DECISION AND ORDER In this action for foreclosure on two mortgages and the sale of the real property pledged as security, nonparty 701 Elton Residence, LLC (Elton Residence) moves seeking, inter alia, an order pursuant to RPL §254(10) appointing a receiver to preserve the premises secured by the mortgages in this action. Elton Residence avers that a receiver is necessary to preserve the status of the mortgaged premises and to safeguard Elton Residence’s interests therein. Defendants 701 ELTON AVENUE LLC (Elton Avenue) and MESHULEM ZUSIA TWERSKY (Twersky) oppose the instant motion asserting that Elton Residence fails to establish that the mortgaged premises is subject to irreparable loss or waste thereby warranting the appointment of a receiver. For the reasons that follow hereinafter, Elton Residence’s motion is granted, in part. The instant action is for foreclosure on two mortgages and the sale of the real property pledged as security therein. The complaint alleges the following. Plaintiff owns and holds an amended, restated and consolidated senior loan promissory note, dated August 30, 2019, wherein Elton Avenue agreed to repay a loan totaling $6.9 million. Plaintiff owns, by assignment, a consolidated mortgage, assignment of leases and rents and security agreement, which secures the foregoing note and pledges 701 Elton Avenue, Bronx, NY 10455 (701) as security. It is alleged that the foregoing mortgage has its nexus in a series of prior agreements securing the note and assignments related thereto. It is alleged that on April 29, 2016, Elton Avenue executed a first mortgage and security agreement in favor of nonparty Signature Bank. In February 2017, the foregoing mortgage was assigned to nonparty Sharestates Investments, LLC (Sharestates). On February 10, 2017, Elton Avenue executed a mortgage, assignment of leases and rents security agreement in favor of Sharestates. On that same date, Elton Avenue executed a consolidation, extension, and modification agreement in favor of Sharestates. The foregoing agreement consolidated the mortgages executed in 2016 and 2017, and was assigned to nonparty Chondrite Asset Trust (Chondrite). In 2017, Chondrite assigned the foregoing mortgage to Sharestates. On May 3, 2018, Elton Avenue executed a gap mortgage, assignment of leases and rents and security agreement, in favor of Sharestates. On that same date, Elton Avenue executed a consolidation, extension, and modification agreement, consolidating the 2016, 2017, and 2018 mortgages, and the 2017 agreement into one mortgage. The foregoing agreement was assigned to nonparty Pallasite Asset Trust (Pallasite). Pallasite assigned the foregoing agreement to Coventus, LLC (Coventus). On August 30, 2019, Elton Avenue executed a gap senior loan mortgage, assignment of leases and rents, fixture filing, and security agreement, in favor of Coventus. Elton Avenue executed a land loan consolidation, extension and modification agreement in favor of Coventus, which consolidated the 2016, 2017, 2018, and 2019 mortgages and the 2017 agreement into one mortgage. The foregoing mortgage was then assigned to plaintiff. Plaintiff also owns and holds a building loan promissory note dated August 30, 2019 executed by Elton Avenue in favor of Coventus, wherein Elton Avenue agreed to repay a loan totaling $500,000. The foregoing note is secured by a building loan mortgage, assignment of leases and rents, fixture filing and security agreement, dated August 30, 2019, which pledges 701 as security for the note. The foregoing mortgage was assigned to plaintiff. Plaintiff also owns and holds two guaranty agreements, dated August 30, 2019, wherein Twersky agrees to personally guarantee the loans evinced by the foregoing notes. Pursuant to the foregoing agreements, Elton Avenue was, inter alia, required to make monthly payments on the loans therein and pay all amounts due under the loan on the maturity date — December 1, 2020. The failure to make a payment when due constituted a default, which, per the agreements, would authorize plaintiff to bring an action to foreclose on the mortgages, seek the appointment of a receiver and sell 701. Elton Avenue defaulted under the terms of the agreements by failing to make monthly payments when due, failing to pay the loan in full on the maturity date, and by