No. 231 October Term, 1979, Appeal from Judgment entered January 9, 1979, by the Court of Common Pleas, Philadelphia County, Trial Division, at January Term, 1975, No. 3817.
Victor Wright, Philadelphia, for appellant.
Joseph H. Huston, Jr., Philadelphia, will not file a brief on behalf of Southeastern Pennsylvania Economic Development Corp. and The Greater Philadelphia Foundation, appellees.
David P. Bruton, Philadelphia, for Girard Trust Bank, appellee.
Price, Van der Voort and Wieand,*fn* JJ.
[ 275 Pa. Super. Page 597]
Is a lending institution liable to a general contractor for work done pursuant to contract with an owner where the owner has become insolvent and there are loan proceeds which remain undistributed? This is the issue raised on appeal following the lower court's granting of the lender's motion for summary judgment.
In 1972, when the Ford Motor Company determined to close the old Philco plant at Wissahickon Avenue and Abbottsford Road in Philadelphia, the Greater Philadelphia Chamber of Commerce negotiated an agreement by which Ford conveyed the property to the Greater Philadelphia Foundation (GPF), a nonprofit corporate affiliate of the Chamber. In turn, GPF entered a lease and lease back arrangement with Southeastern Pennsylvania Economic Development Corporation (SPEDCO). Plans were made to renovate the premises and convert the same into a modern
[ 275 Pa. Super. Page 598]
industrial complex to be known as the SPEDCO Industrial Mall. It was hoped that by attracting commercial and industrial tenants jobs could be made available to offset the loss of jobs caused by the Philco plant shutdown.
Financing for the project was obtained from three sources. The first was a two million dollar loan from the Pennsylvania Industrial Development Authority (PIDA), an agency of the Commonwealth of Pennsylvania. The second was a working capital loan of $450,000 from a consortium of three banks, Philadelphia National Bank, First Pennsylvania Banking and Trust Company, and Girard Trust Bank. The third source was a one million dollar construction loan from the same three banks. Girard acted as the disbursing institution under the three loans.
R. M. Shoemaker Co., appellant, was the general contractor employed by GPF and SPEDCO to do the work pursuant to a construction agreement executed on September 12, 1972. According to the terms thereof, Shoemaker was to be paid its costs, plus 4% overhead and a profit of 6%. Initial construction costs were paid from the proceeds of the PIDA loan. Appellant's vouchers were submitted for approval to an architect and SPEDCO's construction committee, and funds were disbursed by Girard in accordance therewith.
By March, 1974, only $19,500 of the PIDA loan remained undisbursed. The $450,000 working capital loan had also been paid out. On March 19, 1974, Girard received appellant's voucher No. 11 for $243,595.14; on April 8, 1974, a final voucher for $6,613.20 was also received. The construction loan agreement contained a clause which required that at the time of disbursing loan proceeds "no event of default hereunder shall have occurred and be continuing." An event of default was defined to include the insolvency of GPF. Girard believed that GPF had become insolvent by March 19, 1974 and refused to disburse the proceeds of the construction loan. The remaining PIDA funds were disbursed, however, for all ...