15‐2407‐cv Bunnell v. Haghighi UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 4th day of October, two thousand sixteen. PRESENT: DENNY CHIN, SUSAN L. CARNEY, Circuit Judges, KATHERINE B. FORREST, District Judge.* ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x KATHLEEN BUNNELL, DENNIS BUNNELL, Plaintiffs‐Counter‐Defendants‐Appellants, v. 15‐2407‐cv FARZAD HAGHIGHI, Defendant‐Counter‐Claimant‐Appellee. ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x * The Honorable Katherine B. Forrest, of the United States District Court for the Southern District of New York, sitting by designation. FOR PLAINTIFFS‐COUNTER‐ DEAN T. CHO, New York, New York. DEFENDANTS‐APPELLANTS: FOR DEFENDANT‐COUNTER‐ DANIEL ALLIANCE, Jamaica, New York. CLAIMANT‐APPELLEE: Appeal from the United States District Court for the Eastern District of New York (Block, J.). UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED. Plaintiffs‐counter‐defendants‐appellants Kathleen Bunnell and Dennis Bunnell (the ʺBunnellsʺ) appeal a July 27, 2015 judgment of the United States District Court for the Eastern District of New York, entered after a bench trial, awarding $125,000 plus accrued and post‐judgment interest to defendant‐counter‐claimant‐ appellee Farzad Haghighi. By memorandum and order entered July 27, 2015, the district court made findings of fact and conclusions of law, finding in favor of Haghighi. We assume the partiesʹ familiarity with the facts, procedural history, and issues on appeal. On July 27, 2012, Haghighi contracted to purchase the Bunnellsʹ house in Forest Hills, New York, for $1.25 million (ʺBunnell Homeʺ). The agreement contained a mortgage contingency clause, releasing Haghighi from his obligation to purchase the property if he was unable to obtain a mortgage loan on specified terms. Haghighi tendered and the Bunnellʹs accepted $125,000 as a down payment. On August 12, 2012, Haghighi contracted to purchase another property in Forest Hills for $805,000 (the ʺAlternate Propertyʺ). On August 20, 2012, Landmark Funding Group (ʺLandmarkʺ), a mortgage brokerage firm, submitted two loan applications on Haghighiʹs behalf ‐‐ one to Flagstar Bank for a $750,000 loan to purchase the Bunnell Home and the other to another bank for a $400,000 loan to purchase the Alternate Property. The applications were identical in all material respects, indicating that Haghighi had approximately $800,000 in liquid assets, a six‐figure income, and a 790 credit score. Flagstar denied Haghighiʹs application for the $750,000 mortgage on the Bunnell Home. The loan for the Alternate Property was approved. Asserting that Haghighi breached their agreement by failing to apply for a mortgage in good faith, the Bunnells filed this diversity action, claiming entitlement to Haghighiʹs $125,000 down payment. At a bench trial on February 3, February 17, April 13, May 11, and June 1, 2015, the district court heard testimony from Haghighi, Douglas Baum, the Bunnellsʹ expert witness on mortgage loan underwriting, and Leah Paskus, the mortgage broker at Landmark who prepared and submitted Haghighiʹs applications. The district court excluded evidence of misconduct by Haghighiʹs counsel during the course of the litigation on grounds that it was irrelevant to the trial on the merits. ‐ 3 ‐ The critical issue at trial was Haghighiʹs intent, i.e., whether he applied for the mortgage on the Bunnell Home in good faith or whether he submitted a deliberately defective application to Flagstar. Based on the evidence, the district court found that: (1) Haghighi initially entered into contract with the Bunnells under the honest but mistaken belief that he would qualify for a $750,000 mortgage loan; (2) he subsequently learned from Paskus that he would probably not qualify for such a loan; (3) he submitted the application knowing that it would probably be denied, but honestly hoping it would be approved; and (4) if the application was approved, Haghighi would have purchased the Bunnellsʹ Home. S. App. at 10. It therefore concluded that the mortgage contingency clause was