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New York State
REAL PROPERTY LAW (RPL)
Laws 1909, Chap. 52
ARTICLE 4
USES AND TRUSTS
Section 119. Purchase by mortgage trustee.
120. Operation and sale by mortgage trustee.
120a. Liquidation of mortgage by trustee.
121. Reorganization of property covered by
trust mortgage.
122. Procedure of reorganization and expenses
in connection therewith.
122a. Modification of trust mortgages
given in prior re-organizations.
123. Preserving existing rights.
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Sec. 119. Purchase by mortgage trustee.
Any banking corporation, including corporations organized under
the banking law and also national banking associations authorized
to act as trustees within this state, which shall act as trustee,
depository or in other representative or fiduciary capacity in
respect to any mortgage upon real property within this state or
upon some interest therein or in respect to any indenture
relating to such real property against which bonds or
certificates of parts or of shares have been issued to the
public, may acquire such real property in any foreclosure action
now or hereafter pending; and in lieu of paying cash therefor,
may make settlement for the purchase price by crediting upon the
bond, mortgage or other obligation held by it, the net proceeds
of sale after deducting therefrom the expenses of the sale and
the costs of the action and any other sums which such trustee is
authorized to deduct under the mortgage, deed of trust or
indenture. The officer making such foreclosure sale shall accept
such settlement without requiring the production of the bonds,
notes, certificates of sharing, certificates of participation, or
other security evidencing the pro rata interest of the holders
thereof in the mortgage or indenture being foreclosed; and,
without such production, there shall be deemed credited thereon
the pro rata share of the net proceeds of sale ascertained and
established as aforesaid.
Sec. 120. Operation and sale by mortgage trustee.
Such banking corporation, upon acquiring such property, shall
hold, lease, rent, operate and manage the same for the pro rata
benefit of all parties interested in said mortgage, deed of trust
or indenture and may, but shall not be required to, issue
certificates of participation in said property and the rents,
issues and profits thereof to those parties interested in said
mortgage or indenture according to their respective interests. At
any time thereafter with the consent of the holders of eighty-
five per centum of the principal amount of the bonds or
certificates outstanding, or with the approval of the court after
such notice to the bondholders or certificate holders as the
court by order may direct, the court may make an order
authorizing the trustee to sell such property for such price and
upon such terms as to credit or otherwise or for such stocks,
bonds or other securities as it deems best for those beneficially
interested in said mortgage, deed of trust or indenture. The
order directing the giving of notice to bondholders and
certificate holders of the application of the trustee to sell
such property shall provide for personal service of such notice
not less than thirty days before the return date thereof, upon
not less than ten specified bondholders or certificate holders
and notice by mail to all other bond or certificate holders whose
addresses are known to the trustee and publication of such notice
once a week on a week day for three successive weeks preceding
the return date thereof in one newspaper of general circulation
published in the city or county where said real property is
located.
Sec. 120-a. Liquidation of mortgage by trustee.
Any banking corporation or individual acting as trustee in
respect to any mortgage upon real property against which bonds
shall have been issued to the public and which mortgage shall
have been given to such trustee by a corporation organized under
the provisions of Section one hundred twenty-one hereof, pursuant
to a plan of reorganization approved by the court and which
became effective under section one hundred twenty-two hereof, or
which mortgage shall have been given pursuant to a plan of
reorganization heretofore or hereafter approved and confirmed
under the bankruptcy acts of the United States, or which mortgage
shall have been given to such trustee under a voluntary plan of
reorganization by a corporation caused to be organized by a
bondholders' committee for the purpose of acquiring the property
secured by such mortgage at a sale under a judgment of
foreclosure and sale of a prior mortgage given to secure bonds
theretofore issued to the public, may, with the approval of the
supreme court in the county where all or part of the property
affected by such mortgage is situate, sell, assign, discharge or
satisfy such mortgage upon such consideration in cash as the
court shall deem fair and equitable to the bondholders and as the
court by order shall direct. Such order may be made upon the
application of the trustee or the holder of twenty-five per cent
of the bonds or of the mortgagor or owners of the property
securing such mortgage. The court may approve a sale, assignment,
discharge or satisfaction at such price as may appear to the
court to be fair and in the best interests of the bondholders and
not less than the cash value of said mortgage if sold at a public
sale, unless duly acknowledged dissents thereto by holders of
more than one-third of the principal amount of the bonds then
outstanding have been filed. If the application for such sale
shall be consented to by the holders of two-thirds of the
principal amount of the bonds outstanding such consent shall
constitute a presumption that it is fair and in the best
interests of the bondholders that said mortgage be liquidated at
the price fixed in such consent and the court may approve a sale
at such amount unless it shall appear to the court that such
amount is less than the cash value of said mortgage if sold at a
public sale. If the application shall not be made by the trustee
then notice shall be given to the trustee and in any event the
order directing notice to the bondholders of the application to
liquidate such mortgage shall provide for personal service of
such notice not less than thirty days before the return date
thereof upon not less than ten specified bondholders whose
addresses are known to the applicant and notice by mail to all of
the bondholders whose addresses are known and the publication of
such notice once a week on a week day for three successive weeks
preceding the return date thereof in one newspaper of general
circulation published in the city or county where the real
property securing said mortgage is located. Except as herein
otherwise provided all proceedings hereunder and the rights of
the parties hereto, shall be governed by section one hundred
twenty-two hereof; except that if the order shall become
effective it shall be without prejudice to the right of any
particular bondholder who has filed a duly acknowledged dissent
therefrom, within the time fixed in the order, to have the court
determine the cash value of the mortgage securing such bond if
sold at a public sale and providing for the payment or securing
his ratable share of such amount as a condition for declaring the
order effective.
