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UNITED STATES LIFE INS. CO. IN THE CITY OF

NEW YORK v. ETTINGER et al.

[32 Misc. 578; 100 St. Rep. 1; 66 Supp. 1.]

(Supreme Court, Special Term, New York County. August, 1900.)

MORTGAGES-RECEIVER-PROVISION FOR APPOINTMENT.
A covenant in a mortgage extending the lien thereof to the rents and

profits, and providing for the appointment of a receiver in case of fore.
closure, will not entitle the mortgagee to the appointment of a receiver,
where it appears that the taxes upon the property have been fully paid,
that the interest was met when last due, that the persons liable for the
debt are solvent, and that the premises are adequate security for the
mortgage debt.

NOTE.--Right to RECEIVER IN MORTGAGE FOREOLOSURE.

a. The statute.
b. Under receiver's clause.
c. When security inadequate or mortgagor insolvent.
d. Relative right of senior and junior mortgagee.
e. Of property of corporation.

a. The statute.

$ 713 of the Code of Civil Procedure provides as follows: "In addition to the cases, where the appointment of a receiver is specially provided for by law, a receiver of property, which is the subject of an action, in the supreme court or a county court, may be appointed by the court, in either of the following cases :

1. Before final judgment, on the application of a party who establishes an apparent right to, or interest in, the property, where it is in the possession of an adverse party, and there is danger that it will be removed beyond the jurisdiction of the court or lost, materially injured, or destroyed.

2. By or after the final judgment to carry the judgment into effect, or to dispose of the property, according to its directions.

3. After final judgment, to preserve the property, during the pendency of

1900]

United States Life Ins. Co. v. Ettinger.

Action by the United States Life Insurance Company in the City of New York against Moritz Ettinger, and Moritz Ettinger and Maurice H. Baumgarten as executors, and others, for the foreclosure of a mortgage. Motion by plaintiff for the appointment of a receiver. Denied.

Donald B. Toucey, for plaintiff.
Maurice Rapp, for defendant Nathan.

GIEGERICH, J. It appears affirmatively from the opposing affidavits, without denial by the applicant, that the taxes upon the mortgaged premises have been fully paid, that the interest upon the bond and mortgage in suit was met when last due, that the persons liable for the debt are solvent, and that the premises in question are adequate security. The plaintiff relies solely

RIGHT TO RECEIVER IN MORTGAGE FORECLOSURE, -continued.

an appeal. The word "property” as used in this section, includes the rents, profits, or other income, and the increase of real or personal property.”

b. Under receiver's clause.

The existence in a mortgage of a receiver's clause gives the mortgagee no absolute right to the appointment of a receiver, but such clause is to be con: sidered in connection with the other features of the case in determining the propriety of appointing a receiver.

Eidlitz v. Lancaster, 40 App. Div. 446; 93 St. Rep. 54; 59 Supp. 54.

A clause mortgaging the rents and profits does not oblige the court to appoint a receiver unless the land is shown to be inadequate security.

Brick v. Hornbeck, 19 Misc. 218; 77 St. Rep. 301; 43 Supp. 301.

A receiver will not be appointed, although the mortgage contains a clause providing for such appointment, where no allegations are made as to the sufficiency or insufficiency of the security.

Jarvis v. McQuaide, 24 Misc. 17; 87 St. Rep. 97; 53 Supp. 97.

Where the property is ample security for the payment of the mortgage, a receiver will not be appointed and possession taken from the mortgagor before a decree and sale, although the mortgage provides for a receiver on de. fault of the mortgagor.

Degener v. Stiles, 25 St. Rep. 422; 6 Supp. 474; 2 Silv. S. Ct. 30.
Where the mortgage not only provides for a foreclosure without regard

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upon the covenant contained in the mortgage, which virtually mortgages the rents and profits of the premises, and permits the appointment of a receiver, without regard to the solvency of the mortgagees or the value of the mortgaged premises. While it is true that such provision is entitled to "consideration and weight,” it is equally true that "courts of equity will not enforce such a provision in a mortgage when it would be inequitable, or unconscionable to do so. Fletcher v. Krupp, 35 App. Div. 586; 89 St. Rep. 146; 55 Supp. 146; Degener v. Stiles, 25 St. Rep. 422; 0 Supp. 474; 2 Silv. S. Ct. 30; Brick v. Hornbeck, 19 Misc. 218; 77 St. Rep. 301; 43 Supp. 301. Under the circumstances disclosed, the appointment of a receiver would involve a disregard of all the equities in the case.

Motion denied, with $10 costs.

RIGHT TO RECEIVER IN MORTGAGE FORECLOSURE,-continued.

to the adequacy of the security, but assigns the rents and profits to the holder as security in the event of a default in payment, insolvency and insecurity need not be shown in order to obtain the appointment of a receiver.

Butler v. Frazer, 91 St. Rep. 900; 57 Supp. 900.

A clause providing that the mortgagee shall have the right, after any default, to take possession and receive the rents and profits of the mortgaged premises will be enforced by the appointment of a receiver, unless it would be unconscionable to do so.

Bryson v. James, 55 Super. 374.
Appeal dismissed, 110 N. Y. 633; 17 N. E. 871.

A covenant that the mortgagee, after a default in any of the conditions of the mortgage, be entitled, without regard to the value of the premises or the solvency of the mortgagor, to the appointment of a receiver of the rents and profits taken in connection with the statements in plaintiff's affidavit that the insurance and the water tax were unpaid as well as principal and interest, and that the premises did not furnish adequate security for the payment of the mortgage, is sufficient, in the absence of any proof that its enforcement would be inequitable, to authorize the court to appoint such receiver.

Fletcher v. Krupp, 35 App. Div. 586; 89 St. Rep. 146; 55 Supp. 146.

A receiver will be appointed upon an express stipulation in the mortgage, where the defense of invalidity of the mortgage on account of usury was not positively sworn to.

Knickerbocker Life Insurance Co. v. Hill, 2 Hun, 680.

1300] RIGHT TO RECEIVER IN MORTGAGE FORECLOSURE, --continued.

A defense that the mortgagee failed to make the advances as required by the mortgage to be used in the erection of buildings on the mortgaged premises, in consequence whereof the mortgagor was compelled personally to advance a large sum to complete the work, and then, to save his credit, to sell the houses erected at a large reduction from their actual value, is not a good objection to granting a motion made, pursuant to a covenant to that effeot in the mortgage, for the appointment of a receiver.

MacKellar v. Rogers, 52 Super. 360.

c. When security inadequate and mortgagor insolvent.

A receiver will not be appointed unless it is clearly shown that the security is inadequate.

Shotwell v. Smith, 3 Edw. 588.

A receiver of the rents and profits of the mortgaged premises will be appointed, where the mortgage debt is all due, and the premises are inadequate security, and the mortgagor is insolvent.

Smith v. Tiffany, 13 Hun, 671.

Where the mortgaged premises are insufficient in value to pay the mortgage-liens, and the persons responsible for any deficiency are wholly insol. vent, the holder of the mortgage is entitled to the appointment of a receiver, although the time has not expired, by reason of an extension, within which the principal would become due by default in the payment of Interest, and the interest only can be collected.

Veerhoff v. Miller, 30 App. Div. 355; 85 St. Rep. 1048; 51 Supp. 1048.

Where but part of the mortgage-debt is due, and the premises are divided into two nearly equal parcels, which can be sold separately without injury to the parties interested, and there is no specific pledge by which the accruing rents of that portion of the mortgaged premises which is not liable to be sold are constituted a security for that portion of the mortgage which is not yet due, a receiver will not be appointed of the whole property, for the protection of that portion of the mortgage-debt which is not yet due, or of that portion of the premises as to which the right to sell has not yet accrued, but only of one of the parcels, although the value of the premises has been so far impaired that they have ceased to be adequate security for the amount unpaid upon the nortgage.

Hollenbeck v. Donnell, 94 N. Y. 342, rev'g 29 Hun, 94.

Where the whole amount secured by the mortgage is not yet due, and the mortgagee has neglected to take a specific pledge of the rents and profits of the mortgaged premises for the security of his debt before it becomes due, he is not entitled to have a receiver appointed, although the residue, after the sale of part of the premises to satisfy the amount due, will be insufficient to satisfy the amount yet to become due.

Bank of Ogdensburgh v. Arnold, 5 Paige, 38. VIII. X. Y. A. C.

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Right to RECEIVER IN MORTGAGE FORECLOSURE,-continued.

The fact that the taxes are suffered to remain unpaid, and that the insurance of the buildings is neglected, in connection with the probable insol. vency of the mortgagor presents sufficient ground for the appointment of a receiver.

Wall Street Fire Insurance Co. v. Loud, 20 How. Pr. 95.

In an action in a state court to foreclose a mortgage belonging to the estate of a bankrupt by the assignee in bankruptcy, a receiver will not be appointed unless it clearly appears that the mortgaged premises are inadequate security for the debt, and that the mortgagor is insolvent.

Burlingame v. Parce, 12 Hun, 144.

Where the proceeds of the sale of the mortgaged premises under a decree of foreclosure are insufficient, and the mortgagor is insolvent, the mortgagee is entitled to a receiver to collect the rent accruing between the day of sale and the time when the purchaser will be entitled to possession by the terms of the decree, and to apply it to the payment of the deficiency.

Astor v. Turner, 11 Paige, 436.

Where the mortgaged premises are of sufficient value to pay the mortgagedebt with the interest till the probable time of a sale and the costs of suit, a receiver will not be appointed, although the mortgagor is insolvent.

Quincy v. Cheeseman, 4 Sandf. Ch. 405.

A receiver will not be appointed, although there is no doubt of the mortgagor's insolvency, where there is considerable doubt as to the inadequacy of the security.

Warner v. Gouverneur's Exec's., 1 Barb. 36.

A receiver will not be appointed, although the mortgagor is insolvent and the mortgaged premises are inadequate security, where a third person took, for a valuable consideration, an assignment of the rents, before any default had occurred in the payment of the mortgage-debt and before there was any reason to anticipate that the mortgagor would become insolvent.

Syracuse City Bank v. Tallman, 31 Barb. 201.

The court may appoint a receiver where it appears that the whole of the premises are inadequate security and that they are rapidly depreciating in value by reason of the fact that the oil business, for which they are chiefly valuable, is rapidly decreasing at that point.

Smith v. Kelley, 31 Hun, 387.

Where the defendant is in possession of the mortgaged premises by his tenant, who is not a party, and it is not shown that he is irresponsible, a receiver will not be appointed.

Sea Insurance Co. v. Stebbins, 8 Paige, 565.

An affidavit of plaintiff's attorney, in which he states that he is informed by plaintiff that it is extremely doubtful whether the mortgaged premises will sell at a foreclosure sale, subject to the incumbrances, for enough to

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