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Commerce Bank v. Mountain View Village Inc.

argued: July 7, 1993.

COMMERCE BANK; HARRIS SAVINGS ASSOCIATION, APPELLEES
v.
MOUNTAIN VIEW VILLAGE, INC.; PROPERTY MANAGEMENT, INC., MOUNTAIN VIEW VILLAGE, INC., APPELLANT



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA. (D.C. Civ. No. 92-00938).

Before: Sloviter, Chief Judge, Nygaard and Weis, Circuit Judges.

Author: Weis

Opinion OF THE COURT

Weis, Circuit Judge.

After the owner of an apartment complex defaulted on its mortgages, the mortgagees served notice on the tenants and began collecting the rents. Some months later, the owner petitioned for bankruptcy protection under Chapter 11 and asserted its right to use the rents as cash collateral in its reorganization plan. The bankruptcy Judge concluded that the rents were part of the estate, but was reversed on appeal by the district court. That court concluded that the rents were the property of the mortgagees. We agree with the district court and will affirm its order.

The debtor, Mountain View Village, Inc., is the owner of an apartment complex in Cumberland County, Pennsylvania. Mountain View gave Harris Savings Bank first and second mortgages dated March 17, 1989 and October 18, 1989, respectively, on Phases I, II, and V of the apartment project. The duly recorded mortgages contained an absolute assignment of rents, and gave the bank the right to accelerate the debt and enter and take possession upon default.

Mountain View then gave a mortgage to Commerce Bank on November 13, 1990, covering a building in Phase VI of the project. On that same date, Mountain View executed an assignment of rents and leases covering the same property. Both documents were properly recorded.

Mountain View defaulted on the mortgages. On August 23, 1991, Harris notified the tenants of its interests and collected the rents thereafter. On December 5, 1991, Harris entered a judgment in mortgage foreclosure and, on January 3, 1992, occupied the premises to the exclusion of Mountain View.

Commerce took possession of the Phase VI premises on September 24, 1991, collected the rents after that date and, on November 26, 1991, entered a judgment in foreclosure against Mountain View. A sheriff's sale was scheduled for March 4, 1992.

On January 6, 1992, Mountain View filed its petition for relief under Chapter 11 of the Bankruptcy Code. A few days later, Mountain View filed motions against Harris and Commerce for emergency use of cash collateral.

The bankruptcy Judge concluded that Mountain View retained an equitable interest in the rents that he regarded as property of the estate and available as cash collateral. He then certified the issue as a controlling question of law. Both banks filed notices of appeals and motions for leave to appeal which the district court granted.

Without discussing its basis for jurisdiction, the district court decided that the rents and leases were not part of the debtor's estate. The court held that whether the banks held title to, or merely a security interest in, the rents and leases, the result was the same because the security interests were perfected prepetition. Therefore, the court reversed the bankruptcy Judge's order. The debtor has appealed.

I.

We must first consider whether this Court has jurisdiction over the appeal. 28 U.S.C. § 158(d) authorizes us to review "all final decisions, judgments, orders, and decrees entered under subsection[](a)." Subsection (a) gives district courts jurisdiction over "final judgments, orders, and decrees, and, with leave of the court, from interlocutory orders and decrees, of bankruptcy Judges." Thus, this Court has jurisdiction over final orders of the district court in appeals taken from final orders of a bankruptcy Judge, In re Colon, 941 F.2d 242, 244 (3d Cir. 1991), but not over a ...


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