PIONEER PLUMBING SUPPLY COMPANY, an Arizona corporation, and H. E. Davis, dba Rural Plumbing Company, et al., Appellants, v. SOUTHWEST SAVINGS AND LOAN ASSOCIATION, an Arizona corporation, Appellee, 102 Ariz. 258

Summary

The lender and developer had entered into separate loan and construction agreements for each of thirty-six separate mortgages on lots and on houses to be built on the lots. The construction loan required the lender to disburse moneys to an escrow agent as certain phases of the construction were completed. The construction loan contract stated that, in case of default, the lender was entitled to undisbursed loan funds for its sole protection. The plumbing suppliers relied on representations made by the developer's officers that the suppliers would be paid from the construction loan funds for their materials. When the developer abandoned construction and stopped making payments, the lender brought an action to foreclose. The suppliers counterclaimed that they were entitled to an equitable lien to satisfy their claim against each lot. The court reversed the lower appellate court and affirmed the superior court's decision. The court found that (1) the lender did nothing to induce the ...