Court Opinion

ID: 6887631
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:32:54.236323+00
Date Added: 2024-06-11T16:05:45.501533
License: Public Domain

On Petition for Rehearing.
PER CURIAM.
The 'appellee-trustée has filed a petition for rehearing on the ground that the language of our opinion leaves him in doubt as to his rights and duties in dealing with the rental and condemnation monies in the further course of the reorganization proceedings.
All we needed to decide was that the District Court had power to direct the trustee to take the rental and condemnation monies pending the outcome of the reorganization proceedings. In order to correct an apparent misapprehension by the District Court as to the meaning and effect of our opinion on the earlier appeal, we went further and stated that these monies were not general assets of the estate. We pointed out that if, as claimed by the mortgagee, the debtor is insolvent, the mortgaged premises might have to be sold in bankruptcy pursuant to § 236 of the Bankruptcy Act, 52 Stat. 899, 11 U.S.C.A. § 636. If the sale did not realize enough to pay off the full mortgage debt, the mortgagee would have a prior claim to the application of the rental and condemnation monies toward the satisfaction of the deficiency. This would be true whether or not the mortgage contained an acceleration clause.
Let it be supposed that the debtor is not insolvent. Then, since the mortgage here does not contain an acceleration clause and is in arrears only in a few instalments of interest and principal, the payment to the mortgagee of the amount of the arrears would purge the mortgage of default, and any balance of rental monies could then be dealt with as general assets. But we are not prepared to say that the same would be true also of the condemnation monies. It may be that without the consent of the mortgagee no plan of reorganization can be put through which does not involve the application of all the condemnation monies to the reduction of the mortgage debt. We do not have to decide this question now, and we hold it open, because after such examination as time has permitted, we have found singularly little illumination as to how condemnation monies deposited by the government as just compensation for the taking of a term for years, not the fee, should be distributed as between the mortgagee and the owner.
Even if a default had not occurred, it is possible that the mortgagee would have had a claim to the condemnation monies paid for the taking of a term for years. The argument would be that1'the taking necessarily impairs the mortgagee’s security, and therefore gives the mortgagee a compensable interest. Part of the mortgagee’s security is that in case of a future default the mortgagee may take possession of the premises and collect the rents and profits thereof. But if the United States has condemned the term for years and deposited with the court *211the requisite just compensation therefor, the mortgagee could not, upon a subsequent default, take possession as against the United States and collect the rents and profits. This argument would be pointed to the conclusion that the mortgagee should be entitled to receive all the condemnation monies and apply the same to the reduction of the mortgage debt, to compensate for the impairment of the security resulting from the taking. Perhaps as an alternative such monies might be held in trust, to be paid over to the debtor at the end of the government’s occupancy if not needed to pay instalments due on the mortgage debt.
As above stated, we reserve judgment on this problem until we are required to determine it. And we do not feel that we should give an advance opinion on other points mentioned in the petition for rehearing for the guidance of the trustee in administering the estate in the pending reorganization proceedings.
The petition for rehearing is denied.