Davis v. Strazza

On May 31, 2001, Charles and Barbara Davis (plaintiffs) contracted to sell real property to Eileen Strazza, Nora Bernesby, and Christopher Bernesby (the purchasers) (defendants). The purchasers paid a $25,000 deposit that was refundable if the contract was lawfully canceled. The contract contained a mortgage-contingency clause stating that the contract was contingent on the purchasers obtaining a conventional 30-year mortgage. The purchasers were required to promptly apply for a mortgage. If a written mortgage agreement from a lender was not obtained within 30 days, then the contract could be canceled by either party. The purchasers promptly applied for a mortgage. On June 18, New Century Mortgage Company (New Century) issued a written mortgage commitment that contained certain prerequisites for funding, one of which was the Bernesbys’ sale of a property and Strazza’s sale of a property. They struggled to sell those properties despite price reductions because the properties needed significant repairs. On August 7, New Century canceled its mortgage commitment for failure to meet the funding conditions. The purchasers notified the Davises that the mortgage application had been denied and they were canceling the sale contract. The Davises sued the purchasers for breach of contract. The purchasers argued that the contract entitled them to cancel and have their deposit refunded. The trial court agreed, granting summary judgment in the purchasers’ favor. The Davises appealed.