Genuth v. First Division Ave. Realty Corp.

• Decision Date: 06 October 1976
• Citation: 387 N.Y.S.2d 793,88 Misc.2d 586
• Parties: Wolf GENUTH v. FIRST DIVISION AVENUE REALTY CORP. et al.
• Court: New York Supreme Court

Page 793

387 N.Y.S.2d 793

88 Misc.2d 586

Wolf GENUTH v. FIRST DIVISION AVENUE REALTY CORP. et al.

Supreme Court, Special Term, Kings County, Part I.

Oct. 6, 1976.

Pruzan, Levy & Pruzan, Brooklyn, for plaintiff.

Richard S. Panebianco and Martin S. Needelman, Brooklyn, for defendants.

ARTHUR S. HIRSCH, Justice.

In this mortgage foreclosure action the tenants of the subject premises, by order to show cause, seek (1) dismissal of the complaint; and (2) vacatur of the appointment of a Receiver which was made by another justice of this court in an order dated June 25, 1976.

That branch of the motion requesting dismissal of the complaint is denied. The tenants are not such indispensable parties to the maintenance of this mortgage foreclosure action that their absence mandates a dismissal pursuant to CPLR 3211(a)10 (Douglas v. Kohart, 196 App.Div. 84, 88, 187 N.Y.S. 102, 105 (2d Dept.); Robinson v. Hartley, 134 Misc. 703, 704, 240 N.Y.S. 197, 198). However, as a result of the failure of plaintiff to join the tenants as defendants, the interest which the tenants have in the premises would be unaffected by the foreclosure decree, viz., they could not be ejected until the expiration of their tenancies (Harvey v. Mooney, 168 App.Div. 169, 170, 153 N.Y.S. 268, 269 (2d Dept.); Scheidt v. Supreme Woodworking Co., Inc., 212 App.Div. 179, 180, 208 N.Y.S. 394, 395 (2d Dept.)).

Turning to the second branch of their motion, the tenants argue that the appointment of the Receiver should not have been made because the property was in the hands of an Administrator, James T. Harris, who was appointed by the Civil Court on February 11, 1976 pursuant to an action commenced by the tenants under Article 7--A of the Real Property Actions and Proceedings Law (R.P.A.P.L.).

The initial question facing this court is whether it has the power to overturn the prior order appointing a Receiver. It is clear that the propriety of such appointment rests in the sound discretion of the court in the first instance (Home Title Ins. Co. v. Isaac Scherman Holding Corp., 240 App.Div. 851, 267 N.Y.S. 84 (2d Dept.); Rae v. Hotel Governor Clinton, Inc., 22 A.D.2d 644, 252 N.Y.S.2d 875; Ardeb Realty Corp. v. East Estates, Inc., 12 Misc.2d 167, 178 N.Y.S.2d 972; Blair v. Donlon, Sup., 51 N.Y.S.2d 921, 922). But it is equally clear in the instant case that since plaintiff's application for appointment of a Receiver was made ex parte, the court was not fully apprised of the circumstances surrounding the subject premises to enable it to properly exercise this discretion. Sufficient facts having been alleged on this motion, the court is now in a position to determine whether the appointment was warranted (see, Wolf v. 120 Middleton Realty Corp., 31 Misc.2d 668, 670, 221 N.Y.S.2d 110, 113). If the appointment should not have been made, the motion to vacate will be granted (Dajon Realty Corp. v. Ansonia House, Inc., 275 App.Div. 834, 89 N.Y.S.2d 919; Ardeb Realty Corp. v. East Estates, Inc., supra; Blair v. Donlon, supra).

In exercising its discretion in this matter, the court must balance the equities of the various interests involved. Specifically, the plaintiff-mortgagee has the statutory right to apply to the court for the appointment of a Receiver in a mortgage foreclosure action (CPLR 6401; R.P.A.P.L. § 1325; Real Property Law § 254, subd. 10). The tenants are also statutorily entitled to and did commence an Article 7--A proceeding (R.P.A.P.L. § 769, et seq.) for the purpose of remedying conditions dangerous to their life, health or safety (§ 769, subd. 1). As part of this proceeding in the Civil Court, an Administrator was appointed pursuant to R.P.A.P.L. Section 778 to 'order the necessary materials, labor and services to remove or remedy the conditions specified in the judgment' (Cole v. Westlong Investors Corp., 64 Misc.2d 933, 937, 318 N.Y.S.2d 337, 341).

New York City has an interest in this proceeding too, for in addition to protecting the tenants of multiple dwellings from conditions which endanger their lives, health or safety, Article 7--A was enacted 'to increase the supply of adequate, safe and standard dwelling units, the shortage of which constitutes a public emergency and is contrary to the public welfare' (Legislative findings and intent, L.1965, Ch. 909, § 1). The Housing and Development Administration of the City of New York has submitted findings in support of the tenants' motion on the ground that they regard the continued viability of the subject dwelling to be of great significance in terms of neighboring buildings and the immediate residential area. HDA supported the appointment of James T. Harris as Administrator and now asserts that continuation of management by Mr. Harris is preferable, in terms of the best interests of the building, to the appointment of the Receiver.

In considering these various interests, the court makes the following findings and conclusions:

1) The appointment of a Receiver rests upon the general principle that it is necessary for the preservation of the subject property, as against the owner-mortgagor, pending its final disposition in foreclosure (Gordon v. Washington, 295 U.S. 30, 37, 55 S.Ct. 584, 79 L.Ed. 1282). Here, for all practical purposes, the plaintiff-mortgagor and defendant-owner are one and the same, as it is alleged and not denied by the plaintiff that he owns a controlling interest in defendant-corporation. Thus, plaintiff's need for a Receiver is minimized to the extent that he requires no protection of his security interest as against the owner.

2) As against the Administrator, both plaintiff and defendant recorded their respective interests in the property subsequent to his appointment and subsequent to the notice of pendency of the Article 7--A proceeding. Consequently, they were or should have been aware of the condition of the property...