Case ID: ad_137/html/0200-01.html
Source: Caselaw Access Project
Author: {"author": "McLaughlin, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Bernhard Vogel, Plaintiff, v. Simon Nachemson and Others, Defendants, Impleaded with Minnie Sable, Respondent, and Jennie Nachemson, Appellant.
    First Department,
    March 11, 1910.
    Foreclosure — surplus — rents collected by receiver—right of junior mortgagee superior to that of mortgagor;
    Aftef a sale on foreclosure and payment of all sums due the mortgagee a surplus consisting of rents collected by a receiver appointed for that purpose should be paid to a junior mortgagee rather than to the owner of the equity of redemption. This is true, although the junior mortgagee did not extend the rfeceiver- *■ ship for the benefit of her mortgage.
    Especially is this so where the junior mortgage by its terms assigned the rents tó the mortgagee in the event of a default.
    
      Appeal by the defendant, Jennie Eacliemson, from an order of the Supreme Court, made at the' Eew Fork Special Term and entered in the office of the clerk of the county of Eew Fork on the 5th day of January, 1910, directing a receiver appointed in a foreclosure action to pay rents which he had collected to the owner of the equity of the property foreclosed.
    
      Louis L. Kahn, for the appellant.
    
      Herman Kahn, for the respondent.
   McLaughlin, J.:

This action was brought to foreclose a mortgage upon real estate and for a sale. During the pendency of the action the plaintiff had a receiver appointed to collect the rents. After applying the proceeds of the sale upon the plaintiff’s mortgage there remained in the hands of the receiver, after paying all expenses of the receivership, $390.67. The plaintiff moved for the discharge of the receiver and the distribution of this sum, The respondent, as the owner of the equity of redemption, claims that' she is entitled to it, and a like claim is made by the appellant, a junior mortgagee. The learned justice sitting at Special Term decided in favor of the respondent and made an order directing such distribution, and the appeal is from that order.

I have been unable, to find any. authority bearing directly upon the question, but upon principle it seems to me that the owner of the junior mortgage is entitled to the money in preference, to the owner of the equity of redemption. If the plaintiff in the foreclosure action had applied the sum now in question towards the payment of his mortgage that would have left a surplus of an equal amount derived from the proceeds of the sale of the real estate and to this the appellant would clearly have been entitled as holding the first lien thereon. It. is true the receiver was appointed for. the benefit of the plaintiff^ but the appellant, as the holder of a junior mortgage, would have had the' right to apply to the court to extend the receivership for the benefit of her mortgage, and had she done so she would have been entitled to the sum now sought to be distributed. The fact that she did not make such application ought not to deprive her of that to which, in equity, she is .clearly entitled (Keogh v. McManus, 34 Hun, 521); on the contrary, her claim may now be treated in effect as making such application. Hot only this, but the mortgage which she holds recites'that the rents, in the event of a default, áre assigned to the holder of her mortgage and under such assignment it seems to me she is also entitled to the fund. ■

It follows that the order appealed from should be reversed, with ten dollars costs and disbursements, and an order entered directing the receiver to pay the fund in question to the appellant.

Clarke, Laughlin, Soott and Dowling, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and order directed as indicated in. opinion. Settle order on notice.