Court Opinion

ID: 5429329
Source: CourtListenerOpinion
Date Created: 2022-01-08 16:49:37.573117+00
Date Added: 2024-06-11T08:31:34.203820
License: Public Domain

Eder, J.
(dissenting). The court below decided against the landlord-appellant holding that “ The landlord does not have an- equity in the property of not less than 25% of the purchase price.” The landlord is required by subdivision (d) of section 8 of chapter 314 of the Laws of 1945, as amended and continued by chapter 273 of the Laws of 1946, to have such an equity.
The landlord contends that upon the factual situation here disclosed, a fair construction of this statute qualifies it as having such prescribed equity.
Landlord held a mortgage upon the premises in question and sued to foreclose the same; a judgment of foreclosure and sale was entered showing the sum due to landlord as plaintiff in that action was $7,778,185.72; landlord as plaintiff in that action bid in the property at the foreclosure sale for $1,392,750; it assigned its bid to 29 Broadway, Inc. (its conduit). The bid (was accepted and the referee conveyed the property to said 29 Broadway, Inc., on January 22, 1946; the referee’s deed recites the bid of $1,392,750, as the consideration for the deed. Thereafter and on said day, 29 Broadway, Inc., executed a bond and mortgage to the Penn Mutual Life Insurance Company, for $1,200,000, and on the same day conveyed the premises to the landlord and it holds a junior participation in said bond and mortgage for $300,000.
In urging that it qualified under said subdivision (d) of section 8, landlord contends that thé sum of $7,778,185.72, found *759due in the foreclosure judgment, is its investment in the prop* erty, and, therefore, the purchase price under the statute.
The tenants contend that the bid at the foreclosure sale of $1,392,750, and which is expressed in the referee’s deed, as the consideration, is the purchase price; that the amount less the afore-mentioned mortgage of $1,200,000 was the equity of the landlord in the property, and that the equity is therefore established at $192,750, which said sum is only about 13% of the purchase price of $1,392,750, and thus, the landlord failed to prove that it possessed the requisite equity prescribed by the act.
The majority now holds, and I am in accord, that the indebtedness under the mortgage foreclosure cannot be regarded as the purchase price paid when the landlord became the fee owner as it acquired the fee by virtue of the referee’s deed and not by virtue of its said mortgage.
The majority view is that even if the landlord is confined to the amount of the bid, as the purchase price, that the landlord still has an equity sufficient to qualify it under the statute; that is, if the landlord’s participation of $300,000 is subtracted from the $1,200,000 mortgage, then the difference between the $900,000 senior interest in the mortgage held by the Penn Mutual Life Insurance Company and the foreclosure bid of $1,392,750 is in excess of the necessary 25%. That is, adding the $300,000 junior participation to the said sum of $192,750 would be $492,750, so that the landlord’s equity in the property against the price of $1,392,750 would be more than 35% of such price and in excess of the 25% required under the statute.
The majority view states that whether the equity consists, as here, in a participating interest in a mortgage, or in a direct payment, is unimportant so long as it represents an actual investment of the landlord in the property.
I am unable to concur. The statute requires the landlord to have an equity in the property of not less than 25% of the “ purchase price ”. “ Purchase price ” means money paid for the land, by means of which payment title is acquired (Kimble v. Esworthy, 6 Ill. App. 517); a mortgage is a security, and while it is a form of investment, I cannot agree that it comes within the term “ purchase price a mortgage creates a lien and is an incumbrance; equity is the interest above incumbrances that amount to a lien (Pierson v. Bill, 138 Fla. 104,115).
It is my view that by subdivision (d) of section 8, in this connection, the legislative intent, in the use of the terms *760“ equity ” and “ purchase price ”, was that the purchase price was the money paid for the land, that the term was used in the commonly understood and accepted sense, and does not include and was not intended to include a participating interest in a mortgage, or in a mortgage as an independent investment, and that by the term ‘ ‘ equity ’ ’ was meant and intended the interest of the landlord above incumbrances that amount to a. lien.
Therefore, the equity of the landlord herein must be determined by that standard, and, thus considered, we find the purchase price is the sum of $1,392,750; the mortgage incumbrance is the sum of $1,200,000, and the equity — the interest of the landlord above the incumbrance — to be the sum of $192,750, which is less than 25% of the purchase price.
Again, the $300,000 junior participation interest of the landlord in the mortgage of $1,200,000, which is a lien on the premises, does not reduce the amount of the mortgage lien. There is no claim or-proof that there was an extinguishment of the mortgage lien to the extent of $300,000; on the contrary, the landlord asserts that it still holds a participation in the $1,200,000 mortgage lien to the extent of $300,000, and states that the present mortgage lien on the premises is $1,200,000 and not $900,000. It is thus again established that the landlord’s equity is only about 13% of the purchase price and thus does not satisfy the statutory requirement.
As to subtenant Knoof’s contention that it is entitled to remain in possession of space 1214 until the landlord is able to give it possession of space 1811, I am in accord with the majority view that it is not.
I think the final orders appealed from should be affirmed — that the ruling of the court below was correct in holding that the landlord-appellant has not qualified under the statute.
Hammer, J., concurs with Hofstadter, J.; Eder, J., dissents in opinion.
Final orders reversed, etc.