Bruyere v. Jade Realty Corp.
375 A.2d 600, 117 N.H. 564, 1977 N.H. LEXIS 381 (1977)
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Rule of Law:
The intent of a financing clause in a real estate contract is to protect the buyer from involuntary breach; thus, if financing is initially secured but then fails due to a voluntary action by the buyer, the risk of the transaction's failure is properly imposed upon the buyer, not the seller.
Facts:
- On May 16, 1975, the plaintiffs (the Bruyeres) and the defendant (Turner) entered into a purchase and sale agreement for a piece of residential real estate.
- The agreement included a condition precedent stating that the contract was 'subject to financing at 7%% for thirty (30) years,' and the closing date was set for August 1, 1975.
- On June 17, 1975, the Nashua Federal Savings and Loan Association granted financing approval to the Bruyeres.
- Around this time, due to marital problems, the Bruyeres decided to separate and file for divorce.
- On June 30, 1975, Mrs. Bruyere informed the lender of their divorce plans and proposed that she alone purchase the home and assume the existing financing terms.
- The bank declined Mrs. Bruyere's proposal, stating that one income would not suffice to carry the mortgage, and subsequently withdrew its financing commitment.
- The Bruyeres were unable to arrange alternative financing, causing the real estate transaction to fall through.
Procedural Posture:
- The plaintiffs (the Bruyeres) sued the defendant (Turner) in District Court (Kfoury, J.) seeking the return of their $1,000 deposit.
- The District Court agreed with the plaintiffs and granted a verdict in their favor.
- The defendant's exceptions (appeals) to this verdict were reserved and transferred to the New Hampshire Supreme Court.
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Issue:
Does a buyer, whose financing commitment is revoked due to their voluntary decision to file for divorce, remain entitled to the return of their deposit when the purchase agreement was conditioned on obtaining such financing?
Opinions:
Majority - Per curiam
No, the plaintiffs are not entitled to the return of their deposit. The court held that the purpose of a financing clause in a purchase and sale agreement is to protect prospective purchasers from a technical breach due to an inability to secure funds based on facts present at the time of signing or due to some fortuitous intervening event. The defendant contracted with a married couple, and the financing provision was understood to involve two wage earners. The court did not believe the intent of the financing clause was to place upon the seller the hazard that the buyers would alter their circumstances and borrowing potential through a voluntary act of their own. Therefore, where the condition precedent of financing is first satisfied, but then fails because of a voluntary action by the buyer, the risk of the transaction's failure is properly imposed upon the buyer.
Analysis:
This case clarifies the scope and intent of common financing conditions in real estate contracts. It establishes that such clauses are not absolute protections against any failure to secure financing but rather are designed to cover risks beyond the buyer's voluntary control. The ruling emphasizes the principle that parties should bear the consequences of their own voluntary actions that lead to the non-fulfillment of a contract condition, particularly when those actions alter the fundamental assumptions under which the condition was initially satisfied. This precedent could impact future cases where buyers attempt to use financing contingencies to escape contracts after making personal choices that affect their creditworthiness.
