15 N.J. Eq. 135 | New York Court of Chancery | 1862
The bill is filed to foreclose a mortgage, given by the First Methodist Protestant Church of Newark to the complainants’ testator, upon a lot of land fronting seventy feet on the south side of Hill street, in the city of Newark, to secure the payment of six thousand dollars.
The mortgage bears date on the twentieth day of July, 1859, and was given to secure the purchase money of said lot in one year from date with interest. The mortgagors covenanted to keep the building to be erected upon the premises insured against loss by fire in at least the sum of $4000, and to assign the policy of insurance to the mortgagee as collateral security for the payment of the debt. The mortgage was recorded on the twenty-seventh of July, 1859. After the date of the complainants’ mortgage the mortgagors erected a church edifice upon the lot. Ezra Eeeve, one of the defendants, filed a lien upon the building and lot for carpenter work
There is no question as to the validity and order of priority of the respective encumbrances.
It is admitted that the mortgage was given and recorded before the commencement of the building; that the mortgage is the prior encumbrance on the land, and the liens the prior encumbrance on the building.
The only question is, how is the relative value of the building and the land to be ascertained.
The complainants insist that the master shall ascertain the present value of the lot, were there no building upon it, not at a forced or public sale, but at its fair market value, to a person able and willing to hold it till he can realize its true value, and that the sum so ascertained shall be first paid to the mortgagee out of the proceeds of the sale.
The defendants insist that the true mode is to ascertain, as near as may be, the price which the building alone, and the building and the lot together, will respectively bring at sheriff’s sale, and the relative value of the two will fix the proportion of the proceeds of the sale to which the parties are respectively entitled.
It is clear that the value of the building and lot should be ascertained by the same standard, and that value should have relation, as near as may be, to the time of the sale.
The true measure of equity unquestionably would be to give to the mortgagee the value of the lot clear of the encumbtance of the building, and to the lienholder the enhanced value which his labor and materials have given to the lot. The mortgagee cannot in equity claim that he shall be benefited by the work and labor of the mechanic or materialman, but he has a strong claim in justice and equity to insist that he shall not be injured by the operation of their claims. On the other hand, the materialman has a right to insist that the loss
By this process the security of the mortgagee may be greatly deteriorated. Thus, supposing this church to have cost $18,000, the original cost of the lot being $6000; now if the value of the lot and building together is but $12,000, sup
The only safe mode of determining the relative claims of the respective .parties will be for the master to ascertain the fair market value of the lot and building and also the value of the lot clear of the building, and improvement upon it, as it stood at the time of the mortgage. This will establish the proportions of the claims of the respective parties upon the proceeds of this sale.
It will be decreed accordingly.