Demharter v. First Fed. Sav. & Loan Ass'n of Pittsburgh

• Decision Date: 09 October 1963
• Citation: 194 A.2d 214,412 Pa. 142
• Parties: L. DEMHARTER and Paul Demharter, Partners, Trading and Doing Business as 'L. Demharter & Son', and J. F. Kingston, and Walters & Haas, et al., Intervenors, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF PITTSBURGH, Appellant, and Leo Klemzak and Antonio Iacino, Trading and Doing Business as 'Keystone Construction & Supply Co.' Appeal of L. DEMHARTER and Paul Demharter, Partners, Trading and Doing Business as 'L. Demharter & Son', and J. F. Kingston, Plaintiffs, and Albert J. Balister, Glenn A. Garrett, and Sidney Shapiro, Intervenors, and W. N. Walters and Sidney G. Haas, Partners, Trading and Doing Business as Walters & Haas, Intervenors.
• Court: Pennsylvania Supreme Court

Page 214

194 A.2d 214

412 Pa. 142

L. DEMHARTER and Paul Demharter, Partners, Trading and Doing Business as 'L. Demharter & Son', and J. F Kingston, and Walters & Haas, et al., Intervenors, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF PITTSBURGH, Appellant and Leo Klemzak and Antonio Iacino, Trading and Doing Business as 'Keystone Construction & Supply Co.' Appeal of L. DEMHARTER and Paul Demharter, Partners, Trading and Doing Business as 'L. Demharter & Son', and J F. Kingston, Plaintiffs and Albert J. Balister, Glenn A. Garrett, and Sidney Shapiro, Intervenors, and W. N. Walters and Sidney G. Haas, Partners, Trading and Doing Business as Walters & Haas, Intervenors.

Supreme Court of Pennsylvania.

Oct. 9, 1963.

Samuel M. Jackson, Pittsburgh, Myron W. Lamproplos, Cassidy & Lamproplos, Greensburg, James C. Larrimer, Pittsburgh, for appellant in No. 31 and appellee in No. 57.

Louis E. Sensenich, H. Reginald Belden, Vincent E. Williams, Smith, Best, & Horn, Greensburg, for appellant in No. 57 and appellee in No. 31.

Before BELL, C. J., and MUSMANNO, JONES, COHEN, EAGEN, O'BRIEN and ROBERTS, JJ.

JONES, Justice.

These two appeals are from a decree of the Court of Common Pleas of Westmoreland County. One appeal ¹ challenges the propriety of that portion of the decree which upholds the validity of a sheriff's sale; the other appeal ² challenges the propriety of that portion of the decree which directs the payment of $47,216.30.

Leo Klemzak and Antonio Iacino, partners Keystone paid. Supply Company, [Keystone], owned 76 lots in a development known as Greene Hill, located partly in Hempfield Township and partly in Greensburg City, Westmoreland County. On April 24, 1956, Keystone, contemplating the construction of 76 dwellings in Greene Hill, executed a construction loan agreement [Agreement], a bond and a mortgage with the First Federal Savings and Loan Association of Pittsburgh [First Federal]. The amount of the bond and mortgage and the amount to be advanced under the Agreement by First Federal was $1,363,420. This mortgage, [original mortgage], recorded April 25, 1956, erroneously recited that the 76 lots were located in Hempfield Township, although in the recorded Greene Hill plot plan, specifically referred to in the mortgage, the lots were correctly shown to be located partly in Hempfield Township and partly in Greensburg City. Construction of the dwellings commenced on April 30, 1956.

To correct the mistaken recitation as to the location of the lots in the original mortgage, a second mortgage [corrective mortgage] was recorded on May 26, 1956. Such correction constituted the only difference between the original and the corrective mortgage.

As the construction of the dwellings progressed, First Federal made payments to Keystone; at first, in accordance with a payment schedule contained in the Agreement and, later, under a modified payment schedule.

From April 30, 1956 until June 12, 1957, First Federal had no notice of any unpaid indebtedness owed by Keystone to suppliers of materials and labor. ³ On June 12, 1957, counsel for one supplier of material told a First Federal official that his client had a substantial unpaid claim against Keystone and he informed the First Federal official that he would attempt to ascertain whether any other suppliers had not been paid. Approximately, one month later, counsel for another supplier of labor and material mailed a letter to each of thirty-five creditors of Keystone enclosing a list of creditors to whom Keystone, purportedly, was indebted to the extent of $250,000. A copy of this letter and list was given to First Federal on July 15, 1957.

During the period from the middle of July until October, 1957, several meetings were held by Keystone creditors with First Federal officials. At these meetings, as the court below found upon supportable evidence, First Federal did not commit itself in any way to allow Keystone's creditors to continue construction or to make direct payments to them nor did First Federal assume any obligation whatsoever to them.

