Donlon & Miller Manufacturing Co. v. Cannella — 69 N.Y. St. Rep. 8

Majority

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Donlon and Miller Manufacturing Company, Pl’ff v. Joseph Cannella, Def’t. Frank Mann, as Receiver, etc., App’lt.

(Supreme Court, General Term, Second Department,

Filed July 26, 1895.)

Headnote

Mobtgage—Receiver—Rents.

When a mortgagee commences an action to foreclose a mortgage and procures the appointment of a receiver of the rents of the premises upon the ground of the insufficiency of the security, such receiver becomes entitled to the rents accruing during the pendency of the action as against a ieceiver appointed in supplementary proceedings against the mortgagor, though they accrued after the appointment of the latter, but before the appointment of the former, receiver.

Appeal from an order, made on the application of a receiver in supplementary proceedings, permitting a tenant of the mortgaged premises to pay rent to said receiver.

Moffett & Kramer, for app’lt; Grout, DeFere & Mayer, for resp’t..

This was an appeal from an order made at the special term, upon the application of Paul E. Jones, as receiver in supplementary proceedings, and the defendant Joseph Cannella, permitting a tenant of certain real estate belonging to the defendant pay $50 rent to that receiver, and restraining the tenant from paying the same to another person. The appeal is taken by Frank Mann, a receiver appointed in the foreclosure suit to collect the rents of the mortgaged premises. There is no controversy in relation to the facts, which are these : On the 80th day of Qctober, 1894, the plaintiff recovered judgment in the supreme court, Kings county, against the defendant, for the sum of $378.88, upon which execution was duly issued, and returned unsatisfied. On

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the 2d day of November, 1894, an affidavit and order for the examination of the defendant, the judgment debtor, was served, and such proceedings were had thereupon that on the 24th day of November, 1894, Paul B. Jones was appointed receiver in those proceedings, and he filed his bond, and qualified as such receiver. On the 21st of November, 1894, William Bierman commenced an action against the defendant, Cannella, to foreclose a mortgage upon property in the city of Brooklyn. On the 29th of December, 1894, Frank Mann, the appellant, was appointed receiver of the rents and profits of that property in that action of Eierman’s. to foreclose the mortgage, in the county court of Kings county, and at that time the county court was not advised that a receiver had been previously appointed in the supplementary proceedings. Frank Mann, qualified as such receiver January 7, 1895. Edward Eckert was the tenant of the defendant’s property, and on the 18th day of January, 1895, being indebted for the rents of the month of December, 1894, and January, 1895, due January 1, 1893, at $25 per month, the receiver in supplementary proceedings obtained an order to show cause why the tenant should not. be permitted and directed to pay the rents to that receiver, and be enjoined from paying the same over to the receiver in the foreclosure action. These rents had accrued and become due from the tenant to the defendant prior to the time when the receiver in the foreclosure suit qualified. That application was granted, and from the order granting the same the appeal is taken.

When a mortgagee commences an action to foreclose a mortgage, and procures the appointment of a receiver of the rents of the premises upon the ground of the insufficiency of the security, such receiver becomes entitled to the rents accruing during the pendency of the action. A mortgagee has an equitable right to have the mortgaged premises devoted to the payment of his mortgage debt, and while he cannot claim the rents and profits by virtue of his mortgage alone, yet, when the court recognizes his equitable right to the rents by the appointment of the receiver to collect them, then the right attaches to have them applied in ex-tinguishment of the mortgage, so far as such application becomes, necessary. A specific lien upon such rents and profits is thus obtained by the mortgagee, and he becomes entitled thereto. Astor v. Turner, 11 Paige, 436. In this case it must be assumed that the mortgaged premises are insufficient security for the payment of the mortgage debt. That is implied by the order appointing the receiver. The receiver in the mortgage case was appointed to receive a particular fund, upon which the mortgagee had acquired a specific lien, and the receiver in supplementary proceedings takes the property of the judgment debtor subject to the equitable claim of the mortgagee upon the rents and profits of the premises, to be applied in payment of the mortgage debt. These rules show the order to be erroneous, and it should be reversed, with $10 costs and disbursements, and the motion denied,, with $10 costs.

' All concur.