New York Title & Mortg. Co. v. Polk Arms, Inc.

• Decision Date: 23 May 1933
• Citation: 186 N.E. 35,262 N.Y. 21
• Parties: NEW YORK TITLE & MORTGAGE CO. v. POLK ARMS, Inc., et al. FREIDUS v. 198 WEST 134TH STREET REALTY CO., Inc., et al.
• Court: New York Court of Appeals Court of Appeals

262 N.Y. 21

186 N.E. 35

NEW YORK TITLE & MORTGAGE CO.

v.POLK ARMS, Inc., et al.

FREIDUS

v.198 WEST 134TH STREET REALTY CO., Inc., et al.

Court of Appeals of New York.

May 23, 1933.

Actions by the New York Title & Mortgage Company against Polk Arms, Incorporated, and by Israel Freidus against the 198 West 134th Street Realty Company, Incorporated, Clilan B. Powell and others. Order of Special Term in the first action denying defendant's motion to vacate an order appointing a receiver in mortgage foreclosure was unanimously reversed as matter of law by the Appellate Division and motion to vacate granted (237 App. Div. 852, 261 N. Y. S. 183), and plaintiff by permission appeals, and a question was certified (237 App. Div. 899, 262 N. Y. S. 895). In the second action, an order of Special Term granting defendants' motion to vacate an order appointing a receiver was affirmed by the Appellate Division (237 App. Div. 881, 261 N. Y. S. 979), and plaintiff by permission appeals, and questions were certified.

In the first case, order of Appellate Division reversed, and that of Special Term affirmed and question answered, and, in the second case, orders reversed and motion to vacate order appointing receiver denied and questions certified not answered.

The following question was certified in the first entitled action:

‘Upon the facts set forth in the moving papers was the plaintiff entitled to the appointment of a receiver pending the foreclosure action notwithstanding the provisions of section 150 of the General Corporation Law?'

The following questions were certified in the second entitled action:

‘1. Is the power of the Supreme Court to appoint a receiver of rents and profits of mortgaged real property in an action brought to foreclose a mortgage thereon curtailed or impaired by the provisions of the General Corporation Law, section 150?

‘2. Is said section repugnant to the provisions of either article I, section 6, or of article VI, section 1, of the Constitution of the State of New York, or repugnant to the provisions of article I, section 10, of the Constitution of the United States, or to the Fourteenth Amendment thereto?

‘3. May the requirements of said section be waived?

‘4. Upon the facts appearing herein, have the requirements of said section been waived by respondents?

‘5. Upon such facts, is plaintiff a mortgagee in possession?'

Appeal from Supreme Court, Appellate Division, First and Second departments.

John Vance Hewitt, of New York City, Morris Woolf, of Jamaica, L. I., and J. Earl Williams, of New York City, for appellant New York Title & Mortgage Co.

Ralph E. Freidus, of New York City, for Israel Freidus.

William Davis, of New York City, for respondents 198 West 134th Street Realty Co. and Powell.

Stephen S. Bernstein and Martin Lippman, both of New York City, for respondent Polk Arms, Inc.

De Coursey Fales and John G. Boston, both of New York City, for Savings Bank Ass'n, Bowery Sav. Bank, and Bank for Savings in City of New York, amici curiae.

George W. Whiteside, Leonard P. Moore, and Robert M. Bozeman, all of New York City, for Chemical Bank & Trust Co., amicus curiae.

POUND, Chief Judge.

These cases are actions to foreclose mortgages on real property owned by corporations. They present the question as to the bearing of section 150 of the General Corporation Law (Consol. Laws, c. 23) on the appointment of receivers in such actions pendente lite, of the rents and profits of the mortgaged premises. It has been held that orders appointing such receivers in these cases are improperly made if the plaintiff fails to show that the mortgage debt or interest thereon remained unpaid for at least thirty days after payment demanded, although the mortgage itself provides for the appointment of a receiver of rents and profits without notice or demand in the event of any default in the payment of principal or interest.

Section 150 of the General Corporation Law now reads as follows:

Ԥ 150. Appointment of receivers of property of corporations. A receiver of the property of a corporation can be appointed only by the court, and in one of the following cases: * * *

‘2. An action brought for the foreclosure of a mortgage upon property of the corporation, where the mortgage debt or the interest thereon has remained unpaid for at least thirty days after payment demanded and where either the income of the peoperty is specifically mortgaged or the property itself appears to be insufficient to pay the mortgage debt.'

It is followed by section 151, which provides as follows: Ԥ 151. Application for appointment or removal of receiver. An application for the appointment or removal of a receiver of the property of a corporation shall be made at a special term of the supreme court in the judicial district in which the office of the corporation is located, except that such an application in an action brought by the attorney-general in behalf of the people shall be made in the judicial district in which the action is triable.'

Civil Practice Act, § 183, provides that actions to foreclose a mortgage upon real property must be tried in the county in which the real property or some part thereof is located.

The language of section 150 of the General Corporation Law is not clear. An inconsistency between the general purpose of the section and paragraph 2 thereof is obvious. Receivers of the property of a corporation are appointed pursuant to statute in actions for sequestration, in actions to annul a corporation, and in other actions where violation of the law or insolvency is shown and judicial supervision of the corporation is required. Such receivers take title to all the corporate property for the benefit of all the creditors and stockholders. The appointment of a receiver of rents and profits is a not unusual incident of an ordinary mortgage foreclosure. The inconsistency of language may be due to a confusion of ideas. Section 150 of the General Corporation Law has to do in general with the appointment of a receiver of the general assets of an insolvent corporation named to secure equality of payment of claims due creditors by preventing priority through attachments and judgments. Such purpose is not germane to the appointment of a receiver of the rents and profits of the mortgaged...