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Madison Trust Co. v. Axt

Supreme Court of New York, Appellate Division

July 7, 1911

ALEXANDER AXT and Others, Defendants. (Action No. 1.) JACOB KLEIN, Receiver, and CHARLES STRAUSS, Respondents.

APPEAL by the plaintiff, Madison Trust Company (Van Norden Trust Company), 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 19th day of May, 1911, directing that the rents collected by a receiver in foreclosure be disbursed for repairs.


Albert Southard Wright of counsel [Allen W. Ashburn, Jr., attorney], for the appellant.

Charles Strauss of counsel [Strauss, Reich & Boyer, attorneys], for the respondent Strauss.

Nathan G. Goldberger, for the respondent receiver.


This action was brought by the plaintiff to foreclose a third mortgage held by it on certain tenement property known as 4000 Third avenue. Immediately after the action was commenced, and on April 4, 1910, plaintiff made an ex parte application for and obtained, on the ground of inadequacy of the

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security, a receiver of the rents, issues and profits of the premises for the benefit of the plaintiff. The receiver was authorized to keep the property insured against loss or damage by fire and in repair and to pay the taxes, assessments and water rates.

On December 12, 1910, judgment was entered directing a sale of the premises to satisfy plaintiff's claim of about $3,000, and on January 9, 1911, the property was offered for sale at public auction, to be sold subject to the first mortgage of $13,000 and a second mortgage of $2,000. No bid was made at the sale and the property accordingly had to be withdrawn.

The receiver, solely under the authority of the order appointing him in this action, collected the rents down to March 13, 1911, amounting to $864.46. On said day, in another action brought by the respondent Strauss, to foreclose his second mortgage of $2,000, an order was entered extending the receivership of this action to that action, and on or about April 11, 1911, the receiver at the instigation, as is alleged, of the respondent Strauss, not a party to this action, obtained an order directing plaintiff and the said Strauss to show cause why an order should not be made directing and instructing the receiver to apply the rents in his possession, including those collected by him prior to March 13, 1911, as well as those collected since, to the making of repairs to the premises and to the payment of any unpaid taxes upon the premises. The Special Term, over the opposition of the plaintiff, granted the motion as to repairs but not as to the taxes and from the order entered thereon this appeal is taken.

The appellant concedes that its interests in the rents collected since the extension of the receivership, that is to say, since March 13, 1911, must give way to the priority of the second mortgage and, therefore, does not object to the application of the sums thereafter collected to repairs, but claims that it acquired a specific lien on the rents collected prior to said date.

The receiver was not appointed in this action generally for the benefit of all parties according to their respective interests, but was specifically appointed for the benefit of the plaintiff. Washington Life Ins. Co. v. Fleischauer (10 Hun, 117) was an action brought for the foreclosure of the first mortgage where a second mortgagee applied for and obtained a receiver for his own

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benefit. After a sale of the property had resulted in a deficiency, a contest arose between plaintiff and defendant as to which was entitled to the collections made by the receiver. Mr. Justice DANIELS said: 'The * * * defendant applied for the receiver in his own behalf solely and not generally in the action. That he had the right to do, and the parties holding earlier incumbrances upon the property could have done the same at any time during the pendency of the action and that would, from the time of favorable action as to either of them, have suspended the special clause of the order made in favor of the defendant who procured it. But, as long as they failed to take any proceeding to secure the collection of the rents for themselves, they were not in a situation to complain of those of the respondent. If it had not been for his application and the order made upon it, the owner of the equity of redemption would, by their practical assent, have himself received and appropriated the rents and profits of the premises during the pendency of the action. He has intervened and prevented that, not for them, but exclusively for himself, and it would be inequitable now to allow him to be deprived of the advantage which his diligence alone has secured. * * * The case is within the principle applied in the decision of Howell v. Ripley (10 Paige, 43), where the contest concerning the rents was ...

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