John G. Groves, Trustee of the Estate of Park Terrace, Bankrupt v. Fresno Guarantee Savings and Loan Association

Appeal from an order of the district court, sitting in bankruptcy.

On September 30, 1964, Park Terrace, a copartnership, filed a petition for an arrangement under Chapter XI of the Bankruptcy Act. Its principal asset was an apartment house in Fresno. It was appointed debtor in possession and authorized to operate the apartment house. The property was subject to a first deed of trust dated October 1, 1963, in favor of appellee, which contained a clause giving it the right, upon default, to collect the rents.

On October 2, 1964, the debtor filed a petition in which it alleged that appellee had filed notice of default and sought an order establishing the nature and extent of appellee’s lien, and enjoining it from, among other things, collecting the rents. An order to show cause was issued by the referee, setting the matter for hearing on October 12, 1964, and in the meantime enjoining enforcement of the lien, including collection of the rents. On October 5, the District Judge, ex parte, and on petition of appellee, modified the restraining order by adding the following proviso:

The petition of appellee recited that "the debtor was in default in monthly payments totalling $12,000,…