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SIGNAL CONSUMER DISCOUNT COMPANY v. ANTHONY L. BABUSCIO AND BARBARA L. BABUSCIO (07/12/78)

decided: July 12, 1978.

SIGNAL CONSUMER DISCOUNT COMPANY, PLAINTIFF,
v.
ANTHONY L. BABUSCIO AND BARBARA L. BABUSCIO, ORIGINAL DEFENDANTS APPELLANTS, V. OLD REPUBLIC LIFE INSURANCE COMPANY, ADDITIONAL DEFENDANT APPELLEE



No. 132 April Term, 1978, Appeal from the Order of the Court of Common Pleas of Allegheny County, Civil Division, entered at Docket Entry GD 77-07035.

COUNSEL

Edward A. Olds, Pittsburgh, for appellants.

Sidney Baker, Pittsburgh, for appellee.

Jacobs, President Judge, and Hoffman, Cercone, Price, Van der Voort, Spaeth and Hester, JJ. Spaeth, J., dissents.

Author: Hoffman

[ 257 Pa. Super. Page 103]

This case presents an issue of first impression in Pennsylvania: do the Pennsylvania Rules of Civil Procedure permit a defendant in a mortgage foreclosure action to join an additional defendant whose purported liability to either the mortgagee or the original defendant is based upon an assumpsit claim? The lower court answered this question in the negative, sustained appellee's preliminary objections, and dismissed appellants' third party complaint. We affirm.

On March 31, 1977, Signal Consumer Discount Co. (hereinafter Signal) filed a complaint in mortgage foreclosure against appellants, Anthony and Barbara Babuscio, in the Allegheny County Court of Common Pleas. The complaint alleged that on December 6, 1974, Signal loaned appellants $5366.40; as security, appellants executed a mortgage with Signal as mortgagee on their residential property at 2824 Connecticut Avenue in Pittsburgh. After November, 1976, appellants failed to meet the monthly loan payment obligations; a principal balance of $3649.74 remained outstanding. Signal's mortgage foreclosure action requested this sum plus an attorney's commission of 15% of the unpaid balance.

On April 27, 1977, appellants filed an answer and new matter. Appellants admitted that they had secured a loan from Signal and executed a mortgage in its favor, but denied defaulting on their loan obligations. In new matter, appellants made the following allegations: Signal conditioned its extension of credit upon appellants' purchase of a disability insurance policy. Pursuant to a continuing business relationship, Signal referred appellants to appellee, Old Republic Life Insurance Co. (hereinafter Old Republic or appellee). On December 6, 1974, the same date as the loan and mortgage transaction, appellants purchased the required policy. This policy provided that if appellant Anthony Babuscio suffered total disability, Old Republic would pay

[ 257 Pa. Super. Page 104]

    appellants' monthly loan obligations to Signal directly during incapacity.*fn1 When Anthony Babuscio suffered total disability in May 1976, Signal sought and accepted payment of the monthly loan obligation from appellee instead of appellants over the ensuing six month period. However, after November, 1976, despite the continuing and total nature of Mr. Babuscio's disability, Signal stopped demanding and receiving payments from appellee. In short, appellants' new matter charged that the mortgage transaction included three interrelated documents: the loan note, the mortgage, and the disability insurance policy. These documents, read together, imposed a contractual duty upon Signal to seek payment of monthly loan obligations from appellee rather than appellants in the event of Mr. Babuscio's total disability. Signal allegedly failed to observe this duty.

In its reply to appellants' new matter, Signal denied that it conditioned the loan upon appellants' purchase of a disability insurance policy from Old Republic; instead, Signal asserted that it had merely suggested the advisability of this insurance. When appellants indicated a desire to obtain disability insurance coverage, Signal suggested that they contact Old Republic. Signal conceded that, under the insurance contract, Old Republic would be primarily liable for payment of appellants' monthly loan obligations during periods when Mr. Babuscio suffered total disability. Further, Signal admitted that after it first learned of Mr. Babuscio's disability, it received and accepted $376.99 from Old Republic in partial payment of appellants' obligations. However, Old Republic stopped payment, and Signal did not protest, when the Babuscios failed to provide corroboration of the total disability claim. Finally, Signal averred that it did not have sufficient information to form a belief as to whether Mr. Babuscio's total disability had ceased prior to the initiation of its mortgage foreclosure action.

[ 257 Pa. Super. Page 105]

On June 3, 1977, appellants filed a third party complaint against appellee, Old Republic, which sought to join appellee as an additional defendant. This complaint alleged that Signal and Old Republic enjoyed an ongoing business relationship in which Signal, acting as Old Republic's agent, required its credit customers, including appellants, to secure an Old Republic disability insurance policy. Although the insurance policy required Old Republic to pay appellants' monthly loan obligations directly to Signal during Anthony Babuscio's total disability, Old Republic discontinued payments a few months after Babuscio suffered a totally incapacitating auditory illness. As a consequence, appellants' monthly loan obligations were not satisfied and Signal, pursuant to an acceleration clause in the mortgage document, demanded payment of the entire balance ...


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