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KEYSTONE BANK v. NUCLEAR MAGNETIC RESONANCE SPECIALTIES (11/22/76)

decided: November 22, 1976.

KEYSTONE BANK, APPELLANT,
v.
NUCLEAR MAGNETIC RESONANCE SPECIALTIES, INC., AND EDWARD F. WELSH



COUNSEL

Abraham Fishkin, Pittsburgh, for appellant.

Robert G. Sable, Pittsburgh, for appellees.

Watkins, President Judge, and Hoffman, Cercone, Price, Van der Voort and Spaeth, JJ. Jacobs, J., did not participate in the consideration or decision of this case. Hoffman and Van der Voort, JJ., dissent.

Author: Spaeth

[ 243 Pa. Super. Page 473]

This is an appeal from an order sustaining exceptions to the sheriff's proposed schedule of distribution*fn1 of the proceeds of an execution sale of real estate in Allegheny County. The certified list of liens*fn2 showed that appellee had executed postponements of certain judgments, and the sheriff proposed to give effect to those postponements.

[ 243 Pa. Super. Page 474]

The court below, however, agreed with appellee that a condition precedent to the efficacy of the postponements had not been performed within a reasonable time. Accordingly, the court awarded priority to appellee's judgments over the mortgage lien of appellant bank. On this appeal, appellant argues that the issue whether the postponements were conditional should not have been decided on exceptions to the proposed schedule of distribution, and that if it should have been, it was decided incorrectly. We address these arguments in reverse order, reject both, and affirm.

I

Appellee, a patent attorney, was a director of Nuclear Magnetic Resonance Specialties, Inc. (NMRS), and also served nominally as its treasurer.*fn3 (Record 129a-130a) Appellant had provided NMRS with substantial financing, and in connection with one transaction had obtained appellee's signature as guarantor of a $34,000 note. NMRS was in serious financial difficulty, and on October 22, 1971, a meeting was held at appellant's offices at which officers of NMRS and of appellant discussed the possibility of additional substantial financing. Appellant's president, Herman Israel, stated that appellant would be able to loan NMRS $112,000 but only if NMRS gave appellant a first mortgage on real estate in Plum Borough, Allegheny County. (This is the real estate here in question.) Since the real estate was already encumbered by several liens, including two judgments owned by appellee, Israel asked appellee to execute a subordination agreement so that appellant could obtain a first lien (Record 84a, 134a). Appellee, however, refused to execute the subordination agreement unless appellant procured a similar agreement from one Yajko,

[ 243 Pa. Super. Page 475]

    who was the founder and majority shareholder of NMRS.*fn4 Israel agreed to this condition, and told appellee that appellant would either obtain a subordination agreement from Yajko or would take action to have Yajko's liens stricken.*fn5 Appellee thereupon executed the subordination agreement, and the following day NMRS executed a bond and mortgage to appellant in the amount of $112,000. On November 4, 1971, appellee's subordination agreement was entered of record.*fn6 Appellant, however, did not obtain a subordination from Yajko until eighteen months later, on May 2, 1973, after paying Yajko $3,000. The Sheriff's sale was on May 7, 1973.*fn7

[ 243 Pa. Super. Page 476]

At the time of the sheriff's sale, the order of priorities was as follows (Record 169a):

(1) Mortgage -- Archimede ...


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