New West, L.P. v. Fudge, No. 21-1372 (7th Cir. 2021)

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Justia Opinion Summary

Joliet condemned a housing complex managed by New West and paid $15 million. HUD rent subsidies for low-income tenants provided almost all of the money for operating the development. A $2.7 million fund had been established by New West and HUD, to cover necessary maintenance and repairs in the event of a default by New West. HUD refused to release that account to New West, contending that it now holds the account to cover Joliet’s obligations.

The Seventh Circuit affirmed the summary judgment rejection of New West’s suit to recover the account. New West cannot establish conversion of the fund without first establishing ownership. HUD’s lien on the fund does not establish ownership of the fund and New West has not established its ownership by showing that it treated deposits into the fund as taxable income.

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Primary Holding
Seventh Circuit rejects a suit by the former manager of a housing complex against the Department of Housing and Urban Develpment to recover a fund established to cover maintenance and repairs in the event of a default.

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