Crosby, J.
The Title and Mortgage Guarantee Company of Buffalo, hereinafter, for the sake of brevity, called the mortgage company, was organized under and pursuant to article 5 of the Insurance Law. Its business was that of selling to the public so-called “ guaranteed first mortgage certificates ” which were secured by underlying bonds and mortgages deposited with a bank, called the “ depositary,” as security for the payment of the certificates. A typical certificate provides that the mortgage company —“ in consideration of $2,000 paid to it, the receipt of which is acknowledged, hereby assigns to the registered holder hereof an undivided share of the same amount [i. e., $2,000] in the principal sum secured by the bonds and mortgages deposited or which may hereafter be deposited by the Company with the [named bank] as Depositary.”
The certificate contains three provisions, known as the “ Ten Year Clause,” the “ Five Year Clause ” and the “ Three Year Clause,” respectively. The “ Ten Year Clause ” is a provision by which the mortgage company agrees that, ten years from date, it will pay the $2,000 together with five and one-half per cent interest. The “ Five Year Clause ” is a provision that the mortgage company by giving sixty days’ notice of intention so to do, may pay the $2,000 with interest at five and one-half per cent, and demand an assignment of the certificate. And the “ Three Year Clause ” is one reading as follows: “ Three years after the date of this Certificate and on any interest date thereafter, the registered holder of this Certificate, having given sixty days’ previous notice in writing of his intention so to do, shall have the right upon the assignment of this certificate to the Company to require the payment of the principal sum and interest as aforesaid out of any moneys received by the Company in payment of the deposited bonds and mortgages after the receipt of such notice by the Company, and after the payment of any certificates of this issue in respect of which the Company shall previously have received notices requiring payment; and the Company agrees to pay such principal and interest accordingly. All Certificates shall be payable in the order in which such notices shall be received and registered by the Company.”
[229]*229It is this latter provision of the certificate that creates the question to be decided.
Due to causes, with which everyone is familiar, the mortgage company got into financial difficulty and an order of the Special Term of the Supreme Court was made upon the petition of the respondent, as Superintendent of Insurance, appointing him rehabilitator of the mortgage company and directing him to manage the same under the directions of the court. This order was made pursuant to clause (1) of section 401 of the Insurance Law upon consent of a majority of the board of directors of the mortgage company.
A plan of reorganization was devised and put into operation, pursuant to court order. The plan for reorganization contemplated the formation of a new corporation to take over the assets of the mortgage company and administer them, and the plan contained a paragraph reading as follows:
“ Determination of Priorities. The rights of any certificate holders claiming priority over others, and the rights, if any, of the Rehabilitator in the assets transferred to the [new] corporation shall forthwith be submitted to the Supreme Court in and for Erie County, New York, in the Rehabilitation Proceeding.”
The court order, approving the plan of reorganization, modified the plan, as regards claims for priorities by adding this provision: “ All such claimed priorities and rights, however, shall be determined on the basis as if no reorganization of the rights of the holders of mortgage investments had been effected and this plan had not been approved and become binding.”
The appellants here have duly served notice of their demand to be paid the face value of certificates held by them, and interest, in pursuance of the “ Three Year Clause ” hereinbefore quoted in full. Their appeal is from an order denying their right to priority of payment.
Appellants argue that since the mortgage company is not in bankruptcy or other state of liquidation, but only in a state of rehabilitation, they have a right to payment of their certificates according to the terms of the “ Three Year Clause ” even though, as a practical matter, it gives them a priority over less vigilant certificate holders who have made no demand for payment. They argue that this is especially true since, by the terms of paragraph 7 of the certificate, each certificate holder, “ by the acceptance hereof assents and agrees to all the terms and provisions ” of the depository agreement, so that, in effect, the certificate holders have agreed between and among themselves upon rights of priority to those who serve notice under the “ Three Year Clause.” Appellants argue [230]*230that the court should not strain to do equity but should have regard for the freedom to make contracts, and for the sanctity of contracts when made.
