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UNITED STATES v. PARK SIDE COURT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY


August 9, 1966

UNITED STATES of America, Plaintiff,
v.
PARK SIDE COURT, INC., Defendant. UNITED STATES of America, Plaintiff, v. SEAWYN COURT, INC., Defendant

The opinion of the court was delivered by: COHEN

FINDINGS OF FACT and CONCLUSIONS OF LAW

 COHEN, District Judge.

 This proceeding arises out of two mortgage foreclosure actions instituted in this Court by Plaintiff, United States of America, for the use, benefit and credit of Philip N. Brownstein, Federal Housing Commissioner, under provisions of the National Housing Act, as amended, 28 U.S.C. ยง 1345. The mortgages which were foreclosed were each on different multi-family housing units of the separate New Jersey corporate defendants, situate in Wildwood, New Jersey. Between the judgment of foreclosure, December 4, 1964, and the advertised forced sale, April 20, 1965, the petitioners, Roy E. Anderson and Joy Bright Ofstie, sought proprietary control of these corporations and attempted to interest the Federal Housing Administration in a proposition, whereby they would salvage these corporate mortgages through refinancing of these projects. In order to accomplish this, they proposed a stay of the sale and a six month moratorium on the mortgage payments in consideration of a pledge of $10,000.00 ($5,000.00 from each of defendant corporations) as evidence of good faith, during which period they would seek a refinancing source, to redeem the properties from foreclosure judgments, or failing that to reinstate the mortgages and thereafter recast them for the balance of their installment terms. Various conversations, conferences and correspondence ensued in an effort to consummate this venture. During these negotiations a Receiver was appointed to manage the housing units and to collect the rents. The negotiations failed of ultimate resolution, and the properties were readvertised for sale during December, 1965, the sale date being fixed for January 11, 1966. Four days before the scheduled sale, Mr. Anderson and Mrs. Ofstie filed petitions for an order to show cause why the mortgages should not be reinstated. Sale was stayed pending a hearing on the petitions. Plaintiff moved to dissolve the restraints and asserted sovereign immunity from suit.

 On June 9, 1966, testimony was taken without a jury; thereafter, briefs and proposed findings were submitted by counsel. The bar of immunity was briefed but not argued orally, the United States Attorney not having pressed for argument. Nevertheless, it will be disposed of at the outset. Authority to strike this defense is clear. The Federal Housing Administration is the real party in interest. Congress, having launched its agency into the world of commerce, endowed it with both the right to sue and be sued as any other private enterprise. Darlington, Inc. v. Federal Housing Administration, 142 F. Supp. 341, (D.C.S.C.1956) redetermined by Statutory Court on remand, 154 F. Supp. 411 (D.C.S.C.1957), reversed on other grounds 358 U.S. 84, 79 S. Ct. 141, 3 L. Ed. 2d 132 (1958), rehearing denied 358 U.S. 937, 79 S. Ct. 310, 3 L. Ed. 2d 311 (1959).

 Analysis of the evidence in this case leads to the conviction in that, despite extensive negotiations between the parties, no meeting of the minds in fact ever actually occurred, and consequently no contract for reinstatement came into being. There is no evidence of mutual understanding and agreement on essential terms; nor was there in fact any tender of performance by petitioners, even under their alleged understanding of the arrangements between the parties. This being so, the payment of $10,000.00 made by petitioners as good faith, in anticipation of the execution of a contract for reinstatement of the defaulted mortgages, and to which it was to be thereafter applied, is refundable to them, as no contract to which the payment was to be a part was ever consummated.

 In support of this conclusion and pursuant to Rule 52, Fed.R.Civ.P., 28 U.S.C., the following findings and conclusions are made:

 FINDINGS OF FACT

 1. Judgments of foreclosure were entered on November 20, and December 4, 1964, against Seawyn Court, Inc., and Park Side Court, Inc., respectively.

 2. Foreclosure sale of these properties was duly advertised and scheduled for April 20, 1965.

 3. The parties hereto entered into negotiations, whereby the scheduled sale was cancelled and an option granted to petitioners until October 20, 1965, during which term the parties proposed to finalize the essential conditions of a contract for redemption of the foreclosure judgment or, in the alternative, for a reinstatement of the mortgages.

 4. To this end, a meeting was arranged and held in the latter part of March, 1965, at the principal office of the Federal Housing Administration in Washington, D.C. This meeting was attended by petitioner Anderson, Ward H. Bright, a realtor and brother of Mrs. Ofstie, the other petitioner, and acting on her behalf, and Mr. Marsh Cunningham, the National Director of the Rental Housing Division, who was assigned by the Commissioner of the Federal Housing Administration to represent the interests of that agency. In addition, several other persons from the Department of Justice and the housing agency were present.

