Sullivan v. Rosson

• Decision Date: 02 April 1918
• Parties: SULLIVAN v. ROSSON et al.
• Court: New York Court of Appeals Court of Appeals

223 N.Y. 217

119 N.E. 405

SULLIVAN

v.ROSSON et al.

Court of Appeals of New York.

April 2, 1918.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Hannah Sullivan against Thomas Rosson and others. From so much of an order of the Appellate Division of the Supreme Court in the First Judicial Department (166 App. Div. 68,151 N. Y. Supp. 613) as modifies an order herein of the New York Special Term, passing and allowing the accounts of a receiver appointed in said action, and directing him to pay to the plaintiff the moneys remaining in his hands, the plaintiff appeals. Order of Appellate Division reversed, order of Special Term affimed, and question certified answered in the negative.Gustavus A. Rogers, of New York City, for appellant.

David Cohen, of New York City, for respondent James E. March.

CHASE, J.

In and prior to 1913 the real property in the city of New York, known as No. 115 McDougal street, was incumbered by a mortgage of $27,000, which was a first lien thereon, a mortgage of $4,000, which was a second lien thereon, a mortgage of $1,000, which was a third lien thereon, and a mortgage of $7,000, which was a fourth lien thereon. The fourth mortgage covered two other pieces of real property, and at all the times herein mentioned the plaintiff was the owner of that mortgage. It contained a provision that in case of default in the payment thereof, the mortgagee should have the right forthwith--

‘to enter upon and take possession of the said mortgaged premises and receive the rents, issues and profits thereof, and apply the same after payment of all necessary charges and expenses on account of the principal and interest of this bond and the mortgage accompanying the same, and the said obligee and her legal representatives or assigns shall be at liberty and have the right immediately after any such default upon the complaint filed or any other legal proceeding commenced for the foreclosure of said mortgage, to apply for and shall be entitled as a matter of right and without regard to the value of the premises or the solvency or the insolvency of said obligors or of any owner of the mortgaged premises, and upon ten days' notice to said obligors, heirs or assigns in any court of competent jurisdiction to have granted a receiver of the rents, issues and profits of the said mortgaged premises, with power to lease said premises for a term to be provided by the court, with power to pay taxes and assessments and water rents which are or may become a lien on said premises and keep same insured, and * * * after deducting all charges and expenses attending the execution of the said trust as receiver shall apply the residue of said rents and profits to the payment and satisfaction of this mortgage and the bond accompanying the same, or to any deficiency which may arise after applying the proceeds of the sale of said premises to the amount due, including interest and costs and expenses of the foreclosure and sale.’

The second and third mortgages at all the times herein mentioned were owned by the respondent March. The second mortgage contained a clause as follows:

‘That if default shall be made in the payment of the principal sum mentioned in the said bond, or any installment thereof, or 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.’

The third mortgage contained a clause as follows:

‘The holder of this mortgage, in any action to foreclose it, shall be entitled, without notice and without regard to the adequacy of any security for the debt, to the appointment of a receiver of the rents and profits of said premises; and said rents and profits are hereby, in the event of any default or defaults in paying said principal or interest, assigned to the holder of this mortgage as further security for the payment of said indebtedness.’

Prior to August 13, 1913, the plaintiff's mortgage being due, she commenced this action to foreclose it. The prior mortgagees were not made parties to the action. On that day the court, on motion of the plaintiff in the action, and on the ground of inadequacy of plaintiff's security, appointed for the benefit of the plaintiff a receiver of the rents, issues, and profits of the real property No. 115 McDougal street included in the mortgage sought to be foreclosed.

The receiver so appointed duly qualified and between the date of his appointment and July 1, 1914, collected rents from the McDougal street property amounting to $1,884.09 after paying his expenses other than commissions and the expenses of the accounting. Judgment was not entered in this action except as hereinafter stated. Subsequent to the commencement of this action the owner of the first mortgage commenced an action to foreclose the same, making the subsequent mortgagees parties thereto. Judgment of foreclosure and sale was entered in that action, and the McDougal street property was sold thereunder for an amount from which the first mortgage with interest and costs has been paid, leaving a surplus of $75 now in the hands of the court.

Since the sale of the McDougal street property as stated, judgment has been entered in this action adjudging that there is due the plaintiff $7,000 and interest as alleged in the complaint. The $4,000 mortgage of the defendant March became due ‘long before’ and the $1,000 mortgage before this action was commenced, but the particular time when each became due does not appear from the record before us.

The receiver made an application to account as such receiver, and notice of his application was served upon March, the holder of the second and third mortgages. The plaintiff claimed the money in the hands of the receiver to apply on the amount due on her mortgage and the judgment entered thereon and as the person for whose benefit the receiver was appointed, and March claimed the same to apply on the amount unpaid on his two mortgages, alleging that he is the owner thereof by virtue of the provisions thereof. The Special Term directed that the money in the hands of the receiver after paying his commissions and the expenses of the accounting be paid to the plaintiff. The Appellate Division modified the order by directing that the amount of the third mortgage so owned by March and interest be first paid therefrom, but permitted the plaintiff to appeal to this court from such order of modification, and certified that a question of law had arisen which in its opinion ought to be reviewed by the Court of Appeals. The following is the question as certified:

‘Is James E. March entitled as against the plaintiff to the application of the surplus in the hands of the receiver to the payment of his third mortgage of $1,000?’

[1][2] The respondent March claims that by the provision of his third mortgage quoted he became the absolute and unqualified owner of the rents of the McDougal street property to an amount sufficient to pay said mortgage and the interest thereon. The answer to the question certified to us depends upon whether the claim of March under his third mortgage should be sustained. We think it should not be sustained. Rent that has accrued may be assigned like any other chose in action, and rent to accrue may be assigned at common law independent of the reversion so as to enable the assignee to recover thereon when due. Demarest v. Willard, 8 Cow. 206;Swan v. Inderlied, 187 N. Y. 372, 374,80 N. E. 195. It is said in Halsbury's Laws of England (volume 18, p. 468):

‘If it [rent] is reserved to a stranger, it is not a true rent and cannot be distrained for, but the stranger can recover it by action. Similarly, no rent can be reserved on the assignment of a lease, since no reversion remains in the assignor; but here, also, the reservation is good as a contract to pay the rent.’

Our statutes recognize the right to assign a lease or the interest of the parties either lessor or lessee thereunder. It is provided by section 223 of the Real Property Law (Cons. Laws, c. 50) that...