Their arguments are persuasive, but they fail to take cognizance of some important considerations. The present economic upset is familiar to everybody. Calamity would be added to calamity if everybody insisted upon the performance of the letter of the bond. Therefore, much remedial legislation has been enacted, the constitutionality of some of which has been seriously questioned. Such an act was the so-called Schackno Act (Laws of 1933, chap. 745). When it was found that the mortgage company was tottering on the verge of collapse these rehabilitation proceedings were instituted for the purpose of saving it for everybody interested, not for a few. But the powers of the rehabilitator were found to be too much restricted by the Insurance Law to enable him to do all the good that was intended. The Schackno Act gives the rehabilitator, in effect, all the powers of a liquidator, enabling him to administer fully. That act was held to be constitutional in an appeal from an order approving the plan of rehabilitation of a series of certificates (R) in all respects like the certificates (B) involved in this proceeding. (Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69.)
In that case the Court of Appeals was considering, primarily, only the constitutionality of the Schackno Act, but it discussed the whole scope of the problems to be met and solved. The opinion states: “ The Legislature has decreed that the rights of the holders of such interests [referring to interests such as are here involved] shall not be enforced in strict accordance with the letter of the contract. To that end it has impaired the obligations of contract.” The opinion further quotes, from a recent opinion of the United States Supreme Court, a statement to the effect that the constitutional prohibition against impairing the obligation of contracts “ is not an absolute one and is not to be read with literal exactness like a mathematical formula.” (Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398, 428.)
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Crosby, J.
The Title and Mortgage Guarantee Company of Buffalo, hereinafter, for the sake of brevity, called the mortgage company, was organized under and pursuant to article 5 of the Insurance Law. Its business was that of selling to the public so-called “ guaranteed first mortgage certificates ” which were secured by underlying bonds and mortgages deposited with a bank, called the “ depositary,” as security for the payment of the certificates. A typical certificate provides that the mortgage company —“ in consideration of $2,000 paid to it, the receipt of which is acknowledged, hereby assigns to the registered holder hereof an undivided share of the same amount [i. e., $2,000] in the principal sum secured by the bonds and mortgages deposited or which may hereafter be deposited by the Company with the [named bank] as Depositary.”
The certificate contains three provisions, known as the “ Ten Year Clause,” the “ Five Year Clause ” and the “ Three Year Clause,” respectively. The “ Ten Year Clause ” is a provision by which the mortgage company agrees that, ten years from date, it will pay the $2,000 together with five and one-half per cent interest. The “ Five Year Clause ” is a provision that the mortgage company by giving sixty days’ notice of intention so to do, may pay the $2,000 with interest at five and one-half per cent, and demand an assignment of the certificate. And the “ Three Year Clause ” is one reading as follows: “ Three years after the date of this Certificate and on any interest date thereafter, the registered holder of this Certificate, having given sixty days’ previous notice in writing of his intention so to do, shall have the right upon the assignment of this certificate to the Company to require the payment of the principal sum and interest as aforesaid out of any moneys received by the Company in payment of the deposited bonds and mortgages after the receipt of such notice by the Company, and after the payment of any certificates of this issue in respect of which the Company shall previously have received notices requiring payment; and the Company agrees to pay such principal and interest accordingly. All Certificates shall be payable in the order in which such notices shall be received and registered by the Company.”
[229]*229It is this latter provision of the certificate that creates the question to be decided.
Due to causes, with which everyone is familiar, the mortgage company got into financial difficulty and an order of the Special Term of the Supreme Court was made upon the petition of the respondent, as Superintendent of Insurance, appointing him rehabilitator of the mortgage company and directing him to manage the same under the directions of the court. This order was made pursuant to clause (1) of section 401 of the Insurance Law upon consent of a majority of the board of directors of the mortgage company.
A plan of reorganization was devised and put into operation, pursuant to court order. The plan for reorganization contemplated the formation of a new corporation to take over the assets of the mortgage company and administer them, and the plan contained a paragraph reading as follows:
“ Determination of Priorities. The rights of any certificate holders claiming priority over others, and the rights, if any, of the Rehabilitator in the assets transferred to the [new] corporation shall forthwith be submitted to the Supreme Court in and for Erie County, New York, in the Rehabilitation Proceeding.”
