247 A.D. 911 | N.Y. App. Div. | 1936
On appeal by City Bank Fanners Trust Company from the order dated June 7, 1934, determining the respective rights of the parties with respect to a mortgage upon the premises owned by the New York Polyclinic Medical School and Hospital, held by City Bank Farmers Trust Company and guaranteed by the Bond and Mortgage Guarantee Company, the order is affirmed, with ten dollars costs and disbursements. With respect to the payments toward arrears of interest, the mortgage company is entitled to reimburse itself for interest payments advanced. (Matter of People [Bond & Mortgage Guarantee Co.], 245 App. Div. 744; affd., 270 N. Y. 527; Matter of People [Lawyers Title & Guar. Co.], 265 id. 20, 26.) And this is so when the company is operated by the Superintendent of Insurance, as rehabilitator. Within the contemplation of the parties, part of the consideration for the making of the guaranty was the control of the mortgage. Upon the withdrawal of control from the mortgage company, resort to the real estate is forever lost to the company, but equity dictates that an offset on its liability be allowed to the extent of the value of the security thus withdrawn, such value to be fixed by the value of the real property covered by the mortgage. Any other course would interfere with the efforts of the rehabilitator to the prejudice of all the creditors of the mortgage company. The fairness of the principle thus invoked is well recognized in bankruptcy, liquidation and in the method of arriving at the amount of a deficiency judgment. (Glenn Liquidation, §§ 528, 530; Armory v. Francis, 16 Mass. 308; Ins. Law, § 425; Civ. Prac. Act, §§ 1083-a, 1083-b.) If the company were in liquidation, under section 425 of the Insurance Law, it would either retain