Denco Development Co., a Corporation, an Alleged Bankrupt v. Community Savings & Loan Assn.

Denco Development Co. (Denco), an alleged bankrupt, appeals the judgment of the United States District Court for the Central District of California. The judgment reversed an order of the Referee in Bankruptcy awarding to Denco the balance of certain funds in the hands of the Receiver, and instead awarded the funds to appellee Community Savings and Loan Association (Community).

The facts found by the district court are, in summary, as follows:

Denco borrowed money from Community to build apartment houses on 29 tracts of real estate and secured the loan with deeds of trust making Community beneficiary. The buildings were constructed, and Denco subsequently defaulted on the loan. Community elected to foreclose and sell the property, pursuant to a remedy provided in the deeds of trust. On the day before the scheduled sales, however, an involuntary petition in bankruptcy was filed against Den-co. The Referee in Bankruptcy issued a temporary order restraining the sales and placing the real estate under the control of a receiver.

Community then applied to the Referee for an order directing the Receiver to sequester the rents arising from the property and to hold them for Community’s…