Associated Co. v. Greenhut
| Decision Date | 25 July 1933 |
| Docket Number | No. 5107.,5107. |
| Citation | 66 F.2d 428 |
| Parties | ASSOCIATED CO. v. GREENHUT. NATIONAL COMMERCIAL TITLE & MORTGAGE GUARANTY CO. v. SAME. In re WEISS. |
| Court | U.S. Court of Appeals — Third Circuit |
Lindabury, Steelman, Zink & Lafferty and Ronald A. Gulick, all of Newark, N. J., for appellants.
Maurice J. Zucker, of Newark, N. J., for appellee.
Before BUFFINGTON, DAVIS, and THOMPSON, Circuit Judges.
The issue in this case is whether rents collected between the adjudication in bankruptcy and the sale under mortgage foreclosure proceedings belong to the trustee of the bankrupt estate or to the mortgagee. The referee held that they belonged to the trustee, and in this he was sustained by the District Court.
The National Commercial Title & Guaranty Company, hereinafter called the National Company, held a first mortgage for $70,000 upon certain property of Morris Weiss. The Associated Company held a second mortgage upon the same property for $15,000. Both bonds and mortgages contained an express assignment of the rents. Defaults occurred on both mortgages, and on October 14, 1928, Weiss wrote to the National Company that:
The District Court, with the consent of the trustee, allowed the National Company to foreclose its mortgage in the Court of Chancery of New Jersey. The foreclosure sale resulted in a deficiency on both mortgages.
Both mortgagees made application for the rents collected by the trustee from the date of his appointment to the date of the foreclosure sale, less administration expenses, but, as above stated, this was denied by the referee and District Court. It is admitted that the second mortgagee cannot secure anything unless there is a surplus over and above the amount required to pay the first mortgagee.
The rule of law in this circuit is uniform that, as between mortgagee and trustee in bankruptcy, the rents, collected between adjudication and the sale under foreclosure proceedings, belong to the mortgagee under claim of deficiency where the proceeds of the sale are insufficient to pay the mortgage indebtedness. The mortgagee is the equitable owner of the bankrupt's real estate covered by the mortgage, and it would be inequitable to take the rents from what is really his property and divide them among general creditors. In re Industrial Cold Storage & Ice Co. (D. C.) 163 F. 390; In re Torchia (C. C. A.) 188 F. 207; In re Dooner & Smith (D. C.) 243 F. 984; Bindseil v. Liberty Trust Company (C. C. A.) 248 F. 112. This is the trend of decisions generally. Mortgage Loan Company v. Livingston, 45 F.(2d) 28 (C. C. A. 8); In re Wakey, 50 F.(2d) 869, 75 A. L. R. 1521 (C. C. A. 7).
There is another reason why the rents thus collected should go to the...
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