Pioneer Plumbing Supply Co. V. Southwest Savings And Loan Association

Southwest and W. & R., entered into separate construction and loan agreements for each of thirty-six separate mortgages on lots and houses to be built thereon. The amount to be loaned on each home was specifically provided for in each of the mortgages and in the construction loans. The construction loan also provided that such amount be disbursed by Southwest to the Union Title Company as escrow agent periodically as certain phases of the construction were satisfactorily completed. Rural was employed by W. & R., and did the plumbing work on all thirty-six houses. Pioneer supplied the materials which Rural used on these houses, and both parties allege through uncontradicted affidavits that they relied on representations made by officers of W. & R. that they would be paid out of the construction loan funds for their services and materials. The construction loan contract specifically set out that in case of W. & R.'s default, Southwest was entitled to the undisbursed loan funds to offset its losses. These same contracts further provided that they were for the sole protection of W. & R. and not for the benefit of third parties. Without notice to anyone, W. & R. abandoned construction and stopped making payments on the notes. Pioneer and Rural filed timely mechanics' and materialmen's liens on the lots. Southwest treated the abandonment as a default on the mortgages and brought suit to foreclose the mortgages. Both Rural and Pioneer counter-claimed, requesting that the mortgages not be foreclosed in the manner that Southwest requested, but that Rural and Pioneer should be entitled to an equitable lien to satisfy their claim against each lot, and that Southwest should only receive such monies in the construction loan funds which exceeded the amounts claimed by counter-claimants on the respective lots.