The parties stipulated at trial that they attended mediation but did not resolve their
dispute.
Mr. Fishman denied he had communicated that the financing contingency had
been met, as suggested by Attorney Taylor. (Pis.' Ex. 16.) On June 27, 2012, Mr.
Fishman told defendant and Attorney Orso the escrow money was at risk because, Mr.
Fishman testified, he "was trying to be safe." (Pls.' Ex. 17.) Mr. Fishman believed
11 defendant continued to have the right to exercise the contingency. He believed his
detailed email stating that defendant was not clear to close could be the writing
required by the Agreement. (Jt. Ex. 1 'IT 14(d).) Once the attorneys became involved, a
few days before the closing, Mr. Fishman was asked to cease communication. ·
The record contains a series of email communications contained in Wells Fargo
loan notes that were subpoenaed by plaintiffs. (Pls.' Ex. 21.) The loan notes dated May
23, 2012 from Marlene Raymond, an underwriting assistant with Wells Fargo, provide
that Ms. Raymond requested "proof of divorce proceedings." (Pls.' Ex. 21 387.) On the
same day, Mr. Murdoch sent an email to Ms. Raymond, "Divorce info. I will get for you.
It just started so I can get you what Gerry is expecting to receive." (Pls.' Ex. 21 388.)
The loan notes from Lisa Rogg, an underwriter, dated May 24, 2012 provide that
defendant was to provide a copy of the divorce decree. (Pis.' Ex. 21 395.) On May 30,
2012, Mr. Murdoch sent an email to Mr. Fishman about information that was needed,
including a copy of the separation agreement and the status of the divorce proceedings.
(Def.'s Ex. 7.) On May 30, 2012, defendant responded and Mr. Murdoch forwarded the
response to underwriting. (Pis.' Ex. 21 443.) Defendant stated her divorce was not final.
(Pis.' Ex. 21 443.) Mr. Murdoch understood the divorce proceedings were ongoing.
During May 2012, no one asked defendant for a copy of a divorce decree.
Also on May 30, 2012, the loan notes from Ms. Raymond provide that she
discussed the suspended items with defendant, who requested that Ms. Raymond send
an email outlining what was needed from defendant. (Pis.' Ex. 21 386.) The notes also
reflect defendant would supply "proof of funds to close after 6 I 1 I 12." (Pis.' Ex. 21
386.) Defendant recalled she spoke with Ms. Raymond on May 30, 2012. They
discussed the suspense conditions, including a gift letter. Defendant wrote the letter,
which was reviewed by her husband, and then sent to Wells Fargo. She had many
12 communications regarding the status of the settlement agreement or divorce
proceedings. (See, ~ Pls.' Ex. 5.) There was no requirement of producing a divorce
decree. Defendant responded to Mr. Murdoch's request for information regarding the
divorce proceedings. (Pls.' Ex. 6.) Although she stated the "divorce is not final," the
divorce proceeding was not begun until July 2012. Defendant was unaware of the
required wait period after the filing of a divorce complaint. Defendant's representation
of the divorce settlement did eventually occur but the process took much longer than
she had anticipated.
On June 4, 2012, Ms. Raymond sent an email to defendant and requested, among
other things, a gift letter from defendant if her husband intended to contribute toward
the property price. (Pls.' Ex. 21 434.) Ms. Raymond stated defendant's employment had
been verified. (Pls.' Ex. 21 434.) Ms. Raymond did not request a copy of the divorce
decree. (Pls.' Ex. 21 434.) Ms. Raymond's loan note dated June 4, 2012 reflects the
information requested. (Pls.' Ex. 21 385.) The note reflects that after defendant sends a
gift letter and information from Bank of America and Gti Mortgage, "then I can send
the suspended conditions to the underwriter." (Pls.' Ex. 21 434.)
Mr. Murdoch could not remember when the divorce decree became an issue. On
June 13, 2012, Ms. Rogg sent an email to Ms. Raymond and Mr. Murdoch and outlined
the conditions for the loan, including receiving a copy of the divorce decree. (See Pls.'
