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United States v. Ivy Hall Apartments Inc.

filed: November 19, 1962.

UNITED STATES OF AMERICA
v.
IVY HALL APARTMENTS, INC. AND LEON SIDELL, CLAIMANT, APPELLANT.



Author: Forman

Before STALEY and FORMAN, Circuit Judges, and LANE, District Judge.

FORMAN, Circuit Judge.

On June 13, 1957 appellant, Leon Sidell, purchased the stock of Flamingo Apartments, Inc.*fn1 (Flamingo) from H.S.R. Realty Corporation, Inc. (H.S.R.). At the time of said sale the sole stockholder appears to have been the late Nelson Hause.*fn2 The main asset of Flamingo was a fifteen story apartment house in Philadelphia, encumbered by a mortgage to secure a bond for $2,533,000 given to the Irving Trust Company in 1950 which had been reduced in principal but little. The mortgage was insured by the Federal Housing Administration. Upon default in principal and interest the Federal Housing Administration. Upon default in principal and interest the Federal Housing Administration was called upon to take over the mortgage.

On December 22, 1958, the United States, on behalf of the Federal Housing Commissioner, filed a complaint for a judgment on the bond, and for the foreclosure of the mortgage, in the United States District Court for the Eastern District of Pennsylvania. That court appointed forthwith receivers, pursuant to the terms of the mortgage, to take charge of the property and collect the rents for the benefit of the mortgagee pending the litigation. On August 5, 1959 default resulted in judgment on the bond for $2,489,508.79 and on January 29, 1960 an order was entered for a judicial public sale of the mortgaged property on March 1, 1960.

Meanwhile Mr. Sidell had asserted three claims to the receivers as follows: (1) That certain furniture contained in 48 of the 300 apartments constituted his personal property and was not covered by the mortgage; (2) that rental for such furniture was due him from October 1, 1957 through September of 1960; and (3) that he should be reimbursed for cash advances he had made to Ivy Hall Apartments, Inc.*fn3 (Ivy Hall) prior to the appointment of the receivers. Negotiations for the settlement of the claims were in progress with the United States Attorney for the Eastern District of Pennsylvania, as counsel for the Federal Housing Administration, as the time approached for the public sale. It was deemed by all the parties in interest that it would be of advantage to sell the items of furniture along with the real estate with the understanding that Mr. Sidell's claims, if sustained, would attach to the funds in the hands of the receivers resulting from their rent collections. It was so stipulated and the property, real and personal, was exposed for sale. The only bidder was the Federal Housing Commissioner and the price was in excess of $500,000 less than the principal and interest due under the mortgage.

The receivers petitioned the District Court for leave to pay, among others, Mr. Sidell's claim for cash advances made by him to Ivy Hall prior to the receivership

of $16,785.73.

They also proposed to pay

him for the value of the

furniture claimed by him 15,225.00

and for furniture rental

from October 1, 1957 to December 21, 1958 9,358.98

and for furniture rental

from December 22, ...


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