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.*
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KATHLEEN BUNNELL, DENNIS BUNNELL,
Plaintiffs‐Counter‐Defendants‐Appellants,
v. 15‐2407‐cv
FARZAD HAGHIGHI,
Defendant‐Counter‐Claimant‐Appellee.
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* 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.
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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
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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
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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
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