Ex. 21 426.) On June 19, 2012, Wells Fargo was interested in receiving a copy of
defendant's divorce decree or separation agreement, what defendant was expecting to
receive in the divorce, retirement funds information, and copies of bank/ asset
statements. (Pls.' Ex. 21 383, 386-88, 395, 406, 426, 434, 491; see also Pls.' Exs. 5, 6.)
These requests from Wells Fargo were not communicated to plaintiffs.
13 The loan notes dated June 19,2012 provide that Ms. Raymond emailed defendant
and requested a copy of the divorce decree and the other three items identified in Ms.
Rogg's June 13 email. (Pls.' Ex. 21 383.) That email to defendant is not in evidence.
Defendant denied receiving any email requesting a divorce decree or that the divorce
decree issue was raised by Wells Fargo. (Cf. Jt. Ex. 6 35-37.) She agreed Wells Fargo
requested divorce information and a great deal of other information. (Pls.' Ex. 21 388;
Pls.' Ex. 5; Def.'s Ex. 5.)
On July 20, 2012, a Wells Fargo Regional Processing Manager was concerned
about the need to cancel the loan because it had been suspended since May 24, 2012.
(Pls.' Ex. 21407, 403.) The loan was cancelled on August 15, 2012. (Pls.' Ex. 21403.)
Defendant did not purchase plaintiffs' property. The property was not relisted
immediately because of an offer from Mary Wilmont. Plaintiffs and Ms. Wilmont
entered a Purchase and Sale Agreement for the property effective July 30, 2012 for
$875,000.00. (Def.'s Ex. 24.) Ms. Wilmont was relieved of her obligation based on
inspection issues and did not purchase the property.
Plaintiffs relisted the property in April 2013 for $1,100,000.00 with Ms. Maynard.
She marketed the property in Downeast, Maine Home and Design, newspapers, on the
Internet, her web site, and Facebook, and had nine open houses. The sale price was
reduced three times: to $989,000.00 on June 14, 2013; to $949,000.00 on August 12, 2013;
and to $899,000.00 on August 23, 2014.
Although plaintiffs' son lived in the home for a period of time, the house was
generally empty, a red flag to potential buyers according to Ms. Whitney. Potential
buyers wonder why a property was under a contract that fell through and believe they
can get a better deal. A fully furnished home makes people want to move in. Plaintiffs
14 and Ms. Maynard recreated the dining room and living room, which potential buyers
first saw when they entered the home.
The property finally sold to Paul and Barbara McConnell. (Pls.' Ex. 23.) They
closed on January 12, 2014. The sale price was $850,000.00, which Ms. Maynard
believed was the fair market value.
Plaintiffs claim damages of $163,948.49 as a result of defendant's failure to
purchase the property. (Pls.' Ex. 26; see Pls.' Exs. 23, 27-37.) Plaintiffs seek amounts
incurred between June 28, 2012, the date of the failed closing, and January 13, 2014, the
date of the sale to the McConnells. Claimed damages include mortgage interest, real
estate taxes, insurance, heating and electric, snow plowing, association dues, lawn care,
costs for staging, and moving costs, all of which total $83,948.49. In addition, plaintiffs
seek to retain the escrow deposit of $40,000.00 and the difference between defendant's
contract price and the McConnell sale price, $40,000.00. Finally, plaintiffs request
attorney's fees.
Ms. Whitney agreed that conditions placed on a loan is common and does not
mean the lender was unwilling or unable to provide the loan. Further, when she is a
buyer's agent and knows of conditions, she does not necessarily advise the seller's
agent of the conditions. Pursuant to the realtors' code of ethics, however, notice is
required for any significant loan condition. (Pis.' Ex. 47 Art. 2.) Ms. Whitney concluded
that a condition of the loan that cannot be met by the closing date means the buyer is
unable to obtain the loan. If a buyer is unable to obtain financing, she would get a
statement from the lender stating that it is unable to approve the loan, which is not
difficult to do, according to Ms. Whitney.
Mr. Fishman stated some conditions are more significant than others. The
requirement of a divorce decree is a significant condition, according to Mr. Fishman,
15 especially because defendant and her husband were only separated and not going
through a divorce. If he learned of a significant condition from the lender that imposed
a major barrier to financing, he would exercise the financing contingency.
