Case ID: ad_148/html/0054-01.html
Source: Caselaw Access Project
Author: {"author": "\n      McLaughlin, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Frederick W. Kroehle, Appellant, v. Abraham Ravitch and Others, Defendants, Impleaded with J. Van Vechten Olcott and James W. B. Rockwell, Executors, etc., of Theodore F. Vail, Deceased, Respondents.
    First Department,
    December 29, 1911.
    Mortgage—foreclosure of second mortgage —receiver of rents — subsequent foreclosure of first mortgage — deficit — right of first mortgagee to intervene in action to foreclose second mortgage — right to rents collected by receiver.
    Where after a receiver of the rents and profits appointed in a suit to foreclose a second mortgage had collected considerable money, the holder of the first mortgage, without having the receivership extended, foreclosed his mortgage and sold the property for a sum insufficient to satisfy the amount due thereon, he should not be allowed to intervene in the suit to foreclose the second mortgage. ,
    The receivership having been for the benefit of the holder of the second mortgage and never having been extended, whatever money was collected belonged to the holder of that mortgage who acquired a specific lien thereon superior to any claim either legal or equitable of the holder of the first mortgage.
    Appeal by the plaintiff, Frederick W. Kroehle, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 11th day of November, 1911, allowing the respondents to intervene and become parties to the action.
    
      Louis W. Osterweis, for the appellant.
    
      Walter F. Wood, for the respondents.
   McLaughlin, J.:

This action was brought to foreclose a second mortgage upon real estate upon which there was alleged to be due the sum of $6,000. After the action had been commenced, the plaintiff had a receiver appointed to collect during the pendency of the action the rents, issues and profits. Some two months after the action had been commenced, the respondents herein, who were the holders of a first mortgage upon the same real estate, commenced an action to foreclose their mortgage. That action was prosecuted to judgment, under which, on May 24, 1911, a sale took place. The proceeds of the sale were insufficient to satisfy the amount found due, there being a deficiency of upwards of $2,500. li the meantime the receiver appointed in this action collected a substantial sum, but no steps whatever had been taken to extend the receivership for the benefit of the holders of the first mortgage. After the sale the holders of the first mortgage applied for an order to compel the receiver to pay to them out of the moneys collected by him the amount found due upon their mortgage, and which they had failed to realize out of the sale. The motion was denied, and they appealed to this court, where the order was affirmed. (Olcott v. Miller, 146 App. Div. 940.) After the affirmance of the order, they applied for leave to intervene in this action. Their application was granted, and the plaintiff appeals. The application for leave to intervene was evidently upon the theory that, if they were permitted to do so, they would then be in a position to renew their application to compel the receiver to pay over to them so much of the moneys collected by him as would satisfy the amount due upon their mortgage. The affirmance of the other order on appeal determined that they were not entitled, as against the holder of the second mortgage, to such moneys.

The receiver was appointed for the benefit of the holder of the second mortgage, and whatever money he collected — the receivership not having been extended — was for his benefit. He had acquired a specific hen upon such moneys, superior to any claim, either legal or equitable, of the holders of the first mortgage. (Ranney v. Peyser, 83 N. Y. 1; Bradley & Currier Co. v. Hofmann, 70 App. Div. 77; Washington Life Ins. Co. v. Fleischauer, 10 Hun, 117.) Having acquired such lien by superior diligence, he cannot now be deprived of it, even though the proceeds of sale were not sufficient to satisfy the amount found due upon the first mortgage. The amount collected by the receiver is insufficient to satisfy the amount due upon the second mortgage, and, therefore, the holder of that - mortgage is entitled to the moneys collected. It would not aid the respondents, so far as such moneys are concerned, to intervene in the action. To permit the intervention would accomplish no purpose whatever. An order permitting. the intervention under such circumstances ought not to have been granted.

It follows, therefore, that the order appealed from must he reversed, with ten dollars costs and disbursements, and the motion for leave to intervene denied, with ten dollars costs.

Ingraham, P. J., Clarice, Scott and Dowling, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.