If any provision of this section or of section one hundred twenty-
two hereof or any clause, sentence, paragraph or any part of such
section or the application thereof to any person or circumstance
shall be held unconstitutional or invalid, such decision or
judgment shall not affect or impair the constitutionality or
validity of the remainder thereof, but shall be confined in its
operation to the clause, sentence, paragraph or part thereof
directly involved in such decision or judgment.
Sec. 121. Reorganization of property covered by trust
mortgage.
Such banking corporation, under the direction of the court in the
foreclosure action may, and if directed by the court shall,
purchase or cause to be purchased said real property, pursuant to
a reorganization plan, and cause to be formed a domestic business
corporation, or a foreign corporation providing such foreign
corporation is authorized to do business within this state, or
utilize any other such corporation, providing the corporation so
formed or utilized shall have provided in its certificate of
incorporation the restriction set forth in section one hundred
eleven of decedent estate law, and shall thereupon grant and
release said property to such new corporation and its assigns
forever, or by assignment of its bid to such new corporation, or
otherwise, cause the referee's deed in foreclosure to be executed
and delivered directly to such new corporation granting and
releasing such property to it and its assigns forever, in
exchange for the stocks, bonds and other securities of such new
corporation except such of said securities as may be reserved for
the adjustment of liens and claims against said property, or for
other purposes as specified in the plan, including any provision
made in a plan approved by the court and thereafter becoming
effective as provided in section one hundred twenty-two for any
interest, junior or subordinate to the mortgage foreclosed;
provided, however, that such new corporation shall be authorized
to raise money by mortgage, pledge, borrowing, sale of securities
or otherwise to the extent which may be set forth in the plan of
reorganization. The trustee, upon receiving such securities and
any cash available from the new corporation, shall distribute the
same and any other funds or property constituting part of the
trust estate, ratably amongst those parties interested in such
mortgage, deed of trust or indenture less such trustee's proper
expenses and charges in connection therewith; and thereupon the
trustee upon the filing and approval of its accounts in the
foreclosure action and upon assigning to such new corporation any
deficiency judgment and any guarantees and insurance policies
held by the trustee and any claim for waste or otherwise in
connection with the mortgage estate, shall be discharged of any
further obligation or liability under such mortgage or indenture
or otherwise. Nothing herein contained shall affect or impair the
liability of any guarantor or any right or remedy existing in
favor of any holders of bonds, notes, certificates or other
securities which are secured by or participate in such mortgages,
deeds of trust or indentures.
Sec. 122. Procedure of reorganization and expenses in
connection therewith.
The reorganization plan may be presented to the court with the
complaint for foreclosure, or thereafter by the trustee or by any
persons owning or representing twenty-five per centum of the
principal amount of the securities covered by such mortgage, deed
of trust or indenture at any time prior to the foreclosure sale.
The plan shall contain a statement of the minimum and maximum
sums which the trustee shall bid for the property, which sums may
be varied by the court upon its approval of the plan; and the
trustee shall not incur any liability by reason of its failure to
bid more than said maximum sum. The trustee shall not be liable
for any action in executing the plan of reorganization approved
by the court except for its wilful misconduct, fraud, bad faith
or gross negligence. Hearings upon such reorganization plan shall
be at such time and place and upon such notice by publication,
mailing or otherwise, as the court shall fix in an order to show
cause why the plan should not be approved. The trustee and any
person beneficially interested in said mortgage, deed of trust or
indenture, and any person whose rights may be affected by such
reorganization, may appear upon the return day of the order to
show cause or at any adjournment thereof, and submit objections
to and modifications of the plan or an alternate plan, and the
court shall hear the parties by affidavit or summarily or
otherwise, as in its discretion it may direct, and thereupon
finally determine the plan of reorganization and fix the time and
method for persons affected by such reorganization to become
parties thereto. Where neither the mortgage or indenture, nor the
statute relating to the particular class of securities nor any
other statute, authorizes the purchase of the property on behalf
of all the holders of bonds or certificates of parts or shares,
then if any holder, within twenty days after the approval of the
plan, shall file with the court a duly acknowledged dissent
therefrom, the court shall determine the cash value of the
property as if sold at a public sale and such dissenting holder
shall be entitled to be secured for his ratable share of such
amount as a condition for declaring the plan effective. In all
other cases the reorganization plan shall be deemed binding on
all holders of bonds or certificates of shares or parts unless
within twenty days after the approval of the plan one-third in
principal sum of such holders shall file with the court duly
acknowledged dissents therefrom; in which event the plan may be
abandoned or may be further modified as the court shall direct,
with the same right of dissent as aforesaid as to any
subsequently amended plan. Notice of the court's approval of the
plan shall be given by publication, mailing or otherwise as the
court may in particular cases or by general rule direct. Any
person aggrieved by any determination hereunder shall have such
rights of appeal as are granted to a party to a special
proceeding. The expenses and compensation of the trustee and of
any committee or person who shall have submitted a plan of
reorganization or modifications thereof shall be fixed at such
sum as the court may deem reasonable and shall be chargeable as a
lien upon the property or collectible through their assumption by
the new corporation or in such other manner as the court may
approve. All proceedings and appeals in respect to the plan of
reorganization shall be entitled to preference over all other
civil causes next in order to actions or special proceedings in
which the people of the state or any officer, board or political
subdivision thereof shall be a party.
