U.S. v. Altman, s. 82-2216
| Citation | 750 F.2d 684 |
| Decision Date | 17 December 1984 |
| Docket Number | 82-2293,Nos. 82-2216,83-1754 and 83-1645,s. 82-2216 |
| Parties | UNITED STATES of America, Appellee, v. Norman S. ALTMAN; E.J. Ehrlich; Pierre V. Heftler and Hart Perry, General Partners of Mansion House Center Redevelopment Company, a limited partnership, Appellants, Norman S. Altman; E.J. Ehrlich; Pierre V. Heftler and Hart Perry, General Partners of Mansion House Center North Redevelopment Company, a limited partnership, Appellants, Norman S. Altman; E.J. Ehrlich; Pierre V. Heftler and Hart Perry, General Partners of Mansion House Center South Redevelopment Company, a limited partnership, Appellants, Gerald A. Rimmel, receiver and Towers Hotel Corporation, Appellees. Gerald A. RIMMEL, Receiver of Mansion House Center, Appellee, v. MERCANTILE TRUST COMPANY NATIONAL ASSOCIATION, Appellant, Samuel R. Pierce, Secretary of United States Department of Housing and Urban Development and Mansion House Center South Redevelopment Company, Appellees. MERCANTILE TRUST COMPANY NATIONAL ASSOCIATION, a National Banking Association, Appellant, v. MANSION HOUSE CENTER SOUTH REDEVELOPMENT COMPANY, a Missouri Limited Partnership, et al., Appellees. MERCANTILE TRUST COMPANY NATIONAL ASSOCIATION, Appellant, v. MANSION HOUSE CENTER SOUTH REDEVELOPMENT COMPANY, a Missouri Limited Partnership, Appellee. UNITED STATES of America, Appellant, Mansion House Center North Redevelopment Company, a limited partnership; Mansion House Center Redevelopment Company, a limited partnership; Mansion House Center South Redevelopment Company, a limited partnership, v. Gerald A. RIMMEL, Receiver, et al., Appellee. Towers Hotel Corporation, et al. UNITED STATES of America, Mansion House Center North Redevelopment Company, a limited partnership; Mansion House Center Redevelopment Company, a limited partnership; Mansion House Center South Redevelopment Company, a limited partnership, et al., Appellants, v. Gerald A. RIMMEL, Receiver and Towers Hotel Corporation, et al., Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Charles A. Siegel, St. Louis, Mo., for appellant.
J. Christopher Kohn, James G. Bruen, Jr., Dept. of Justice, Civil Div., Washington, D.C., for United States.
Mike Clear, Gene M. Zafft and Charles A. Newman, St. Louis, Mo., for appellee.
Before ROSS and FAGG, Circuit Judges, and WOODS, * District Judge.
This case consists of four consolidated appeals which evolved from the financial difficulties of the Mansion House Center (MHC) in St. Louis, Missouri. It concerns the district court's 1 actions in attempting to resolve the lawsuits surrounding Mansion House in an equitable fashion. Specifically, it raises issues as to 1) whether the district court erred in enjoining the consummation of settlement agreements executed by various Mansion House litigants, particularly the foreclosure settlement agreement between the United States and the owners of Mansion House, where a Receiver had been appointed to preserve the Mansion House properties; 2) whether the district court erred in denying Mercantile Trust Company's motion for enforcement of its settlement agreement with the United States and the owners of Mansion House; and 3) after consolidation of the various Mansion House cases, whether the district court erred in appointing a Receiver to the consolidated action.
The financial difficulties of MHC date back to 1972. Since that time, multiple and complex lawsuits have resulted, involving the owners of MHC (Owner-Partnerships), the Department of Housing and Urban Development (HUD), the court-appointed Receiver, Mercantile Trust Company (Mercantile), and Towers Hotel Corporation (Towers). Several settlement proposals have surfaced during the pendency of the lawsuits. However, final resolution of the lawsuits has failed to come about.
This court recognizes that the extended delay in resolving the Mansion House litigation has prevented various parties from going forward in their business concerns, and has resulted in considerable expense to the participants, 2 and to the district and circuit courts. We believe that any further delay would be fruitless in effecting a settlement and would accomplish nothing more than to exacerbate the already complex nature of the litigation. We therefore conclude that it is judicially prudent and equitable to attempt to adjudicate the issues of the respective appeals in a way to bring to an end the seemingly endless saga of the already protracted Mansion House litigation. 3
As indicated above, the history of the Mansion House litigation is long and complex. MHC consists of three 28-story towers in downtown St. Louis, Missouri, respectively known as the North, Center, and South Towers. It was originally designed for residential apartments, but today only the North and Center Towers contain residential apartments; the South Tower now operates as a hotel. MHC was constructed with the proceeds of three mortgage loans made in 1964 to Owner-Partnerships. These loans totaled approximately $36 million and were insured by HUD pursuant to Section 220 of the National Housing Act, which promotes urban redevelopment. 12 U.S.C. Sec. 1715k (1976).
