Summary
In Abrahams v. Berkowitz (supra) the mortgage contained a clause giving the mortgagee, upon default, the right to enter and take possession of the premises and to let them and to receive the rents, issues and profits and apply the same, after payment of all necessary charges and expenses, on account of the amount secured by the mortgage and such rents and profits were, in the event of such default, assigned to the mortgagee.
Summary of this case from 148th Street Realty Co., Inc., v. ConradOpinion
January, 1911.
Henry Escher, Jr., for motion.
Franklin Taylor, Charles J. Belfer, and Herman M. Schaap, opposed.
The Builders' Mortgage Company makes this motion in an action to foreclose a second mortgage to which it is not a party. It claims the rents collected by the receiver under a first mortgage which has been foreclosed. The sale under this foreclosure resulted in a deficiency. It appears that the receiver, Carberry, was first appointed in supplementary proceedings for the benefit of certain judgment creditors of the mortgagor, and that he was subsequently also appointed receiver in the action to foreclose the second mortgage. The receiver's accounts have not yet been settled. The rights of the judgment creditors and the second mortgagee to the fund in the hands of the receiver cannot, therefore, and will not now be determined, the rights thereto of the Builders' Mortgage Company being alone considered in the disposition of the motion.
The first mortgage contains the following provision: "That if default shall be made in the payment of the principal sum mentioned in the condition of said bond, or of the interest which shall accrue thereon, or of any part of either, at the respective times therein specified for the payment thereof, the said mortgagee shall have the right forthwith, after any such default, to enter upon and take possession of the said mortgaged premises, and to let the said premises, and receive the rents, issues and profits thereof, and to apply the same after payment of all necessary charges and expenses, on account of the amount hereby secured, and said rents and profits are, in the event of any such default, hereby assigned to the mortgagee."
Default in the first mortgage occurred and the action to foreclose the same was commenced before the receiver was appointed. The first mortgagee, the moving party herein, not only has never entered into the possession of the mortgaged premises, but has never in any way demanded the rents of the premises either from the mortgagor, tenants or receiver prior to the making of this motion. The receiver's possession has terminated, and he has been directed to account by the judgment entered in the action to foreclose the second mortgage.
It is difficult to find any theory by which the first mortgagee can have any claim against the receiver. The receiver was not appointed for its benefit, but for the benefit of others. Assuming that the above quoted provision of the mortgage effected an assignment of the rents upon default to the mortgagee without entry by him, such an assignment would be merely an assignment of a chose in action. It confers on the first mortgagee a right of action against the tenants for the rent but gives him no right to recover any money which the tenants have paid to the receiver. The tenants had a right to deal with their own money as they saw fit; if they chose to pay it to the receiver, he is entitled to hold it for the benefit of those for whom he was appointed.
It is very doubtful, however, if the provision in the first mortgage above quoted can properly be construed as assigning the rents on default to the first mortgagee without entry. See Matter of Banner, 149 F. 936.
Motion denied.