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HOUSING MORTGAGE CORPORATION v. ALLIED CONSTRUCTION (06/26/53)

June 26, 1953

HOUSING MORTGAGE CORPORATION, APPELLANT,
v.
ALLIED CONSTRUCTION, INC.



Appeals, Nos. 4, 5, 16 and 17, March T., 1953, from orders of Court of Common Pleas of Beaver County, June T., 1948, Nos. 56 and 57, in case of Housing Mortgage Corporation v. Allied Construction, Inc. Orders in Appeals Nos. 16 and 17 affirmed, in Appeals Nos. 4 and 5 reversed.

COUNSEL

Myron E. Rowley, with him Ralph E. Smith, James E. Rowley and Rowley & Smith, for purchase money mortgagee.

W. Denning Stewart, with him Harold L. Roth and Ira Hurwick, for Housing Mortgage Corporation.

Before Stern, C.j., Stearne, Jones, Chidsey, Musmanno and Arnold, JJ.

Author: Stern

[ 374 Pa. Page 314]

OPINION BY MR. CHIEF JUSTICE HORACE STERN

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, or 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.

[ 374 Pa. Page 315]

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 ...


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