Irving Trust Co. v. Spruce Apartments

• Decision Date: 27 October 1930
• Docket Number: No. 5857.,5857.
• Citation: 44 F.2d 218
• Parties: IRVING TRUST CO. et al. v. SPRUCE APARTMENTS, Inc.
• Court: U.S. District Court — Western District of Pennsylvania

44 F.2d 218 (1930)

IRVING TRUST CO. et al. v. SPRUCE APARTMENTS, Inc.

No. 5857.

District Court, E. D. Pennsylvania.

October 27, 1930.

Arthur Littleton, of Morgan, Lewis & Bockius, of Philadelphia, Pa., Cardozo & Nathan, of New York City, and Francis H. Bohlen, Jr. (of Saul, Ewing, Remick & Saul), of Philadelphia, Pa., for complainants.

Joseph H. Sundheim and Sigmund H. Steinberg, both of Philadelphia, Pa., for Perpetual Building & Loan Ass'n.

Herman Moskowitz, of Philadelphia, Pa., for Morris J. Moskovitz Building & Loan Ass'n Sur Petitions of Morris J. Moskovitz Building & Loan Association, and Rules to Show Cause.

On March 17, 1930, Irving Trust Company, as corporate trustee, and Charles C. Moore, as individual trustee, under a trust mortgage dated June 16, 1924, made by Spruce Apartments, Inc., filed a bill in equity for foreclosure against the latter corporation and against the Handel & Haydn Building & Loan Association and Perpetual Building & Loan Association, subsequent mortgagees. On March 19, 1930, the Real Estate Land Title & Trust Company was appointed receiver in aid of foreclosure, and, as authorized in the decree, it took possession of the real estate covered by the mortgage, known as the Spruce Apartments, and of all the furniture, furnishings, and equipment therein, and continued to conduct and carry on the business of an apartment house and to collect the rentals, both those which accrued after the receivership and those which had accrued before the receivership and were then uncollected.

The Spruce Apartments, Inc., had, on August 3, 1925, executed and given to the Morris J. Moskovitz Building & Loan Association its bond for $25,000 with warrant of attorney to confess judgment and a mortgage upon real estate of the Spruce Apartments, Inc., not covered by the Irving Trust Company's mortgage, to secure the payment of $17,000.

On April 16, 1930, the petitioner caused judgment to be entered upon the bond in the court of common pleas No. 4 of Philadelphia county, whereupon damages were assessed by the prothonotary in the sum of $17,850. On the same day the petitioner caused a writ of attachment sur judgment to issue directed to the receiver as garnishee. On May 2, 1930, a decree of foreclosure was entered and a special master appointed with authority and direction to sell the property, both real and personal, at public sale in one lot and as an entirety.

On May 21, 1930, the appraisers appointed by the court appraised the furniture and furnishings in the apartment house and in the possession of the receiver as of a value of $6,807.65, based upon "what reasonably could be secured for the contents at a public auction sale."

The petitioner on June 5, 1930, asked leave of this court to prosecute a writ of attachment execution out of the court of common pleas against a fund of $2,094.45 in the hands of the receivers, being the amount of rents accrued before the receivership. It also asked leave to issue a writ of fieri facias directing the sheriff of Philadelphia county to levy upon the furniture and equipments contained in the apartment house. Upon these petitions, rules were allowed, and upon the petitions, rules, and answers the rules were discharged on June 26, 1930, without prejudice to the petitioner's assertion of its rights against the fund it had sought to attach, and the furniture and furnishings upon which it had sought to levy. Under the order of sale, the real estate, together with all the furniture, furnishings, and equipment, was sold by the master in one lot and as an entirety on August 1, 1930, for the sum of $50,000.

On August 22, 1930, the Morris J. Moskovitz Building & Loan Association filed two separate petitions, in one of which it recites the order of court of June 26, 1930, discharging its rule to show cause why it should not be permitted to issue a writ of fieri facias against the furniture and equipment, and also recites the sale of the property by the special master for $50,000. It asserts that its rights in the furniture and equipment are paramount to the rights of the complainants and defendant in the bill, and claims so much of the fund realized from the sale as equals the appraised value of the furniture and equipment, to wit, $6,807.65.

