Clyde Bldg. Ass'n v. Walsh

AGEE, J. Plaintiff-contractor appeals from a judgment in favor of defendant in an action for damages for breach of a contract under which plaintiff agreed to build a fourplex on defendant’s property. Defendant subsequently refused to proceed with the contract on the ground that an adequate construction loan could not be obtained and that this was a condition precedent to the effectiveness of the contract.

On April 1, 1963 defendant accepted plaintiff’s bid of $67,252.73. On May 8, 1963 defendant advised plaintiff by letter of the difficulties he was having in obtaining the loan and that with “so many refusals by lenders” he was doubtful of the project. He stated, however, that Citizens Federal Savings and Loan Association (hereafter “Citizens”) would “come up with” a loan of $68,600.

Defendant thereafter decided to accept Citizens’ loan commitment, which called for 6½ percent interest and 2 points.1 As plaintiff states in its brief, “With the financing commitment in hand and pursuant to the requirements of Citizens, a formal written contract [between plaintiff and defendant] . . . was executed on June 21, 1963, . . .” (Italics ours.).

The contract did not mention Citizens by name, providing only that “Payments to be made by a recognized lending institution . . . for dispursal [sic] against construction and labor costs.” However, three days later, in a letter to defendant proposing a modification of the contract, plaintiff states: “It is further understood that this service will be acceptable to your lender, Citizens Federal Savings and Loan.” (Italics added.)

It is completely clear from the record that at the time of the execution of the contract plaintiff knew that the “recognized lending institution” was Citizens and that, because of inability to obtain the loan elsewhere, the effectiveness of the contract was dependent upon Citizens making the loan.

[515]On July 9, 1963 Citizens determined not to make the loan because of soil conditions on the subject property. On July 12, 1963 plaintiff wrote to Citizens protesting this decision and asking for a reconsideration. However, on July 16, 1963 Citizens gave formal notice that its loan committee would not approve the loan.

The trial court made the following finding of fact: “That it was agreed between plaintiff and defendant that the taking effect of the agreements2 were contingent upon defendant John D. Walsh obtaining financing from Citizens Federal Savings and Loan Assn, to complete the transaction, which financing was not obtained and was without fault on defendant John D. Walsh’s part. ’ ’