Appeal from Order of the Court of Common Pleas, Civil Division, of Lebanon County, No. 896, 1983.
Thomas P. Harlan, Lebanon, for appellant.
Samuel G. Weiss, Jr., Lebanon, for appellees.
Wieand, Montemuro and Johnson, JJ.
[ 362 Pa. Super. Page 94]
This appeal requires that we determine the priority of the liens of two purchase money mortgages, one of which is
[ 362 Pa. Super. Page 95]
held by the seller of the mortgaged property and the other by a lending institution which advanced money to the mortgagor to enable the mortgagor to purchase the mortgaged property.
By agreement dated May 29, 1981, Leroy Schucker agreed to sell and Ralph and Kathryn Bomberger agreed to buy the Halfway Tavern in Lebanon County for a consideration of One Hundred Twenty-Five Thousand ($125,000.00) Dollars. The agreement was subsequently amended to provide that the sellers would borrow Eighty-Five Thousand ($85,000.00) Dollars from Farmers Trust Company, to be secured by mortgage constituting a first lien on the premises. The seller agreed to provide the remaining Forty Thousand ($40,000.00) Dollars, which, by the express terms of the agreement, was to be secured by a mortgage whose lien would be "a second mortgage on the premises after the first mortgage of the Farmers Trust Company." In reliance on this supplemental agreement, the bank agreed to lend the purchasers the sum of Eighty-Five Thousand ($85,000.00) Dollars. The transaction was closed on June 24, 1981. The deed was recorded at 2:10 p.m.; the mortgage to the bank was recorded at 2:11 p.m.; and the seller's mortgage was recorded at 2:12 p.m. As a result of a mutual mistake, however, the bank's mortgage did not contain language expressly providing that it was a purchase money mortgage; and the mortgage held by the seller did not contain language that it was intended to be subordinate to the mortgage held by the bank.
The purchasers defaulted and, on June 7, 1983, the bank instituted foreclosure proceedings. When the purchasers went into bankruptcy, however, the foreclosure proceedings were stayed. On March 21, 1984, the stay order was vacated, and the premises were thereafter scheduled for sale by the sheriff. Shortly before the sale, Schucker, the seller, notified the sheriff that he held a first lien on the tavern and expected to be paid first from the proceeds of the sale. At the sheriff's sale, the bank purchased the
[ 362 Pa. Super. Page 96]
tavern property for a high bid of Forty-Four Thousand ($44,000.00) Dollars. The sheriff filed a schedule of distribution in which he proposed to pay the Schucker mortgage in full before distributing any part of the proceeds to Farmers Trust Company. The bank filed exceptions to the sheriff's schedule of distribution in which it alleged the foregoing facts and to which were attached copies of the relevant documents. The seller did not deny the facts. Instead, he filed a motion for summary judgment in which he conceded the correctness of the facts recited by the bank. His motion for judgment did not allege estoppel as a basis for the entry of judgment in his favor; it relied solely on the state of the record at the time of the sale. The motion was argued before the Honorable John Walter, who denied the same. Thereafter, the bank filed a separate motion for summary judgment which came before the Honorable Robert J. Eby for decision. Judge Eby denied the bank's motion and, instead, entered an order granting summary judgment in favor of Schucker, the seller. The basis for this decision was the trial court's determination that the bank should be estopped to assert a mistake in the preparation of the mortgage documents because it had waited too long to correct the same.*fn1 Farmer's Trust Company appealed. We reverse.
Where exceptions to the distribution of the proceeds of a foreclosure sale are filed, a court will hear and determine them according to law and equity. 22 Std.Pa.Prac.2d § 121:120. See: Donnan v. Barnes, 272 Pa. 33, 115 A. 883 (1922). The priority of liens as they appear on record is prima facie evidence of the manner in which the proceeds are to be distributed. 22 Std.Pa.Prac.2d § 121:120. See: Gosser v. Yohn, 67 Pa. Super. 521 (1917). However, if the exceptant can produce evidence that he is equitably entitled to ...