The Superior Reign Co., Inc., instituted an action to foreclose a third mortgage upon real estate situated at 391-393 Broadway, New York city. An order was made upon its application appointing Reginald Field receiver of the rents, and, in its resettled form, authorizing, but not directing, him to pay running expenses. Thereafter the plaintiffs sued to foreclose a second mortgage upon the same property and procured an order extending the receivership for its benefit. The receiver has in his possession net rentals collected prior to the time of the extension of his receivership in the sum of $17,315, subject to certain undisputed bills and to his commissions and the fees of his attorney. *428The third mortgagee appeals from an order of Special Term directing the receiver to pay from these moneys, as well as from all other moneys in his possession, all taxes and assessments which are or may become a hen upon the premises during the pendency of the action. At the time of his original appointment there were no unpaid taxes. The effect of the Special Term order is to deprive the third mortgagee of the surplus rents collected during the time when the receiver was functioning solely for its benefit and to compel their application to a payment of taxes which will enure to the benefit of the second mortgagee. The rents collected prior to the extension of the receivership should be applied solely for the benefit of the third mortgagee.
It is conceded that by the exercise of diligence in securing the appointment of a receiver the third mortgagee could get the benefit of these rents. (Ranney v. Peyser, 83 N. Y. 1; Madison Trust Go. v. Axt, No. 1, 146 App. Div. 121.) If it had not applied for a receivership, the rents would not have been used for the benefit of the second mortgagee, but would have been collected by the owner of the property. It is inequitable that'the second mortgagee should now by indirection get the benefit of them.
The respondents insist that the resettled order appointing the . receiver, and consented to by the Superior Reign Co., Inc., estops the appellant from asserting its claim. The order, however, contained no direction to the receiver to pay taxes or any other running expense. It was merely permissive. The controversy here is solely between the second and third mortgagees, and there is nothing in the language of the resettled order appointing the receiver which impairs the rights of the third mortgagee as against those of the second mortgagee.
For these reasons, the first order appealed from should be reversed, with ten dollars costs and disbursements, and the motion of the defendant Superior Reign Co., Inc., granted, with ten dollars costs; and the second order appealed from should be reversed and the receiver’s prayer for instructions granted in accordance with this opinion.
Mehrell and Finch, JJ., concur; Dowling, P. J., and McAvoy, J., dissent.