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COUNTY COURT OF NEW YORK, MONROE COUNTY 1969.NY.43586 <>; 306 N.Y.S.2d 64; 61 Misc. 2d 504 November 25, 1969 FRANK GRIFFO, AS EXECUTOR OF CHARLES GRIFFO, DECEASED, ET AL., PLAINTIFFS,v.MILTON SWARTZ ET AL., DEFENDANTS George T. White, Jr., and Erwin N. Witt for plaintiffs. Whitbeck & Holloran (John J. Keigher of counsel), for Milton Swartz, defendant. Thomas G. Presutti for receiver. David O. Boehm, J. Author: Boehm

David O. Boehm, J.

Author: Boehm

 This action was commenced to foreclose a mortgage made by the defendants, Milton Swartz and Ronald Cohen, to the plaintiffs herein, upon premises known as 310-314 Central Park, Rochester, New York.

A default judgment of foreclosure and sale entered on May 31, 1966, provided that the mortgaged premises be sold at public auction, that from the proceeds there be paid to plaintiff the sum of $470.75 costs and disbursements and the sum of $11,707.82 due on the mortgage. The judgment further provided that plaintiff recover of defendant Milton Swartz, the whole deficiency or so much thereof as the court determined to be just and equitable of the residue of the mortgage debt remaining unsatisfied after the sale.

By a further order of this court, dated August 19, 1964, a receiver was appointed of the rents and profits of the mortgaged premises during the pendency of the action.

At the foreclosure sale on March 17, 1967, there being no other bidders, the premises were sold to plaintiff Angelina Griffo, for the sum of $1. Copies of the Referee's report of sale, dated June 14, 1967, were duly served on all parties. No exceptions thereto were ever filed. The report of sale shows a deficiency of $12,419.90. According to the plaintiffs' appraiser, realtor Thomas H. Brenna, the premises at the time of sale had a fair market value of $4,500.

Prior to the foreclosure action, Cohen conveyed his interest in the premises to Swartz, hereinafter designated as the defendant. Since Cohen was served, but did not appear or answer, he is presently in default. The present application for a deficiency judgment, brought pursuant to section 1371 of the Real Property Actions and Proceedings Law, is resisted by the defendant on the ground that the long delay prior to conducting the foreclosure sale constitutes laches. In addition, the defendant seeks to surcharge the receiver because of the alleged negligent performance of his duties.

The position of the plaintiffs is that the unopposed judgment of foreclosure requires awarding the deficiency judgment as a matter of course because any defenses the defendant had should have been raised when the application for the foreclosure judgment was made.

The receiver denies being negligent, but admits that the condition of the property deteriorated after his appointment and stopped producing any income some time thereafter. His explanation is that this was due entirely to the already run-down condition of the property when he took over, the number of improvements required and the inadequate income produced by the property to make them.

Almost one year after the receiver's appointment, in June or July, 1965, plaintiffs' and defendant's attorneys, following many months of fruitless settlement negotiations, personally viewed the premises together as a result of the plaintiffs' concern about the property's state of decay and disrepair. The premises were then vacant and suffering badly from vandalism, windows were broken, doors missing, copper pipes removed and toilet fixtures ripped out.

After this visit defendant's counsel served on July 19, 1965, a notice of appearance only, requesting service of the Referee's report, order of sale, notice of motion to confirm sale and order of confirmation and the other papers in the proceeding. The notice of appearance contains the following language: "Defendant, Milton Swartz, does hereby appear but interposes no answer in this proceeding."

Defendant claims that after acquiring title, he caused extensive improvements to be made and thereby obtained increased tenant occupancy. He introduced evidence at some length regarding the nature of the improvements and that when he relinquished management to the receiver in September, 1964, all of the rental units were fully occupied and, except for two small delinquencies totaling $11, all rentals were current.

The extent and nature of the defendant's repairs and improvements are open to serious question. Plaintiffs point out that many of the plumbing improvements claimed by the defendant had already been installed or purchased before defendant took title. The existing unsatisfactory heating arrangements in the premises were apparently not replaced or improved by him as the receiver, in his affidavit of November 8, 1967, notes that when he took over in September, 1964, some of the heating was in violation of the Rochester City Building Code.

Plaintiffs' affidavit of May 4, 1964, in support of the application for the appointment of a receiver, stresses that the mortgagors (defendant and Cohen) "allowed the premises to become deteriorated, run-down to such a point and condition as to not allow complete occupancy due to the numerous violations allowed to continue on the part of the defendants".

The Rochester Rehabilitation Commission's records disclose that on December 4, 1962, three months after defendant took title, there was a serious uncorrected violation. On March 7, 1963 a further inspection by the city showed many additional violations, all attributed to "owner neglect". Presumably defendant did nothing to correct them, for the Building Bureau's records specifically note that violations listed in 1959 were corrected in 1960, but note no similar correction for the 1962 and 1963 violations.

The rentals, even from full occupancy, were obviously not adequate to meet expenses as the defendant did not pay the 1963 and 1964 county taxes, the 1962-1963 city taxes and the 1963-1964 city taxes, totaling about $1,000. This action was begun because of failure to meet a mortgage payment.

Unfortunately, the property, already marginal, deteriorated even further after the receiver was appointed. In September, 1964, one month after his appointment, there was a fire involving the corner store. This was followed by extensive water damage when a water pipe burst in January, 1965. By October, 1964, tenants had already begun to vacate the premises. This situation compounded the difficulty of the receiver whose position throughout is that the income from the property was insufficient to keep the property in repair and that the income was so inadequate that he became personally responsible for a sizeable utility bill. The rental income dwindled and finally stopped altogether as the property's condition went steadily downhill.

On February 3, 1965, the Rochester Bureau of Buildings, Rehabilitation and Conservation mailed a notice of violations to the defendant, who in turn gave it to his lawyer, who in turn mailed it to the receiver. On April 28, 1965, the receiver was notified by the Department of Social Welfare that it would withhold any further rentals unless the property was in compliance on or before September 1, 1965. On May 10, 1965 the Bureau of Buildings sent another notice of violations to the defendant, which again was turned over to the receiver by the defendant's lawyer. There was a second fire on the premises in December, 1965, and then a third fire a week or so later.

Complaints and notices of violations from the Bureau of Buildings were received in increasing number by the defendant and the receiver. Finally, in February, 1966, the premises were boarded up by the city to prevent entry by unauthorized persons, but the vandalism and deterioration were unchecked. At last, following a hearing on January 31, 1967, the city issued an order to repair, followed on April 10, 1967, ...

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