## Facts

- Plaintiffs held a second mortgage on an apartment building in the Bronx, New York.
- The mortgage included an assignment-of-rents clause stating that rents were assigned as security and were to be applied to real estate taxes, sewer and water charges, and interest and principal on the second mortgage.
- Defendant Edith Levine later took title to the property subject to the second mortgage, without assuming personal liability on the debt.
- Plaintiffs alleged that for about two years Levine collected rents, including some paid more than a month in advance, and failed to apply those rents to the listed obligations.
- Plaintiffs sought money damages against Levine (approximately \$31,180.64) in addition to pursuing foreclosure.

## Issues

1. Whether an assignment-of-rents clause given as security becomes effective before foreclosure or appointment of a receiver, so that a mortgagee may recover damages from a subsequent titleholder for the pre-foreclosure use of rents.
2. Whether Levine, as a purchaser subject to the mortgage without assuming it, owed plaintiffs a legally enforceable duty to remit or apply rents under the clause before foreclosure or a receiver.

## Decision

- The court granted Levine summary judgment dismissing the second cause of action for money damages.
- The court held the assignment-of-rents clause was not self-executing and did not give the mortgagee a present right to rents before foreclosure or the appointment of a receiver.
- Because no foreclosure had occurred and no receiver had been appointed, Levine retained the right to collect and use rents during the relevant period as a matter of law.

## Legal Principles

- In New York, a mortgage generally creates a lien on real property, not title; incidents of ownership, including the right to rents, remain with the owner until foreclosure or comparable enforcement.
- An assignment-of-rents clause that is conditional or stated as security does not automatically transfer rights to rents upon default; it typically becomes operative only upon foreclosure or the appointment of a receiver (absent other unequivocal enforcement action).
- Where the mortgagee lacks a present right to rents, a damages claim premised on the owner’s pre-foreclosure collection or use of rents fails as a matter of law, supporting summary judgment.

## Conclusion

The court ruled that a security-based assignment-of-rents clause does not give a mortgagee an immediate right to rents before foreclosure or a receiver, so a mortgagee cannot recover pre-foreclosure rent-based damages from a subsequent titleholder who took the property subject to the mortgage.


Ganbaum v. Rockwood Realty Corp., 62 Misc. 2d 391, 308 N.Y.S.2d 436 (Sup. Ct. Bronx Cnty. 1970)