The contract for the sale of New York real property was contingent on the husband and wife buyersobtaining a $280,000 mortgage. After their mortgage application was denied, they sought the return of their $35,000 deposit.

The seller sued the buyers for breach of contract. The buyers counterclaimed for return of their deposit. The Nassau County, New York Supreme Court ruled that the sellers were entitled to retain the deposit having demonstrated that the buyers failed to promptly, diligently pursue a mortgage loan as required by the mortgage contingency provision in the contract.

It found that the husband did not apply for a mortgage. Only the wife applied for the mortgage, which was denied because her income alone was insufficient to qualify for a $280,000 mortgage. As such, the court ruled that the buyers failed to make a diligent, good faith effort to secure a mortgage. The failure was ruled a breach of the unambiguous mortgage contingency clause and a breach of the contract.

It is well established that a seller is entitled to recover the entire amount of down payment, and is not limited to recovery of actual damages where buyers default on a real estate contract without lawful excuse. Every contract implies good faith and fair dealing which will be implied even if not found in the express terms of the contract.

The court cited a case where the buyer, in delaying to make application for a mortgage commitment, was found in breach of the contract, and therefore, not entitled to recover the down payment, despite the fact that the sellers resold the premises for a sum equal to the contract price.

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