The opinion of the court was delivered by: KRAFT
Plaintiff, acting for the Federal Housing Commissioner, instituted this action to foreclose a real estate mortgage and an accompanying chattel mortgage created by Ivy Hall Apartments, Inc., on property situate in Philadelphia.
On December 22, 1958, pursuant to an agreement contained in the mortgage, we appointed receivers to take charge and possession of the mortgaged premises, to manage and operate the same and to collect the rents and income therefrom, under the orders and supervision of the Court, during the pendency of the action.
In the course of the foreclosure proceedings, Leon Sidell, President and sole stockholder of the corporate mortgagor, claimed ownership of various articles of furniture located upon the mortgaged premises which were not described in the chattel mortgage. Counsel for all parties thereafter stipulated that the furniture claimed by Sidell should be sold at public sale free and clear of all claims and liens together with the mortgaged premises and chattels. Sidell also claimed to be entitled to reimbursement for advances allegedly made by him to the corporation before the foreclosure proceeding in the aggregate sum of $ 16,785.73.
The mortgaged real estate and chattels and the furniture were subsequently sold at public sale to the only bidder, the Federal Housing Administration, for a sum far below the amount of the debt, and we entered an order confirming the sale.
On September 30, 1960, in accordance with a stipulation of counsel, we ordered, inter alia, that Sidell's claims be relegated to the funds in the hands of the receivers.
The receivers duly filed their account, and, on December 19, 1960, we ordered that the sum of $ 60,500 be paid to the Clerk of this Court, to be held by the Clerk in the registry of the Court pending disposition of contested claims against the fund.
The only claims against the fund now before us are Sidell's claims (1) for reimbursement for advances to the corporation in the amount of $ 16,785.73, (2) for the value of the disputed furniture and (3) for rental for the same furniture during the period of receivership and for an additional period prior thereto. Counsel have expressly stipulated, both formally and at the hearings, that this Court has jurisdiction in this proceeding to adjudicate the issues in controversy.
Sidell's claim for reimbursement for advances allegedly made by him to the corporation prior to the foreclosure proceeding requires little discussion. The claim is apparently pressed because of the difficulty experienced by his counsel in perceiving the essential difference between this proceeding and one in bankruptcy. At best, Sidell is nothing more than an unsecured, general creditor of the corporate mortgagor. This proceeding is one in which the corporate mortgagee, conformably to the terms of the mortgage, took possession as mortgagee, through receivers appointed by the Court, during the foreclosure proceeding. Sidell had no lien against the mortgaged premises and, even had his claim been reduced to judgment, it would have been junior to the mortgage lien and discharged by the sale. As an unsecured, general creditor, his position was weaker still. This fund which accrued from rentals collected by the mortgagee in possession was insufficient to pay the costs of operation and the interest and principal installments in default and so left nothing available for the corporation. Sidell's claim for reimbursement in the sum of $ 16,785.73 will therefore be disallowed.
Sidell made a half-hearted attempt to show that counsel had reached an agreement on the validity and the amount of his claims for the furniture and the rental thereof. The evidence is conclusive that no agreement was consummated. There were meetings in the office of Government counsel in an attept to reach a settlement. The Government's counsel made certain recommendations to the Federal Housing Administration. However, as counsel testified, 'The client rejected vigorously my recommendation.'
Sidell's testimony with respect to his ownership of the furniture was confused, contradictory and wholly dissuasive, and was altogether insufficient to establish to our satisfaction the fact of ownership. Moreover, he failed to offer a scintilla of evidence bearing either on the value of the furniture or its fair rental value for the periods claimed.
Sidell testified that on June 14, 1957, he purchased the stock of defendant corporation (then Flamingo Apartments, Inc.) from the HRS Realty Corporation, which was 'owned' exclusively by one Hause. He stated that he also 'bought the furniture in 48 units from Mr. Hause.' He said that he paid Hause $ 18,700 for the furniture, and that Hause still owed $ 6,000 on the original purchase price thereof, which Hause agreed to pay off by July 1959. Sidell testified that he assigned mortgages to Hause in payment of the stock and the furniture.
Not only did Sidell fail to produce any bills of sale or other written evidence of title to any of the furniture, but it appeared from his own documentary evidence that Hause had no title to transfer. Sidell offered in evidence a conditional sales contract, dated December 3, 1955, covering the sale of furniture for the cash selling price (exclusive of finance charges) of $ 13,407. The buyer named therein was 'Flamingo Apts., Inc.' Sidell explained that the contract was 'for the furniture most recently purchased by Mr. Hause and covered by what he was selling me.' Asked if the contract covered all or a portion of the furniture he purchased from Hause, Sidell testified: 'There were other things that were in the building which were not brand-new, which he indicated he had brought from an Ivy Hall Apartment building which he owned I think in Camden or across the river somewhere, and some of those things which made up the then total of the 48 units were almost new or fairly new in addition to this.'
Sidell testified that, in addition, he purchased 'two groups' of new furniture which were placed in the premises. He said that he paid for the furniture, and thus described the method of payment: 'The checks were drawn on the Ivy Hall Apartments account out of rent, paid for and then in turn charged to the amount that was due me from the moneys which I had been advancing ever since the day that I bought this.'
Sidell offered in evidence an informal 'Memorandum of Agreement,' dated June 1, 1957, wherein Sidell purported to 'rent' furniture to Flamingo Apartments, Inc., 'for monthly rental to be determined as follows: All sums of money charged to individual tenants for use of said furniture shall be totaled and paid over to Sidell or deposited at his direction.' ...