
    In the Matter of the Rehabilitation of the Lawyers Mortgage Company (8910 35th Avenue, Jackson Heights).
    Supreme Court, Additional Special Term, New York County,
    November 25, 1937.
    
      
      O’Malley & Wilson, for the Brooklyn Trust Company, as trustee, for the motion.
    
      Walter B. Herendeen, for the rehabilitator of the Lawyers Mortgage Company, opposed.
   Frankenthaler, J.

Prior to rehabilitation the title company paid to itself $21,006.77 in reimbursement of previous interest advances pursuant to its guaranty As arrears of taxes and other liens and of amortization at the time the company reimbursed itself exceeded the amount of such reimbursements they were clearly improper. The fact that the owner of the property, pursuant to a plan of reorganization, has paid the taxes, water rates and assessments, does not affect the situation, for since the order of rehabilitation the company has been unable to comply with its guaranty. Arrears of amortization payments alone as of November 1, 1935, amounted to $28,000, and the mortgage itself matured on May 10, 1936. It would be manifestly unjust to permit the company, though it is unable to fulfill its guaranty, to keep for itself moneys which it has heretofore illegally recouped. The petitioner is accordingly entitled to an order of segregation in the sum of $21,006.77, as well as $6.25 improperly paid as interest on the company’s own equity in the mortgage, which is subordinate to the rights of certificate holders. The petitioner is also entitled to an order directing the rehabilitator to pay over the amounts referred to in subdivision B of paragraph 3 of the moving affidavit, as well as to the relief sought in paragraphs 2 and 3 of the notice of motion. Settle order.  