Opinion ID: 662404
Heading Depth: 2
Heading Rank: 2

Heading: Were Defendants Owners After the Bankruptcy?

Text: 18 On May 30, 1989, during the pendency of a previous Superior Court litigation, the record owners of Tyler House (entities controlled by defendants) declared bankruptcy, and a trustee was appointed. The trustee succeeded to the formal control of Tyler House. See 11 U.S.C. Sec. 704(2). Plaintiffs argued, however, that this transfer of formal control did not end defendants' ownership of Tyler House for purposes of the D.C.Housing Code, because defendants continued to exercise actual control over the property. The district court allowed the jury to decide whether defendants continued as owners; the jury found that they did. Defendants now challenge this ruling as a matter of law, arguing that they could not possibly have continued as owners because the bankruptcy trustee became responsible for remedying the conditions at the project. They argue that the trial judge erred in allowing the issue to go to the jury, and that he erred in allowing evidence to be submitted as to the condition of Tyler House after May 30, 1989. 19 We are not persuaded. The question is not whether defendants had record title or formal legal control--they never had that in the first place, and they still didn't have it when the trustee took over. The question is whether they were owners within the meaning of the Housing Code. They were owners if they continued to exercise actual charge, care, or control of the premises as owners. Transfer of formal title to a trustee does not necessarily preclude this finding. Therefore, in the face of evidence that defendants did, in fact, continue to act as actual owners after the bankruptcy, the district court permissibly treated the issue as one of fact for the jury. 20 The defendants' argument that they cannot be liable for rent they did not collect is equally unavailing. They argue that, while breach of the warranty of habitability is remedied by return of rent wrongly collected, once the bankruptcy trustee was appointed he, not they, collected rent. Therefore, the defendants contend that they cannot return rent they did not collect. This argument disregards the function of the bankruptcy trustee. The trustee does not collect rent for his own benefit; he collects it to pay the debts of the bankrupt. Thus, the trustee's collection of rent and disbursement of the money to Tyler House's creditors accrued to the benefit of the owners of Tyler House--the defendants. Accordingly, requiring them to return the money is entirely equitable.