Corley v. Centennial Const. Co.

• Decision Date: 03 February 1966
• Docket Number: No. 18452,18452
• Parties: Ex Parte Harbert W. Corley and Ina Corley, Respondents. In Re Harbert W. CORLEY and Ina Corley, Respondents, v. CENTENNIAL CONSTRUCTION CO. and First Provident Corporation, Appellants. LESTER BROTHERS, INC., Appellant, v. Harbert W. CORLEY, Ina H. Corley, and Centennial Construction Co., of whom Harbert W. Corley and Ina H. Corley are, Respondents.
• Court: South Carolina Supreme Court

Page 609

146 S.E.2d 609

247 S.C. 179

Ex Parte Harbert W. Corley and Ina Corley, Respondents.

In Re Harbert W. CORLEY and Ina Corley, Respondents, v. CENTENNIAL CONSTRUCTION CO. and First Provident Corporation,

Appellants.

LESTER BROTHERS, INC., Appellant, v. Harbert W. CORLEY, Ina H. Corley, and Centennial

Construction Co., of whom Harbert W. Corley and

Ina H. Corley are, Respondents.

No. 18452.

Supreme Court of South Carolina.

Feb. 3, 1966.

Rogers W. Kirven, Robert G. Knight, Florence, for appellant.

McEachin, Townsend & Zeigler, Florence, for respondents.

MOSS, Justice.

The record here shows that prior to October 9, 1962, Harbert W. Corley and Ina Corley, the respondents herein, owned a home located on Lot No. 15, in Block F, of Brookgreen Park, in the County of Florence. On October 9, 1962, the respondents entered into a contract with Centennial Construction Co., an appellant herein, whereby it agreed to construct on Lot No. 78 of College Park Subdivision, a new dwelling for a contract price of $20,600.00. The dwelling was to be constructed according to written specifications meeting the requirements of the Federal Housing Administration. The contract provided for a down payment of $2,100.00, $600.00 of which was paid in cash and a conveyance by the respondents to this appellant of title to their home in Brookgreen Park, the agreed equity being $1,500.00. The balance of the purchase price was to be paid from the proceeds of a mortgage loan guaranteed by the Federal Housing Administration, which was to be obtained on behalf of the respondents by First Provident Corporation, an appellant herein. A commitment for this loan was obtained from the Federal Housing Administration on December 26, 1962.

Centennial Construction Co., on January 10, 1963, conveyed in fee simple Lot No. 78 in College Park Subdivision to the respondents.

Construction of the new dwelling was principally done in June, July, and August, 1963. During the course of such construction, the respondents made complaints to the appellants with respect to certain defects in the construction and they undertook to correct such. It was discovered that a mistake had been made in the location of the dwelling upon the lot and it was also asserted that the restrictive covenants applicable to the College Park Subdivision were violated, in that the residence contains on the ground floor an area of less than that required by such restrictions.

The respondents, on September 16, 1963, instituted an action for the rescission of the aforesaid contract, alleging and relying upon delay in performance, mislocation of the house upon the lot in question, defective construction and noncompliance with the building restrictions applicable to College Park Subdivision.

The respondents, in their complaint to rescind the contract entered into by them with the appellants for the construction of a dwelling for them, alleged in paragraph (7) thereof that Centennial Construction Co. 'negligently executed said construction and negligently failed to complete said construction within the time called for in the contract and said house is still not complete nor has it been approved by FHA.' In the prayer of their complaint the respondents demanded the following relief: (a) that the contract between the parties be rescinded and Centennial Construction Co. be ordered to reconvey to the respondents their house and lot in Brookgreen Park; (b) that it be required to refund the respondents all moneys, credits and deposits related to said transaction upon the respondents reconveying to Centennial Lot No. 78 of the College Park Subdivision; and (c) that the respondents be refunded all moneys paid in the form of rent subsequent to their having executed a deed of their house and lot in Brookgreen Park. In the alternative, the respondents demanded in the event the Court failed to grant the aforesaid relief, that they be awarded damages for the negligent construction, placement of the house, impairment of marketable title and unreasonable delay in completing construction.

