Harris v. Lesster

O’BRIEN, J. Lesster was not a necessary party in the suit brought to foreclose the plaintiff’s mortgage (Bank v. Goldman, 75 N. Y. 127), and his presence as a co-defendant has made much confusion, and has presented difficulties with which the several judges below have been obliged to contend in the course of this litigation. As a co-defendant, he endeavored to have his rights determined in plaintiff’s suit, instead of resorting to independent action. The receiver having been appointed without notice to him, and having collected the rents, Lesster, down to the time of the accounting, sought to compel payment of his claim by several summary applications. Lesster has been at a disadvantage because of a confusion*,which seems to have arisen in the minds of the judges below as well as of the plaintiff’s attorney, resulting from a failure to apprehend the decision of this court upon the former appeal. On the previous appeal we were not called upon to decide, and did not decide, the merits of the conflicting claims to the fund as between the plaintiff and Lesster. The question before us was the proper form, of an order directing a receiver in foreclosure proceedings, and we held that the provision in that order, which directed payment to the plaintiff, should be stricken out, and the rents collected should remain in the hands of the receiver. The question of the respective rights to the fund not being before us, that determination was left open for such further application as either party might be advised to take in order to present the matter for decision. The respondent strenuously insists that the failure of Lesster to appeal from the several orders denying his request for payment out of the rents collected by the receiver is fatal to his right to have the question presented on this appeal; but in none of Lesster’s previous applications had the merits been passed upon, or his rights determined, and it was only upon the motions made subsequent to the confirmation of the referee’s report that such merits were determined, and his claim denied. From the order thereupon entered this appeal was taken. It is true that Lesster, proceeding on the theory, possibly, that he was not concerned with the accounting, the merits of his claim not being [866] there in issue, but that he was entitled as a matter of right to receive the amount due him from the rents collected, made several applications, as- the respondent says, for payment from the money in the hands of the receiver. These applications were correctly disposed of by the court below, for the reason, though not stated, that they were premature, and that it was proper, in the first place, that the amount of the fund ready for distribution, and also the amount of the plaintiff’s claim, should be ascertained after the sale of the property, and then, upon motion for distribution, the rights to the fund could be determined. This question, was finally presented by separate motions, which were argued together, and from the order thereupon made Lesster brought this appeal. We think, therefore, that the question is properly before us for review, as to what are the respective rights of the claimants to the fund which consists of the rents collected by the receiver. We are thus brought to a consideration of the title acquired by Lesster under his assignment of rents, and the rights acquired by the plaintiff by virtue of the appointment of the receiver. The validity of Lesster’s assignment is not questioned, and it purports to “assign and transfer * * - the sum of $200 of the rents collected for each month until the said sum of $1,284, with interest, has been fully paid.” Such payment, it appears, was being made without objection, and the debt thereby had been reduced to $773.38, when the receiver appointed on foreclosure of the plaintiff’s mortgage, without notice to Lesster, took possession of the premises, and collected all rents. We think that Lesster’s right to the rents is plainly superior to the plaintiff’s. It is Immaterial whether or not the plaintiff’s mortgage was executed prior to Lesster’s assignment. Even if that were so, it did not give the plaintiff a lien upon the rents." She obtained no right thereto until the appointment of the receiver (Ranney v. Peyser, 83 N. Y. 1); and this was long after the execution of the assignment. The plaintiff .relies upon the rule that a prior mortgagee obtains no right to the rents of the premises as against the receiver for a junior mortgagee. Ranney v. Peyser, supra. There can be no doubt that such is the rule, but it has no application here. The appellant does not base his right to the rents upon the prior mortgage, but upon his assignment, which conferred upon him an unquestionable right as against the subsequent receivership. It is said that the assignment is a secondary security, to be resorted to only in case the proceeds of sale of the mortgaged premises should prove insufficient, and that there is no proof on this head. There is nothing in the assignment to warrant such a construction. It