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COMMONWEALTH PENNSYLVANIA EX REL. PENNSYLVANIA SECURITIES COMMISSION v. RELIANCE DEVELOPMENT CORP. (10/20/78)

decided: October 20, 1978.

COMMONWEALTH OF PENNSYLVANIA EX REL. PENNSYLVANIA SECURITIES COMMISSION,
v.
RELIANCE DEVELOPMENT CORP., TRANS CORPORATION, TRAV-VERSE LTD., REDEVCO, INC., AND GOLFCO CORP., EX REL. BUSHKILL TOWNSHIP. APPEAL OF RELIANCE DEVELOPMENT CORPORATION (AT NO. 850). APPEAL OF ANTHONY AND JEAN MERLO, INTERVENORS (AT NO. 864)



Nos. 850 and 864 October Term, 1977, Appeal from the Order dated January 3, 1977, of the Court of Common Pleas, Civil Action, in Equity, of Northampton County at No. 15 October Term, 1971.

COUNSEL

Ronald W. Shipman, Easton, for appellant at No. 850, and appellee at No. 864.

Donald F. Spry, II, Bangor, for appellants at No. 864, and appellees at No. 850.

Joseph M. Reibman, Easton, for appellee, Bushkill Tp.

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

Author: Cercone

[ 258 Pa. Super. Page 278]

The instant appeal arises from a final decree in equity denying the claims of Mr. and Mrs. Anthony Merlo and the receiver for Reliance Development Corp. to a fund of money currently held in escrow by Bushkill Twp. in Northampton County. The effect of the decree was to award the fund to Bushkill Twp. We find this decree in error, and will reverse and remand for further proceedings. The relevant facts are as follows.

In March, 1969 Reliance Development Corp. purchased a parcel of land in Northampton County upon which it intended to develop a residential housing plan. In furtherance of that purpose Reliance submitted a subdivision plan to the Lehigh-Northampton Joint Planning Commission. The plan, called Camelot, envisioned dividing the parcel into numerous lots which were to be accessible to nearby highways by two proposed new streets called Round Table Drive and Arthur's Court. The planning commission approved the subdivision plan but, in order to assure that Reliance would construct the new streets as needed, and according to specifications, the planning commission required Reliance to deposit money in escrow. Generally speaking, the expected course of performance was that Reliance would construct the streets as it sold and developed the various lots which fronted on them so that the homeowners' would have access to existing roads adjacent to the subdivision. As the streets were constructed Bushkill Twp. would remit portions of the fund equal to five dollars per foot of lot frontage on the streets. In the event of default, Bushkill Twp. was empowered to use the escrowed funds to build the streets through the plan as needed.

[ 258 Pa. Super. Page 279]

Unfortunately, not long after the subdivision plan was approved and the escrow account was established in May, 1970, it became apparent that Reliance's expectations of a successful real estate venture were not going to be fulfilled. Having developed and sold only one lot in the plan, and not having constructed any roadway, Reliance became insolvent. In November, 1971, the real estate was purchased at Sheriff's sale by the Merlos, and in December, 1971, a receiver was appointed for Reliance. The Merlos completed the development and constructed the streets, including so much of the street necessary to provide access to the adjacent highways for the owners of the home which Reliance had sold. When the development was satisfactorily completed and the streets were accepted by Bushkill Twp., Reliance filed a petition for a rule to show cause why Bushkill Twp. should not pay over the money remaining in the escrow account to the use of Reliance. Bushkill Twp. interpleaded the Merlos, who also claimed the fund on the basis of their having completed the streets in accordance with the subdivision plan. Ultimately, the court en banc determined that neither Reliance nor the Merlos had a claim to the fund superior to possessory interest of Bushkill Twp. and, accordingly, awarded the money which now totals $7,446.56, plus interest, to the township. From that decree both the Merlos and the receiver for Reliance have appealed.

The relevant provisions of the written escrow contract between Reliance and Bushkill Twp. establish that the escrow fund was provided in consideration for the approval of the subdivision plan by the joint planning commission. The agreement expressly states that its purpose is "to assure Township that the aforesaid improvements [Round Table Drive and Arthur's Court] will be made by Developer as lots are sold or developed therein." The contract also stated that construction of the streets " will be made and completed as needed by virtue of sales or development of the lots from [the] Plan." The amount of money in escrow was to equal "five dollars per foot on all land sold and/or developed abutting on said streets," and the money so deposited was to

[ 258 Pa. Super. Page 280]

    remain in escrow until the "streets are actually installed and accepted by Township, and said funds to be released and paid to developer from time to time as the same are installed and accepted by Township." The contract also purported to provide the sole remedy in case Reliance breached the agreement: "In the event Developer fails to construct said streets within two (2) years of the date of any sale or development in which said construction is contemplated, the funds so deposited in escrow shall be paid to the Township solely for the purpose of constructing said streets and payment to the Township by the escrow holder shall be a complete discharge and release for ...


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