Home Life Insurance v. O'Sullivan

This action was brought to foreclose a mortgage made by Mary A. McKenna and others to the plaintiff for the sum of $2,500, on the 18th day of December, 1896, and duly recorded in Kings county on the 19th day of December of the same year. On the 3d day of March, 1909, Madalena Sisia entered into a lease with Mary A. McKenna, individually and as life tenant under the last will and testament of James McKenna, deceased, for a period of two years, at a yearly rental of $2,160, payable in monthly installments of $180, and upon the execution of said lease she claims to have deposited with the landlord the sum of $180, under a provision of the lease which acknowledges the receipt of that sum—

“deposited by the tenant as security for the faithful performance by the tenant of the covenants and conditions herein,' and the landlord agrees to apply said sum in payment of the rent for the last month of the tenancy, provided the tenant shall faithfully perform the covenants and conditions on her part to be performed.”

Subsequently Mary A. McKenna died, and the lease was renewed and ratified by her heirs at law, under the same terms and conditions, and Madalena Sisia was in possession down to the 1st day of March, 1912, as a holdover tenant. On the 5th of January, 1912, the plaintiff moved for the appointment of a receiver of the rents of the mortgaged premises, and the appellant, Minnie R. Kallman, was appointed and duly qualified. On taking possession, appellant found Madalena Sisia in possession under the above-mentioned lease. The tenant was notified of the appointment of the appellant as receiver, and the latter demanded the rent cojlected by Sisia for the month of January. This was refused, whereupon the appellant secured an order to show cause why Sisia should not pay over the rent to her as receiver, and upon the return day Sisia appeared by counsel and opposed the motion, but was ordered to pay over the same. No appeal was taken from this order. When the appellant demanded the February rents, she was met by a like refusal, and upon the return of an order to show cause the learned County Court refused to compel the payment. The objections raised in behalf /of Sisa were (1) that she was not made a party defendant 'in this foreclosure action; (2) that she was relieved from paying said rent by reason of the provision of the lease above mentioned, it being contended that February was the last month of her leasehold possession, and that the sum had already been paid.

[1] The lease under consideration provided that it was “understood and agreed that the rights of the lessee under this lease are subject and subordinate to all existing mortgages, and to an additional mortgage to be hereafter executed in a sum hot to exceed $3,000”; and we are unable to discover any reason why Sisia should have been made ''a1 party to the foreclosure proceeding, so long as it was not

[2] This mortgage, made, executed, and delivered in 1896, gave the mortgagee the equitable right in a proper case to a receiver of the rents and profits upon the commencement of the foreclosure action (Hollenbeck v. Donnell, 94 N. Y. 342 ; Rutherfurd Realty Co. v. Cook, 198 N. Y. 29 , 34, 90 N. E. 1112 ), and the lease to Sisia, being made subject to the existing mortgages, was, of course, subject to the right of the mortgagee to demand the rent for the term, and the question of whether Sisia had performed all of the covenants on her part to be performed could not be determined at the 1st of February; for the term did not end until the 1st day of March, at which time she was to deliver the premises in as good condition as when she came into possession, subject only to the action of the elements. But, passing over the point that it could not be determined whether the covenants had been fully performed, it is enough that a receiver appointed at the instance of a mortgagee, under a mortgage executed and recorded prior to a lease, stands in a very different position to the tenant from that held by the landlord. A tenant under a subsequent lease takes with notice of all the rights- which the mortgagee has under the mortgage. Derby v. Brandt, 99 App. Div. 257 , 90 N. Y. Supp. 980 . He is bound to know that if the security is deemed inadequate, and the mortgagee seeks .equitable,relief, he is entitled to a receivership. Therefore, whatever may be the relations between Sisia and her landlord, as between herself and the-receiver, she is, as the occupier of real property subject to a mortgage under foreclosure in an action wherein a receiver has been appointed, bound to.answer to such receiver for rént which may be due or which may accrue after such receiver’s appointment. In making her advance- payment, as recited in the lease, she took the chances of a foreclosure, and of the appointment of a receiver of the rents and profits, and she has no right to attempt to withhold from the plaintiff the full measure of his security. The plaintiff is enforcing a legal and equitable right which belonged to him long prior to the lease in question; and as part of his remedy, where the security is- inadequate and the terms of the mortgage permit it, he is entitled during the pendency of the action to receive either the rent or the occupation value of the premises upon which his mortgage is a lien; and the rights which the tenant under his lease may have against the landlord are necessarily subordinate to the rights and remedies which the 'plaintiff has under his mortgage. Derby v. Brandt, supra.

There is here no question of dispossessing the tenant. The question is- as to the rights of -a mortgagee upon the1 foreclosure of his

The order appealed from should be reversed, with $10 costs and disbursements, and the motion granted, without costs. All concur.