Case ID: ny-sup-ct_17/html/0117-01.html
Source: Caselaw Access Project
Author: {"author": "Daniels, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

THE WASHINGTON LIFE INSURANCE COMPANY, Respondent, v. JACOB FLEISCHAUER and others, Appellants.
    
      Foreclosure suit — appointment of receiver in, on application of subsequent incwmb’ancer — •who entitled to a/mount collected.
    
    Where, in an action brought to foreclose a mortgage, a subsequent incumbrancer, who is made a party defendant thereto, applies, in bis own behalf for, and secures tbe appointment of a receiver of the rents and profits of tbe mortgaged premises, be is entitled to retain tbe amount collected by tbe receiver as against tbe claim of a prior mortgagee whose debt tbe amount realized upon tbe sale of the mortgaged property, under tbe judgment entered in tbe action, has been insufficient to satisfy.
    Appeal by defendants Bernard Amend and Joseph Koelble, executors of Joseph Mosbacb, from an order denying a motion to modify an order appointing a receiver.
    Tbe plaintiff, bolding a first mortgage on certain premises on tbe 21st of March, 1876, filed a complaint for foreclosure and sale, malting tbe holders of tbe second, third and fourth mortgages parties defendant.
    All tbe parties were served with tbe summons in tbe action without a complaint. After tbe defendants Amend and Koelble, tbe holders of tbe second mortgage, bad been served with tbe summons, but before they appeared in tbe action and before tbeir time for appearing had expired, and on tbe 31st of March, 1876, tbe defendant Susman Schuster, tbe bolder of tbe fourth mortgage on the-premises, without notice to said Amend and Koelble, moved for a receiver of tbe rents of tbe mortgaged premises for bis benefit. Tbe motion was granted, tbe order reciting that it bad been made on notice to all parties who bad appeared in tbe action. Tbe mortgaged premises were sold under tbe decree in tbe action on tbe 12th of July, 1876, and after tbe sale a motion was made on behalf of tbe said Amend and Koelble, tbe holders of said second mortgage, to modify tbe order appointing tbe receiver by striking out tbe words “ for tbe benefit of ” tbe fourth mortgagee, and that tbe rents in tbe bands of tbe receiver be paid over to them as holders of tbe second mortgage, tbeir ben being prior to the ben of tbe fourth mortgage, and they not having bad notice of tbe appbcation for tbe receiver for Schuster’s benefit.
    
      B. M. SUlboell, for tbe appebants.
    
      John, S. Ban/, for tbe respondent.
   Daniels, J.:

This action was brought to foreclose a mortgage, which was tbe first incumbrance on tbe premises described in it. Three other mortgages were afterwards given upon tbe same property, and tbe parties bolding them were made defendants in this action. During its pendency tbe defendant Susman Schuster procured tbe appointment of a receiver of tbe rents of tbe mortgaged premises, for tbe benefit of himself, the defendants appealing having not then appeared in tbe action; they bad no notice of that appbcation. Tbe receiver cobected about $420, rents of tbe premises, by virtue of bis appointment, and after that and a sale of tbe premises bad been made under tbe judgment recovered, tbe appealing defendants, who owned tbe second mortgage, appbed for such a modification of tbe order as would entitle them to tbe rents cobected by tbe receiver, tbe proceeds of tbe sale paying only tbe first mortgage upon tbe property. This appbcation was denied, and tbe appeal has been taken from tbe order made upon that denial. Tbe respondent, defendant, applied for tbe receiver in bis own bebalf solely and not generally in tbe action. Tbat be bad tbe right to do, and tbe parties bolding earlier incumbrances upon tbe property could bave done tbe same at any time during tbe pendency of tbe action, and tbat would, from tbe time of favorable action as to either of them, bave suspended tbe special clause of tbe order made in favor of tbe defendant who procured -it. But, as long as they failed to take any proceeding to secure tbe collection of tbe rents for themselves, they were not in a situation to complain of those of tbe respondent. If it bad not been for bis application and tbe order made upon it, tbe owner of tbe equity of redemption would, by their practical assent, bave himself received and appropriated tbe rents and profits of tbe premises during tbe pendency of tbe action. He has intervened and prevented tbat, not for them, but exclusively for himself, and it would be inequitable now to allow him to be deprived of tbe advantage which bis diligence alone has secured. Ordinarily, it is true tbat a receiver is appointed for tbe benefit of all tbe parties in the action. But tbat is only so when all are interested and bave tbe probable right to participate in tbe subject of tbe litigation. Tbat in this case did not directly include tbe rents and profits of tbe property while tbe suit should be pending. They could be impounded only because tbe property itself was an inadequate security for tbe debt, and then only by means of a special application of tbe court for tbat piupose. Tbe parties each bad their election whether tbat should be made or not. They all elected not to make it, except tbe respondent. Tbe rest were satisfied to leave tbe rents and profits out of tbe case, and unaffected by its determination. He alone was actuated by a different disposition, and moved for their sequestration, as be bad a right to, for bis own exclusive benefit. After tbat bad been done, and tbe anticipated benefit bad been secured, tbe appellants could not justly deprive him of its fruits.

Tbe case is within tbe principle applied in tbe decision of Howell v. Ripley (10 Paige, 43), where tbe contest concerning tbe rents was between tbe complainants in two separate actions of foreclosure, and it was held tbat tbe junior incumbrancer could not be divested of bis right to tbe rents and profits in favor of tbe party bolding the first mortgage, until be bad procured tbe appointment of a receiver, who should collect them for bis benefit and subordinaré to bis own superior rights. In principle, there can be no difference between this case and that which was then decided by the chancellor. The same principle was maintained in Post v. Dorr (4 Edw. Ch. [m. p.], 412), where it was held “ to be an established rule that a second or third mortgagee, who succeeds in getting a receiver appointed, becomes thereby entitled to the rents collected during the appointment, although a prior mortgagee steps in and obtains a receivership in his behalf, and fails to obtain enough out óf the property to pay his debt. This is on the principle that a mortgagee acquires a specific lien upon the rents by obtaining the appointment of a receiver of them, and if he be a second or third incumbrancer, the court will give him the benefit of his superior diligence over his senior in respect to the rents which accrued during the time that the elder mortgagee toot no measures to have the receivership extended to his suit and for his benefit.” (Id., 414.)

The order appealed from was a proper one, and it should be affirmed, with ten dollars costs, besides disbursements to the respondent.

Beady, J., concurred.

Present — Davis, P. J., Beady and DaNiels, JJ.

Order affirmed, with ten dollars costs and disbursements.