By August 8, 1957, eleven homes had been completed and sold, three homes had been completed but not sold, and twenty-seven homes had been partially completed. On that date, First Federal confessed judgment on the bond, executed April 24, 1956, in the sum of $475,695.66 and filed an affidavit of default alleging, inter alia, that Keystone was in default in interest as of August 1, 1957, in the amount of $3,071.47. The certificate attached to the D.S.B. confessing judgment recited that the mortgage which the bond accompanied had been recorded May 26, 1956, i. e. the corrective mortgage.

Within the next several weeks various mechanics liens were filed against dwellings in the construction area.

A sheriff's sale of the properties, originally scheduled for September 27, 1957 but continued at first by agreement and later by court order, was held on October 11, 1957 and, at that sale, the properties were sold to First Federal. It is to be noted that, on that same day, Keystone's creditors, representing claims totalling $254,435, executed a creditors' composition agreement.

On December 6, 1957, on First Federal's petition, the Court of Common Pleas of Westmoreland County permitted an amendment of the certificate attached to the D.S.B. confessing judgment to show that the bond upon which the execution had been issued also accompanied the original mortgage.

At the time of the sheriff's sale, as the court found on supportable evidence, there remained in First Federal's loan account, earmarked for the completion of uncompleted dwellings, $71,502.00. Thereafter, First Federal spent $71,337.13 to finish the uncompleted dwellings and $4,767.00 for replacement of a sewer and extra landscaping. At the time of trial First Federal still had a net amount of $136,153.44 invested in the remaining homes and lots which then had a fair market value of $124,620.00. Subsequent to June 12, 1957, when First Federal first learned that one supplier of labor and material had not been paid, First Federal paid Keystone $47,216.30.

On March 10, 1958, on petition of First Federal, the court directed the sheriff to deliver a deed to First Federal and approved First Federal's $275,000 bond.

On June 28, 1958, Keystone's creditors and mechanics lienholders, ⁴ [plaintiffs], instituted an equity action against Keystone ⁵ and First Federal in the Court of Common Pleas of Westmoreland County wherein plaintiffs requested the court: (a) to declare invalid the judgment entered upon the bond upon which the sheriff's sale took place, or, in the alternative, to direct distribution of the proceeds of the sale to plaintiffs to the extent of their mechanics liens; (b) to declare void and set aside the sheriff's sale, or, in the alternative, to award damages to plaintiffs. Dismissal of preliminary objections to the equity complaint was affirmed by our Court in Demharter v. First Federal Savings and Loan Association, etc., 395 Pa. 400, 150 A.2d 354.

After various hearings, the chancellor entered a decree, later affirmed by the court en banc, which held: 1. That First Federal's judgment against Keystone and the sheriff's sale were valid and that, by virtue of such sale, First Federal acquired a fee simple title to the properties; 2. That First Federal must pay plaintiffs, in proration to the amounts owed them by Keystone, $47,216.30, i. e. the amount paid to Keystone by First Federal subsequent to June 12, 1957. From the first portion of the decree plaintiffs appeal; from the second portion of the decree First Federal appeals.

THE VALIDITY OF THE JUDGMENT AND SHERIFF'S SALE

The attack upon the validity of the judgment entered on the bond and the sheriff's sale is based upon several grounds: (1) that the court order--which permitted the certificate attached to the D.S.B. confessing judgment to be amended to show that the bond accompanied both the original and the corrective mortgage--was obtained upon a false averment and ex parte; (2) that, at the time of issuance of execution, Keystone was either (a) not in default on the mortgage or (b) a default had been artificially created; (3) that First Federal and Keystone had acted in collusion to bring about the execution.

The record discloses that the petition, which requested the amendment, did aver that the execution of the corrective mortgage had taken place on April 24, whereas, in fact, such mortgage had been executed sometime after April 24th and prior to May 26th. The real thrust of plaintiffs' argument is that, if this amendment had not been allowed, execution would have been upon the corrective mortgage which was junior in lien to plaintiffs' mechanics liens since construction of the dwellings had been commenced prior to recordation of the corrective mortgage. We are in full agreement with the conclusion of the court below: 'The allegation that the corrective mortgage was executed on April 24, 1956 was not material to the granting of said amendment as the Court was merely allowing the record to be amended so as to set forth the fact that First Federal was executing on the lien of the original mortgage.' Regardless of the inaccuracy of the averment as to the date of execution of the corrective mortgage, the court properly permitted the amendment. The corrective mortgage simply corrected a recital in the original mortgage as to the location of the lots, a correction which, in view of the reference in the original mortgage to the correct location of the lots in the Greene Hill plan, was not necessary. The court-permitted amendment related the bond, upon which the execution was issued, to the original mortgage, the bond having been executed and delivered contemporaneously with the original mortgage. That which Mr. Justice Musmanno stated in Peoples Natural Gas Company Appeal, 399 Pa. 226, 234, 160 A.2d 391, 395, is presently apt: 'The attainment of justice is over the highway of realities and not...