256 A.D. 301 | N.Y. App. Div. | 1939
Lead Opinion
The mortgagee made application for an order directing the Muller Paper Goods Co., Inc., the last record owner of the property covered by the mortgage, to make available to it all records and data showing income and disbursements pursuant to section 1077-c of the Civil Practice Act, so that it might become known whether the mortgaged property produced a surplus over and above taxes, interest and other carrying charges. The real property is improved with a six-story concrete fireproof factory and loft building. A vacant lot adjoining the building is included in the mortgaged premises. Two of the six floors of the building are occupied by a tenant of the owner under a lease and the owner receives substantial rent therefor. Appellant contends that the balance of the building is occupied by the owner in connection with its business of manufacturing paper products. Respondent says that only two floors are occupied by it for that purpose and the other two floors of the building are unoccupied. The examination and inspection disclose that the owner, in reckoning the income from the property, made no allowance for the rental value of that part of the building which it occupies. The mortgagee thereupon made application for another order directing the owner to pay to it the surplus income derived from the premises and in this proceeding proof was offered by the affidavits of real estate experts of the reasonable rental value of that part of the building occupied by the owner in the conduct of its business. The mortgagee urges that such reasonable rental value should be charged as income from the mortgaged premises. If that is done there will be a surplus over and above taxes, interest and other carrying charges, part of which the mortgagee will be entitled to receive under the provisions of section 1077-c of the Civil Practice Act in reduction of the overdue principal sum of the mortgage. The owner opposed the application on the ground that no surplus is available and, because it is the owner of the property, it is not required to list on the income side of the statement furnished under section 1077-c of the Civil Practice Act any amount for rent for that part of the property occupied by it for its business. The motion of the mortgagee was denied, and it appeals from the order of denial.
In the opinion of the court the section (Civ. Prac. Act, § 1077-c) is broad enough to require the owner to render an account of the use being made of the premises and the fair and reasonable rental value of that part thereof which is occupied by it in its business.
The holding in Holmes v. Gravenhorst (263 N. Y. 148) is not inconsistent with this conclusion. There the mortgagee sought to have the owner in possession of his own property during the foreclosure pay the receiver a fair and reasonable amount in the nature of rental or submit to eviction. Here the mortgagee asks only that such part of the surplus issuing out of the mortgaged property as the court may determine be paid to it in partial discharge of the overdue mortgage debt, and not at all in the way of rent.
The order should be reversed on the law and the facts, with ten dollars costs and disbursements, the motion granted and the matter remitted to Special Term to take proof and fix the reasonable rental value of the part of the mortgaged property occupied by the owner in the conduct of its manufacturing business, which rental value so fixed should be included as income received from the property.
Dissenting Opinion
(dissenting). I dissent and vote to affirm. Although I admit that the views of the majority lead to a morally just result, that result is without foundation in law and involves a departure from the doctrine of Holmes v. Gravenhorst (263 N. Y. 148), defining the rights of the owner of mortgaged premises whose right of possession “ is an incident of title which, in the absence of contract, may be divested only under the method prescribed by law.” (Id. 152.) The case cited asserts in effect the legal truism that in the absence of an express agreement to that end in the mortgage, a mortgagor-owner, during the pendency of a foreclosure action of the premises, may not be disturbed in his possession or required to pay rent. (Id. 153.) The -majority view contemplates, practically, the payment of rent by the owner of two floors of the premises occupied by it, namely, the value of its use thereof, as a basis for the computation of a surplus within the purview of section 1077-c of the Civil Practice Act. It may not lawfully constitute such basis, for such surplus is one that “ the mortgaged property * * * shall have produced ” over and above specified charges. (Id.) As the statute reads, “ surplus ” may not be figured by charging this owner for its occupancy of a part of the mortgaged premises which it is entitled to occupy as an incident of its title. (Holmes v. Gravenhorst, supra.) Such a charge cannot be said to figure lawfully in surplus “ produced ” within the terms of the statute. To hold otherwise would be to legislate a new and amplified definition of surplus, which is not a judicial function.
Order reversed on the law and the facts, with ten dollars costs and disbursements, motion granted, and the matter remitted to Special Term to take proof and fix the reasonable rental value of the part' of the mortgaged property occupied by the owner in the conduct of its manufacturing business, which rental value so fixed should be included as income received from the property.