In its other petition setting forth the facts of the execution of the bond of the Spruce Apartments, Inc., for $25,000 with warrant of attorney, secured by mortgage upon real estate not covered by the Irving Trust Company's mortgage, it recites its judgment in the court of common pleas, assessment of damages in the sum of $17,850, and its attachment sur judgment directed to the receiver as garnishee. It further sets out interrogatories and answers in the attachment proceeding, showing that the sum of $2,094.45 is held by the receiver as garnishee, consisting of rents which had accrued prior to the appointment of the receiver. It claims the right to the sum of $2,094.45 as subject to attachment execution. It claims that the right of the petitioner to the fund is paramount to the right of complainants and defendants in the bill of foreclosure. Upon each of these petitions a rule to show cause was allowed.

Answers were filed to both of these petitions and rules.

The separate answer of Charles C. Moore, individual trustee, sets out that, at the time of the creation of the trust mortgage and the issuance of the bonds secured thereby, the Spruce Apartments, Inc., agreed to furnish to the trustees such title to the goods and chattels, which were to be placed on the mortgaged premises upon completion of the building, as should be satisfactory in form to the American Bond & Mortgage Company, Inc., the purchaser of the bonds, and to its counsel, in order that the trustees and the bondholders should be properly secured by a good and substantial title to, or lien against, such goods and chattels; that, pursuant to such agreement, upon completion of the hotel building on or about July 24, 1925, the Spruce Apartments, Inc., delivered to Moore a bill of sale conveying and transferring to him its right, title, and interest in and to all the beds, chairs, rugs, furniture, and furnishings generally in the hotel; that on July 25, 1925, Moore leased the furniture to Spruce Apartments, Inc. A copy of the lease is attached. It contains an option to terminate the lease. On March 21, 1930, after the appointment of the receiver, he exercised his option on behalf of the trustees, and the receiver has since held possession of the furniture and used it in the operation of the mortgaged premises by and with the authority of Moore. In accepting the bill of sale, Moore accepted it in trust for Irving Trust Company, corporate trustee under the mortgage, and in trust for the bondholders.

The description of the mortgaged property contained in the trust mortgage includes not only a description of the real estate, but also "all fixtures and articles used or to be used in the operation of said premises or any part thereof and of every other article, chattel, or thing used or to be placed in said building, whether herein enumerated or not, and constituting a part of the plant thereof and/or used in its operation as a hotel building." As between the mortgagor and the mortgagees, the mortgage or pledge of the furniture was good and enforceable. Klaus v. Majestic Apartment House Co., 250 Pa. 194, 95 A. 451.

While the furniture is not in hæc verba included in the mortgage, the general description of personal property above set forth, when accompanied by the specific pledge of the furniture and furnishings by Moore to the trustees, shows a clear intention on the part of the mortgagor to pledge all of the furniture and equipment contained in the building constituting a part of its plant and used in its operation as a hotel building.

Assuming, however, that a creditor, having a judgment entered prior to entry of the decree of the court putting the receiver in possession with authority to conduct the business of the mortgagor and to collect its rents, might, with leave of court, obtain a lien upon personal property so pledged through a writ of execution, or might proceed against the rents and issues of the property by attachment, it does not follow that, by virtue of a judgment entered after the property was in the possession of this court through its receiver, the creditor obtained any advantage whatever over other creditors. There is ample evidence to show that the petitioner had notice of the proceedings. Otherwise, it would not have summoned the court's receiver, as such, as garnishee in its endeavor to attach the rents in its hands. When the receiver was put in possession of the hotel as a going concern, the evident purpose was to enable it to be sold as such in order that the mortgagee and other creditors might realize an advantageous price at the sale. At the hearings upon the applications of the Perpetual Building & Loan Association for leave to sell the furniture under an execution upon its judgment, it was distinctly ruled that any claims against the proceeds of the furniture would be upon its appraised basis. While that is all that the petitioner is asking, it has no rights against any of the funds derived from the furniture or from the rents over those of any other creditor.

That conclusion is reached because the property, both real and personal, was in the custody of the receiver as the right arm of the court of equity before the petitioner's judgment was obtained and before it attempted, by virtue of its judgment, to attach moneys in the hands of the receiver. While it is questionable whether the rents accruing prior to receivership are subject to the lien of the mortgage, they were properly collected by the receiver as collateral to his duty in the custody and conservation of the mortgaged property. But the petitioner attempted to seize them through proceedings in another court, and now claims the right also to the proceeds of the furniture...