incurring fines at 701 in excess of $187,000. Based on the foregoing, plaintiff, inter alia, seeks a judgment authorizing foreclosure on the mortgages and the sale of 701. MOTION TO FOR SUBSTITUTION Elton Residence’s application pursuant to CPLR §1018, seeking to substitute itself as the plaintiff in this action is granted on consent1. It bears noting that absent consent, the instant motion would have been denied insofar as the record is bereft of any admissible evidence that Elton Residence holds and owns the two notes executed by Elton Avenue on August 30, 2019, which are secured by the two mortgages also executed on that date. CPLR §1018 states that “[u]pon any transfer of interest, the action may be continued by or against the original parties unless the court directs the person to whom the interest is transferred to be substituted or joined in the action.” Moreover, pursuant to CPLR §1021, “[a] motion for substitution may be made by the successors or representatives of a party or by any party.” Thus, while an action may continue even after a party thereto has been divested of interest, upon a motion to substitute the successor in interest, the court ought to grant substitution (U.S. Bank, N.A. v. Duran, 174 AD3d 768, 769 [2d Dept 2019] ["Thus, it was established that Gustavia, rather than MERS, was the real defendant in interest. The branch of Gustavia's cross motion which was for leave to amend the caption and to substitute Gustavia as successor in interest in place of MERS should, therefore, have been granted, and the caption amended accordingly."]; First Am. Tit. Ins. Co. v. Chavannes, 176 AD3d 678, 680 [2d Dept 2019] ["Upon the submissions by Golden Grand that it had received an assignment of Robert's interest in this action and that it had thereafter assigned such interest to First American, the Supreme Court providently exercised its discretion in granting those branches of Golden Grand's motion which were to substitute First American as the plaintiff and to amend the caption accordingly."]; 41st Rd. Properties, LLC v. Wang Real Prop., LLC, 164 AD3d 455, 458 [2d Dept 2018] ["Upon 41st Road's submission of proof that Emigrant had assigned it the mortgage and the note, the Supreme Court providently exercised its discretion in granting 41st Road's motion to be substituted as the plaintiff and to amend the caption accordingly."]). Based on the foregoing, while substitution is warranted upon a motion to substitute, the proponent must establish that it is a successor in interest to the claims asserted against the defendant (U.S. Bank, N.A. at 769; First Am. Tit. Ins. Co. at 680; 41st Rd. Properties, LLC at 458). As such, it follows that the proponent of substitution must demonstrate that it has the very same standing to prosecute the action as the plaintiff it wants to replace. As relevant here, it is well settled that since “foreclosure of a mortgage may not be brought by one who has no title to it” (Lasalle Bank Natl. v. Ahearn, 59 AD3d 911, 912 [3d Dept 2009] [internal quotation marks omitted]), plaintiff in a foreclosure action must establish that it has legal or equitable interest in the mortgage, such that it has standing to foreclose on the mortgage when an action is commenced (Aurora Loan Servs., LLC v. Weisblum, 85 AD3d 95, 108 [2d Dept 2011]; Deutsche Bank Natl. Trust Co. v. Barnett, 88 AD3d 636, 637 [2d Dept 2011]; Wells Fargo Bank, N.A. v. Marchione, 69 AD3d 204, 207 [2d Dept 2009]). A plaintiff in a mortgage foreclosure action has standing to bring an action when it is “both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced” (Bank National Assoc. v. Dellarmo, 94 AD3d 746, 748 [2d Dept 2012] [internal quotation marks omitted]; Weisblum at 108; Barnett at 637; Bank of N.Y. v. Silverberg, 86 AD3d 274, 279 [2d Dept 2011]; U.S. Bank, N.A. v. Collymore, 68 AD3d 752, 753 [2d Dept 2009]). Neither the assignment of a note nor of a mortgage need be in writing and merely the transfer of those instruments, meaning physical delivery, confers title upon an assignee and, therefore, also confers standing (Flyer v. Sullivan, 284 AD 697, 699 [1954]; Dellarmo at 748; Barnett at 637; Silverberg at 279; Weisblum at 108; Ahearn at 912; Collymore at 2009). Insofar as the mortgage is merely security for the note, namely the debt, assignment of a note