In re CLARK REALTY CO., 234 F. 576

ANDERSON, District Judge (after stating the facts as above). [1] First.

As to the appeal of the Citizens’ Saving & Trust Company and Kuolt, commissioner of banking: It is insisted that the trustee, having abandoned as burdensome the real estate theretofore belonging to the bankrupt, was not entitled to hold the net rents collected by himself and the receiver in bankruptcy; that the trustee’s abandonment of the real estate carried with it the rents he had collected therefrom; that the same reverted to, or the title thereto became vested in, the bankrupt, this being the legal effect of an abandonment; and that the bankrupt made no claim to the rents and could not do SO' because of the superior equities of the Savings & Trust Company and the commissioner of banking.

We are not now concerned with the title of the bankrupt to these rents, but with the claim of the trust company to them. This claim is based upon the letter of November 1, 1912, hereinabove set out, and the circumstances under which it was executed, and it is insisted that this instrument, under the circumstances of its execution, operated as an equitable assignment and created a lien in favor of the trust company. In our opinion, it was a mere promise to pay.

The agreement of the bankrupt to- collect the rents was merely an agreement to collect what was its own and the agreement to pay over was no. more than the agreement to pay its own debt. Something more was necessary to amount to an assignment of, or create a lien upon, the rents. As was said by the Supreme Court in Christmas v. Russell, 14 Wall. 69, 20 L. Ed. 762: “An agreement to pay out of a particular fund, however clear in its terms, is not an equitable assignment; a covenant in the most solemn form lias no greater effect. The phraseology employed is not material provided the intent to transfer Is manifested.

Such an intent and its execution are indispensable. The assignor must not retain any control over the fund — any authority to collect, or any power of revocation. If he do, it is fatal to the claim of the as-signee.” In Trist v. Child, 21 Wall. 441, 22 L. Ed. 623, the same court said: “It is well settled that an order to pay a debt out of a particular fund belonging to the debtor gives to the creditor a specific equitable lien upon the fund, and bindsi it in the hands of the drawee. A part of the particular fund may be assigned by an order, and the payee may enforce payment of the amount against the drawee.

But a mere agreement to pay out of such fund is not sufficient. Something more is necessary.

There must be an appropriation of the fund pro tanto, either by giving an order or by transferring it otherwise in such a manner that the holder in authorized to pay the amount directly to the creditor without the further intervention of the debtor.” In Hare & Wallace’s notes to Leading Cases in Equity, it is said: “A covenant on the part of the debtor, to apply a particular fund in payment of the debt as soon as he receives it, will not operate as an assignment, for it does not give the covenantee a right to the funds, save through the covenantor, and looks to a future act on his part as the means of rendering it effectual.” See also Christmas, Administrator, v.

Griswold, 8 Ohio St. 559; Silent Friend Mining Company et al. v. Abbott et al., 7 Colo. App. 73, 42 Pac. 318; Hossack v. Graham et al., 20 Wash. 184, 55 Pac. 36. Tested by the above principles and authorities, the agreement in question did not operate as an equitable assignment, nor did it create any lien in favor of the trust company; and the decision of the referee and the District Court upon this branch of the case was correct. Second.

As to the claim of the mortgagees to the rents and profits: The referee held that these rents belonged to the mortgagees from the time when by intervening petitions they claimed them, but denied their right to them prior to the date of the claim. Much of the brief o.f counsel for the mortgagees is devoted to the proposition that the clause in the mortgages including with the property mortgaged “all the rents, issues and profits issuing and to issue out of said premises,” is valid. There can be no question as to the validity of this clause. The question is as to its effect.

This clause in the mortgage did not give to the mortgagees an absolute right to. the rents. Until there was a default and until the mortgagees made some claim or demand 'for the rents, they belonged to the mortgagor. Until the mortgagee takes some steps to sequester the rents, he is not entitled to them. “Ordinarily the mortgagor is entitled to. rents and profits accrued up to the time that the mortgagee enters, or brings his right of entry or •his bill to foreclose, and this right inheres in a trustee in bankruptcy.” In re Chase (D. C.) 133 Fed. 79, and cases cited.

To the same effect are Freedman Savings & Trust Company v. Shepherd, 127 U. S. 494, 8 Sup. Ct. 1250, 32 L. Ed. 163; New York Security & Trust Company v. Saratoga Gas & Electric Company, 159 N. Y. 137, 53 N. E. 758, 45 L. R. A. 132; Wyckoff v. Scofield, 98 N. Y. 475; Rider v. Bagley, 84 N. Y. 461; United States Trust Company v. Wabash Railway, 150 U. S. 287, 306-308, 14 Sup. Ct. 86, 37 L. Ed. 1085.

Under these authorities the decision of the referee and the District Court, giving to the mortgagees the rents from and after the time they made claim for them and denying the rents accruing prior to such claims, was correct. Third: As to the claims of Richter, trustee: Richter, trustee, petitioned the referee to order the trustee in bankruptcy to turn over to. him all rents and profits collected from the premises included in his mortgage, or to direct the trustee to use the rents so collected in payment or redemption of the taxes for which said premises were sold, as stated.

This petition was denied by the referee and his order was affirmed by the District Court. As to the denial of the petition to turn over the rents and profits, we need not add anything to what we have already said. I The trustee for the bondholders or the bondholders themselves could have come into the bankruptcy proceedings and petitioned the court for a sequestration of tire rents and profits accruing from the mortgaged premises, but until some such steps are taken, neither the trustee nor the bondholders can assert any right to the rents and profits.

This, of course, is predicated upon the proposition that the mortgage held by this trustee had a clause in it covering the rents and profits, but it nowhere appears in the agreed statements of facts in these cases that the mortgage in question contained any such clause and in the absence of such clause, it is difficult to see what possible claim Richter, trustee, can have to these rents and profits. As to taxes, Richter, trustee, bases his petition on

section 64a of the Bankruptcy Act, which is as follows: ‘‘Debts which have priority. — The court shall order the trustee to pay all taxes legally due and owing by the bankrupt to the United States, state, county, district, or municipality in advance of the payment of dividends to creditors,” etc. It appears that, the taxes for the year 1913 were not paid; that on February 25, 1914, the premises were sold for the payment of citv taxes and on May 20, 1914, they were sold for the state and county taxes.

The purchasers at the sales paid the amount of outstanding taxes and tax certificates were duly issued to them and now outstanding. Richter, trustee, filed his petition to have the rents used in redemption of the taxes on the 12th day of November, 1914. Whether Wisconsin real estate taxes due at the date of adjudication constitute a personal debt of the owner, as well as a lien on the property, so that a claim therefor would be allowable against his estate in bankruptcy and would be entitled to priority, we need not consider; for here no claim was filed.

Moreover, the mortgagee stood by and saw the property sold for these taxes, and made no application to the bankruptcy court for an order to pay them while the bankruptcy trustee was in possession or before the tax sales; then after the trustee had abandoned the property, Richter asked the court to apply the rents, not in the payment of taxes then due and owing, but to the redemption of the property from tax sales already made.

Even if the trustee in this mortgage could have procured an order upon the trustee in bankruptcy to pay these taxes upon. seasonable application therefor, there is no basis for his application, after the tax sales, and after the abandonment of the property to have rents which do not appear to be covered by his mortgage applied to the redemption from sales for taxes. The referee’s orders and the decisions of the District Court were proper, and they are affirmed.