triggered and that the Bunnells were required to return the deposit. Accordingly, the district court entered judgment in Haghighiʹs favor. This appeal followed. On appeal, the Bunnells argue that the district court erred in granting judgment in favor of Haghighi. Other than arguing that the district court erred in excluding the evidence concerning the conduct of Haghighiʹs counsel, however, the Bunnells dispute only the district courtʹs factual findings and the inferences it drew from the evidence presented at trial. ʺOn appeal from a bench trial, we review the district courtʹs findings of fact for clear error and its conclusions of law de novo.ʺ Oscar Gruss & Son, Inc. v. Hollander, 337 F.3d 186, 193 (2d Cir. 2003). ʺUnder the clear error standard, we ʹmay not reverse a [factual finding] even [if we are] convinced that had [we] been sitting as the trier of fact [we] would have weighed the evidence differently.ʹʺ Id. (quoting Anderson ‐ 4 ‐ v. Bessemer City, 470 U.S. 564, 574 (1985)). We review the district courtʹs evidentiary rulings for abuse of discretion. United States v. Litvak, 808 F.3d 160, 179 (2d Cir. 2015). Under New York law, a ʺmortgage contingency clause is construed to create a condition precedent to the contract of sale.ʺ Creighton v. Milbauer, 594 N.Y.S.2d 185, 187 (1st Depʹt 1993). ʺIn the absence of waiver . . . by the buyer, any claim that [the seller] is entitled to retain the down paymentʺ for failure to satisfy such a condition must be based on allegations that the buyer acted in bad faith ʺby bringing about the failure of [the] condition precedent.ʺ Id. at 187‐88. The seller bears the burden of proof in establishing bad faith. Id.at 188; Lindenbaum v. Royco Prop. Corp., 567 N.Y.S.2d 218, 221 (1st Dep’t 1991) (ʺ[I]t is incumbent upon [the seller] to establish that [the buyersʹ effort] to obtain[] financing was a mere pretense to avoid their obligations under the contract.ʺ). If the seller fails to prove bad faith, the buyer is ʺentitled to recover her down payment.ʺ Schramm v. Mei Chu Solow, 935 N.Y.S.2d 659, 660 (2d Depʹt 2012). We conclude that the district courtʹs finding that Haghighi applied for the mortgage on the Bunnell Home in good faith was not clearly erroneous. Haghighi testified that he agreed to purchase the Bunnell Home under the misguided belief that he would qualify for a $750,000 mortgage. He further testified that he submitted bona fide applications for mortgages on the Bunnell Home and the Alternate Property and was prepared to purchase them both if the loans were approved. The mortgage broker corroborated Haghighiʹs testimony, while the mortgage underwriting expert disputed ‐ 5 ‐ it. The district found that Haghighi and the mortgage broker were credible and the expert witness was unpersuasive. To be sure, another factfinder could have weighed the evidence differently, but where, as here, ʺthere are [competing] permissible views of the evidence, the factfinderʹs choice between them cannot be clearly erroneous.ʺ Anderson, 470 U.S. at 574. We also conclude that the district court did not abuse its discretion in refusing to admit at trial evidence of misconduct by Haghighiʹs counsel during the pendency of this litigation. While that evidence was relevant to a motion for sanctions filed by the Bunnells under Federal Rule of Civil Procedure 11, it did not have ʺany tendency to makeʺ any fact ʺof consequence in determining the [merits of this] actionʺ ʺmore or less probable,ʺ i.e., whether Haghighi met his obligations under the mortgage contingency clause, and thus it was properly excluded. Fed. R. Evid. 401. Further, we note that the district court has since considered this evidence and imposed sanctions against Haghighiʹs counsel, which is not inconsistent with its finding that Haghighi himself applied for the mortgage on the Bunnell Home in good faith. We have reviewed the Bunnellsʹ remaining arguments and conclude they are without merit. Accordingly, we AFFIRM the judgment of the district court. FOR THE COURT: Catherine OʹHagan Wolfe, Clerk ‐ 6 ‐
Bunnell v. Haghighi
Combined Opinion