also effectuates assignment of the mortgage (Dellarmo at 748; Silverberg at 280). However, assignment of the mortgage, does not by itself, result in the assignment of the note (Dellarmo at 748; Silverberg at 280). Thus, the assignment of a mortgage without the concomitant assignment of the note is a nullity (Flyer at 698; Merrit v. Bartholick, 9 Tiffany 44, 45 [1867]; Dellarmo at 749; Collymore at 754). Here, while the in support of the instant motion, Elton Avenue submits the complaint, verified by Robert E. Records, Director of Special Servicing for SitusAMC, plaintiff’s servicer, the same only alleges that plaintiff holds the foregoing mortgages. While Elton Residence submits assignments dated February 23, 2022, which evince that it was assigned the relevant mortgages — one securing a note for $6.9 million and another securing a note for $500,000 — the record is bereft of any assertion, except by counsel, that Elton Residence holds and owns the notes. Again, while the assignment of the note effectuates the assignment of the mortgage, the converse is not true. Hence, where as here the record only establishes the assignment of the mortgage, there is no evidence that Elton Residence — as urged — holds and owns the notes. As such, there is insufficient evidence to warrant the conclusion that Elton Residence is plaintiff’s successor in interest. Nevertheless, the motion for substitution is granted on consent. MOTION FOR THE APPOINTMENT OF A RECEIVER Elton Residence’s motion seeking the appointment of a receiver is denied. Significantly, here, Elton Residence fails to establish that 701 is subject to irreparable loss or waste thereby warranting the appointment of a receiver. The appointment of a receiver is a remedy which courts should use sparingly since it is tantamount to “the taking and withholding of possession of property from a party without an adjudication on the merits” (Hahn v. Garay, 54 AD2d 629, 629 [1st Dept 1976] ["It is well recognized that courts of equity exercise extreme caution in appointing receivers Pendente lite."]; S.Z.B. Corp. v. Ruth, 14 AD2d 678, 679 [1st Dept 1961]). Indeed, the drastic remedy of appointing a receiver should only be awarded when it is absolutely necessary to protect the parties to the action and their interests (In re Armienti, 309 AD2d 659, 661 [1st Dept 2003]; S.Z.B. Corp. at 679). Accordingly, generally, the proponent seeking the appointment of a receiver must establish that absent a receiver, there is danger of irreparable loss” (In re Armienti at 661; S.Z.B. Corp. at 679). RPL §254 and §254(10), read together, state that [i]n mortgages of real property, and in bonds and notes secured thereby or in assignments of mortgages and bonds and mortgages and notes, or in agreements to extend or to modify the terms of mortgages and bonds and mortgages and notes, the following or similar clauses and covenants must be construed as follows…Mortgagee entitled to appointment of receiver. A covenant ‘that the holder of this mortgage, in any action to foreclose it, shall be entitled to the appointment of a receiver,’ must be construed as meaning that the mortgagee, his heirs, successors or assigns, in any action to foreclose the mortgage, shall be entitled, without notice and without regard to adequacy of any security of the debt, to the appointment of a receiver of the rents and profits of the premises covered by the mortgage; and the rents and profits in the event of any default or defaults in paying the principal, interest, taxes, water rents, assessments or premiums of insurance, are assigned to the holder of the mortgage as further security for the payment of the indebtedness. Thus, where a mortgage contains language providing for the appointment of a receiver in an action to foreclose on a mortgage, upon application, the court must generally appoint a receiver and can do so without notice (Maspeth Fed. Sav. and Loan Ass’n v. McGown, 77 AD3d 890, 891 [2d Dept 2010] ["The mortgage agreement at issue contains a provision which specifically authorizes the appointment of a receiver upon application by the mortgagee in any action to foreclose the mortgage. Consequently, the plaintiff, as mortgagee, was entitled to the appointment of a receiver without notice and without regard to the adequacy of the security."]; Naar