## Facts

- Borrowers executed a mortgage to a bank secured by two connected apartment buildings.
- The borrowers defaulted, and the bank brought a foreclosure action.
- The trial court appointed a receiver of rents and directed that the receiver be totally responsible to protect and preserve the mortgaged premises.
- By the time the receiver qualified, the buildings were vacant and effectively abandoned by the borrowers.
- The receiver collected minimal rents and lacked funds to secure or board up the property; the borrowers refused to provide funds when requested.
- The premises remained unsecured and suffered substantial vandalism during the foreclosure.
- The bank purchased the property at the foreclosure sale and later resold it for a much lower amount than the foreclosure bid.
- The bank moved for a deficiency judgment under RPAPL § 1371.
- The trial court denied the deficiency motion, reasoning the bank should have advanced funds to secure the premises, and awarded $1,000 in costs to each of the borrowers and the receiver.

## Issues

1. Whether a mortgagee must advance its own funds to a court-appointed receiver to secure and preserve vacant mortgaged property, such that failure to do so permits denial of a deficiency judgment.
2. Whether the trial court may use equitable power to deny a deficiency judgment and impose monetary costs based solely on the mortgagee’s failure to fund preservation efforts when a receiver has been appointed with explicit preservation duties.

## Decision

- The appellate court reversed the order denying the deficiency judgment application.
- The court held the mortgagee had no legal obligation to expend its own funds to preserve or secure the premises after a receiver was appointed and charged with that responsibility.
- The court vacated the awards of costs to the borrowers and to the receiver.
- The matter was remitted for further proceedings, including consideration of the deficiency judgment consistent with RPAPL § 1371.

## Legal Principles

- A deficiency judgment under RPAPL § 1371 must be decided through the statutory mechanism, including determination of fair market value as of the foreclosure sale date.
- Appointment of a receiver to collect rents and “protect and preserve” mortgaged premises places operational responsibility for preservation on the receiver (and does not, without more, shift that duty to the mortgagee).
- Absent a statute, agreement, or other recognized legal basis, a mortgagee is not required to advance its own funds to maintain, secure, or repair collateral during foreclosure.
- Equitable considerations in foreclosure proceedings do not authorize a court to impose duties inconsistent with the parties’ legal obligations and the statutory framework governing deficiency judgments.

## Conclusion

The appellate court held that, once a receiver was appointed and charged with preserving the property, the mortgagee had no duty to finance security measures; the trial court therefore erred in denying the deficiency judgment motion and imposing costs, and the case was remitted for proper proceedings under RPAPL § 1371.


Trustco Bank, Nat'l Ass'n v. Eakin, 256 A.D.2d 778, 681 N.Y.S.2d 410 (N.Y. App. Div. 3d Dep't 1998)