 5. At this meeting, Mr. Anderson, an architect by profession, explained that he had made studies, plans and estimates for the complete rehabilitation of the two apartment projects at an estimated cost of $300,000.00; that he believed he could obtain permanent financing to cover such cost, as well as provide funds sufficient to redeem the mortgages held by the federal agency; and he speculated, that with the proposed repairs and improvements to the properties, he and Mrs. Ofstie would be able to increase the rentals, thus making both projects self-supporting. It was proposed by petitioners that they would deposit $10,000.00 with the federal agency as a pledge of good faith; that the foreclosure sale scheduled for April 20, 1965 be cancelled; that a six month moratorium be declared by the federal agency, during which period petitioners were to pay the mortgages in full with costs, or reinstate them by the payment of all interest due to October 1, 1965, including the regular October principal payment, and then the other costs and defaulted amounts were to be recast as augmented installment payments over the unexpired terms of the respective mortgages, along with the balance of principal due. Additionally, petitioners represented that they could and would acquire the capital stock of both corporate mortgagors, and pledge it with the federal agency as collateral security during the terms of the mortgages. The meeting concluded without firm commitment. It was agreed, however, that petitioners would submit written detailed proposals, as discussed, to the office of the Federal Housing Administration in Camden, New Jersey.

 6. Subsequent phases of the negotiations were conducted by David Perskie, Esquire, as attorney for petitioners.

 7. On April 5, 1965, Mr. Perskie wrote to Commissioner Brownstein, outlining the position of petitioners and their offer to contract on certain terms. *fn1" This letter in part reads as follows:

 

"There is available to deposit promptly upon your notifying us of your acceptance of this proposition the sum of $10,000.00, which my clients will be willing to forfeit if at the end of six months they are unable to bring all past-due interest on each property to date, after which it is contemplated that they will continue to make the regular payments required under your mortgages, augmented by a proportionate part of the principal which should have been paid by the end of the six-month period, but which will not have been paid at that time.

 

"It is our understanding that the properties are now producing sufficient in the hands of the Receiver to meet the mortgage requirements as to interest. Consequently, we submit for your consideration the fact that the Government stands to lose nothing by accepting this proposition. If the mortgage is not reinstated at the end of six months, the sale can then be had, but, in the meantime, the Government will have $10,000.00 on hand, which my people are, as indicated, now willing to put up. This $10,000 may be retained by the Government at the end of the six-month period as further security for the ability of my people to reinstate the mortgages in full and there would be no objection, for a period of five years, for the Government to maintain its present mortgage position, so that in the event of default foreclosure proceedings would not have to be recommenced.

 

* * *

 

"Time is very much of the essence and it would be appreciated if you would let us have a prompt response."

  Following this letter, Mr. Perskie spoke with Mr. Cunningham of the federal agency, which conversation he confirmed by letter dated April 7, 1965, directed to the Camden office of the agency in anticipation of a prearranged meeting there on April 9, 1965.

 8. The April 7, 1965, letter covered the same subject-matter as that of April 5th, in substantially the same language.

 9. On April 9, 1965, Mr. Perskie wrote to Mr. Cunningham submitting his version of the proposal made on behalf of the petitioners and attempting to clarify his understanding of the offer to the federal agency. The body of the letter is as follows:

 

"Pursuant to our telephone conversation and in clarification of all previous correspondence in this matter, please be advised that our clients, Roy E. Anderson and Joy Bright Ofstie who are about to consummate a purchase of all of the stock of Park Side Court, Inc., and Seawyn Court, Inc. and who have had no previous proprietary interest in either of these corporations, herewith tender $10,000.00 to the Federal Housing Administration which sum is to be forfeited if on or before six months from the date previously scheduled for the foreclosure sale of property owned by said corporations one or the other of the following contingencies does not occur:

 

"1. The foreclosure judgment and costs shall have been paid in full.

 

"2. The existing mortgages shall have been reinstated to the satisfaction of the F.H.A. *fn2" so that the said mortgages shall be liquidated in full over the original terms thereof, the monthly payments to be increased, if necessary, in order to effectuate the full payment over the original term, and it being further understood that commitments must be given to bring the property to a satisfactory state of repair.

 

"In consideration of the foregoing my clients request a stay of the sale under foreclosure for the six-month period aforesaid.

 

"The aforementioned $10,000.00 will be delivered to you forthwith upon your request for same."

 9. Mr. Cunningham acknowledged receipt of the foregoing letter by his letter dated April 13, 1965, saying he was referring the April 9th letter of clarification to General Counsel with a request for him to obtain compliance with the terms and arrange for a stay; he also stated that in addition to a tender of $10,000.00, petitioners should be prepared to place all their corporate stock in escrow.

 10. The month of May was uneventful, except that by letter dated May 28, 1965, Lester H. Thompson forwarded to Mr. Perskie, at Mr. Cunningham's request, a "Statement of Amounts Required to Reinstate the Mortgages as of May 1, and as of June 1, 1965". These statements are as follows: "Statement of Amounts Required to Reinstate Mortgage as at May 1, and as at June 1, 1965 Park Side Court, Inc. Project No. 035-42060 CHM Wildwood, New Jersey Total Monthly Total Amounts Payment Amounts Due 5-1-65 Due 6-1-65 Due 6-1-65 Service Charges $ 113.88 $ 56.94 $ 170.82 Deposits for Taxes 517.96 430.04 948.00 Mortgage Interest 8,154.22 478.68 8,632.90 Principal Payments 7,526.30 389.63 7,915.93 Reserve for Replacements 1,435.00 75.75 1,510.75 Reserve for Replacements Delinquency 427.85 21.38 449.23 Total Amounts Due $18,175.21 $1,452.42 $19,627.63

19660809

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