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TRUSTEES C. I. MORTGAGE GROUP v. STAGG HUNTINGTON (04/19/77)

decided: April 19, 1977.

TRUSTEES OF C. I. MORTGAGE GROUP, APPELLANT,
v.
STAGG OF HUNTINGTON, INC. (D. C. GOODMAN & SONS, INC.), APPELLEE



Appeal From the Order Dated April 23, 1975, of the Court of Common Pleas, Civil Action, Law, of Huntingdon County at Nos. 47 and 89 J.D., April Term, 1974; No. 2 E.D., September Term, 1974 (Mortgage Foreclosure). No. 1307 October Term, 1975.

COUNSEL

James E. Himes, Huntingdon, with him Himes, Himes & Feltham, Huntingdon, for appellant.

William J. Myers, Huntingdon, for appellee.

Watkins, President Judge, and Jacobs, Hoffman, Cercone, Price, Van der Voort and Spaeth, JJ. Price, J., concurs in the result. Spaeth, J., files a dissenting opinion in which Jacobs and Hoffman, JJ., join.

Author: Watkins

[ 247 Pa. Super. Page 338]

This case comes to us on appeal from an Order of the Court of Common Pleas of Huntingdon County, Civil Court Division, which granted exceptions filed by a subcontractor to a sheriff's Statement of Distribution following a sheriff's sale.

Appellant, Trustees of C. I. Mortgage Group, was the mortgagee of a piece of real estate upon which a shopping center was to be built in Smithfield Township in Huntingdon County. Appellant had obtained a mortgage foreclosure on the above real estate and had purchased the property at the sheriff's sale when its loan became subject to default. Stagg of Huntington, Inc., (Stagg) was the defendant in the mortgage foreclosure action. D. C. Goodman & Sons, Inc., (Goodman) was a subcontractor who had performed work on a portion of the shopping center for which it had not been paid and which formed the basis of its mechanic's lien.

On September 1, 1971 Stagg acquired title to the premises which was the subject of the mortgage foreclosure. On September 24, 1971 a mortgage in favor of appellant was recorded covering the subject property. The mortgage was an advance-money mortgage providing for advancements to be made as the buildings in the shopping center progressed, to the extent of $1,600,000.

On September 24, 1971 a stipulation against mechanic's lien was filed of record in the Prothonotary's Office of Huntingdon County with Stagg of Huntington, Inc., (Stagg) as the owner and Stagg Contracting Company as the contractor. On December 30, 1971 Stagg executed a deed, recorded on March 6, 1972, which conveyed the real estate to Huntingdon Associates. On December 17, 1973 a mechanic's lien was filed by Goodman covering work performed on a

[ 247 Pa. Super. Page 339]

    portion of the shopping center from January 2, 1973 to September 20, 1973. The amount of the lien was $36,756.69. After appellant had foreclosed its mortgage on the premises and purchased the premises at the sheriff's sale for the sum of $1,488,000, Goodman filed exceptions to the Schedule of Distribution which had provided appellant with the total proceeds of the sale. After a hearing, the court below sustained Goodman's exceptions to the Schedule of Distribution on April 23, 1975. Appellant then took this appeal claiming that the original Schedule of Distribution was correct.

At the outset it should be emphasized that because of the privilege extended by the legislature in the mechanic's lien law it must be strictly construed. One issue is whether the advance of the last $600,000 by C. I. Mortgage was obligatory under the terms of the mortgage agreement with Stagg. Under the terms of the mortgage agreement the last $600,000 was to be advanced to Stagg upon presentation to the mortgagee of a lease between Stagg and a third party for part of the shopping center. The advance was made by the mortgagee prior to the presentation of any such lease. Therefore there is an issue as to whether the condition precedent to the last advance was met. If not, this would render the last $600,000 nonobligatory.

Additionally there is the fact that on December 30, 1971 Stagg conveyed the real estate which was subject to the mortgage to another party (Huntingdon Associates). This conveyance was made without the written permission of C. I. Mortgage and thus was in direct violation of paragraph 11 of the building loan agreement made between C. I. Mortgage and Stagg. Therefore the last advance made by C. I. Mortgage was also nonobligatory since Stagg had violated the building loan agreement by transferring the real estate in violation of the agreement. Advances made pursuant to an advance-money mortgage take lien precedence over a mechanic's lien if the mechanic's lien is filed ...


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