In 1964, Owner-Partnerships was comprised of three separate limited partnerships, namely, Mansion House Center Redevelopment Company, Mansion House Center North Redevelopment Company, Mansion House Center South Redevelopment Company. Maurice Frank and a corresponding redevelopment company served as general partners of these limited partnerships, with Frank managing the affairs of MHC.
In early 1972 after construction of Mansion House was completed, the Owner-Partnerships defaulted on the mortgages. HUD, as insurer, subsequently paid the claims of the private lenders and became holder of the notes and deeds of trust. At that time, HUD agreed not to exercise its rights to foreclose on MHC in exchange for Owner-Partnerships' promise to make certain capital contributions and other payments.
In 1974, as part solution to the serious financial difficulties of MHC, Owner-Partnerships negotiated a $2,050,000 loan with Mercantile to convert the South Tower of MHC to a hotel. The loan was issued under an agreement executed by Mercantile, HUD and the Owner-Partnerships, which provided that the Mercantile loan was to be repaid out of revenues generated from operation of the South Tower hotel ("the Mercantile South Tower Agreement"). In this agreement, HUD agreed to subordinate its interests to that of Mercantile. Conversion of the South Tower was completed in 1975.
On January 12, 1976, after learning that substantial project funds had been diverted for improper purposes and that the mortgagors were engaging in other acts of mismanagement, the United States (on behalf of HUD) filed suit for recovery of the improperly expended funds (Cause No. 76-20(C)). On April 29, 1976, the United States filed a Motion for Appointment of a Receiver pendente lite to manage, preserve and protect the MHC properties. Thereafter, on June 31, 1976, Maurice Frank resigned as general partner of the three redevelopment companies. On September 8, 1976, upon finding that the mortgagors had indeed violated mortgage agreements and mismanaged the property the district court appointed Gerald A. Rimmel, Esq., as Receiver pendente lite. United States v. Mansion House Center North Redevelopment Co., 419 F.Supp. 85, 87 (E.D.Mo.1976) ("the Receivership action"). Mr. Rimmel has continued as Receiver since that date. At the time of his appointment, the Mercantile loan was in default, and MHC was in danger of complete financial collapse.
Attempting to regain possession and control of the Mansion House properties, Maurice Frank, though retired as general partner of the Ownership companies, subsequently initiated two Chapter XII bankruptcy proceedings as president of those companies. 4 The specifics of those actions are set out in United States v. Mansion House Center North Redevelopment Co., 594 F.2d 653, 654-55 (8th Cir.1979). In those cases, upon requests for instructions from the Receiver, the United States District Court for the Eastern District of Missouri held that the Receiver was not required to surrender the Mansion House assets. United States v. Mansion House Center North Redevelopment Co., 426 F.Supp. 479, 483 (E.D.Mo.1977); United States v. Mansion House Center, 455 F.Supp. 434 (E.D.Mo.1978), aff'd, 594 F.2d 653 (8th Cir.), cert. denied, 444 U.S. 835, 100 S.Ct. 69, 62 L.Ed.2d 45 (1979). The court also enjoined the Frank Group from asserting any ownership interest in the Mansion House properties in any future or pending Chapter XII bankruptcy proceedings, and from interfering with the Receiver's possession or control of those properties. United States v. Mansion House Center, supra, 455 F.Supp. at 436.
As a result of these bankruptcy proceedings, the United States amended its complaint in the Receivership action, seeking a declaration of the identity of the owners of the property. At that time, a number of the limited partners of the Frank partnerships responded by claiming that they had reconstituted themselves into successor limited partnerships. On December 22, 1978, the successor limited partnerships (herein referred to as "the Owner-Partnerships") were adjudged to be the owners of Mansion House. United States v. Mansion House Center, 463 F.Supp. 591, 594 (E.D.Mo.1978), aff'd, 605 F.2d 1090 (8th Cir.1979), cert. denied, 445 U.S. 917, 100 S.Ct. 1278, 63 L.Ed.2d 601 (1980).
As noted above, at the time of the Receiver's appointment, the Mercantile loan for the South Tower conversion was in default. Mercantile contacted Receiver, asserting its claim to the hotel operating revenues. Soon thereafter, Receiver and Mercantile agreed that two-thirds of the monthly payment due to Mercantile under the Mercantile South Tower agreement would be escrowed pending resolution of...
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