Case Name: Edward F. Browning, Appellant, v. Albert I. Sire and Others, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1900
Citations: 56 A.D. 399
Docket Number: 
Parties: Edward F. Browning, Appellant, v. Albert I. Sire and Others, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 56
Pages: 399–402

Head Matter:
Edward F. Browning, Appellant, v. Albert I. Sire and Others, Respondents.
Mortgage foreclosure —appointment of a receiver of rents — what proof is required where the mortgage contains a receiver’s clause.
The plaintiff in an action to foreclose a second mortgage upon real property is entitled to the appointment of a receiver.of the rents and profits of the mortgaged premises pending the action, although the mortgagors contend that the property is ample security for the incumbrances thereon, where it appears that the interest upon tlie first mortgage and the taxes are in arrears and that the first mortgage is about to be foreclosed, and that the second mortgage contains a clause authorizing the second mortgagee to apply for and be entitled as a matter of right and without regard to the value of the premises described in the mortgage or the solvency or insolvency of the mortgagors, to the appointment of a'receiver of the rents, issues and profits immediately upon commencing an action of foreclosure.
In view of the express stipulation in the mortgage, the moving papers need not contain any allegation as to the solvency or insolvency of the bondsman.
Van Brunt, P. J., and Rumsby, J., dissented.
Appeal by the plaintiff, Edward F. Browning, 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 7th day -of December, 1900, denying the plaintiff’s motion for the appointment of a receiver of the mortgaged premises sought to be foreclosed in the action.
. William H. Stoehwell, for the appellant. •.
Albert I. Sire, for the respondents.

Opinion:
Ingraham, J.:
This action was brought to foreclose a mortgage executed by the defendant Buckley to the defendant Sire, and by Sire assigned to the plaintiff. This mortgage contained a clause by which the mortgagor agreed that the mortgagee should be at liberty, immediately after any default, upon a complaint filed, or any other proper legal proceedings commenced for the foreclosure of the mortgage, to apply for and be entitled as a matter of right and without regard to the value of the premises described or the solvency or insolvency-of the party of the first part, or of any owner of said premises, and on ten days' notice to the party of the first part (mortgagor), his heirs or assigns, to the appointment of a receiver of the rents, issues and profits of said premises. It appeared from the motion papers that there was a prior mortgage of $125,000 on the property, the interest on which became due on July 1, 1900 ; that such interest is unpaid, and that the first mortgagee had instructed his attorneys to commence proceedings for the foreclosure of this prior mortgage. The taxes for the years 1899 and 1900, aggregating about $6,000, are also unpaid; the total amount of the incumbrances on the property, including the mortgage in suit, amounting to about $141,000. There was also submitted the evidence of several real estate experts, who testified that in their opinion the mortgaged premises would not sell for more than $125,000 to $135,000 if sold under a decree of foreclosure. The defendants interposed answers, alleging that the mortgage was void for usury, and opposed the application for a receiver, alleging the projierty to be worth upwards of $200,000. The appraisement as to the value of this property was estimated upon a gross rental of $18,000, though the evidence is that the. actual rental is about $16,000. The affidavits submitted on-behalf of the defendants fixed the value of the property in the neighborhood of $100,000 and the value of the land about $115,000. - There were also annexed to these affidavits certain unverified appraisements of the property by real estate appraisers, appraising it in the neighborhood of $225,000. Upon this evidence the court below denied the motion, and from the order denying the motion the plaintiff appeals.
An examination of the affidavits submitted by the defendants Indicates that the value of this property was not fixed at the actual selling price, but at its value when sold under the most favorable conditions and as the basis of obtaining a loan upon the property. The owners of this property have agreed in the mortgage that upon default of the payment of the- interest and the commencement of the action to foreclose the mortgage, the mortgagee should have the .right to have a receiver of the rents of the property appointed as a matter of course, without proof of the insufficiency of the property as security or of the responsibility of the bondsman. While it is well settled that the court will not specifically enforce such an agreement, without evidence of its necessity to protect the plaintiff, still, where such an agreement exists, the court does not require that the proof should be quite up to- the standard which would be required in a ease where no such agreement has been made. These mortgagors have in effect stipulated that if they failed • to pay the interest on this mortgage, the rents pending the necessary proceedings to realize upon the mortgage should be sequestrated to add to the mortgagor's security. These defendants have received the rents of these premises, but instead of applying them to the interest upon the prior mortgage and to the taxes, they have allowed both to become in arrears, the taxes being unpaid for the two past years. That they desired to continue thus in possession of the property,- collecting the rents and refusing to discharge the accruing interest and taxes, would seem somewhat inconsistent with a real belief in the value of the property and that they would be enabled to or desired to retain title to it. But what the parties to this mortgage have agreed to is that these rents should be held as additional security for the protection of the plaintiff's mortgage; and in such a case as this, where there is a second mortgage upon' property that is being fore•closed, where the interest on the prior mortgage- is in arrears so that that mortgage has now become due and is about to be foreclosed, and where the mortgagors and owners of the property refused to apply the rents to the payment of the interest or taxes, but appropriated them to their own use, we think that the evidence presented tb the court below justified' the appointment of a receiver. The defendants here have interposed an answer to the plaintiff's mortgage. When the first mortgage comes to be foreclosed, if no answer is interposed, a decree of sale can bé obtained in that action before a sale "can be decreed in this; and thus to protect his mortgage the plaintiff will have to pay the amount of the first mortgage,, with interest, taxes and costs; and this, because of the failure of the-defendants to apply the rents of the property to the payment of the. interest upon the first mortgage. Irrespective of the valúe of the-property, the plaintiff is placed by the action of the defendants in a, position' which would require him to raise $140,000 in order to pro- tect his mortgage.. No excuse is offered by the defendants for their refusing to pay this interest upon the first mortgage, and their refusing to pay that interest in itself would, it seems to me, go far to-justify the court in finding that, as a matter of fact, this property is. not of such a Value aS to make it a safe security for the amount of the incumbrances upon it." It is true there is no allegation in the moving' papers as- to the solvency or insolvency of the bondsman, but the mortgagor is careful to avoid any statement as to his solvency in his-affidavit in opposition to the motion. I do not think that, in view of the express stipulation of the mortgagor as contained in the mortgage, such proof is essential. The plaintiff loaned his money, inlying upon the security of the real property, and not upon the personal obligation of the bondsman, and where it appears that the mortgagor has made such .an agreement as to a receiver and has applied the-rents of the property to his own use and failed to pay the taxes and interest on prior incumbrances, and that the property is of doubtful security, he should show that the bondsmen are responsible so that there is no reasonable doubt but that the' mortgagor will be protected.
I think the order should be reversed, With ten dollars costs and disbursements, and the motion for the appointment of a receiver-granted, with ten dollars Costs.
Patterson and Hatch, J.T., concurred; Van Brunt, P. J., and Rtjmsey, J., dissented.
Qrder reversed,- with ten dollars costs and disbursements, and motion for appointment of receiver granted, with ten dollars costs.