v. I.J. Litwak & Co., Inc., 260 AD2d 613, 615 [2d Dept 1999]; Clinton Capital Corp. v. One Tiffany Place Developers, Inc., 112 AD2d 911, 912 [2d Dept 1985]). Under the foregoing circumstances, the mortgagee has no obligation to establish the necessity of a receiver (Febbraro v. Febbraro, 70 AD2d 584, 585 [2d Dept 1979]). Significantly, however, in a foreclosure action, even where the parties have agreed to the remedy of the appointment of a receiver in the relevant loan documents, such that the Real Property Law would ordinarily require such appointment, the appointment of a receiver is not absolute. To be sure, since an action to foreclose on a mortgage is one in equity (ADHY Advisors LLC v. 530 W. 152nd St. LLC, 82 AD3d 619, 619 [1st Dept 2011]), “a court of equity, in its discretion and under appropriate circumstances, may deny such an application,” even when the parties previously agreed to the appointment of a receiver (id. at 619; see US Bank, N.A. v. Rufai, 202 AD3d 719, 721 [2d Dept 2022]; Essex v. Newman, 220 AD2d 639, 640 [2d Dept 1995]; 366 Fourth St. Corp. v. Foxfire Enterprises, Inc., 149 AD2d 692, 692 [2d Dept 1989]). In ADHY Advisors LLC, the Appellate Division affirmed the trial court’s decision, which denied plaintiff’s application to appoint a receiver pursuant to RPL §254(10) (id. at 619 ["Based upon the circumstances presented here, we find that the motion court properly exercised its discretion in declining to appoint a receiver."]). Significantly, in ADHY Advisors LLC, plaintiff commenced an action to foreclose on a mortgage after defendant had defaulted under the terms of a mortgage between the parties (Brief for defendant-respondent in ADHY Advisors LLC v. 530 W. 152nd St. LLC, 82 AD3d 619 [1st Dept 2011], available at 2011 WL 11777861, *4-11). The trial court, noting plaintiff’s salient argument — that the Real Property Law required the appointment of a receiver — nevertheless denied the motion, noting that its equitable powers did not compel it to appoint a receiver (id.). In denying the motion, the trial court noted that before appointing a receiver, it had to conclude that the property was in jeopardy or that the loan was vulnerable, and that on the record before it, there was no such showing (id. at *10). Instead, the court noted that the relevant property was “well run,” had a superintendent who lived at the premises, was current on all utilities, had paid all tax arrears, and that the recession driven diminution in rent rolls was being rectified by re-letting all but one unit (id. at *10-11). Thus, the court denied the application seeking the appointment of a receiver (id. at *12). Here, in support of the instant application, to the extent relevant, Elton Residence submits the amended, restated and consolidated senior loan promissory note, dated August 30, 2019, wherein Elton Avenue agreed to repay a loan to Conventus in the amount of $6.9 million. Pursuant to paragraph 2.1. of the note, Elton Avenue was to pay monthly interest payments on the loan, each totaling $48,875 beginning on October 1, 2019. In addition, the entire loan was due on the maturity date — October 1, 2020. Paragraph 4 of the note defined a default as, inter alia, as “the failure to pay any installment or other sum due.” Elton Residence submits the senior loan mortgage, assignment of leases and rents, fixture filing, and security agreement, dated August 30, 2019. The mortgage is between Elton Avenue and Conventus and indicates that it is to secure the note, which is listed in Schedule A appended thereto. Schedule A references the note evincing the loan totaling $6.9 million. Paragraph 1.19 defines the mortgaged property as 701. Paragraph 1.21 lists Elton Avenue’s obligations as those listed in the note. Paragraph 49 of the mortgage states that [u]pon an Event of Default under this Mortgage or a breach of any clause of any agreement signed in connection with the loan to Borrower, Borrower agrees that Lender may appoint a receiver to control the Mortgaged Property within seven (7) days of any default. Elton Residence also submits the building loan promissory note and building loan mortgage, assignment of leases and rents, fixture filing, and security agreement. The former evinces a loan by Conventus to Elton Avenue totaling $500,000 and the latter pledges 701 