In re Lawyers Mortgage Co. , 40 N.Y.S.2d 1 ( 1943 )

Townley, J.

The original orders reducing the interest rate upon the guaranties contained in the certificate issues involved herein were entered on consent. No appeal was or could be taken from such orders. Thereafter a motion was made before the late Mr. Justice Frankenthaler to modify these orders. The motion was not predicated upon any claim of error in form or substance, but upon the sole ground that in the light of what had bteen done in settling claims of certificate holders of other issues, the provisions of the earlier orders entered on consent had become “ unjust.” Special Term denied the motion on the ground that it lacked power to change these orders. Mr. Justice Frankenthaler’s order was affirmed by this court (261 App. Div. 1055). Leave to appeal to the Court of Appeals was twice denied by this court (262 App. Div. 713; 262 App. Div. 1007 on reargument) and an appeal taken as of right to the Court of Appeals was dismissed on the ground that the order was not final (286 N. Y. 624).

By these orders the interest rate upon the guaranties contained in these certificates has become fixed and determined. The action taken by this court in refusing to upset 229 settlements entered on consent is based not alone on the ground stated by Special Term, but also on the ground that no sufficient reason has been asserted to justify the exercise of any discretion that the court may have to reopen these consent decrees.

At the time the original orders reducing the guaranteed interest rate to be paid by the Lawyers Mortgage Company were made, there was, by agreement of the certificate holders, a corresponding reduction in the interest rate on the underlying mortgages. To continue the original guaranteed rate fixed by the company and reduce the rate fixed in the mortgages would impose on the company an absolute obligation to pay the difference between the two with no opportunity to collect from the owner of the property. This would unjustly increase the liability of the company to the detriment of its general creditors.

In connection with the equities of the situation consideration may be given to the facts stated in the affidavit submitted in opposition to the original motion that Brentmore Estates, Inc., was incorporated only two months before the company was taken over by the Superintendent of Insurance and practically all of the certificates held by it were acquired after that date.

The fact that plans of reorganization involving a reduction in the mortgage interest rate without any corresponding reduction in the interest rate upon the guaranties were approved in Matter of Lawyers Mortgage Co. [Serviced Equities] (168 Misc. 762, affd. 255 App. Div. 849) and Matter of Home Title Ins. Co. (255 App. Div. 635) affords no reason for modifying the settlements involved in this proceeding. In each of those cases there was no agreement on the part of the certificate holders that the interest rate fixed by the guaranties should be reduced to correspond with that of the mortgages. In the present case each of the plans involved contains such provisions. There were full hearings before the plans were approved in which the certificate holders had an opportunity to be heard and the orders as finally entered represented the considered agreement of the certificate holders and the Superintendent of Insurance.

We see no reason for destroying the status created by the prior orders of Special Term and by this court upon the sole ground that an arrangement different from the one made was legally possible and that such an arrangement in some cases has been approved. The present order appealed from simply gives effect to the prior orders and should be affirmed.

The opposition on the part of the Superintendent of Insurance at the present time is based on the ground that it would be expensive to reopen and recompute the amounts to be paid to all the creditors in this liquidation. There is no doubt that there is great merit to that contention. We also think, however, that the rights of other creditors became fixed when these 229 settlements were made.

The order so far as appealed from should be affirmed on the law and the facts and in the exercise of discretion with costs and disbursements.