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July 17, 1958

The ADMIRAL COMPANY, Incorporated, Plaintiff,
Ernest A. THOMAS, Regina S. Thomas, Samuel Scrivener, Jr. (Trustee), Junior F. Crowell (Trustee), Elsie L. Leishear, Perpetual Building Association, Defendants

The opinion of the court was delivered by: YOUNGDAHL

Plaintiff, holder of a second deed of trust, seeks to set aside trustee's sale, or in the alternative, recover $ 3,405, the unpaid balance of its note. The facts from which the cause of action arises are these:

Plaintiff, Admiral Company, Inc., bought from Washington Mortgage and Investment Co., in April, 1953, a second deed of trust on the property 4212 Livingston Road, S.E. It never notified Perpetual Building Association, the holder of the first deed of trust on the property, of its purchase. At that time, and until the second day of the trial of this case, Admiral was not registered as a corporation in the District of Columbia.

 Payments fell five months behind, both on the first and second deeds of trust. Despite this development, Admiral took no action to protect its interest on the mortaged property. Perpetual Building Association, however, contacted the trustees on the note, who were also officers of the Association, and it was agreed to foreclose the first deed of trust on the property. An advertisement was placed in the newspaper listing the address of the property to be foreclosed, the fact that it was a brick dwelling, and describing the lot in words identical to those in the trust deed. It is conceded by Admiral that from a reading of this advertisement it could have been aware of the foreclosure proceedings and attended the sale.

 Mr. Thomas then decided that this property could prove profitable and contacted Perpetual to take title in his own behalf. Perpetual, interested solely in getting the balance due on its note, agreed. Thomas then made arrangements to take title in the name of a straw party, a practice which appears common in the real estate business, and this was done. Title was then taken in the name of Elsie Leishear, a woman who was never at the sale and has never taken any interest in the terms of the sale or the property involved.

 Plaintiff relies upon three contentions in support of its position that the foreclosure should be set aside:

 (1) There was a defect in the advertisement.

 (2) That the trustees under the trust deed, being officers of the savings and loan association, were not proper trustees and could not be fair and objective in their approach.

 (3) There was not a valid public sale because of the failure to deposit $ 500, the excessively low price paid for the property, and the necessity on the part of Thomas to bid a higher price than Perpetual if he intended to take the property on his own behalf.

 (1) With reference to the advertisement, plaintiff agrees this is one of its weakest contentions and does not advance any statutory case law in support of its position that the advertisement is defective. It states it would have been better if it had been mentioned in the ad that it was a semi-detached dwelling. The Court finds no basis, whatever, for the contention that the advertisement is defective. *fn1"

 (2) The authorities seem to hold that there is no bar to an officer of a corporation acting as trustee, provided there is no fraud or over-reaching. *fn2" Plaintiff's cause of action is not based upon fraud or over-reaching and the Court finds nothing in the evidence to sustain such a challenge. Moreover, it is a common practice among the insurance companies and savings and loan associations to have the officers act as trustees in trust deeds. Until it is declared by statute or court decision that such is prohibited, absent any fraud or over-reaching, the Court cannot find the mere fact that the officer of Perpetual Building Association, the lender, was trustee in the trust deed, made the foreclosure defective in any way.

 (3) It appears that the auctioneer waived the payment of the $ 500 deposit and this is common practice where there is reliability in the bidder. No authority has been advanced to indicate that this makes the sale illegal.

 It appears, also, that Perpetual bid in at the sale for the amount owing it under its first deed of trust and that there was not such a substantial variance between this bid and what appears to be the agreed value of the property (between $ 12,000 and $ 12,800) so as to create any defectiveness in the sale. *fn3" The mere fact that Thomas, an officer of Perpetual, purchased the property at foreclosure through a straw party would not, in the Court's opinion, make the sale defective, absent any fraud and over-reaching.

 By this holding the Court is not approving the practice of an officer of defendant, associated so closely with another officer of defendant who is a trustee under the trust deed, to bid ...

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