No. 734 Philadelphia, 1982, Appeal from Order of the Court of Pleas, Civil Division, of Philadelphia County, No. 4027 January Term, 1982.
Charles J. King, Jr., Norristown, for appellants.
Louis J. Sinatra, Blue Bell, for Girard BK, appellee.
Donald K. Joseph, Philadelphia, for Wolfington, appellees.
Wieand, Olszewski and Popovich, JJ.
[ 334 Pa. Super. Page 564]
May the holder of a second mortgage obtain injunctive relief which restrains an assignment of funds which the mortgagor is entitled to receive on grounds that the assignment will render the mortgagor-assignor unable to comply with the terms of the first mortgage and thereby impair the security of the second mortgage? The trial court sustained preliminary objections in the nature of a demurrer and entered judgment in favor of the mortgagor and its assignee. We affirm.
The plaintiffs, V. Pinnock Bailey, III, William Geppert and Joseph Geppert, conveyed premises known as 100-102 Chestnut St. and 108 South Front St., Philadelphia, to Alexander Wolfington and Wolfington-Chestnut Associates, a limited partnership, for $600,000.00 plus one-half the profits to be derived from development of the premises as a residential and commercial project. The sum of $50,000.00 was made as a down payment; the balance was due in November, 1982. A mortgage was given to the plaintiffs to secure the payment of the balance. This mortgage, however, was subordinated to a construction mortgage intended to secure funds which Germantown Savings Bank agreed to advance for construction purposes. The loan agreement
[ 334 Pa. Super. Page 565]
required the mortgagor to maintain a construction fund which, with moneys to be advanced by the Germantown Bank, would always remain in an amount sufficient to complete the project. The mortgage held by plaintiffs was also subordinated to an easement for historic preservation made to obtain a grant from the Pennsylvania Historic and Museum Commission for construction and rehabilitation of the building's facade. Instead of placing the proceeds of this grant into the construction fund, the mortgagor-developer made an assignment thereof to Girard Bank. The consideration for this assignment, if any, has not been alleged. Plaintiffs do allege, however, that the assignment, if completed, will make it impossible for the assignor to maintain the construction fund in an amount adequate to comply with the terms of the loan agreement. They also allege that the holder of the first mortgage, Germantown Savings Bank, has given notice of default to the mortgagor-developer because the construction fund contains inadequate funds.
The present action in equity was brought to enjoin Girard Bank, the assignee, from receiving the proceeds of the Historic Commission's grant. It also sought to have Wolfington and Wolfington-Chestnut Associates declared constructive trustees of the grant and enjoined from assigning the grant or otherwise diverting the proceeds thereof from the cost of developing the land. Unless an injunction were issued, plaintiffs contended, the first mortgage would be foreclosed, with a resulting divestiture of their second mortgage. Girard Bank filed preliminary objections in the nature of a demurrer. It contended that plaintiffs had failed to state a cause of action and that, in any event, plaintiffs had an adequate remedy at law. Wolfington and Wolfington-Chestnut Associates also filed preliminary objections. On February 4, 1982, the trial court sustained preliminary objections and dismissed the complaint with prejudice. An opinion filed by the trial court after an appeal had been taken discloses the court's belief that plaintiffs have an adequate remedy at law and also that no cause of action
[ 334 Pa. Super. Page 566]
exists against the mortgagor-developer unless the balance due plaintiffs is not paid ...