Court Opinion

ID: 5373282
Source: CourtListenerOpinion
Date Created: 2022-01-08 08:23:03.206767+00
Date Added: 2024-06-11T08:30:02.557871
License: Public Domain

Dore, J. (dissenting).
The consent to reduce the interest rate was given in 1933 at the request of the Superintendent of Insurance in efforts to rehabilitate the company under the Schackno Act. (L. 1933, ch. 745.) Such efforts failed and the company went into liquidation. The original motion herein, requesting a modification of all plans then pending by eliminating the reduced interest rate, was made in September, 1935. The order of liquidation was not entered until November 17,1937. The court did modify other plans pending and undetermined and the other certificate holders have gained thereby.
The company is insolvent; creditors will not be paid in full; stockholders will receive nothing. The Mortgage Commission, the Superintendent of Insurance, and ninety-nine and ninety-six one hundredths per cent of all creditors do not object to the application. The only creditor objecting was a bank as trustee with a very small allowed claim; it had so little interest in the outcome that it filed*no brief before us either on this or on the prior appeal. No one appeared in opposition on the prior appeal in this court or in the Court of Appeals. The Superintendent appeared as a co-appellant both as liquidator and statutory successor to the Mortgage Commission and urged in the interest of fairness and equity that the application be granted.
In that state of facts, it seems to me, that consents given while the company was in rehabilitation should not impel a court of equity to deprive appellants of their right to share equally in the assets in liquidation. “ 1 The fundamental basis underlying the standard or method for the determination of claims on guaranties is * * * that the creditor-claimant shall receive such allowance as will measure his actual loss.’ ” (Matter of New York Title & Mortgage Co., 277 N. Y. 66, 75.)
The proceeding has now become an equitable proceeding for distribution of the assets of an insolvent guarantor. The whole *536purpose of such liquidation is “to insure equitable treatment * * * and to avoid preferences.” (Pink v. Title Guarantee & Trust Co., 274 N. Y. 167,171.) The guaranty company, having elected to accept the advantages of the statute and having breached its contract, is in no position to complain if ultimately it sustained some loss. (Matter of Home Title Ins. Co., 255 App. Div. 635.)
This is not an action between private litigants where the court has no control over the fund and the proceeding is not still pending as in Herpe v. Herpe (225 N. Y. 323) which the Special Term originally considered controlling. This proceeding is still pending ; no final order has been entered; the Court of Appeals so held when it dismissed the prior appeal “ on the ground the order is not final.” (Matter of Lawyers Mortgage Co., 286 N. Y. 624.) The fund is still in court and this court has the power and should direct equal and equitable final distribution thereof. (Youngs v. Goodman, 240 N. Y. 470, 472; 242 N. Y. 575; Matter of City of Buffalo, 78 N. Y. 362, 370; Moscow Fire Ins. Co. v. Bank of New York, 280 N. Y. 286, 313, 324.)
It is now intimated that Brentmore Estates, Inc., purchased its certificates at bargain prices from original investors. But it should be clear that among the numerous other certificate holders who share fully without reduction of the interest rate, there are doubtless many who also purchased their certificates from the original investors. In any event, as the case comes before us, all certificate holders should stand on an equal footing and receive in liquidation that equality which established public policy requires.
It is also suggested that an additional payment of $515,700 to certificate holders in the 229 series involved* is de minimis, and that the Superintendent should not have to recompute. I think there is no merit to this especially as the objectants offer to bear the expense of recomputation.
Similar interest reduction clauses given in connection with Shackno plans in four other companies have been released by judicial orders after the companies went into liquidation. These objecting certificate holders are the only ones who do not share ratably in the assets of the company.
Accordingly I dissent and vote to modify the order so far as appealed from and sustain appellants * objections.
Untermyer, Cohn and Callahan, JJ., concur with Townley, J.; Dore, J., dissents in opinion.
Order, so far as appealed from, affirmed, with costs and disbursements to the respondent.