24 N.E.2d 724 | NY | 1939
Lead Opinion
The Lawyers Title and Guaranty Company owned a mortgage for $42,300. It sold participating certificates therein to third parties to the amount of $40,475. It repurchased one $100 certificate. It at all times retained an interest of $1,825 in the mortgage. The company is *12
now in liquidation. The question presented for determination is whether the plaintiff, as liquidator, is entitled to share prorata in the proceeds to be received from the mortgaged property with the third parties holding participating certificates. The mortgage company guaranteed to certificate holders the payment of the certificates. If it had not guaranteed the payment of the certificates it would be entitled to share pro rata with the certificate holders in the proceeds of the sale of the mortgaged property (Title Guarantee Trust Co. v. Mortgage Commission,
It should take very clear and unambiguous language in the certificates to overcome that rule and substitute a holding that in spite of its guarantee of payment it should be permitted to share in the available assets even though the certificates which it had guaranteed should be paid remained unpaid. Such an inequitable result could be accomplished if the language used was so clear and unmistakable that the courts would be compelled to give effect to the intent of the parties as expressed in the writing. *13 Otherwise the equitable rule should prevail. In the case at bar the wording of the certificates does not require the holding contended for by respondent.
The certificates here in question, so far as here material, read: "Lawyers Title and Guaranty Company hereby assigns to the holder hereof ____ an undivided share of ____ Dollars and interest thereon at the rate of ____ per cent. per annum from the date hereof, in the bond and mortgage hereinafter specified, equal and co-ordinate with all other shares assigned or retained by the Company, the aggregate amount of all such shares, issued and retained, at no one time to exceed the amount then owing on said bond and mortgage."
As we know, these mortgage certificates are sold at different times to different individuals. The words "equal and co-ordinate with all other shares assigned or retained by the Company" constitutes an agreement that the shares in question shall be equal and co-ordinate with those previously sold. That is, that the date of sale of different shares shall not in any event constitute a preference, and the shares retained by the company at the date of the sale of any particular share are retained presumably for subsequent sale, as that was the business of the company. They shall, when sold, be equal and co-ordinate with those in question and all other shares previously sold or those still remaining and retained by the company to be thereafter sold. All shares taken together, that is, all those sold and all those unsold but retained for future sale, shall not exceed the amount at any time owing on the bond and mortgage.
That is what a purchaser of a certificate would understand the clause in question to mean and what it was intended to mean. Given that meaning an equitable result is reached.
The judgment should be reversed and judgment directed for defendants, without costs.
Dissenting Opinion
This is an appeal by defendants from the decision of the Appellate Division on a submitted controversy and an agreed statement of facts. *14
The mortgage was for $42,300. Certificates outstanding in the hands of the public aggregated $40,375. A certificate for $100 was reacquired by the company. The unsold portion at all times retained by the company was $1,825. By the stipulation it is conceded that the reacquired certificate was subordinate to the rights of the certificates outstanding in the hands of the public (Matter of Lawyers Title Guaranty Co. [Forshay],
The participation certificate, so far as material, provides:
"Lawyers Title and Guaranty Company hereby assigns to the holder hereof ____ an undivided share of ____ Dollars and interest thereon at the rate of ____ per cent. per annum from the date hereof, in the bond and mortgage hereinafter specified, equal and co-ordinate with all other shares assigned or retained by the Company, the aggregate amount of all such shares, issued and retained, at no one time to exceed the amount then owing on said bond and mortgage."
The Appellate Division, first department, held, with two justices dissenting, that the plaintiff Superintendent of Insurance, as liquidator of the Lawyers Title and Guaranty Company, was entitled by virtue of its retained interest to share in the proceeds of the security on a parity with outside holders of participation certificates since "the parties stipulated for equal and co-ordinate rights in the security not only with respect to all other shares `assigned' by the Company to other parties but with respect to all shares `retained by the Company.'" (
Where the certificates are guaranteed, in the absence of language to the contrary, the presumption is that the certificate holders shall have priority on distribution over the corporation retaining part of the certificates or shares *15
(Matter of Title Mortgage Guaranty Company of SullivanCounty,
We again discussed this matter in the case of Matter ofLawyers Title Guaranty Co. (Forshay) (supra), where it was held that a reacquired interest of the company was subordinate to the rights of certificate holders under certificates containing the exact language of the certificates *16
here involved. Leave to appeal was allowed for the purpose of determining whether the decision in Title Guarantee Trust Co.
v. Mortgage Commission (
The last point raised by appellants is that it would be inequitable to permit the company to share with certificate holders in the proceeds of the mortgage until the certificate holders have been paid in accordance with the terms of the guaranty contained in the certificates. The certificate holders must be deemed to have bought the certificates with the understanding that the company was to share equally with them in view of the express provision in the certificates to that effect, and, therefore, it is not inequitable to deny them preference over the company's interest in retained shares.
The judgment appealed from should be affirmed.
CRANE, Ch. J., LEHMAN and LOUGHRAN, JJ., concur with HUBBS, J.; RIPPEY, J., dissents in opinion, in which FINCH, J., concurs; O'BRIEN, J., taking no part.
Judgment reversed, etc. *17