Carver Federal Savings Bank, Plaintiff, v. 1671 LLC JOSHUA SOUFEH NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE NEW YORK CITY DEPARTMENT OF FINANCE NEW YORK CITY ENVIRONMENTAL CONTROL BOARD NEW YORK CITY PARKING VIOLATIONS BUREAU NEW YORK CITY TRANSIT ADJUDICATION BUREAU JOHN DOE JOHN DOE 100 (2026)

The following e-filed papers read herein: NYSCEF Doc. Nos.:

Notice of Motion, Affirmation, and Exhibits 22-133

Affirmation in Opposition, Memorandum of Law, and Exhibits 161-173

Reply Affirmation 174

In this commercial foreclosure action, plaintiff Carver Federal Savings Bank moves for the appointment of a temporary receiver. Defendants 1671 Lincoln Place LLC ("1671 Lincoln Place") and Joshua Soufeh ("Soufeh") oppose the motion.

Facts

The action concerns the property located at 82 Somers Street, Brooklyn, NY 11233. 1671 Lincoln Place owns the property. Soufeh is its managing member. 1671 Lincoln Place executed a Consolidated Mortgage Loan Note ("Loan") on May 19, 2022, borrowing $1,675,000.00 from Carver Federal Savings Bank. To secure payment of the amount owed, 1671 Lincoln Place executed a Mortgage Consolidation Agreement, Modification, and Extension Agreement ("Mortgage") on May 19, 2022. 1671 Lincoln Place also signed an Assignment of Leases and Rents ("ALR"). In addition, Soufeh signed a Guaranty of Payment ("Guaranty"), guaranteeing payment of the loan and interest.

Plaintiff alleges that defendants failed to comply with the terms and provisions of the loan, mortgage, and guaranty by failing to tender the monthly payment due from July 1, 2025 and each month thereafter. Plaintiff served the tenants of the property with a Notice of Default and sent a Demand Letter to defendants on October 10, 2025. Thereafter, plaintiff filed the Summons and Complaint.

Now, seeking to exercise its alleged right to a receiver and to protect its interest in the property, plaintiff filed this motion. Plaintiff asserts that the contractual provisions of the loan, mortgage, and ALR, when read together, entitle it to the appointment of a receiver. Defendants oppose this contention, arguing that plaintiff failed to establish either a contractual right to, or the need for, the appointment of a receiver. Plaintiff must establish that Real Property Law § 254 (10) or CPLR § 6401 (a) entitles it to the appointment of a receiver.

Real Property Law § 254 (10)

Real Property Law § 254 (10) applies when the mortgage or similar instrument entitles the mortgagee to the appointment of a receiver. The statute provides that a covenant stating that "the holder of this mortgage, in any action to foreclose it, shall be entitled to the appointment of a receiver" must be construed to mean that "the mortgagee and his [, her, or their] heirs, successors, or assigns [is] entitled . . . without regard to adequacy of any security of the debt, to the appointment of a receiver . . . ." Real Prop. Law § 254 (10). No such covenant is expressly stated in the submitted loan documents. See HSBC Bank USA, N.A. v. Rubin, 210 AD3d 73, 176 N.Y.S.3d 649 (2d Dept. 2022).

Instead, Section 2.1 of the ALR provides that in an "Event of Default," plaintiff may dispossess the borrower from the property and collect rents by way of a receiver. Similarly, the Loan provides that upon an "Event of Default," the lender can exercise "any and all rights" under the loan documents. Both the ALR and the Loan specify that an "Event of Default" is defined in the Mortgage. Section 5 of the Mortgage provides that the covenants and terms set out in Schedule C replace all the terms and covenants of the individual mortgages. However, Schedule C was not included with the submitted loan documents. Thus, the loan documents do not establish what constitutes an "Event of Default" triggering the appointment of a receiver.

'[W]hen parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms." Goldstein v. AccuScan, Inc., 2 NY3d 811, 782 N.Y.S.2d 50 (2004). See also U.S. Home Corp. v. Elm Farm Assocs., LLC, 71 AD3d 667, 896 N.Y.S.2d 403 (2d Dept. 2010); Foranoce v. Foranoce, 248 AD3d 1092, 258 N.Y.S.3d 116 (2d Dept. 2026); Beacon Sales Acquisition, Inc. v. Hudson Valley Renovations, LLC, 247 AD3d 1113, 251 N.Y.S.3d 359 (2d Dept. 2026). The Court must rule based upon plaintiff's submissions. The Loan and Mortgage contain no language or covenants in which the parties agree to the appointment of a receiver. The ALR contains receiver remedies, but no covenants. Therefore, Real Property Law § 254 (10) does not entitle plaintiff to the appointment of a receiver.

