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 *Page 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,273 N.Y. 415), but if a mortgage company guarantees payment of certificates which it sells to third parties it is not entitled to share in the proceeds received from the sale of collateral until the third-party certificate holders are paid in full unless the certificates sold clearly provide that it retains such right (Matter of Title Mortgage Guaranty Company of SullivanCounty, 275 N.Y. 347), the underlying principle being that a mortgage company which sells participating certificates in a mortgage and itself guarantees them is in the position of a debtor, and the equitable rule existing between debtors and creditors applies. On default and absence of sufficient funds to pay certificate holders other than itself in full it cannot share in the assets available until the certificate holders are paid in full. That is the law, and it is right. Having guaranteed the payment of the certificates it would be highly inequitable to permit it to step in and divert part of the security available to pay such certificate holders whom it had expressly guaranteed should be paid. No one in this case questions that principle.
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. *Page 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.