Collopy v. Dorman

• Decision Date: 03 October 1933
• Citation: 63 S.W.2d 610,250 Ky. 513
• Parties: COLLOPY ET AL. v. DORMAN, BANKING AND SECURITIES COM'R, ET AL.
• Court: Kentucky Court of Appeals

63 S.W.2d 610

250 Ky. 513

COLLOPY ET AL. v. DORMAN, BANKING AND SECURITIES COM'R, ET AL.

Court of Appeals of Kentucky

October 3, 1933

Appeal from Circuit Court, Kenton County, Criminal, Common Law, and Equity Division.

Petition by James R. Dorman, State Banking and Securities Commissioner, and another, against Edward C. Collopy and another. From the judgment, defendants appeal.

Judgment modified and, as modified, affirmed.

Lewis Levy, of Cincinnati, Ohio, for appellants.

Bailey P. Wootton, Atty. Gen., and F. M. Tracy, of Cincinnati, Ohio for appellees.

STANLEY Commissioner.

The petition was filed by the state banking and securities commissioner and a special deputy in charge of the liquidation of the Latonia Deposit Bank & Trust Company, an insolvent institution, against the appellants, Edward C Collopy and Marie Collopy, submitting the facts to be epitomized, and asking for a declaration of rights and duties specifically and generally in respect thereto. The chancellor made such a declaration, and the judgment is before this court for review.

The question propounded may be thus expressed: Has the banking and securities commissioner and his liquidating agents the authority to accept bonds of the Home Owners' Loan Corporation, a relief agency recently created by the United States government, in satisfaction of notes owned by the bank and release the mortgages securing them, which bonds may be quickly converted into cash but at a discount?

The Home Owners' Loan Corporation was brought into being by an act of Congress, approved June 13, 1933 (12 USCA §§ 1461-1468), for the purpose, in part, as stated in its title "to provide emergency relief with respect to home mortgage indebtedness, to refinance home mortgages, to extend relief to the owners of homes occupied by them and who are unable to amortize their debt elsewhere." The capital stock is owned by the United States and provision is made for the corporation's financing. Its bonds are issued in exchange for amortized obligations secured by mortgages on homes as therein provided. Under some circumstances cash may be paid. The bonds are the direct obligations of the corporation. As we understand, they are debentures without any specific lien allocated to the respective bonds. They bear 4 per cent. interest. The United States fully and unconditionally guarantees the payment of interest.

When the Latonia Deposit Bank & Trust Company was placed in the hands of the commissioner for liquidation, it held the notes of the appellants for a balance of about $2,300, which was secured by a mortgage on their home. They are not able to pay that indebtedness. Their condition brings them within the letter and spirit of the act of Congress, and they have made application to the Home Owners' Loan Corporation for a loan in an amount sufficient to pay their debt, the same to be payable to them in bonds. The granting of the loan is conditioned upon the acceptance of the bonds by the banking and securities commissioner in full satisfaction of their note and the discharge and release of the mortgage securing it.

Averment is made that the liquidation of the obligations of various mortgagors can be greatly facilitated if it is within the right and power of the banking and securities commissioner to accept these bonds in satisfaction thereof. It is represented, and so stated in the judgment, that under existing conditions it is practically impossible to liquidate mortgage debts held by the bank; that an attempt to enforce the liens would result in the taking over of the real estate so that no actual progress can be made in the settlement of the bank's affairs; that the bonds of the corporation are susceptible of being converted into cash; that it is anticipated that the bonds will be marketable at a discount of not exceeding 10 per cent., and probably less, of their face value; and that there is at present a market quotation of 92 for the bonds. The court adjudged that in the performance of his duties, the commissioner is authorized to accept the bonds of the Home Owners' Loan Corporation in satisfaction of existing mortgage debts and to release the liens when the amount of bonds approximates the debt to be canceled, and that such is the case set forth in the petition. It was further adjudged that it is the duty of that officer to convert the bonds into cash whenever the discount is not...