Mezzanotte v. Freeland

Brief Fact Summary.

A party to a real estate transaction promised to obtain a second mortgage "satisfactory" to them.  The validity of this term was at issue. 

Synopsis of Rule of Law.

A "promise conditioned upon an event within the promisor's control is not illusory if the promisor also 'impliedly promises to make reasonable effort to bring the event about or to use good faith and honest judgment in determining whether or not it has in fact occurred.' "

Facts.

On May 2, 1972, the Plaintiffs, Mr. & Mrs. Mezzanotte (the "Plaintiffs"), agreed to buy and the Defendants, Mr. & Mrs. Freeland (the "Defendants"), agreed to sell an improved tract of land for $5,000.00.  The agreement was made contingent upon the Plaintiffs being able to procure a second mortgage from North Carolina National Bank ("NCNB") on terms satisfactory to them.

Issue.

Is there valid consideration where a buyer is only obligated to proceed with the transaction when they are satisfied with the financing they can obtain or is this promise illusory?

Held.

The court observed that the parties upon the signing of the contract "intended to be mutually bound to comply with its terms."  All parties involved understood that the Plaintiff's were obligated to make a good faith effort to secure financing terms satisfactory to themselves from NCNB.  The Plaintiffs could only reject the financing for satisfactory cause, not on a personal whim.  The court observes a "promise conditioned upon an event within the promisor's control is not illusory if the promisor also 'impliedly promises to make reasonable effort to bring the event about or to use good faith and honest judgment in determining whether or not it has in fact occurred.' "  Further, "[t]he implied promise is enforceable by the promisee, and it constitutes a legal detriment to the promisor; therefore it furnishes sufficient consideration to support a return promise."
•    Here, the Plaintiffs applied for a loan from NCNB, but were not able to obtain the requisite financing.  As a result, the Plaintiff's attempted to procure other financing from an alternate source. 
•    The court recognized "[a]lthough there are no North Carolina cases specifically in point, courts in other jurisdictions have recognized that a conditional promise may be accompanied by an implied promise of good faith and reasonable effort, and that it need not be illusory."  The court concluded the contract between the Plaintiffs and the Defendants required the Plaintiffs to "use reasonable effort to procure a loan and to exercise good faith in deciding whether the terms of the loan were satisfactory."

Discussion.

This case is interesting to read alongside [Miami Coca-Cola Bottling Co. v. Orange Crush Co.], another case that discusses mutuality.