95.

The defendants contend in their memorandum that the plaintiff's misleading conduct was allowing their mortgage broker to seek a 65% loan to value mortgage loan to purchase the property.   The defendants have not provided any testimony or evidence to demonstrate that all of the plaintiffs engaged in acts intended to somehow induce the defendants to believe in acts which influenced them.   The act that the defendants refer to is the receipt of the preliminary information from Patriot National Bank, which information was not available to the defendants or which caused them in any way to change their position.   The defendants had entered into an agreement with the plaintiffs before the plaintiffs received this information from Patriot National.   Additionally, the information was not available to all of the plaintiffs at that time.   There was very credible testimony from Dipti Shah and Ashwin Shah that the first notice of the term and the amount of the loan was on January 18, 2008.   They also testified that they were disappointed that the project could not go forward and they seriously considered whether it was financially possible to go forward with the purchase even though they determined the loan amount was actually only about 60% with a $100,000 reserve.   They did not exhibit any intention to mislead the defendants about their enthusiasm to purchase the property.   There were no false statements by the plaintiffs.   They engaged, at additional cost, a mortgage broker to perform the task of financing and they followed all of the directions of the mortgage broker so they could secure a mortgage.

The defendant, Daniel Arnould's, testimony concerning the defendants' claims does not provide any information about the impact or their reliance or a change in position.   The defendants' position as noted above merely addresses the lack of an application and diligence, as they interpret it, to a lending institution in a timely manner.   There is nothing in these actions nor any testimony of the defendants that would satisfy the elements of a claim of equitable estoppel.

The third and final special defense is a claim that the plaintiffs have somehow waived their rights to a return of the deposit because they allegedly tasked Cordelli to obtain a mortgage at an amount less than what was provided for under the Mortgage contingency clause.   This allegation has not been proven and the testimony does not warrant a finding of waiver.

COUNTERCLAIM

The defendants' counterclaim requests that they be permitted to keep the deposit as a liquidated damage because of the plaintiff's failure to apply and diligently pursue the mortgage contingency.   This claim utilizes that same testimony and evidence that has been analyzed by this court.   In particular, this court has determined that the plaintiffs are entitled to a return of their deposit pursuant to the mortgage contingency clause.   This decision provides the basis for a finding for the plaintiffs on the counterclaim.   However, the court has additional comments and findings in relation to some of the allegations in the defendants' counterclaims.   In particular, the defendants compare this action with the case of Parker v. Knauf, Superior Court, judicial district of Stamford/Norwalk at Stamford, CV 085007670 (March 3, 2010, Brazzel-Massaro, J.), decided by this court.   The facts in the case of Parker are very different than the instant action.   The buyers in the Parker case did not immediately notify the sellers of their inability to obtain financing and instead did the exact opposite of what the plaintiffs in this action did.   The Parker case involved months where the buyers continually held out their ability and interest in purchasing the property although they were aware that the financing hurdles were substantial and possibly unmanageable.   Here, although some of the plaintiffs, particularly the Shahs, expressed emotional upset over not being able to “stretch” their funds to allow a greater contribution, they realized it and faced the inability to obtain the needed mortgage immediately to exercise their right to void the contract.   There are great factual and legal distinctions in the Parker case that cannot be applied to the instant matter.

CONCLUSION

Based upon the above the court enters judgment for the plaintiffs on the complaint and also on the counterclaim.   The court finds that the defendant did not satisfy his burden of proof as the any of the three special defenses.   Therefore, the court orders that the defendants are to return the amount of $197,500.00 to the plaintiffs.   The plaintiffs are entitled to interest in the amount of ten percent per year from the date of February 1, 2008.   Additionally, the plaintiffs shall submit any documentation for attorney fees and costs if they are requesting an award of such and the court will schedule a hearing to determine what amount should be awarded to the plaintiffs for this action.

THE COURT

Brazzel-Massaro, J.

FOOTNOTES

FN1. The testimony of three of the plaintiffs does not indicate that they had any knowledge of this email.   In fact, correspondence from Attorney Lasnick indicates that several of the plaintiffs were out of the country in December and January because of the holidays and he signed the contract with a power of attorney.  (Plaintiff's Exh. 12.).  FN1. The testimony of three of the plaintiffs does not indicate that they had any knowledge of this email.   In fact, correspondence from Attorney Lasnick indicates that several of the plaintiffs were out of the country in December and January because of the holidays and he signed the contract with a power of attorney.  (Plaintiff's Exh. 12.)

FN2. There was testimony by at least two of the plaintiffs that after the purchase agreement was signed and at some time around January 18, 2008 they became aware of regulations that put a cap on the loans for land of 65%.   The defendant has objected to the relevancy of this regulation.   However, the parties did provide the court with a copy which the court has reviewed.   The regulation does establish a maximum percent when it states, “Institutions should establish their own internal loan to value limits for real estate loans.   These internal limits should not exceed the following supervisory limits ․ Raw land ․ 65%.”   More important is the fact that at least two of the plaintiffs considered this limit and the impact on their ability and obligation to contribute more cash to the purchase.   This has an impact on the reasonableness of their actions in deciding on January 20, 2008 to void the contract based upon the mortgage contingency clause..  FN2. There was testimony by at least two of the plaintiffs that after the purchase agreement was signed and at some time around January 18, 2008 they became aware of regulations that put a cap on the loans for land of 65%.   The defendant has objected to the relevancy of this regulation.   However, the parties did provide the court with a copy which the court has reviewed.   The regulation does establish a maximum percent when it states, “Institutions should establish their own internal loan to value limits for real estate loans.   These internal limits should not exceed the following supervisory limits ․ Raw land ․ 65%.”   More important is the fact that at least two of the plaintiffs considered this limit and the impact on their ability and obligation to contribute more cash to the purchase.   This has an impact on the reasonableness of their actions in deciding on January 20, 2008 to void the contract based upon the mortgage contingency clause.

FN3. On cross examination, counsel for the plaintiffs asked Mr. Arnould to elaborate the premise that there was no application, at which time Mr. Arnould testified the this premise is based upon the fact that the plaintiffs did not sign a contract with Mr. Cordelli until about three weeks after the contracts for the land were signed.   Counsel asked, “So your premise is that until the contract is signed between my clients and AMC, that they didn't actually apply for a mortgage:  is that it?” and the reply was “That's correct.”  (Tr., April 27, 2010, p. 93.).  FN3. On cross examination, counsel for the plaintiffs asked Mr. Arnould to elaborate the premise that there was no application, at which time Mr. Arnould testified the this premise is based upon the fact that the plaintiffs did not sign a contract with Mr. Cordelli until about three weeks after the contracts for the land were signed.   Counsel asked, “So your premise is that until the contract is signed between my clients and AMC, that they didn't actually apply for a mortgage:  is that it?” and the reply was “That's correct.”  (Tr., April 27, 2010, p. 93.)

FN4. The court recognizes that Mr. Cordelli is not a good historian in regards to every conversation and effort he made to help with financing.   However, his testimony that he made efforts to get an approval of the loan to satisfy the mortgage contingency is credible.   It is also credible that because of his position that he knew which lending institutions would be available to make loans for a purchase such as this and did in fact inquire of those institutions..  FN4. The court recognizes that Mr. Cordelli is not a good historian in regards to every conversation and effort he made to help with financing.   However, his testimony that he made efforts to get an approval of the loan to satisfy the mortgage contingency is credible.   It is also credible that because of his position that he knew which lending institutions would be available to make loans for a purchase such as this and did in fact inquire of those institutions.

Brazzel-Massaro, Barbara, J.