purports- to be an absolute, primary security for the debt, and was so treated prior to the appointment of the receiver. The description of It in the appellant’s affidavits as a “further security” is perfectly compatible with this construction. It was a “further” security, but not a “secondary”" one. Finally, there is a denial in the plaintiff’s affidavits as to the amount due the appellant. This denial is upon information and belief, and the sources of information and grounds of belief are not given. It can have no weight: as against the appellant’s positive affidavit as to "what is still due him-;. We think that the order should be reversed and the [867] motion made by Lesster for the payment of $773.38 from the funds in the hands of the receiver should be granted, with $10 costs in the court below, and with costs of this appeal. RUMSEY, J., concurs. Order reversed, with $10 costs and disbursements, and motion granted, with $10 costs. BARRETT, J. I agree with Justice O’BRIEN. The view taken by the plaintiff of the assignment of the rents to Lesster is erroneous. That assignment was not within the recording act. It in no wise affected the title to the land, nor was it a lien or incumbrance thereon. Neither the plaintiff nor Lesster acquired any right to the rents under their mortgages. The rents belonged to the mortgagor as incident to his ownership of the land. They were, in fact, personalty. He could, at any time before he was devested of his title, dispose of these rents as he pleased. And he did so dispose of them to Lesster by the assignment in question. It was under this assignment, and not under his mortgage, treated independently, that Lesster became entitled to these rents. As the person thus entitled,—under the assignment,—Lesster was neither a necessary nor a proper party defendant. The complaint in the action simply sought to cut off the mortgagor’s equity of redemption, and to satisfy the plaintiff’s mortgage by a sale -of the premises. It asserted no right to the rents. It contained no allegation, and demanded no judgment with respect to them. No personal claim was made against Lesster. No issue was possible, therefore, upon the subject. Had Lesster, in his answer, set up his assignment, it would have been stricken out as irrelevant. It is difficult to understand, therefore, upon what principle the respondent contends that the judgment was conclusive that the plaintiff’s mortgage was superior to Lesster’s assignment. That judgment had, in fact^ no legal relation to the rents. It is true that in such an action the rents can be incidentally sequestered for the plaintiff’s benefit upon proof of the inadequacy of the security. Primarily, they can only be so sequestered, however, as against the mortgagor. To sequester them as against the mortgagor’s assignee thereof, the plaintiff would have to show something more than inadequacy. She would have, upon proper allegations and proofs, to overturn the assignment. And certainly she could not do this without giving the assignee notice of her .application. The receiver here was appointed ex parte. There was, •consequently, no adjudication in the plaintiff’s favor as against Lesster’s assignment, and the receiver necessarily took the rents subject to the latter’s rights. The true effect of the orders subsequently made, here and below, was that the receiver should collect the rents, and retain them for the benefit of whoever might ultimately be deemed entitled to them. He was not,-in the meantime, to pay them over either to the plaintiff or to Lesster. The court never intended to use its power through its officer to take away a person’s property without •due process of law. The time has now come for a definite decision upon the subject. That decision should clearly be in Lesster’s favor. The plaintiff, as we have seen, acquired no right to these rents by her [868] judgment of foreclosure and sale. She acquired none as against Lesster by the appointment of the receiver pendente lite, for the reason,, as already observed, that she gave Lesster no notice of her application therefor. She certainly could not pass his assignment by unnoticed, and proceed to sequestrate the rents for her own benefit, to the true owner’s exclusion. The question, then, is, has anything been shown upon the present application which militates against Lesster’s assignment? We find nothing whatever tending to invalidate the instrument, or render it ineffective. It stands unquestioned, and it adequately confers upon Lesster just what it purports to confer. Whether the plaintiff had knowledge of it or not when she took her mortgage is quite immaterial. The extraneous understanding or lack of understanding is equally immaterial. She took what that mortgage gave her, and no more, and Lesster took what his assignment gave him, and no less. The court should now direct its officer to pay the moneys in his- hands, as both law and equity demand. I agree, therefore, to the reversal of the order, and to a direction to the receiver, as indicated by Mr. Justice O’BRIEN.