## Facts

- Western Savings & Loan Association held a first mortgage on a trailer park; Inland Western Mortgage Company held a second mortgage on the same property and also held a separate first mortgage on the Darts’ residence.
- The litigation arose from Western’s foreclosure action on the trailer park, in which Western sought appointment of a receiver; Inland asserted related foreclosure claims and also sought a receiver.
- The trailer park was held in trust with Union Title Company as trustee; William Dart was the residuary beneficiary.
- Union admitted it converted trust income (rents deposited in escrow), jeopardizing the trust property.
- After the conversion was discovered, the Darts took possession and managed the trailer park, collecting approximately $5,000 per month in rent.
- The Darts used some rent proceeds for improvements but applied none to payments due on the first or second mortgages.
- At the receivership hearing, the trailer park was estimated to be worth $500,000 to $800,000.
- The outstanding balances were $244,478.69 on the first mortgage and $55,000 on the second mortgage.
- A federal tax lien of about $187,000 existed but was junior to both mortgages; taxes and interest continued to accrue.
- Western’s evidence included a concession that, under Dart’s management, Western’s security interest was not in jeopardy.

## Issues

1. Whether a mortgage provision stating that a receiver “shall be appointed” upon foreclosure is sufficient, by itself, to justify appointment of a receiver.
2. Whether the evidence showed the mortgagee’s security was in danger of being lost, removed, or materially injured so as to satisfy the statutory standard for receivership in foreclosure.

## Decision

- The Arizona Supreme Court reversed the order appointing a receiver.
- The court held that a contractual receivership clause is not self-executing and does not eliminate the need to satisfy the statutory requirements for receivership.
- The court concluded the record did not support a finding that Western’s security was in the requisite danger, given the property’s value relative to the secured debt and Western’s concession that its security was not threatened under Dart’s management.
- The case was remanded with directions consistent with vacating the receivership.

## Legal Principles

- Appointment of a receiver in a mortgage foreclosure is an extraordinary equitable remedy and is permitted only when statutory conditions are met.
- A court cannot be compelled by private contract language to appoint a receiver; the court must make an independent judicial determination that the mortgagee’s security is in danger of being lost, removed, or materially injured.
- An assignment-of-rents/receivership clause in a mortgage may be considered, but it does not substitute for proof of present risk to the mortgagee’s security.

## Conclusion

The court vacated the receivership because the mortgage’s “shall be appointed” clause could not override statutory and equitable requirements, and the evidence did not show a current danger of material injury to the mortgagee’s security.


Dart v. W. Sav. & Loan Ass’n, 103 Ariz. 170, 438 P.2d 407 (Ariz. 1968)