171 Misc. 15 | N.Y. Sup. Ct. | 1939
In an action to foreclose a mortgage upon real property, the plaintiff moves (1) to restrain the defendants from damaging or committing waste to the mortgaged premises pending the disposition of the action, and (2) to fix the reasonable rental value of the portion of the premises occupied by the owners of the equity and require them to pay the amount thus fixed so long as they occupy the premises during the pendency of the action.
The owners of the equity have, by their attorney, consented to the restraining order applied for, but resist the remainder of the motion. They contend that the plaintiff is not entitled to this relief since it has never obtained possession of the premises either through the appointment of a receiver or by an assignment of rents.
In their answer to this action these defendants have alleged a counterclaim by reason of the collection of rent by the plaintiff herein from the tenant who occupies the second floor of the premises which consist of a two-family house, the first floor of which is occupied by the owners of the equity.
In this application no issues of fact are presented. The opposing affidavit “ concedes the material allegations in the affidavits submitted by the plaintiff.” There is no question that the plaintiff is the owner and holder of the mortgage under foreclosure and that the answering defendants have defaulted in the payment of interest, real estate taxes and assessments.
The sole issue presented is one of law, and involves the interpretation of the following clause in the mortgage:
“ 13. That if default shall be made in the payment of the principal sum mentioned in the said bond or in this instrument or any installment thereof, or of the interest which shall accrue thereon, or of any part of either, at the respective times therein specified for the payment thereof, the holder of this mortgage shall have the right forthwith, after any such default, to enter upon and take possession of the said mortgaged premises, and to let the said premises, and receive all the rents, issues and profits thereof, which are overdue, due or to become due, and to apply the same, after payment of all necessary charges and expenses, on account of the amount hereby
We thus have in the mortgage which is the subject of this action, an express agreement on the part of the owner, conferring, with or without an action to foreclose, and “ without applying at any time for a receiver,” the right upon the holder of the mortgage, when a default occurs, “ to enter upon and take possession ” of the mortgaged premises, the owner in that event “ to pay * * * reasonable rent for the premises occupied by him, and in default of so doing, * * * that he may be dispossessed * * * and further that any tenant defaulting in the payment to the holder of this mortgage of any rent may be likewise dispossessed.”
Dime Savings Bank of Brooklyn v. Altman (249 App. Div. 174) is urged by the opposing defendants as a case presenting circumstances similar to those involved here. The clause in the mortgage in that case provided: “ ‘ That the holder of this mortgage, in any action to foreclose it, shall be entitled (without notice and without regard to the adequacy of any security for the debt), to the appointment of a receiver of the rents and profits of said premises; and in the event of any default in paying said principal or interest, such rents and profits are hereby assigned to the holder of this mortgage as further security for the payment of said indebtedness.’ ” After a default had occurred, the plaintiff-mortgagee notified the owner and the tenants that by reason thereof it would enter and take possession of the premises, and directed that all the rents be paid to it. It did actually enter into possession of the premises, and collected rent from the tenants up to the time of the appointment of a receiver in the foreclosure action, over the protest and opposition of the owner. In the answer to this action, and as a defense and counterclaim, defendant urged that plaintiff trespassed
This question is squarely presented in the instant case. Here, the mortgage clause specifically and clearly confers upon the mortgagee, the plaintiff herein, “ the right forthwith, after any such default, to enter upon and take possession of the said mortgaged premises.” In the Dime Savings Bank case there was no such provision; the mortgagee “ was not given the right to enter.” (249 App. Div. at p. 177.)
Ordinarily, “ prior to judgment in a foreclosure action, the only remedy of the mortgagee for possession, and through it, for the rents, is by the appointment of a receiver in such an action, unless, however, consent to take possession was given by the mortgagor. With the mortgagor’s consent, such an entry and possession prior to foreclosure is lawful.” (Citing cases.) (148th Street Realty Co., Inc., v. Conrad, 125 Misc. 142, 145.)
Assignments of rent giving a mortgagee control of premises as soon as a default occurs, do not automatically become operative. But where, under a mortgage clause such as is here involved, the holder of the mortgage has made formal demand for and been refused possession, I see no reason why the assignment of rents provided therein is not absolute. It is clear, from the language used in the mortgage clause, that the parties contemplated an equitable assignment of rents, and, under such circumstances, such assignment became operative upon the making of a formal demand for and refusal of possession.
Presiding Justice Lazansky, speaking for the Appellate Division in the Dime Savings Bank case (supra), in effect so held when he said in his opinion (249 App. Div. 176): “ Where the assignment of rents clause gives the mortgagee a right of entry upon default, then, upon demand and refusal, the assignment of rents may become absolute.” (Citing Freedman’s Savings & Trust Co. v. Shepherd, 127 U. S. 494; Matter of Banner, [D. C.] 149 Fed. 936; Matter of Brose, 254 id. 664; 148th Street Realty Co., Inc., v. Conrad, 125 Misc. 142.)
The court similarly held in Freedman’s Savings & Trust Co. v. Shepherd (127 U. S. 494, at p. 502), when it said: “ The general rule is that the mortgagee is not entitled to the rents and profits of the mortgaged premises until he takes actual possession, or until possession is taken in his behalf, by a receiver (Teal v. Walker, 111 U. S. 242; Grant v. Phœnix Life Ins. Co., 121 U. S. 105, 117), or until, in proper form, he demands and is refused possession. (Dow v. Memphis Railroad Co., 124 U. S. 652, 654.) (See, also, Sage v. Memphis & Little Rock Railroad Co., 125 U. S. 361.) ”
I am of opinion, therefore, that the plaintiff is consequently in possession of the premises under foreclosure and is entitled to receive the rents, issues and profits thereof, without the necessity of applying for and seeming the appointment of a receiver.
The only remaining question is whether the owners of the equity should be required to pay occupational rent prior to the sale under a judgment of foreclosure and sale, for the premises occupied by them.
The motion is, therefore, granted, and the reasonable rental value of the first floor of the premises, occupied by the answering defendants in this action, is fixed in the sum of thirty-two dollars per month, which they will be required to pay to the plaintiff so long as they occupy the premises pending the action.
Settle order.