The opinion of the court was delivered by: HANNUM
The following facts have been stipulated:
1. On or about December 8, 1955, defendant, a corporation organized and existing under the laws of the Commonwealth of Pennsylvania, made a mortgage loan in the amount of $200,000 to I.J. Knight Realty Corp., a closely held corporation. The loan was secured by a mortgage on the land and building known as the Fretz Building, located at 10th and Diamond Streets in Philadelphia.
2. All of the shares of the capital stock of Knight were owned by Maurice Shorenstein, Joseph Levinthal and Irving J. Schwartz.
3. At the time of making the aforesaid loan, defendant obtained independent appraisals of the mortgaged real estate in the amounts of $533,000 and $560,000, respectively.
4. On or about May 8, 1959, all of the outstanding shares of the capital stock of Knight were sold by Messrs. Shorenstein, Levinthal and Schwartz to one Nathan C. Hoffman. As of that date, the principal balance of the mortgage was $175,000.
5. On or about May 9, 1959, the mortgaged premises were substantially damaged by fire. Claims against the insurer of the premises were settled by Knight for a sum in excess of $112,000 of which $20,000 was used to reduce the mortgage principal to $155,000.
6. From 1959 to 1962, only $6,000 was paid on account of the mortgage principal, reducing the principal balance to $149,000. By reason of these circumstances, the mortgagor was in default with respect to amortizing the mortgage.
7. In September 1962, Knight defaulted on the interest due on the mortgage and defendant became mortgagee in possession.
8. On November 16, 1962, defendant agreed to sell to Nathan C. Hoffman, President of Knight, he acting with the knowledge and approval of all of Knight's officers, directors, and shareholders, the aforesaid mortgage having a principal balance of $149,000 for $65,000.
9. Thereafter, on November 16, 1962 Knight filed a Petition under the provisions of Chapter XI of the Bankruptcy Act and plaintiff, a member of the Bar of this Court, was appointed receiver by the Honorable Francis L. Van Dusen.
10. Thereafter on November 16, 1962 defendant gave to Seymour S. Hoffman a letter reflecting the agreement referred to in Paragraph 8 hereof and acknowledging the receipt of $2,500 toward the purchase price of $65,000. At this ...