The court order, approving the plan of reorganization, modified the plan, as regards claims for priorities by adding this provision: “ All such claimed priorities and rights, however, shall be determined on the basis as if no reorganization of the rights of the holders of mortgage investments had been effected and this plan had not been approved and become binding.”
The appellants here have duly served notice of their demand to be paid the face value of certificates held by them, and interest, in pursuance of the “ Three Year Clause ” hereinbefore quoted in full. Their appeal is from an order denying their right to priority of payment.
Appellants argue that since the mortgage company is not in bankruptcy or other state of liquidation, but only in a state of rehabilitation, they have a right to payment of their certificates according to the terms of the “ Three Year Clause ” even though, as a practical matter, it gives them a priority over less vigilant certificate holders who have made no demand for payment. They argue that this is especially true since, by the terms of paragraph 7 of the certificate, each certificate holder, “ by the acceptance hereof assents and agrees to all the terms and provisions ” of the depository agreement, so that, in effect, the certificate holders have agreed between and among themselves upon rights of priority to those who serve notice under the “ Three Year Clause.” Appellants argue [230]*230that the court should not strain to do equity but should have regard for the freedom to make contracts, and for the sanctity of contracts when made.
Their arguments are persuasive, but they fail to take cognizance of some important considerations. The present economic upset is familiar to everybody. Calamity would be added to calamity if everybody insisted upon the performance of the letter of the bond. Therefore, much remedial legislation has been enacted, the constitutionality of some of which has been seriously questioned. Such an act was the so-called Schackno Act (Laws of 1933, chap. 745). When it was found that the mortgage company was tottering on the verge of collapse these rehabilitation proceedings were instituted for the purpose of saving it for everybody interested, not for a few. But the powers of the rehabilitator were found to be too much restricted by the Insurance Law to enable him to do all the good that was intended. The Schackno Act gives the rehabilitator, in effect, all the powers of a liquidator, enabling him to administer fully. That act was held to be constitutional in an appeal from an order approving the plan of rehabilitation of a series of certificates (R) in all respects like the certificates (B) involved in this proceeding. (Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69.)
In that case the Court of Appeals was considering, primarily, only the constitutionality of the Schackno Act, but it discussed the whole scope of the problems to be met and solved. The opinion states: “ The Legislature has decreed that the rights of the holders of such interests [referring to interests such as are here involved] shall not be enforced in strict accordance with the letter of the contract. To that end it has impaired the obligations of contract.” The opinion further quotes, from a recent opinion of the United States Supreme Court, a statement to the effect that the constitutional prohibition against impairing the obligation of contracts “ is not an absolute one and is not to be read with literal exactness like a mathematical formula.” (Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398, 428.)
The opinion of the Court of Appeals, in speaking of certificates of this same mortgage company, which though of a different series, are like those here involved, said further: “ Each holder of a certificate is, under his contract, entitled to insist upon the enforcement of the bond, mortgages and other security in which he has an interest and to a pro rata share of the moneys collected.”
Parties have a right, no doubt, to contract that one shall be paid ahead of another out of the proceeds of a given security. But from the reading of the whole certificate we think it was not the intention [231]*231of the certificate holders to agree that those who won, in a mad scramble to be the first to serve notice, should receive pay in full while others should receive nothing. The contract was made in contemplation of the company’s continuance in business, while here we are confronted with a condition analogous to bankruptcy.
By the terms of the certificates the mortgage company agrees to pay absolutely and the certificate holders are assignees of “ undivided ” shares in the deposited securities underlying the certificates. This does not give a certificate holder an equitable hen upon the fund or any part thereof. (James v. Alderton Dock Yards, 256 N. Y. 298.)
The certificate holders should share equitably in the proceeds of the sale of the company’s securities as in its assets if ultimately it has to be liquidated, otherwise the beneficial purposes-of rehabilitation will be unrealized.
The order appealed from should be affirmed, without costs.
All concur, Thompson, J., in result in a separate memorandum, except Lewis, J., who dissents and votes for reversal on the law in an opinion. Present — Taylor, Edgcomb, Thompson, Crosby and Lewis, JJ.