In re Union Guarantee & Mortg. Co.
| Decision Date | 24 April 1941 |
| Citation | 285 N.Y. 337,34 N.E.2d 345 |
| Parties | In re UNION GUARANTEE & MORTGAGE CO. (Series 2290). |
| Court | New York Court of Appeals Court of Appeals |
OPINION TEXT STARTS HERE
Appeal from Supreme Court, Appellate Division, First Department.
Proceeding in the matter of the application of the People and others for the liquidation of the Union Guarantee and Mortgage Company, wherein the New York Trust Company filed a petition for instruction. From a unanimous order, 259 App.Div. 866, 20 N.Y.S.2d 490, reargument denied, 259 App.Div. 1001, 20 N.Y.S.2d 985, affirming an adverse order of the Special Term, United Equities, Inc., appealed by leave of the Court of Appeals, opposed by the New York Trust Company and Louis H. Pink, Superintendent of Insurance.
Modified, and, as modified, affirmed.
LOUGHRAN and DESMOND, JJ., dissenting in part. Milton B. Ignatius, of New York City, for appellant.
Adrian D. Stevenson, of New York City, for petitioner-respondent.
This is a proceeding for liquidation of the Union Guarantee and Mortgage Company which had guaranteed certificates of participation in a mortgage on 165 Bennett avenue, Manhattan, city of New York. The question presented by this appeal concerns the respective rights arising between the assignee of the interest of the guaranteeing corporation and the owners of the certificates of participation where the owners have consented to a reduced rate of interest in the mortgage as extended, and where the only interest of the guaranteeing company was a certificate issued by the Superintendent of Insurance to the guaranteeing mortgage company evidencing the alleged share of the interest in the mortgage as the difference between the face of the mortgage less the interest represented by the outstanding certificates. No certificates representing this alleged interest of the guaranteeing mortgage company in the mortgage have ever been issued to that company in place of the certificates which had been repurchasedby the guaranteeing mortgage company, or representing the interest which had never been sold by the company.
The necessary facts, stated briefly, are as follows: The guarantor, Union Guarantee and Mortgage Company, deposited on May 7, 1929, with the Chase National Bank as depositary, a mortgage in the principal amount of $232,500 under a deposit agreement dated November 15, 1927. Certificates registered with the depositary were sold to the public for the full amount of the mortgage less $4,550 representing the unsold share. On November 21, 1928, prior to the sale of any of the certificates to the public, the depositary agreement dated November 15, 1927, was allegedly amended by the guarantor. No reference to this amendatory depositary agreement was included in the certificates. Instead each certificate, when issued, was registered with the depositary and purported to assign: ‘* * * an undivided share or interest to the extent of said principal sum in the bond and mortgage described on the back of this certificate, and the Company hereby certifies that it has deposited said bond and mortgage together with insurance and title policies and other instruments and evidences of title relating thereto with The Chase National Bank of the City of New York (hereinafter called the Depositary) under the terms of an agreement made between the Company and the Depositary dated November 15, 1927, pursuant to which this certificate is issued and to all provisions of which the holder hereof, by acceptance of this certificate, shall be bound.’ (Italics interpolated.) Subsequently the guarantor repurchased certificates which had been sold to the public, amounting to $46,150. Upon the reacquisition of the certificates the company made numerous perforations through the signatures of the officers of the company and of the officers of the depositary, and made notations in the certificate record books and the records of the company to the effect that the reacquired certificates were canceled. No new certificates were ever issued to the guarantor, either for the certificates reacquired from the public to the amount of $46,150, or for the $4,550 which represented the unsold share. All reacquisitions of certificates were effected prior to maturity and it is not alleged that they were made to meet or anticipate the maturity of the mortgage or any portion thereof.
On August 2, 1933, the guarantor company was taken over for rehabilitation by the Superintendent of Insurance. In the proceedings instituted for the purpose of reorganizing the rights of the holders of certificates under the provisions of the Shackno Act, L.1933, ch. 745, Unconsul. Laws, s 1796 et seq., the New York Trust Company was appointed trustee of this mortgage by order dated November 6, 1935, and with the approval of the court the trustee entered into an agreement with the mortgagor whereby all unpaid sums due on the mortgage were compromised and the mortgage was extended at a reduced rate of interest. There has been no subsequent default on the mortgage under this extended mortgage. The trustee has collected the interest at the reduced rate and paid over to every certificate holder his full share of the interest, but has retained in its possession the interest applicable to the share totalling $50,700 now owned by United Equities, Inc. On June 15, 1937, the liquidation of the Union Guarantee and Mortgage Company was ordered. Appellant United Equities, Inc., was organized and acquired all assets of the Union Guarantee and Mortgage Company, the realized proceeds of which are to be used for paying the claims of creditors as established in the proceedings for the liquidation of the guarantor. Among these assets so transferred was the single certificate issued by the Superintendent of Insurance as rehabilitator for $50,700 to evidence the interest of the company in this mortgage. In May, 1938, the New York Trust Company, as trustee of the mortgage, asked instructions of the Special Term, praying for an order determining that the share of the guarantor, now owned by appellant United Equities, Inc., was subordinate to that of the certificate holders, and that the court determine the right of the guarantor to receive the interest on the $50,700. Special Term, after a reargument, held the share of United Equities, Inc., subordinate to that of the certificate holders, and further decreed that the certificate holders should receive interest at the original guaranteed rate of five and one-half per cent instead of the reduced rate of four and one-half per cent until full payment of principal and guaranteed interest had been received by them. The Appellate Division unanimously affirmed. 259 App.Div. 866, 20 N.Y.S.2d...
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