When Ms. Maynard represents a buyer who has difficulty obtaining a loan, she
stays in contact with the lender. She states it is pivotal for the broker to stay in touch
with the lender in order to know where they are in the process and what must be done.
She obtains a letter from the lender on its letterhead and notifies the listing agent for the
property that there are issues with financing. If the specified timeframes are met, the
deposit is returned to the buyer. She states there is a good faith obligation to notify the
other party of problems.
Mr. Fishman stated that if he learns of significant loan conditions from a client or
lender that impose major barriers, he would not be required to give those details to the
other party but would just exercise the contingency. He agreed that brokers do get
along and share information.
It was Ms. Whitney's expert opinion that plaintiffs did all they were required to
do under the Agreement but defendant did not meet her obligations because she did
not apply for the 70-30 loan and did not inform plaintiffs of that fact. Pursuant to the
Agreement, Ms. Whitney concluded defendant forfeited the earnest money. Qt. Ex. 1 '[
16.)
Mr. Fishman believed defendant absolutely acted in good faith in her effort to
obtain a loan. She was very upset because she had her heart set on buying plaintiffs'
house.
At the close of the evidence, the parties stipulated to the following:
1. Owen Pickus, defendant's ex-husband, promised to defendant he would
provide funds for the down payment on the property;
16 2. Mr. Pickus refused to provide a gift letter for the down payment funds;
3. Mr. Pickus delivered defendant's jewelry to a jeweler in Boston and asked
that the jewelry not be sold; and
4. As of May 30, 2012, Mr. Pickus and defendant were discussing a verbal
agreement and defendant's May 30, 2012 letter to Mr. Murdoch reflected
what they had discussed.
Conclusions
A. Plaintiffs' Complaint
The plaintiffs' theory of this case appears to be that defendant is a person who
acts in bad faith and who intentionally misleads others or does not tell the truth. The
court's assessment is different. Unquestionably, defendant wanted to purchase
plaintiffs' property because she wanted to reside near her children when they were with
Owen Pickus and she believed the children would want to stay at the home with her
because it was a lovely home. She responded to the many requests for information
during the loan application process while in the midst of a difficult divorce. She
pursued every avenue to obtain the down payment after her husband changed his mind
about his commitment to contribute to the down payment after he hired a divorce
attorney.
The court concludes that Wells Fargo did not ask defendant for a copy of her
divorce decree until June 25, 2012, days before the June 28, 2012 closing. During her
loan application process, defendant complied with Wells Fargo's requests for
information, including the details about her divorce settlement. Defendant requested
that Wells Fargo send an email with further requested information. (Pls.' Ex. 21 386.)
Although Wells Fargo noted the email was sent, it was not produced in response to
plaintiffs' subpoena and is not in evidence. (Pls.' Ex. 21 383.) Defendant testified,
17 credibly, that she never saw that email. Further, as defendant testified at trial, why
would she go through this entire process if she required a divorce decree that could not
be provided but its unavailability could easily be explained?
Finally, there is no question that Wells Fargo was unable to process loan
applications in a timely way. Mr. Murdoch agreed that the backlog existed and
informed Mr. Fishman of that fact. Mr. Murdoch further stated that the Wells Fargo
underwriters were not prompt in communicating with him. The facts that on May 23,
2012, Mr. Murdoch told Ms. Raymond that the divorce had just started and on May 24,
2012, Ms. Rogg requested a copy of the divorce decree reflect that Wells Fargo was not
communicating appropriately.
1. Breach of Contract
Plaintiffs allege defendant breached the parties' Agreement by failing to
purchase the property and by failing to forfeit the earnest money. They argue defendant
(1) waived the financing contingency when she applied for an 80-20 loan, (2) failed to
give proper notice regarding the contingency, and (3) waived her right to exercise the
contingency when the June 13, 2012 financing deadline passed and was not extended.
First, as discussed below, defendant did not waive the financing contingency by
applying for an 80-20 loan.