Sec. 122-a. Modification of trust mortgages given in prior re-
organizations.
Any such banking corporation or any individual acting as trustee
in respect to any mortgage, deed of trust or indenture upon real
property, or any leasehold interest therein, against which bonds,
certificates, shares or any other evidence of interests therein
(herein called "debts") shall have been issued to the public, and
which mortgage shall have been given to such trustee by a
corporation organized under section one hundred twenty-one
hereof, pursuant to a plan of reorganization approved by the
court and which became effective under section one hundred twenty-
two hereof, or which mortgage shall have been given to or is held
by such trustee pursuant to, or by reason of, a plan of
reorganization heretofore or hereafter approved and confirmed
under the bankruptcy acts of the United States or which mortgage
shall have been given to such trustee under a voluntary plan of
reorganization by a corporation caused to be organized by a
bondholders' committee for the purpose of acquiring the property
secured by such mortgage, may, without foreclosure of such
mortgage, and whether or not a default exists thereunder, present
to the supreme court in the county where all or part of the real
property affected by such mortgage is situated, a plan for the
reorganization of such mortgage, deed of trust or indenture. The
plan of reorganization may provide for: (1) the extension of the
maturity of the mortgage, deed of trust or indenture and the
debts secured thereby; (2) the modification of the provisions for
interest, amortization or sinking funds; and (3) such other
changes, modifications or amendments as may be fair and feasible
and for the best interests of the security holders. Such plan may
likewise be presented by holders or representatives of twenty-
five per centum in principal amount of such securities. Such plan
may cover one or more mortgages with respect to said property. If
no default shall exist in the payment of principal or interest,
such plan may be presented by the mortgagor or by the owner of
the property covered by such mortgage. Hearing upon such
reorganization plan shall be at such time and place and upon such
notice by publication, mailing or otherwise as the court shall
fix in an order to show cause why the plan should not be
approved. No plan shall be approved unless the court, after such
hearing shall determine that it is fair, feasible and for the
best interests of the security holders. The affirmative consent
of the holders of two-thirds of the principal amount of the
outstanding securities shall constitute a presumption that the
plan is fair, feasible and for the best interests of the security
holders. All proceedings hereunder and the rights of the parties
hereto, including the hearing, the final order determining the
plan of reorganization embodying such modifications, the time and
method for the persons affected by such plan becoming parties
thereto and the right of appeal from any order, shall be governed
by section one hundred twenty-two hereof; except that if the
reorganization shall become effective it shall be without
prejudice to the right of any particular holder of such
securities who has duly dissented therefrom to have the court
determine the cash value of such securities as he may have owned
on or before the date of the presentation of the plan of
reorganization pursuant to this section, and providing for the
payment or securing his ratable share of such amount as a
condition for declaring the plan effective. Upon the order
becoming effective the plan shall be binding upon all the
security holders.
If any provision of this section or of section one hundred twenty-
two hereof or any clause, sentence, paragraph or any part of such
section or the application thereof to any person or circumstance
shall be held unconstitutional or invalid, such decision or
judgment shall not affect or impair the constitutionality or
validity of the remainder thereof, but shall be confined in its
operation to the clause, sentence, paragraph or part thereof
directly involved in such decision or judgment.
Sec. 123. Preserving existing rights.
Nothing in this act shall be deemed to prevent any bondholder or
committee of bondholders from bidding at the foreclosure sale and
in case he or they should be a successful bidder, from applying
upon the purchase price the bonds held by him or them at the
amount distributable thereon and reorganizing the property so
purchased in any manner which was lawful prior to the enactment
of this act, nor to impair any previously existing right of a
trustee so to purchase and pay for the property, or to preclude
any trustee which shall have purchased such property from
submitting to the court a plan for its reorganization. The court
may provide for the qualification of bidders other than the
trustee by requiring them to deposit with the officer conducting
the sale in advance of bidding up to ten per centum of the amount
of their bid in cash or in bonds taken at the principal amount
thereof. In any action now or hereafter pending for the
foreclosure of any such mortgage or indenture, the property
shall, on application of the trustee, be sold subject to the lien
of any taxes, assessments and water rates, any prior lien, or to
any liens which may thereafter be established, which are the
subject of litigation pending at the time of the sale, provided a
brief statement thereof is contained in the notice of sale.
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