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Chaplick v. Mao

United States District Court, D. Maryland

February 26, 2016

TREVOR CHAPLICK, Trustee for Canal Vista Trust, Plaintiff,


THEODORE D. CHUANG, District Judge.

This case arises out of the aborted sale of a Maryland home overlooking the Potomac River. Defendants Jeng Fen and Chiayee Chew Mao (collectively, "the Maos"), husband and wife, made an offer on the property, subject to a financing contingency, through a standard form contract of sale. After some negotiation, Plaintiff Trevor Chaplick accepted the offer on behalf of the property's owner, Canal Vista Trust, of which he is the sole trustee. However, when the Maos were unable to obtain financing, Chaplick terminated the contract, sold the house to another buyer for more money, and sued the Maos for damages.

Presently pending is Chaplick's Motion for Partial Summary Judgment, the Maos' Cross-Motion for Summary Judgment, and Chaplick's Motion to Seal. A hearing was held on the two Motions for Summary Judgment on February 3, 2016. For the reasons set forth below, Chaplick's Motion to Seal is DENIED, the Maos' Cross-Motion for Summary Judgment is DENIED, and Chaplick's Motion for Summary Judgment is GRANTED.


I. The Contract

In November 2012, Chaplick, on behalf Canal Vista Trust, listed for sale the residential property located at 13728 Canal Visit Court in Potomac, Maryland ("the Property") with an asking price of $1, 399, 999. On January 22, 2013, the Maos offered to purchase the home for a gross purchase price of $1, 300, 000. The main document constituting their offer is a standard form residential contract of sale published by the Maryland Association of Realtors ("MAR") ("the Contract"). The Maos' offer included several standard MAR addenda.

The Contract identified the seller as Canal Vista Trust, the buyers as Jeng Feng Mao ("Mr. Mao") and Chiayee Chew Mao ("Mrs. Mao"), the Property location, the offer price, a deposit amount of $10, 000, and a settlement date of March 1, 2013. It contained a standard "Time is of the Essence" clause. Pl.'s Mot. Partial Summ. J. ("Pl.'s Mot.") Ex. 3, Proposed Contract at 2.[1]

Paragraph 9, entitled "Financing, " consists of standard MAR form contract language that the "Buyer's obligation to purchase the property is contingent upon Buyer obtaining a written commitment for a loan secured by the Property." Id. ¶ 9. Based on information checked off or filled into blanks in Paragraph 9, the type of loan for which a written commitment needed to be secured was a conventional loan of $800, 000, for a 30-year term, at an interest rate of 4.000 percent. Paragraph 10, entitled "Financing Application and Commitment, " provided that the Buyer agreed to "make a written application for the financing" within "30 days from the Date of Contract Acceptance." Id. ¶ 10. It further provided that "[i]f such written financing commitment is not obtained by Buyer within thirty (30) days, " either the "Seller, at Seller's election and upon written notice to Buyer, may declare this Contract null and void and of no further legal effect, " or the "Buyer, upon written notice to Seller which shall include written evidence from the lender of Buyer's inability to obtain financing as provided in Paragraph 9 of this Contract, may declare this Contract null and void and of no further legal effect." Id. All of the language in this paragraph consisted of the standard language in the MAR form, with the exception of the 30-day time limits, which were typed into the form.

Among the addenda attached to the Contract, however, was the standard form Montgomery County Jurisdictional Addendum to Sales Contract ("Montgomery County Addendum"), which, among other things, contained an additional provision on financing. Paragraph 13 of the Montgomery County Addendum, entitled "Financing, " states "[t]he provisions of this paragraph shall supersede the "FINANCING, FINANCING APPLICATION AND COMMITMENT and ALTERNATE FINANCING paragraphs of the MAR contract" consisting of Paragraphs 9, 10, and 11 of the Contract. Pl.'s Mot. Ex. 3, Montgomery County Addendum ¶ 13. Because a box in Paragraph 13 stating "This contract is not contingent on Financing" was not checked, this paragraph indicated that the contract was contingent on the Maos obtaining financing. Id. In place of the financing contingency terms of Paragraphs 9 and 10 of the Contract, Paragraph 13 of the Montgomery County Addendum, based on boxes checked by the parties, stated only that the Buyer will obtain a fixed rate, conventional loan. Paragraph 13 contained no additional details about the terms of this loan, but included the language "See Addendum Attached." Id. No such addendum was included with the Contract.

The Contract also set forth the Maos' responsibilities in pursuing financing. Under Paragraph 28 of the Contract, if the Buyer (1) "has misrepresented Buyer's financial ability to consummate the purchase of the Property"; (2) "fails to apply for... financing within the period herein specified"; (3) "fails to pursue financing diligently and in good faith"; (4) "makes any misrepresentations in any document relating to financing"; or (5) "takes (or fails to take) any action which causes Buyer's disqualification for financing, " then "Buyer shall be in default, " and the Seller "may elect by written notice to Buyer, to terminate this Contract and/or pursue the remedies set forth under the Default paragraph of this Contract." Proposed Contract ¶ 28.

