In re Watts , 19 F.2d 526 ( 1927 )

BURNS, District Judge.

The petition for review presented on behalf of the Capital Building & Loan Association complains of an order of the referee, dated February 15, 1927, denying its petition to have certain real estate belonging to the bankrupt, and incumbered with a mortgage and vendor’s lien in petitioner’s favor, abandoned by the trustee as onerous, so that the petitioner may proceed by foreclosure outside the bankruptcy court, and further ordering the trustee to sell at publie or private sale to the highest bidder for cost and free of all liens, mortgages, and incumbrances.

From the record it appears that the petitioner, as mortgage creditor, made no proof of claim and was not party to the bankruptcy proceedings, except to appear for the purpose of opposing the sale, thereby electing to rely entirely on its security. It also appears that the trustee, under a provisional order, had offered the property for sale after appraisal and advertising, when, for want of bidders, it failed to sell. Evidence in the record clearly indicates that the property may not be expected to sell for a price sufficient to pay the amount of the mortgage, interest and costs, and certainly not for a price sufficient to leave a fund in which the ordinary creditors might share. There can therefore be no doubt that, in so far as the bankrupt estate is concerned, this property is onerous and burdensome.

By the weight of authority, the trustee, upon whom the title of the bankrupt devolved under the law, should release and surrender his possession and control under the circumstances, particularly since the attorney for the mortgage creditor has formally offered to pay the legitimate costs of advertising on the previous effort at sale, together with such expenses as were incurred by the trustee in the preservation of the property, exclusive, however, of fees and commissions.

Considering that the mortgage creditor seems to have contributed by its conduct to' part of the condition created, it is but equitable and just that such expenses and charges should be borne by it. In re Equitable Loan & Security Co., 125 F. 609 (5 C. C. A.); In re Harralson, 179 F. 490, 29 L. R. A. (N. S.) 737 (8 C. C. A.); In re Rose (D. C.) 193 F. 815; Black on Bankruptcy (1st Ed.) § 566; also section 320; In re Huggins, 179 F. 490, 29 L. R. A. (N. S.) 737, 24 Am. Bankr. Rep. 715 (8 C. C. A.); In re Goldsmith (D. C.) 118 F. 763, 9 Am. Bankr. Rep. 419; In re Anders, P. B. T. Co. (D. C.) 136 F. 995.

The order of the referee will be vacated and set aside, and an order entered directing the trustee to release and surrender his possession and control of the real estate described in the petition and schedules, upon being reimbursed by the Capital Building & Loan Association of the legitimate expenses of preserving the property and the costs of advertising incidental to the previous offer of sale.