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DEMHARTER v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION PITTSBURGH (10/09/63)

October 9, 1963

DEMHARTER, APPELLANT,
v.
FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF PITTSBURGH, APPELLANT.



Appeals, Nos. 31 and 57, March T., 1963, from decree of Court of Common Pleas of Westmoreland County, No. 2907 in equity, in case of L. Demharter and Paul Demharter, partners, trading and doing business as L. Demharter & Son, J. F. Kingston, Albert J. Balister et al. v. First Federal Savings & Loan Association of Pittsburgh, Leo Klemzak and Antonio Iacino, trading and doing business as Keystone Construction & Supply Co. Decree, as modified, affirmed.

COUNSEL

Louis E. Sensenich, with him H. Reginald Belden, and Smith, Best & Horn, for plaintiffs.

Myron W. Lamproplos, with him Samuel M. Jackson, James C. Larrimer, and Cassidy & Lamproplos, for defendant.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Roberts, JJ.

Author: Jones

[ 412 Pa. Page 144]

OPINION BY MR. JUSTICE BENJAMIN R. JONES

These two appeals are from a decree of the Court of Common Pleas of Westmoreland County. One appeal*fn1 challenges the propriety of that portion of the decree which upholds the validity of a sheriff's sale; the other appeal*fn2 challenges the propriety of that portion of the decree which directs the payment of $47,216.30.

[ 412 Pa. Page 145]

Leo Klemzak and Antonio Iacino, partners trading as Keystone Construction & 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 geographical 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.*fn3 On June 12, 1957, counsel for one supplier of material told

[ 412 Pa. Page 146]

    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 ...


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