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filed: June 12, 1981.


No. 1879 October Term, 1979, Appeal from Order of the Court of Common Pleas, Civil Division, of Chester County at No. 2, February Term, 1978, Execution.


Stuart N. Cohen, King of Prussia, for appellant.

James J. Garrity, Norristown, for appellee.

Hester, Cavanaugh and Van der Voort, JJ.

Author: Cavanaugh

[ 287 Pa. Super. Page 521]

The proceedings in the lower court in this case were on exceptions to a sheriff's schedule of proposed distribution. The schedule was filed following execution of a writ by the Sheriff of Chester County. Exceptions were filed by the appellant pursuant to Pa.R.C.P. 3136. The writ of execution was filed by the plaintiff in the court below, Conshohocken Federal Savings and Loan Association, against the property of the defendant, Period & Country Homes, Inc. Following a hearing before Judge Thomas A. Pitt, Jr., the exceptions were dismissed. The exceptant has appealed from the order of dismissal.

The facts in this case are complex, but basically are not in dispute. In May and November, 1974, General Development Corporation sold three lots to Period & Country Homes, Inc. (hereinafter called P. & C. Homes) and took back three purchase money mortgages to secure indebtedness in the total amount of $30,000.00. Two new homes were to be built on the lots by P. & C. Homes. Prior to the recording of the purchase money mortgages given to General Development, Conshohocken Federal Savings and Loan Association (hereinafter called ConFed) loaned P. & C. Homes $276,000.00 for the construction of the two homes. The three lots

[ 287 Pa. Super. Page 522]

    involved were lots No. 28 and 29 Wyllpen Drive on which one house was to be built and No. 48 Hunter Circle on which another house was to be constructed. General Development, whose president was Richard Dilsheimer, was the developer of Wyllpen Farms, a subdivision in Chester County, and P. & C. Homes, whose president was Charles E. Pusey, was one of several builders who were constructing homes at Wyllpen Farms. As work progressed by P. & C. Homes it became clear that the original loan to it by ConFed would be insufficient to complete the homes. By December, 1975, it became necessary for ConFed to inject additional funds into the financially ailing P. & C. Homes. On December 24, 1975, three interrelated contracts were signed, although not necessarily involving the same parties, as follows: (1) a construction loan agreement between ConFed and P. & C. Homes; (2) a construction agreement between Homes & Homesteads, Inc. and P. & C. Homes; and (3) a subordination agreement postponing mortgages entered into between General Development, ConFed and P. & C. Homes.

Under the construction loan agreement ConFed loaned P. & C. Homes $70,400.00 secured by a mortgage on the three lots sold by General Development to P. & C. Homes, which were already subject to the purchase money mortgage from P. & C. Homes to General Development. The purpose of the $70,400.00 construction loan was to put the two homes under construction in such a state that buyers could be found for them. Under the construction loan agreement, P. & C. Homes was referred to as "owner" and ConFed was referred to as "lender." The agreement provided as follows in Section 15(G):

(G) That the Lender shall assume no liability whatsoever to the Owner, his contractors, sub-contractors and materialmen, or others, except for its malfeasance in the application of the said funds for the purpose hereinbefore recited and shall be fully protected in making any payment upon the faith of any requisition, inspector's certificate or release of lien or other instrument, believed by it to be genuine and to have been duly executed by the

[ 287 Pa. Super. Page 523]

    proper parties, and the Owner does hereby release and discharge the Lender of and from any such liability and hereby further agrees to indemnify and save harmless the said Lender of and from any and all liability, damages, costs and expenses which it may sustain by reason of its application of said funds in good faith for the purposes hereinbefore set forth.

The second agreement entered on December 24, 1975, was the construction agreement between Homes & Homesteads, Inc. and P. & C. Homes. Mr. Pusey was the president of Homes & Homesteads, Inc. as well as being president of P. & C. Homes. It is interesting to note that although the construction agreement was entered into between two separate corporations, Charles E. Pusey signed as both president and secretary of Homes & Homesteads, Inc. and also signed as president and secretary of P. & C. Homes. This agreement stated that Homes & Homesteads, Inc. (referred to as contractor in the agreement) was to provide labor and material on the homes being built on lots 28 and 29 and lot 48 which were owned by P. & C. Homes and referred to in the agreement as "owner." ConFed was not a signatory to this agreement but it was stated that it was understood that ConFed, designated as "Lender" in the agreement "has lent the Owner a certain sum of money secured by a first mortgage on the property above described . . . It is expressly understood, however, that the Lender is not the Agent of either the Owner or Contractor, and shall in no event be held liable for any neglect, omission, default, or breach on the part of the Owner or Contractor." Article IX of this agreement also provided as follows:

It is further understood . . . that the Lender [has] in its possession . . . the total amount of . . . $70,400.00 which shall be held by the Lender and applied to the contract price above set forth, which sum shall be paid by the Lender directly to those furnishing labor and/or materials, as the case may be, in accordance with a table of payments which shall be filed with the Lender by the Contractor, based substantially on the following schedule: On

[ 287 Pa. Super. Page 524]

Friday of each week beginning one week after commencement of work, Contractor shall submit to owner a voucher for 90% of the value, based on invoice or contract prices of labor and materials incorporated in the structure and of materials delivered to the site of the work, less the aggregate of previous payments, which voucher, when approved by Owner shall be paid within ten days after; and final payment of the contract price within one month after the full completion of the work, upon presentation of a voucher by Contractor to owner certifying completion and on delivery of a full and complete Release of Liens duly executed by the Contractor and all sub-contractors and materialmen, at which time Owner agrees to sign a certificate of completion.

The third agreement entered into on December 24, 1975, was the subordination agreement between General Development, ConFed and P. & C. Homes. The agreement stated that P. & C. Homes was the owner of lots 28, 29 and 48. The agreement further acknowledged that General Development was the owner and holder of three mortgages on the lots which have been duly recorded in the ...

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