CPLR § 6401

CPLR § 6401 "controls when language of the mortgage [or similar instrument] fails to address the topic of a receiver." HSBC Bank USA, N.A., 210 AD3d 73. CPLR § 6401 (a) specifies that entitlement to a receiver requires a "danger that the property will be removed from the state, or lost, materially injured[,] or destroyed." The appointment of a receiver is an "extreme remedy resulting in the taking and withholding of property from a party." HSBC Bank USA, N.A., 210 AD3d 73. A Court should only grant appointment when the movant makes a "clear evidentiary showing of the necessity." Id. In other words, the movant must submit "clear and convincing evidence" of "irreparable loss or waste to the property." Malek v. Malek, 238 AD3d 731, 233 N.Y.S.3d 681 (2d Dept. 2025); Natoli v. Milazzo, 65 AD3d 1309, 886 N.Y.S.2d 205 (2d Dept. 2009). See also Am. Cancer Soc'y., Inc. v. Ashby, 228 AD3d 805, 214 N.Y.S.3d 119 (2d Dept. 2024) (no danger of irreparable loss or material injury to the property since there was no showing that real estate taxes, water bills, or sewer bills were not paid); Cyngiel v. Krigsman, 192 AD3d 760, 139 N.Y.S.3d 894 (2d Dept. 2021) (no irreparable loss or waste to the property based upon tenants' speculative and conclusory allegations of improper maintenance and commingled income); Zajic v. Sikora Realty Corp., 252 A.D. 343, 299 N.Y.S. 227 (2d Dept. 1937) (holding that without proof of a mortgagee's financial irresponsibility, the appointment of a receiver was not warranted); Eastbank, N.A. v. Malneut Realty Corp., 180 AD2d 442, 579 N.Y.S.2d 96 (1st Dept. 1992) (citing Modern Collection Assoc., Inc. v. Capital Group, Inc., 140 AD2d 594, 528 N.Y.S.2d 649 (2d Dept. 1988)).¹

Plaintiff does not expressly argue that a receiver is necessary, pursuant to CPLR § 6401 (a).² Defendants, however, contend that the property is consistently and properly maintained by a superintendent who resides in close proximity to the premises and is available to address emergency maintenance issues at any time, day or night. Defendants further assert that a porter is responsible for maintaining the cleanliness and overall condition of the property. In addition, defendants assert that they purchased a $2 million insurance policy for the property and substantially improved its condition and income producing-potential. Four apartments were renovated in the subject premises, including demolition, framing, plumbing, electrical, drywall, prime and paint, and bathroom installation. The renovated apartments each generated rents of $1,962.23 for Apartment 1L; $2,742.00 for Apartment 1R; $2,875.65 for Apartment 4L; and $3,001.00 for Apartment 4R. Finally, defendants commenced an eviction proceeding against a nonpaying tenant and are working toward a resolution whereby the tenant will satisfy all rental arrears.

Plaintiff did not show any danger to the subject premises. See Cyngiel, 192 AD3d 760, 139 N.Y.S.3d 894; Am. Cancer Soc'y, 228 AD3d 805, 214 N.Y.S.3d 119. Plaintiff also did not indicate that defendant was financially irresponsible or was at risk of losing the property's profits nor did plaintiff show that defendant commingled or otherwise irresponsibly handled the rent collected from the tenants. See Zajic, 252 A.D. 343, 299 N.Y.S. 227; Gimbel v. Reibman, 78 AD2d 897, 433 N.Y.S.2d 217 (2d Dept. 1980). Plaintiff only claimed that defendants did not demonstrate that the prior work on the apartments was permitted by law or compliant with building or housing regulations. Plaintiff did not identify what work, if any, was unpermitted and not compliant with building codes and habitability standards. Moreover, the work at issue was performed before defendants executed the loan documents and years before the commencement of this action. It is plaintiff's burden to submit clear and convincing evidence that defendants are currently mismanaging or mishandling the property. Mere assertions regarding the validity of defendant's past renovations are conclusory and speculative and miss the mark. See Malek, 238 AD3d 731, 233 N.Y.S.3d 681; Natoli, 65 AD3d 1309; Cyngiel, 192 AD3d 760, 139 N.Y.S.3d 894.

Accordingly, it is

ORDERED that the motion for appointment of a temporary receiver is denied, and it is further

ORDERED that plaintiff shall serve a copy of this Decision and Order with notice of entry upon defendants and file an affidavit of service thereof with the Kings County Clerk.

This constitutes the Decision and Order of the Court.

E N T E R,

Genine D. Edwards

J.S.C.

FOOTNOTES

1.    Eastbank is a First Department foreclosure case, but it cites to the Second Department to support its assertion that a property owner did not show that a receiver was necessary to protect its interests. The cited Second Department case, Modern Collection Associates, is a specific performance contract case, which held that a collector's allegations did not show that a corporation's assets were in danger of being removed from the State.

2.   Plaintiff counters that defendants' belief that the property was well managed is irrelevant, since plaintiff is contractually entitled to a receiver after defendants' continuous default.

Genine D. Edwards, J.