as security for the note. The terms therein are identical to the terms in the note evincing the loan for $6.9 million and the mortgage securing the same. Based on the foregoing, per the verified complaint, Elton Residence establishes that Elton Avenue has defaulted under the terms of the note inasmuch as it has, inter alia, failed to pay all sums due under the loan, which per the note were due on October 1, 2020. Elton Residence also establishes that per paragraph 49 of the mortgage, upon Elton Avenue’s default, it is entitled to the appointment of a receiver. As noted above, in a foreclosure action, even when the parties have agreed to the appointment of a receiver upon default in the relevant loan documents, such that the Real Property Law requires such appointment, the appointment of a receiver is not absolute. This is because an action to foreclose on a mortgage is one in equity and “a court of equity, in its discretion and under appropriate circumstances, may deny” an application to appoint a receiver even when the parties previously agreed to that remedy (ADHY Advisors LLC at 619; see US Bank, N.A. at 721; Essex at 640; 366 Fourth St. Corp. at 692). Instead, as with all applications to appoint a receiver, such drastic remedy should only be awarded when it is absolutely necessary to protect the parties to the action and their interests (In re Armienti at 661; S.Z.B. Corp. at 679). Accordingly, generally, the proponent of the appointment of a receiver must establish that absent a receiver, there is danger of irreparable loss” (In re Armienti at 661; S.Z.B. Corp. at 679). Here, Elton Residence, by counsel, contends that “[b]orrower, defendant 701 Elton Avenue LLC, should not be permitted to continue to collect rents and governmental assistance vouchers with respect to the Property, as it has not paid the amounts outstanding on the Senior Mortgage and Building Loan Mortgage as detailed in the Verified Complaint. Absent a Temporary Receiver, the Property is in danger of being damaged by reason of Borrower’s neglect in its obligation to pay real estate taxes and other governmental assessments and charges relating to the Property.” (NY St Cts Elec Filing [NYSCEF] Doc No. 36 at 8). Moreover, in its reply, Elton Residence submits an affidavit by David Soifer (Soifer), Elton Residence’s managing member, wherein he states that [b]ased on the submission of defendants on these motions, it is readily apparent that defendants have failed to maintain the Property and such misconduct jeopardizes the safety of the Property and its residents. There are no bills or payments for elevator maintenance, water usage, taxes, superintendent, and the like. All that is shown, for the most part, are payments allegedly made to collect rent (e.g., HPD and brokerage fees)-not to maintain the Property. A receiver is needed to maintain the Property, pay its bills, maintain insurance coverage, and safeguard this asset. (NY St Cts Elec Filing [NYSCEF] Doc No. 107 at 2). Soifer, then asserts that despite collecting $75,000 in rental income per month, 701 Avenue has not paid the mortgage, has provided an accounting of expenditures made in maintaining 701, has an outstanding tax bill totaling $490,109, and has been sued for negligence for an accident at 701. Appended to Soifer’s affidavit are several documents, including a New York City Department of Finance bill, which indicates that as of August 20, 2022, the outstanding property taxes at 701 $400,150.55. Contrary to Elton Residence’s assertion, the foregoing is not tantamount to evidence of irreparable loss. Stated differently, beyond the amount of taxes 701 Avenue owes, most of Soifer’s assertions are sheer speculation. Indeed, Elton residence proffers no proof that 701 is not being repaired, maintained, or otherwise cared for, which is what is required to establish irreparable loss and waste. As for the outstanding taxes, here, the record is bereft of any evidence that 701 is in the midst of tax foreclosure proceedings or that by virtue of the failure to pay governmental assessments and/or fines (of which there is no proof), 701 is in danger of being condemned. Instead, the thrust of Elton Residence’s papers is that Elton Avenue continues to collect $75,000 in rents but has failed to make any payments due under the note. In