In re Hines
| Decision Date | 01 March 1937 |
| Docket Number | No. 275.,275. |
| Citation | 88 F.2d 423 |
| Parties | In re HINES et al. |
| Court | U.S. Court of Appeals — Second Circuit |
James G. Moore, of New York City (Albert H. Ruppar, of New York City, of counsel), for appellant.
S. Howard Sundell, of New York City (Maurice Finkelstein, Henry Weiner, Louis Glickhouse, and Arthur Rosenberg, all of New York City, of counsel), for appellee.
Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
Bankruptcy was adjudicated in September, 1932. Thereafter the trustee in bankruptcy entered into possession of an apartment house formerly owned by the bankrupts and collected the rents thereof. This property is subject to a mortgage made by Aldorf Realty Corporation to Title Guarantee & Trust Company (hereafter called the mortgagee) securing a bond for $100,000. The mortgagee had sold undivided shares, evidenced by participation certificates, in the bond and mortgage, payment of which was guaranteed to the certificate holders by Bond & Mortgage Guarantee Company. Pursuant to chapter 19 of the Laws of 1935, the Mortgage Commission of the State of New York has succeeded to the property and business of Bond & Mortgage Guarantee Company. Claiming the right to enforce the terms of the bond and mortgage, the Mortgage Commission, on October 21, 1935, petitioned the bankruptcy court to grant leave to it and the mortgagee to commence a foreclosure action in the state court against the bankrupts and their trustee in bankruptcy and to apply in said action for the appointment of a receiver of the rents and profits of the mortgaged premises. The petition alleged defaults in the payment of interest by reason of which the petitioner had elected to declare due the principal of the bond and mortgage pursuant to the terms thereof. The trustee in bankruptcy set up in defense that he had made an agreement with the mortgagee by which the latter agreed to waive all defaults existing when the trustee took possession of the property, apparently in December, 1933, and the trustee agreed to pay future accruing interest, to pay up back taxes, and to make substantial expenditures in putting the building in better condition for renting; that he had performed his part of the agreement, had paid interest from December, 1933, to May, 1935, and was ready to continue to pay interest if the petitioner would retract its threatened repudiation of the validity of the agreement. The issues of fact raised by this defense were referred by Judge Inch to a special master, before whom hearings were closed on June 24, 1936. On August 19th, and before the special master had filed his report on the reference ordered by Judge Inch, the Mortgage Commission moved before another district judge for an order granting leave to foreclose the mortgage and directing the trustee to pay the interest in arrears. The trustee answered, setting up the same defense interposed to the prior petition and the pendency of the prior reference. Upon petition and answer and without taking evidence, Judge Abruzzo granted the petitioner's motion.
The appellee concedes that the order cannot be sustained in its entirety. So much of it as directs the trustee to pay the Mortgage Commission a sum equal to the interest due for the period from June 1, 1935, to the date when the trustee shall surrender possession of the premises to the Mortgage Commission or to a receiver appointed in its foreclosure action is obviously wrong in starting the period prior to the taking of any steps by the mortgagee to assert a claim to possession of the premises or the rents thereof. In re Humeston, 83 F.(2d) 187 (C.C.A.2); Prudential Ins. Co. v. Liberdar Holding Corporation, 74 F. (2d) 50 (C.C.A.2); Sullivan v. Rosson, 223 N.Y. 217, 119 N.E. 405, 4 A.L.R. 1400. It is now admitted that the...
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