The answer of the appellants contained (1) a general denial; (2) that under the terms of the contract between the parties the appellants were to furnish a loan of $19,000.00; that they were to construct the home according to FHA specifications, all of which has been done; and (3) that on or about August 23, 1963, the appellants were requested by the respondents to correct certain defects in connection with the construction of the dwelling; that these adjustments were made and the respondents then refused to conclude the closing of the loan on August 26, 1963. The appellants asked that the respondents be required to pay them the amount due on the contract.

The record shows that the respondents, on January 14, 1963, obtained from Lester Brothers, Inc., another appellant herein, a construction loan in the amount of $15,200.00, giving to this bank a mortgage upon Lot No. 78 in the College Park Subdivision, which said mortgage was duly recorded in the office of the Clerk of Court for Florence County.

The action to rescind the contract entered into by the respondents with Centennial Construction Co. and First Provident Corporation was referred for trial to a special referee. A hearing was convened on November 12, 1963, at which time the testimony was taken. Harbert W. Corley testified at this hearing the he knew the final FHA inspection had been completed and that 'my wife and son met the FHA man out there.' He admitted that he was present on August 23, 1963, when with his attorney an inspection of the dwelling was made and agreed to close the FHA loan on August 26 or 27, 1963, providing certain 'items were fixed right.' He testified that a further inspection of the house, with his attorney, his wife and a representative of FHA present, showed that the items objected to had been corrected.

A representative of the appellant testified that the dwelling was imspected on August 23, 1963, by a representative of FHA and 'they have passed the house as it stands.' This representative also testified with reference to FHA approval, as follows:

'Q. Have they given final approval?

'A. Oh, yes, we have final approval.

'Q. Dated when?

'A. August 28th, 1963.'

The special referee filed his report, dated November 19, 1963, recommending that the complaint of the respondents for the rescission of the aforesaid contract be dismissed without prejudice to any cause of action that they might have upon the contract for damages. The special referee found that:

'Final approval of the construction was obtained from the Federal Housing Administration on the 23rd day of August, 1963. The testimony on behalf of the Defendants was that they were ready and able at this time to close the loan and give possession to the house to the Plaintiffs. The Plaintiffs refused to close the loan or to accept possession.'

The exceptions of the respondents here to the report of the special referee were overruled and his recommendations were adopted by an order of the court dated February 29, 1964. This order became final because the respondents did not appeal therefrom.

The record shows that Lester Brothers, Inc., on April 24, 1964, instituted an action to foreclose its mortgage covering the premises involved in the rescission action. This case is now pending.

It is agreed that the present action 'was commenced by the filing of a verified petition in connection with two cases.' It is alleged, as to the rescission action, that the testimony to the effect that the dwelling which the appellants contracted to build for the respondents had been inspected and approved by the Federal Housing Administration was false and no final approval of the construction of such building has ever been made by said Administration. It is further alleged that the falsity of the testimony about the approval of the construction of the dwelling, which was the subject of the contract between the respondents and said appellants, concerned a material fact in the litigation between them and constituted a fraud upon the court. The respondents demanded that the judgment of the court, dated February 29, 1964, and the report of the special referee, dated November 19, 1963, be set aside and declared null and void, and for an order granting the respondents a new trial in said case. The respondents further demanded that Lester Brothers, Inc. be enjoined from proceeding against them on its mortgage pending a determination of the first action, and asserted that should the judgment in the first action be set aside it would materially affect the outcome of the foreclosure proceeding.

Based upon the verified petition of the respondents a rule to show cause and a preliminary injunction was issued. This matter was heard at Chambers, on July 2, 1964, before the Honorable G. Badger Baker, at which time the testimony was taken and various exhibits were offered.

At the hearing, representatives of the Federal Housing Administration testified that the dwelling in question had not received final approval. The representative of the appellants did not deny that he...