essence, Elton Residence seeks, via appointment of a receiver, a determination that the rents collected by Elton Avenue belong to Elton Residence because Elton Avenue has breached the agreement. After a dispositive motion or a trial, this may very well turn out to be true. However, the potential merit of an action cannot form the basis for what is tantamount to a taking well before and on the merits disposition. Again, the appointment of a receiver is a remedy which courts should use sparingly, since it is tantamount to “the taking and withholding of possession of property from a party without an adjudication on the merits” (Hahn at 629; S.Z.B. Corp. at 679). Notwithstanding the foregoing insufficiency, Elton Avenue and Twersky’s submissions in opposition further make it clear that 701 is currently not in danger of being irreparably lost so as to warrant the appointment of a receiver. Elton Avenue and Twersky submit an affidavit by Twersky, wherein he states, in relevant part, that the instant action was commenced at a time when because of the Covid-19 pandemic and construction issues related thereto, 701 was not generating any income. Since then, and as of January 2022, 701 has been generating rental income. The foregoing income has been generated as a result of Twersky’s efforts. Specifically, Twersky spent $250,000 to rehabilitate 701. Twersky cured violations and repaired the facade. In addition, Twersky also spent $99,000 in connection with an application to secure a contract with the Housing Preservation Department (HPD) . As a result, 701 has been generating income, which has been used to make repairs, pay for utilities, and to pay management fees. Elton Avenue and Twersky submit checks, and paid invoices, which evince the sums referenced by Twersky in his affidavit, which he states were spent to rehabilitate 701. The checks are all made payable to Reside NY in 2021 and 2022. The invoices evince repairs and/or services to 701 in 2021 and 2022 by a myriad of entities, such as NYC Top Construction LLC and R&SS General Construction Corp. Elton Avenue and Twersky also submit a document evincing that on September 22, 2022, 701 paid HPD $99,000. The foregoing affidavit and corroborative proof establishes, at the very least, that 701 is being maintained, repaired and generating rental income. This negates Elton Residence’s claim that 701 is in danger of being irreparably lost or wasted (Brief for defendant-respondent in ADHY Advisors LLC v. 530 W. 152nd St. LLC, 82 AD3d 619, 619 [1st Dept 2011], available at 2011 WL 11777861, *10-12 [Trial court noted that the relevant property was “well run,” had a superintendent who lived at the premises, was current on all utilities, had paid all tax arrears, and that the recession driven diminution in rent rolls was being rectified by re-letting all but one unit. Thus, the court, denied the application seeking the appointment of a referee). Accordingly, on this record, Elton Residence, fails to establish, as it must, that 701 is in danger of being irreparably lost or wasted, such that absent a receiver, the object of this foreclosure action will, if Elton Residence is successful, be unavailable to make it whole. The motion to appoint a receiver is denied. It is hereby ORDERED that the complaint and caption be deemed amended so as to omit plaintiff and include Elton Residence as follows: 701 ELTON RESIDENCE LLC, AS SUCCESSOR IN INTEREST TO NRP MORTGAGE TRUST I, Plaintiff(s) v. 701 ELTON AVENUE LLC; MESHULEM ZUSIA TWERSKY; THE CITY OF NEW YORK ENVIRONMENTAL CONTROL BOARD; NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE; NEW YORK CITY DEPARTMENT OF FINANCE; PARK NATIONAL CAPITAL FUNDING LLC; THE LAW OFFICES OF CHAIM C ZLOTOWITZ, ESQ. PLLC; AND JOHN DOE NO. I THROUGH JOHN DOE NO. XXX, INCLUSIVE, THE LAST THIRTY NAMES BEING FICTITIOUS AND UNKNOWN TO PLAINTIFF, THE PERSONS OR PARTIES INTENDED BEING THE TENANTS, OCCUPANTS, PERSONS OR CORPORATIONS, IF ANY, HAVING OR CLAIMING AN INTEREST IN OR LIEN UPON THE PREMISES DESCRIBED IN THE COMPLAINT, Defendant(s). it is further ORDERED that the Clerk amend the Court’s file to reflect the foregoing amendment. It is further ORDERED that plaintiff serve a copy of this Decision and Order with Notice of Entry upon all parties within thirty (30) days hereof. Dated: December 2, 2022