Second, the June 13, 2012 deadline was extended precisely because Wells Fargo
was not ready to close by June 13, 2012. (Pis.' Ex. 7 7.) The argument that only the
closing date was extended to June 28, 2012 and the financing deadline remained at June
13, 2012 is not supported by the record.
Third, defendant did not exercise the financing contingency because she was
never notified by Wells Fargo that it was unable or unwilling to provide financing. Gt.
Ex. 1 '1[ 14(d).) Wells Fargo did not cancel the loan application until August 15, 2015.
18 Mr. Murdoch agreed that Wells Fargo did not say it would not provide financing.
Instead, Wells Fargo informed defendant of the requirement of a divorce decree just
before the June 28, 2012 closing. When Mr. Fishman and defendant learned of this
requirement, they requested a one-month extension. Plaintiffs declined.
Mr. Fishman, in his email of June 25, 2012, made clear defendant was not clear to
close but was not exercising the financing condition. He requested a one-month
extension because defendant could not close and proposed alternative methods for
defendant to acquire plaintiffs' home. He hoped to resolve the remaining loan
condition. (Pls.' Ex. 12.) No letter from Wells Fargo regarding financing was given to
plaintiffs or Ms. Whitney.
In order to prevail on the two contract claims, plaintiffs must prove (1) breach of
a material contract term; (2) causation; and (3) damages. See Me. Energy Recovery Co.
v. United Steel Structures, Inc., 1999 ME 31, <[ 7, 724 A.2d 1248.
Assuming that defendant's failure to apply for 70-30 financing was a breach of a
material contract term, that breach proximately caused no damage. There is nothing in
this record that suggests Wells Fargo would have approved a 70-30 loan application
and not an 80-20 application. The lender was satisfied with defendant's income. The
requirement of a divorce decree, an impossibility for defendant, stalled t:0-e financing.
A financing or closing deadline provides a date by which seller knows whether
buyer is able to perform. See Taggart v. Taggart, 2002 ME 164, <[ 13, 809 A.2d 1229.
Defendant was unable to perform because she did not have the necessary down
payment and could not provide a divorce decree because she was not divorced.
According to Ms. Maynard, the Agreement in this case is "standard." The
agreement identifies two events of default: buyer's failure to deliver the additional
earnest money and buyer's failure to notify seller of a lender's notice that it is unable or
19 unwilling to provide financing. (Jt. Ex. 1 11 5, 14(d); see Jt. Ex. 1 1 16.) If the seller is
unable to provide a deed conveying good and merchantable title by the closing date,
the agreement may become null and void and the earnest money is returned to the
buyer. (Jt. Ex. 1 1 7.) The Agreement is silent with regard to any consequence of
buyer's failure to pay the balance due by the closing date. Further, the Agreement
discusses "a default by seller" but the Agreement identifies no event of default by a
seller. (Jt. Ex. 1 1 16.)
"[W]hether time is of the essence in a contract is a matter of fact[.]" Raisin Mem'l
Trust v. Casey, 2008 ME 63, 1 21, 945 A.2d 1211. The absence or presence of "time is of
the essence" language is not dispositive and courts consider the "nature, circumstances,
and purpose of the contract to determine whether time is of the essence." I4; see W.G.
Ambrose Enters. v. Keefe, 2009 Me. Super. LEXIS 136, at *7 (Sept. 23, 2009) (plaintiff
entitled to strict performance, despite absence of time of the essence language, because
agreement specified that payments were due on the first of each month). Although not
expressly stated, the parties' Agreement makes clear time was of the essence. The
closing date was specified and could be extended only by agreement of the parties.
Further, if plaintiffs could not deliver good title within the identified timeframe, the
Agreement "shall become null and void" unless the buyer accepts the deed with a title
defect. (Jt. Ex. 1 1 7); see Frost v. Barrett, 246 A.2d 198, 201 (Me. 1968) ("Although [time
of the essence] language does not appear in the contract here, the contract does express
that the defendants might treat the agreement as broken by the plaintiff if the plaintiff
was unable to convey good and marketable title within sixty days from the date of the
contract ... We view this as persuasive evidence of the parties' intention that the
[buyers] were entitled to strict performance of the contract and equivalent to a recitation
that time is of the essence."); see also 14 Powell on Real Property§ 81.03(5) (2005).
