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The mortgagee's equitable right to have a receiver arises only when he shows something more than a default. Such, at least, is the prevailing rule, and so it remains to ask what is the "something more" that is required. The first point on which all are agreed, is that there should be no receivership if the security is adequate and no waste is threatened which is apt to impair the mortgagee's safety.
These two consolidated appeals arose out of an action to foreclose a mortgage on a trailer park. Appellants William J. Dart and his wife Dorothy, together with appellee Inland Western Mortgage Company, second mortgagee, were sued by appellee Western Savings and Loan Association to foreclose a first mortgage. Appellee loan association also sought the appointment of a receiver. Appellee second mortgagee cross-claimed to foreclose its second mortgage and to foreclose a first mortgage on the appellants' home. It also sought a receiver. Appellant William J. Dart, in answer to the complaint for foreclosure by appellee loan association, asserted that he was the beneficiary of a trust whose res was the subject matter of the foreclosure suit and he cross-claimed against Union Title Company, as trustee, alleging conversion of trust moneys so that the trust res was jeopardized. At the time of the hearing on the application by appellee loan association for a receiver, the property was of the estimated value between $ 500,000 and $ 800,000, and $ 244,478.69 was owed on the first mortgage and $ 55,000 on the second mortgage. A federal tax lien had been placed against the property. It was conceded, however, that this tax lien was junior to both mortgages. Appellant and his wife entered into possession of the real property after it became known that the income of the trailer park had been embezzled. They collected monthly rentals, although some of the income was used by them to improve the trailer court, none was applied to meet the payments due on either the first or second mortgages. The second mortgage provided for an assignment of rents and profits as security. In addition, both mortgages provided that if an action to foreclose was brought, a receiver shall be appointed to take charge of the property and to receive and collect rents, issues and profits and apply them to the payment of the mortgages, taxes and other charges. The court, acting upon the above stated facts, did appoint receivers, first at the instigation of the appellee loan association and later at the instigation of second mortgagee. Appellant mortgagors appealed.
Did the trial court correctly appoint the receivers?
The court set aside and vacated the trial court's orders appointing the receivers in the first mortgagee's action against the appellant mortgagors and appellee second mortgagee to foreclose a first mortgage on the appellants’ trailer park. The court held that the mortgagees were not entitled to a receiver because the appellants’ security was adequate and no waste was threatened. Moreover, the court found that there was no evidence that the appellants had failed to pay their taxes. That, although interest was accruing on the mortgage, there was no showing that the security was insufficient to provide recoupment of interest. Accordingly, the court remanded the action for further proceedings.