In Paragraph 33, the Contract also provided that:

Buyer and Seller are required and agree to make full settlement in accordance with the terms of this Contract and acknowledge that failure to do so constitutes a breach hereof. If Buyer fails to make full settlement or is in default due to Buyer's failure to comply with the terms, covenants, or conditions of this Contract, the initial Deposit and additional Deposits (the "Deposit") may be retained by Seller as long as a Release of Deposit of Agreement is signed and executed by all parties, expressing that said Deposit may be retained by Seller. In the event the parties do not agree to execute a Release of Deposit Agreement, Buyer and Seller shall have all legal and equitable remedies.

Id. ¶ 33.

In making their offer, the Maos initialed each page of the Contract and signed it and the addenda. On January 22, 2013, they sent to Chaplick the Contract with addenda. On January 25, 2013 they sent a letter from Mortgage Capital Partners, Inc. ("MCP"), their lender, stating that they were credit-approved for a 30-year conventional loan of $800, 000 at a fixed interest rate of 3.875 percent. MCP stated that the credit approval was subject to a review of the final contract of sale, a satisfactory appraisal report, evidence of hazard insurance, review of the title binder and insured closing letter, and a satisfactory termite report.

Upon receiving the Maos' offer, Chaplick agreed with nearly all of the proposed language; the standard form language of the Contract and addenda remained untouched. He made a few handwritten changes, including changing the time period for the Maos to apply for financing from 30 days to 15 days. Chaplick did not offer any addendum relating to financing as referenced in Paragraph 13 of the Montgomery County Addendum. On January 28, 2013, Chap lick initialed each page of the Contract and signed it and each of the addenda.

Upon receiving Chaplick's counteroffer, the Maos made four handwritten edits of their own: they changed the date of offer to January 30, 2013; changed the time period to apply for financing back to 30 days; changed the date of settlement to March 21, 2013; and clarified that the wall oven included with the Property consisted of one unit with two ovens.

Upon receiving the Maos' changes, Chaplick initialed next to each of them. At this point, both parties had signed the Contract and its addenda, and they had initialed next to all handwritten changes. The parties agree that this is the final version of the Contract.

II. Financing

On February 8, 2013, the Maos applied for a loan with MCP, a firm they had used to secure loans for previous transactions. Along with their application, the Maos submitted "a lot of asset documents, including their business asset documents." Defs.' Cross-Mot. Summ. J. ("Defs.' Cross-Mot.") Ex. 5, Yeewen Chang Dep. at 24.

Despite their prompt application, the Maos soon came to the conclusion that they could not obtain a written financing commitment or an appraisal by the dates set forth in the Contract. Accordingly, on February 21, 2013, they asked for an extension. That same day, the parties executed a General Addendum to the Contract, which extended the Maos' deadline to obtain a written loan commitment by seven days to March 8, 2013.

On March 7, 2013, one day before the seven-day period was set to expire, Chaplick's real estate agent asked Mrs. Mao for an update on the loan approval process. Mrs. Mao responded with a letter from MCP entitled "Mortgage Loan Commitment" ("the Commitment Letter"), signed by MCP loan officer Yeewen Chang, and dated March 7, 2013. The Commitment Letter stated that the Maos' application for a 30-year, first mortgage of $870, 000, at a 4.000 percent interest rate, had been approved subject to the following conditions: quality control prior to settlement, all underwriting and closing conditions, an appraisal review, and receipt and review of the Maos' 2012 Internal Revenue Service ("IRS") tax transcript. During her deposition, Mrs. Mao agreed that they were required to obtain a written financing commitment under the contract and acknowledged that she sent the Commitment Letter "to make sure we can buy the house." Pl.'s Mot. Ex. 1, Mrs. Mao Dep. at 40-41. Based on this letter, Chap lick kept the property off the market. At this point, Chaplick and Mr. Mao intended to proceed to closing.

Ultimately, however, the parties would not close on the Property because the Maos were unable to meet all of the conditions relating to their loan. The Maos made several unsuccessful attempts to meet one of the conditions in the Commitment Letter: providing their 2012 tax transcript for review. At the time of their loan application, before the Commitment Letter was issued, MCP informed the Maos that it would need their 2012 tax transcript in order to approve the loan. On February 8, 2013, the same day she filed the loan application, Mrs. Mao mailed the Maos' 2012 tax return to the IRS and wrote checks to the state and federal tax authorities. On February 27, 2013, the IRS processed the federal check. Obtaining the Mao's tax transcript would prove to be more difficult. On February 19, 2013, MCP requested the Maos' tax transcript through an independent credit validation agency, only to be told that the 2012 tax transcript was not available. After this initial request, MCP requested the transcript seven additional times between March 8, 2013 and May 9, 2013. Sometime before March 21, 2013, the settlement date, ...

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