20 Further, even if the contract does not specify that the date for performance is
precise, circumstances surrounding the transaction may show that the specified time is
essential. Those circumstances include statements of the parties that indicate the
closing date is important. 14 Powell on Real Property § 81.03(5) (2005); see Colbath v.
H.B. Stebbins Lumber Co., 144 A. 1, 3 (Me. 1929) ("[U]nder some circumstances, in law
time may or not be of the essence according to the intent of the parties."); see also
Baybutt Constr. Corp. v. Commercial Union Ins. Co., 455 A.2d 914, 919 (Me. 1983)
("[T]he paramount principle in the construction of contracts is to give effect to the
intention of the parties as gathered from the language of the agreement viewed in the
light of all the circumstances under which it was made.").
Finally, even if the parties intended more flexibility in deadlines, "a rule of
reasonableness is appropriate." 14 Powell on Real Property §. 81.03(5) (2005); see Me.
Mut. Fire Ins. Co. v. Watson, 532 A.2d 686, 689 (Me. 1987) ("When no time for
performance is specified in the contract, a 'reasonable time' is implied."); see also Seile
v. Adams, 2002 Me. Super. LEXIS 247, at *3-4 (Dec. 18, 2002) (generally, time is not
considered of the essence in contract for conveyance of real estate; attorney's statements
that closing date was flexible indicated that time was not of the essence and a
reasonable time applied). Defendant was correct when she testified that the true issue
in this case was the down payment. Although she stated she needed more time to deal
with Owen Pickus, whether and when he might have agreed a second time to help her
is unknown on this record.
The defendant's failure to close the transaction on June 28, 2012 was a breach of
the parties' Agreement. Gt. Ex. 1
money.
21 2. Negligent Misrepresentation
Plaintiffs argue defendant failed to inform them that she applied for financing on
terms different from those in the Agreement, failed to inform them she was having
issues obtaining a loan because of the need for a divorce decree, and was untruthful in
stating the delay was because of the lender's inability to process loan applications in a
timely way. In order to prevail on the negligent misrepresentation claim, plaintiffs
must prove that defendant (1) in a transaction in which defendant had a pecuniary
interest (2) supplied false information for the guidance of plaintiffs (3) without
exercising reasonable care or competence and (4) plaintiffs justifiably relied on that false
information and sustained pecuniary loss. See Binette v. Dyer Library Ass'n, 688 A.2d
898, 903 (Me. 1996 ).
The issue in this case is not the type of financing defendant applied for. If, for
example, defendant had received the promised help from her husband for the 30%
down payment, the transaction could have closed but for Wells Fargo's last minute
requirement of a divorce decree. See,~ Ross v. Eichman, 529 A.2d 941, 943 (N.H.
1987) ("[I]t made no difference to the seller where the financing came from."); Loda v.
H.K. Sargeant & Assocs., 448 A.2d 812, 817 (Conn. 1982) (realtor and sellers had "no
ascertainable interest in the actual terms obtained" by buyers); Renouf v. Martini, 577
S.W.2d 803, 804 (Tex. Civ. App. 1979) (financing provision benefits buyer and is not a
condition precedent to closing; provision cannot be used by seller for his own benefit if
buyer can perform); Leavitt v. Fowler, 391 A.2d 876, 878 (N.H. 1978) ("[I]t made no
difference to [sellers] where the money came from."). The issue is whether she was able
to obtain financing and close the transaction. See Ross, 529 A.2d at 943. Wells Fargo
never told defendant it was unwilling or unable to provide financing.
22 Defendant had no personal obligation to inform plaintiffs about her application
to Wells Fargo. Further, on this record, she was not involved in the letter sent to
plaintiffs from Wells Fargo. (Pls.' Ex. 3:) The Agreement provided that Wells Fargo
was authorized to communicate with plaintiffs and Ms. Whitney. Gt. Ex. 1 <[ 14(c).) No
inquiry or communication from them occurred. Although Mr. Fishman did not create
an addendum with regard to the financing applied for, Ms. Whitney did not send the
Agreement to the lender, as Ms. Maynard stated is the preferred practice.
