In re Title & Mortg. Guar. Co. of Sullivan Cnty.

Decision Date13 July 1937
Citation275 N.Y. 347,9 N.E.2d 957
PartiesIn re TITLE & MORTGAGE GUARANTY CO. OF SULLIVAN COUNTY (SERIES S-2).
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

Proceedings in the matter of the rehabilitation of the Title & Mortgage Guaranty Company of Sullivan County, and the plan for readjustment, modification, or reorganization of the rights of all holders of mortgage investments represented by Series S-2, first mortgage participation certificates, issued and guaranteed by such company. From an order of the Appellate Division modifying an order of the Special Term denying the claim of Louis H. Pink, State Superintendent of Insurance, as liquidator of the guaranty company, to share in the distribution of the amount collected by William G. Birmingham and others, as trustees for such holders, pro rata with the latter, claimant appeals.

Affirmed. Appeal from Supreme Court, Appellate Division, Third Department.

Harry Rodwin, Jess H. Rosenberg, and Irving H. Jurow, all of New York City, for appellant.

Paul McDermott, of Liberty, for respondents.

Maurice Finkelstein, of New York City, for Mortgage Commission, amicus curiae.

Frank W. Chambers and Frederick J. Wilkens, both of New York City, for trustees of Series N-20 Mortgage Investment of New York Title & Mortgage Co., amicus curiae.

LEHMAN, Judge.

The Title & Mortgage Guaranty Company of Sullivan County issued and sold participation certificates, known as Series S-2, in a bond and mortgage for $5,000. The certificates issued by the company aggregated in amount the sum of $4,800. The company guaranteed to the holder of each certificate payment of the principal and interest due upon the certificates. It retained an unsold interest to the amount of $200 in the $5,000 bond and mortgage. In January, 1933, the superintendent of insurance took possession of the property of the mortgage company under an order directing him to rehabilitate the company. On April 13, 1933, in proceedings instituted for the purpose of reorganizing and readjusting the rights of the holders of the certificates in Series S-2, pursuant to the provisions of chapter 745 of the Laws of 1933, popularly known as the Schackno Act, trustees were appointed under a plan of reorganization. On the same day an order providing for the liquidation of the mortgage company was entered. The net proceeds collected by the trustees upon the bond and mortgage for $5,000 are insufficient to pay in full the holders of the certificates. The superintendent of insurance, as liquidator of the mortgage company, claimed, upon the judicial settlement of the accounts of the trustees, that it was entitled, as holder of the $200 interest which the mortgage company retained, to share in the distribution of the amount collected upon the bond and mortgage pro rata with the holders of the guaranteed certificates. Its claim has been denied. The courts below have held that the holders of the guaranteed certificates had a prior right to payment out of the proceeds of the mortgage.

An assignor of a part of a bond and mortgage or other assignable chose in action may, by the terms of the assignment, fix the rights and interests of the assignor and assignee. In Title Guarantee & Trust Co. v. Mortgage Commission, 273 N.Y. 415, at page 428, 7 N.E.(2d) 841, 847 (decided after the Appellate Division handed down its opinion in the instant case), this court said: ‘We believe that in this State the courts are committed to the proposition that in the absence of an agreement or proven intent to the contrary, the existence of a trust relationship or proof of some equitable reason why priority should exist in favor of an assignee, the assignor of part of a mortgaged indebtedness who has not assumed a liability as guarantor is entitled to share pro rata with his assignee in the proceeds of insufficient security. Such rule we approve and find applicable to the facts as presented in the agreed statement upon which this action is submitted’. In that case the certificates were not guaranteed by the assignor. There was no relation of debtor and creditor between assignor and assignee, and the language of the certificate did not indicate that the interest retained by the assignor should be subordinated in any manner to the interests assigned to the holders of certificates. In earlier cases, to which the court referred with approval in its opinion in Title Guarantee & Trust Co. v. Mortgage Commission, supra, we has held that, in the absence of contractual provisions to the contrary, a corporation which has issued and guaranteed participation certificates in a bond and mortgage is not entitled, as owner of a retained portion of the bond and mortgage, for which no certificate has been issued, to share in insufficient proceeds of the securities, pro rata with the holders of the certificates which had been issued. Matter of Lawyers' Mortgage Co., 545 West End Ave., Manhattan, 157 Misc. 813, 284 N.Y.S. 740, affirmed 248 App.Div. 715, 290 N.Y.S. 129, affirmed 272 N.Y. 554, 4 N.E.(2d) 733;Matter of New York Title & Mortgage Co., 272 N.Y. 556, 4 N.E.(2d) 734.

The language of the certificates in those cases was similar, though not identical, with the language of the certificates in this case. All the certificates contained clauses from which the intent might be inferred that the assignor of part of the mortgage debt, even though a guarantor, should share in the proceeds of the insufficient security for the debt on a parity with the assignees. Other clauses seemed, however, to indicate a contrary intent, and, reading the certificate as a whole, the court held that its intent was that the assignor should not be entitled to share in the proceeds of the mortgage until the outstanding certificates guaranteed by it had been paid in full. The superintendent of insurance, in behalf of the creditors of the corporations which issued the certificates, has moved for a reargument of these cases, but seeks also to have this court draw a distinction between the language of the certificates in those cases and in the instant case.

Reconsideration has not altered our conclusion that what the court said in Title Guarantee & Trust Co. v. Mortgage Commission, supra, and what it decided in Matter of Lawyers' Mortgage Co., 545 West End Ave., Manhattan, supra, and Matter of New York Title & Mortgage Co., supra, is supported by the weight of authority in this and other jurisdictions and produces an equitable result in accordance with the intent of the parties. Cf. Fidelity Trust Co. v. Orr, 154 Tenn. 538, 289 S.W. 500;McClure v. Century Estates (1928) 96 Fla. 568, 120 So. 4;Lawson v. Warren, 34 Okl. 94, 124 P. 46,42 L.R.A. (N.S.) 183, Ann.Cas.1914C, 139;Louisville Title Co.'s Receiver v. Crab Orchard...

To continue reading

Request your trial
14 cases
  • Geist v. Prudence Realization Corporation
    • United States
    • U.S. Court of Appeals — Second Circuit
    • August 11, 1941
    ... ... confirmed, February 19, 1938, and pursuant thereto, title to the mortgaged property was transferred to Geist, ... of Sullivan County, 275 N.Y. 347, 9 N.E.2d 957, 115 A.L.R. 35, and ... ...
  • Prudence Realization Corporation v. Geist
    • United States
    • U.S. Supreme Court
    • April 27, 1942
    ... ... wholly owned subsidiary of Prudence Company, acquired title to the property from the mortgagor, and later went into a ... ...
  • Delaware & Hudson Co. v. Boston R.R. Holding Co.
    • United States
    • United States State Supreme Judicial Court of Massachusetts Supreme Court
    • November 9, 1951
    ... ... [1940 ed.] Title 11, § 205, 11 U.S.C.A. § 205, and that court approved the ... of Sullivan County, 275 N.Y. 347, 9 N.E.2d 957, 115 A.L.R. 35; Pink v ... ...
  • Land Title Bank & Trust Co. v. Schenck
    • United States
    • Pennsylvania Supreme Court
    • June 19, 1939
    ... ... Title and Mortgage Guaranty Co. of Sullivan Co., 275 N.Y. 347 ... For cases in other jurisdictions see: Carson, ... ...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT