Totten v. Harlowe

• Decision Date: 29 March 1937
• Docket Number: No. 6782.,6782.
• Parties: TOTTEN et al. v. HARLOWE et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

90 F.2d 377 (1937)

TOTTEN et al. v. HARLOWE et al.

No. 6782.

United States Court of Appeals for the District of Columbia.

Argued February 11, 1937.

Decided March 29, 1937.

Rehearing Denied April 19, 1937.

Jacob N. Halper and Daniel Partridge III, both of Washington, D. C., for appellants.

Paul E. Lesh and B. Woodruff Weaver, both of Washington, D. C., for appellees.

Before MARTIN, Chief Justice, and ROBB, GRONER, and STEPHENS, Associate Justices.

GRONER, J.

Oaklawn Terrace is an apartment building in Washington City. In 1929 the owner, David L. Stern, and his wife mortgaged the property for $385,000. The debt was payable in three years, and the deed of trust contained the usual provisions for sale in the event of default in principal, interest, or taxes. In 1930 Howe Totten, one of appellants, purchased the property subject to the deed of trust, and executed a second trust to secure $30,000. In October, 1932, the principal debt under the first deed of trust fell due and in November following appellees John C. Harlowe and Eiva D. Harlowe filed a bill in equity alleging only default in the payments of taxes, and asking for the appointment of a receiver to operate the property and collect the rents. Jerome F. Barnard was appointed receiver and continued in possession for three years. Out of the earnings he paid the installments of interest due on the trust indebtedness to October 30, 1935, and taxes to the end of 1935. During the pendency of the suit and in 1934 the Harlowes asked leave of court to amend the bill for the purpose of having the court substitute new trustees in place of trustees substituted by an order of court in a previous suit. The object was to correct what was thought to be an error in the former appointment. Subsequently and in 1935 the Harlowes made an additional motion for leave to amend, alleging default in the principal of the debt. The court allowed the amendment with relation to the appointment of new trustees and entered an order accordingly, but refused to allow an amendment to show also default in the principal debt. The default in taxes having been terminated by payment, the court dismissed the bill, discharged the receiver, and restored Totten to possession of the property. This occurred November 27, 1935. If the litigation between the parties had terminated at this time, it is obvious that the Harlowes would have been in position immediately to demand sale of the property through the trustees, but what actually occurred was that Totten appealed from that part of the order of November 27th substituting trustees, and the effect of this was for all practical purposes to supersede the order until the appeal was disposed of — for obviously the property could not be sold by trustees whose title was challenged, and it was apparent that approximately a year must pass before the appeal could be disposed of and equally apparent that at least for that period Totten would collect the rents and appropriate them to his own use without accountability. In these circumstances, the Harlowes filed their bill in the lower court January 10, 1936, alleging that the whole debt had become due and payable; had not been paid; that the security was not sufficient to pay the debt; that the original maker of the notes was insolvent and unable to pay any deficiency resulting from the sale; and that the present owner, Totten, was not liable on the notes but, together with his son, was collecting the rents; and that his son, Enoch Totten, the other appellant, was the holder of an unrecorded deed of conveyance of the property — and praying the aid of the court for the foreclosure of the trust and for the appointment of a receiver to collect the rents pendente lite.

There was a rule to show cause, a motion by the Tottens to dismiss, and a hearing on the merits by the court below. In February, 1936, the trial judge found that it was almost certain the property would not sell for enough to pay the debt; that the maker of the notes was insolvent and also that the statute of limitations had run, so that in no event was there any other recourse to the noteholders than the property itself; and that there was no dispute that the noteholders were entitled to a decree of foreclosure. The court thereupon, and pending the decision on the appeal in the former case, appointed a receiver with power to collect the rents and operate the property, pay the operating charges, and hold the balance of the rents and income subject to further orders of the court.

This appeal is from the order appointing the receiver.

We are of opinion that the appointment of the receiver was providently made. The ascertainment by the court that the property would almost certainly sell for less than the debt, that the rents were then being collected by the holder of the legal title who was not responsible for the debt or any deficiency which might result — combined with the act of the latter in obstructing the sale for a year by an appeal which we ultimately held to be without merit — made a case in which it was clearly the duty of the court, pending such time when it could properly enter an order of foreclosure, to appoint a receiver to impound the rents. We said in Cassedy v. Strauch, 61 App.D.C. 2, 56 F.(2d) 493, that the power to appoint a receiver in a foreclosure suit is a power inherent in a...