In re Ventura-Louise Properties
Decision Date | 03 January 1974 |
Docket Number | No. 71-2624.,71-2624. |
Citation | 490 F.2d 1141 |
Parties | In the Matter of VENTURA-LOUISE PROPERTIES, a Limited Partnership, Composed of Robert M. Myers and Victor T. Koozin, General Partners. GREAT WEST LIFE ASSURANCE COMPANY, Petitioners-Appellants, v. Don M. ROTHMAN, Trustee-Appellee. |
Court | U.S. Court of Appeals — Ninth Circuit |
Richard M. Moneymaker, Tiernan & Moneymaker, Los Angeles, Cal. (Argued), for petitioners-appellants.
Alan S. Pitt, Beverly Hills, Cal. (Argued), for trustee-appellee.
Before CHAMBERS and BARNES, Circuit Judges, and KING, District Judge.*
This is an appeal from a final judgment of the United States District Court for the Central District of California affirming an Order, made by the Referee in Bankruptcy denying appellant's claim, as a trust deed beneficiary, for recovery of rents collected and held by appellee, Trustee in Bankruptcy.
The relevant facts can best be summarized in outline form in a chronological time sequence.
Great West Life Assurance Company of Winnipeg, Canada, appellant herein, is hereinafter referred to as "Lender". A. J. Bumb and Dan M. Rothman, Appellee (who succeeded Bumb as Trustee), are hereinafter referred to as "Trustee". Ventura-Louise Properties, Inc., the bankrupt corporation, is hereinafter referred to as "Debtor".
Prior to 6/2/66 both loans were in default.
Both parties agree on this appeal, and we find, that the rights of the Lender to the rents are determined by the law of California. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Tower Grove Bank & Trust Co. v. Weinstein, 119 F.2d 120 (8th Cir. 1941).
But two issues are before us for determination. First, what is the legal effect of the "assignment of rents" clause — (a) an absolute assignment of rents to the Lender contingent only upon the occurrence of a default, or (b) an assignment for security purposes only, in which case the rents could inure to the Trustee in Bankruptcy? Secondly, if we hold the latter (i. e., that the clause is an assignment for security purposes only), we must determine whether the Lender perfected its rights to the rents collected by the Trustee.
The "assignment of rents" clause in question reads in pertinent part as follows:
Where a mortgage includes the rents as a portion of the property pledged to secure the debt (additional security as alleged by appellee here), only a security interest passes, and until the mortgagee (Lender) obtains lawful possession, the mortgagor (Debtor) in possession may collect the rents as they fall due. To perfect a claim to the rents thereto, the mortgagee must actually acquire possession of the mortgaged property by consent or lawful procedure, or secure the appointment of a receiver. Kinnison v. Guaranty Liquidating Corp., 18 Cal.2d 256, 261, 115 P.2d 450, 455 (1941).
Provisions granting to the mortgagee the right to collect rents in event of default may be attached to a mortgage or trust deed. Such an agreement can provide for an absolute assignment of rents upon default. "It has been held that such a provision, rather than pledging the rents as additional security, operates to transfer to the mortgagee, the mortgagor's right to the rentals upon the happening of a specified condition." Id. at 261, 115 P.2d at 453. The California rule is:
Id. at 262, 115 P.2d at 453 (emphasis added).
The Kinnison case held that the beneficiary under a trust deed, who, in addition, held an assignment of rents, was entitled to the rents collected and deposited in the bank by the debtor ahead of an existing creditor of the debtor.
The Trustee attempts to distinguish the facts in Kinnison with those here by contending that since the "assignment of rents" clause in Kinnison was not contingent on default, but executed after default, and was an unconditional assignment, therefore all assignments of rent must be unconditional and contemplate an immediate transfer of rents. (Appellee's Brief, p. 13). Kinnison, however, recognizes an absolute assignment of rents can occur upon the happening of a contingency; a default. Id. at 261, 115 P.2d 450. Also, an absolute assignment does not, of necessity, contemplate an immediate transfer of rents.
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