Housing Mortg. Corp. v. Allied Const., Inc.

Citation374 Pa. 312,97 A.2d 802
PartiesHOUSING MORTGAGE CORP. v. ALLIED CONST. Inc. Appeals of CLARK et al. Appeals of HOUSING MORTGAGE CORP.
Decision Date26 June 1953
CourtPennsylvania Supreme Court

Proceedings between advance-money mortgagee, executors of estate of purchase money mortgagee, and mortgagor under such mortgages, involving distribution of proceeds of sale of real estate upon foreclosure of advance-money mortgages. The Court of Common Pleas, Beaver County at Nos. 56, 57 June Term 1948, overruled executors' exceptions to supplemental report of court appointed auditor, approving grant of priority to advance-money mortgages over purchase money mortgage, and executors appealed. The advance-money mortgagee appealed from imposition of costs upon it. The Supreme Court Nos. 4, 5, 16, 17, March Term, 1953, Horace Stern, C. J held that where purchase money mortgage, by its terms, was made subordinate to advance-money mortgages which incorporated contemporaneous construction loan agreements setting forth schedule of advance payments to be made at each successive stage of construction work, advances in excess of those required by agreements were voluntary and were not entitled to priority over lien of purchase money mortgagee, who was entitled to protection afforded by construction loan agreements regarding timing of the advances.

Orders awarding distribution reversed and record remanded; orders imposing costs affirmed.

Myron E. Rowley, Rowley & Smith, James E. Rowley, Ralph E. Smith, Aliquippa, for appellant Clark and others.

W. Denning Stewart, Pittsburgh, Harold L. Roth, Ambridge, Ira Hurwick, Pittsburgh, for Housing Mortgage Corp.

Before STERN, C. J., and STEARNE, JONES, CHIDSEY, MUSMANNO and ARNOLD, JJ.

HORACE STERN, Chief Justice.

The sole question involved in this litigation concerns the relative priority of the liens of a purchase money mortgage and a ‘ construction’ or advance-money mortgage.

James B. Clark was the owner of a tract of land in Beaver County in which he had laid out a plan of lots. On March 15, 1947, he and his wife agreed to sell 34 of these lots to Allied Communities, Inc., for the sum of $23,800, which was to be paid by the execution of a purchase money mortgage in that amount, payable in one year thereafter, with 5% interest thereon, and with the express understanding and agreement that the purchaser would proceed forthwith to erect dwelling houses on the lots, with the privilege for that purpose of placing construction loans on the property, the liens of which by proper stipulation should be made prior to the lien of the purchase money mortgage when the construction mortgages were recorded and the erection of the dwelling houses commenced. This agreement was subsequently assigned by Allied Communities, Inc. to Allied Construction Co., Inc., an affiliated corporation engaged in the erection of dwellings.

A month later, on April 21, 1947, Clark, officers of Allied Construction Company (hereinafter called Allied) and officers of Housing Mortgage Corporation (hereinafter called Housing) which was a corporation engaged in the business of making mortgage loans, met in the offices of Housing, and at that meeting there were simultaneously executed a deed from Clark and his wife to Allied, a purchase money mortgage from Allied to Clark, certain construction loan agreements between Allied and Housing, and three construction loan mortgages from Allied to Housing. The deed and all the mortgages were promptly thereafter recorded.

The purchase money mortgage from Allied to Clark contained a provision that ‘ the lien of this mortgage * * * is hereby postponed and made junior in lien to three certain mortgages of even date herewith and to be recorded given by the mortgagor herein to Housing Mortgage Corporation, which three mortgages are in the sums of $102,200, $102,200, and $43,800, or a total of $248,200; it being understood that the said three mortgages shall be first liens on each of the several lots described in said mortgages.’

Each of the three construction loan mortgages from Allied to Housing contained a provision that ‘ The several sums of money aggregating the full amount of the debt secured by this mortgage are to be advanced by the mortgagee to the mortgagor in accordance with the terms and requirements of a certain agreement of even date herewith between the parties hereto * * *.’

Each of the three construction loan agreements thus referred to provided for a schedule of the amounts which were to be advanced by Housing to Allied at various stages in the erection of the dwellings, as follows:-(a) no immediate payment; (b) a certain specified sum when the foundation of each house was completed and the first floor joists were in place; (c) a certain specified sum when the shell of each house was erected and the roof installed; (d) a certain specified sum when the brick or stone veneer front and all siding had been applied to each house, chimneys erected, door and window frames set, prime coated; (e) a certain specified sum when the plumbing of each house had been installed, wiring roughed in; furnace roughed in; (f) a certain specified sum when each house had the plaster completed; basement floor in; windows and exterior doors hung; (g) a certain specified sum when each house had been trimmed, the doors in; floors completed, hardware in; painting completed; ready for final FHA inspection. It was provided that these payments were to be made only if and when the various stages of work were completed to the satisfaction of the mortgagee.

From time to time as the work progressed Housing advanced money to Allied but apparently, in the case of the 14 lots involved in the present proceedings, it made some payments to Allied before they were due according to the schedule contained in the construction loan agreements. Allied having become financially involved at a time when the houses were still uncompleted, Housing instituted foreclosure proceedings on two of its mortgages, entered judgments on the bonds, issued executions, and at the sheriff's sales bought in 13 of the lots under one sale for the sum of $67,000, and one lot under the other sale for the sum of $8,007.52; on the one sale it paid in cash $1,532 for costs and taxes and obtained from the sheriff a receipt for the balance; on the other sale it paid in cash $410.77 for costs and taxes and obtained from the sheriff a receipt for the balance. The sheriff filed proposed statements of distribution which granted priority to the claim of Housing to the extent of all its payments under its advance money mortgages over the claim of Clark on his purchase money mortgage. Clark filed exceptions, claiming priority for the amount still due on his mortgage[1] over the claim of Housing for any advance payments in excess of those stipulated in the schedule set forth in the construction loan agreements. Upon petition of Housing the court made an order permitting the sheriff to deliver to it deeds for the 14 lots upon its paying to the prothonotary the sums of $9,658 and $742, or a total of $10,400, which was to be held pending the final order of the court. The court appointed an auditor who filed a report recommending that Clark's exceptions be dismissed. The court below sustained the auditor's report, whereupon appeals were taken to this court. We held, Housing Mortgage Corporation v. Allied Construction Co., Inc., 367 Pa. 351, 80 A.2d 748, that the record was not such as to enable us to determine the controlling question, and accordingly we remanded the record to the court below to ascertain to what extent Housing had made payments in excess of those provided provided for in the schedule. The auditor took additional testimony and filed a supplemental report taking the same view as before. Clark having meanwhile died, the executors of his estate filed exceptions to the supplemental report; those exceptions being overruled by the court below the executors took two of the present appeals. The court below imposed the costs upon Housing, from which action Housing has filed the two other appeals now before us.

It is the contention of the Clark Estate (1) that their decedent the purchase money mortgagee, had the right to insist upon Housing...

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1 cases
  • Housing Mortg. Corp. v. Allied Const. Inc.
    • United States
    • Pennsylvania Supreme Court
    • 26 Junio 1953
    ...97 A.2d 802 374 Pa. 312 HOUSING MORTGAGE CORP. v. ALLIED CONST. Inc. Appeals of CLARK et al. Appeals of HOUSING MORTGAGE CORP. Supreme Court of Pennsylvania. June 26, 1953. [374 Pa. 313] Myron E. Rowley, Rowley & Smith, James E. Rowley, Ralph E. Smith, Aliquippa, for appellant Clark and oth......

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