2. Damages
Plaintiffs have failed generally to mitigate their damages.' See Schiavi Mobile
Homes, Inc. v. Gironda, 463 A.2d 722, 725 (Me. 1983); 14 Powell on Real Property §
81.04(2)(c) (2005). After the transaction with defendant did not close in June 2012 and
after the Wilmont agreement did not proceed, plaintiffs did not relist the property until
April 2013 for $1,100,000.00, a price plaintiffs' broker could not support. The price was
reduced three times to $899,000.00 and sold in January 2014 for $850,000.00. Plaintiffs
made no effort to rent the property, even though they agree an empty house is a red
flag for potential buyers. Instead, they allowed their son to live there for a time.
Plaintiffs did attempt to mitigate their damages when they signed the Purchase
and Sale Agreement with Ms. Wilmont. That agreement is an important factor in the
damage assessment. The June 28, 2012 closing with defendant did not take place.
Plaintiffs signed a Purchase and Sale Agreement with Ms. Wilmont effective July 30,
2012. Although that sale did not proceed and Ms. Wilmont was released from the
'Defendant did not plead mitigation of damages as an affirmative defense. (Def.'s Ans.) Defendant raised the issue of mitigation during the testimony of Mr. Lukas at trial. The court will consider this defense. M.R. Civ. P. 15(b).
23 agreement,' it remains unexplained why defendant's liability should then be
resurrected. On this record, defendant had no involvement in the unraveling of
plaintiffs' agreement with Ms. Wilmont.
Finally, plaintiffs request attorney's fees based on defendant's conduct.
Defendant did nothing that rises to the level required for an award of attorney's fees.
See Baker v. Manter, 2001 ME 26, <]I 13, 765 A.2d 583. The court found defendant
credible and does not conclude that she acted in bad faith or that she intentionally
misrepresented material information to plaintiffs. (Pis.' Mem. 19.)
The issue of whether she worked full time is unclear. She testified at her
deposition that she took time off after her children were born. (Jt. Ex. 6 89-90.) She
informed Mr. Murdoch that she worked full time for the past nineteen years. (Pis.' Ex.
6.) She testified at trial that she took time off for her children but always worked full
time.
With regard to the financing, defendant did not testify at her deposition that she
applied for 70-30 financing. (Jt. Ex. 6 27-28.) Although the question of whether she
applied for 70% financing was asked, another question was immediately asked about a
30% down payment, which defendant answered. She intended to pay a 30% down
payment with the help of her husband from marital assets.
B. Defendant's Counterclaim
Defendant alleges plaintiffs breached the Agreement by failing to return the
earnest money to defendant. Defendant's failure to close the transaction constituted a
default of the parties' Agreement. Pursuant to that Agreement, defendant is not
'The events surrounding the failure of the plaintiffs-Wilmont Purchase and Sale Agreement or the reason for not relisting the property again until April 2013 are not explained on this record.
24 entitled to a return of the earnest money. Gt. Ex. 1 CJI 16); see 14 Powell on Real Property
§ 81.03(5) (2005) ("[T]he delinquent party loses any right to enforce the contract.").
The entry is
Judgment is entered in favor of Plaintiffs Suzanne Lukas and Mark Lukas and against Defendant Geraldine Ollila-Pickus, M.D. on Counts I and II of Plaintiffs' Complaint in the amount of $40,000.00, plus prejudgment interest at the rate of 3.16% and post-judgment interest at the rate of 6.27%, plus costs.
Judgment is entered in favor of Defendant Geraldine Ollila- Pickus, M.D. and against Plaintiffs Suzanne Lukas and Mark Lukas on Count III of Plaintiffs' Complaint.
Judgment is entered in favor of Plaintiffs Suzanne Lukas and Mark Lukas and against Defendan Geraldine Ollila-Pickus, M.D. on Defendant's Counterclai .
Date: December 23, 2015 N cy Mills Justice, Superior C
YORK-CV-13-010
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