Upon the following papers numbered 1 to 8read on this motion for appointment of rent receiver; Notices of Motion/Order to Show Cause and supporting papers 1-4; Notice of Cross Motion and supporting papers; Opposing papers:5-6; Reply papers7; OtherMemo of law (8); (and after hearing counsel in support and opposed to the motion) it is, ORDERED that this motion (#003) by the plaintiff, seeking an Order for the appointment of a rent receiver, as against the property currently owned by defendants, Lewis Goldstein and Trinity Estates LLC, is granted in its entirety; and it is further ORDERED that the Court appoints Brian Eagan, Esq., as a rent receiver to protect and preserve the subject collateral property; and it is further ORDERED that the Court has simultaneously signed the Long Form Order, as modified; and it is further ORDERED that plaintiff is directed to file a notice of entry within five days of receipt of this Order pursuant to 22 NYCRR §202.5-b(h)(3). The appointment of a rent receiver in a residential foreclosure case is an extraordinary remedy — this case presents such an extraordinary situation. This is not the usual residential foreclosure action. This is an action to foreclose an $825,000.00 mortgage on residential property situate in Stony Brook, which was executed by defendants Lewis Goldstein and Jessica Goldstein on April 21, 2005. Since February 1, 2008 — more than 14 years ago — the defendants defaulted on the monthly mortgage payments and no payments have been made on the agreed to mortgage contract, including nearly all the annual taxes and insurance. This action was commenced by filing on March 25, 2021. The defendants filed separate answer with counterclaims on June 1, 2021. The individual defendants, together with defendant Trinity Estates LLC1, had previously moved (#001) for dismissal and summary judgment, but this Court, by Memo Decision and Order dated January 13, 2022 (NYSCEF Doc. Nos. 123 and 124), denied the motion. The Court detailed the pattern of actions undertaken by the defendants, and the papers underlying that decision are incorporated into the record before the Court, for purposes of this determination. In that decision, the Court explained its rationale to support the conclusion that the defendant, Lewis Goldstein, was seeking to mislead the Court and why he was estopped by his actions. The record before the Court shows that the foreclosed premise is actually being leased to the Stony Brook Foundation, as temporary lodging for visiting scientists, for what appears to be a sum of over $60,000.00 a year (the submitted lease agreement attempts to black-out the yearly lease sum). The record reflects a high-priced home close to the Stony Brook University campus, that is not being used as the primary residence of either Lewis or Jessica Goldstein, the homeowner borrowers, but as a commercial business venture by Mr. Goldstein and the principals of Trinity Estates LLC, all operating out of the office of the defendants’ attorney. The plaintiff, in making this motion, has submitted the affidavit of its employee, Terry White, which details the payment history, the unpaid principal balance and, importantly, the fact that an additional $371,586.56 has been advanced and spent for such items as property taxes and homeowners insurance. However the submission by the defendants — who have been collecting monies by renting this home as part of their commercial venture with the local University — demonstrates that the 2020/2021 taxes are in arrears. Plaintiff has requested the appointment of rent receiver. The Court of Appeals has held that an action to foreclose a mortgage is an action in equity (see Jamaica Sav. Bank v. M.S. Investing Co., 274 NY 215 [1937]). “A foreclosure action is equitable in nature and triggers the equitable powers of the court” (Mortgage Elec. Registration Sys., Inc. v. Horkan, 68 AD3d 948, 948 [2d Dept 2009]; see U.S. Bank N.A. v. Losner, 145 AD3d 935 at 937 [2d Dept 2016]). “Once equity is involved, the court’s power is a broad as equity and justice require” (U.S. Bank N.A. v. Losner, 145 AD3d at 938, supra; see also Norstar Bank v. Morabito, 201 AD2d 545, 546 [2d Dept 1994]). Additionally, “[a] wrongdoer should not be permitted to profit from his or her own wrong” (Norwest Bank Minn., N.A. v. E.M.V. Realty Corp., 94 AD3d 835, 836 [2d Dept 2012]). Whether to appoint a receiver is a matter confined to the “sound discretion of the court” (Handman v. Madonick, 235 App Div 47 [1st Dept 1932]). “[T]he powers and duties of the receiver appointed pursuant to the court’s equitable powers are formulated as a matter of judicial discretion and the court ‘is vested with inherent plenary power to fashion any remedy necessary for the proper administration of justice’” (64 B Venture v. American Realty Co., 194 AD2d 504, [1st Dept 1993] [citations omitted]). Defendants oppose the motion, claiming the Court has no statutory or contractual authority to appoint a temporary receiver. The Court disagrees, but needs only to invoke its inherent power afforded it under its equity powers (NY Const, art VI, §7). As stated by the Court of Appeals in Copeland v. Salomon, 56 NY2d 222, 227-8 (1982): The power to appoint a receiver in foreclosure proceedings, though now touched upon by RPAPL 1325 (see, also, CPLR art. 64), stems not from statute but from the inherent powers of the Court of Chancery (Hollenbeck v. Donnell, 94 NY 342, 346). The record before the Court reveals that back taxes have not been paid, even though the defendants have disclosed that they are collecting over $60,000.00 a year from the property and the plaintiff admits to having advanced over $370,000.00 for taxes and insurance, since 2008. The failure to pay taxes can be the predicate leading to the premises being sold by the responsible county official in charge of tax collection, as noted by the Court of Appeals in Johnson v. Smith, 297 NY 165 (1948). Under these unique circumstances, the Court will exercise its equity power to appoint a rent receiver, who will collect all due rents and solely pay all outstanding and due property taxes and property insurance. The rent receiver shall not pay to the plaintiff any sums due on the principal or interest — from the sums collected — but shall retain all surplus sums collected to await the final outcome of the case, whether by judgment of foreclosure and sale or otherwise. Support for such a decree can be found in Hollenbeck v. Donnell, 94 NY at 347, supra: On general principles of equity, the court may make the decree, when obtained, relate back to the time of the commencement of the action, and where necessary for the security of the mortgage debt, may appoint a receiver of the rents and profits accruing in the meantime, thus anticipating the decree and sale. This is not a matter of contract interpretation or election of remedies. As to the new, partial owner, Trinity Estates, LLC, it “bought” with notice of the foreclosure action. Here, equity and justice justify the appointment of the rent receiver, with limited powers (see, for example, Countrywide Bank, FSB v. Charan Jit Singh, 173 AD3d 673 [2d Dept 2019]; compare Indymac Bank, F.S.B. v. Yano-Horoski, 78 AD3d 895 [2d Dept 2010]). Aside from all that is set forth above, a sense of justice and fairness supports this decision (see generally, Sy Jacl Realty Co. v. Pergament Syosset Corp., 27 NY2d 449 [1971]). Finally, the Court notes that the defense has sought a recusal of this Court by way of letter to the District Administrative Judge. Here, the defendants failed to establish a basis for recusal (see Nationstar Mtge. LLC v. Balducci, 165 AD3d 959 [2d Dept 2018]). In light of the foregoing, plaintiff’s motion (#003) is granted and the court simultaneously signs the proposed Order, as modified. Dated: August 29, 2022
