295 N.Y. 173 | NY | 1946
We are to determine whether a portion of a mortgage recording tax paid under protest by the petitioner-mortgagor was legally exacted.
The Register of the City of New York, acting as a recording officer, denied a claim by the mortgagor for the exemption of a portion of a mortgage tax demanded upon the recording of the instrument presently to be described. Thereafter the mortgagor applied to the State Tax Commission for a review of the determination and for a refund of taxes paid under protest in the amount of $5,375. Responsive to that application the commission granted a hearing after which it ratified the recording officer's action and denied a refund to the mortgagor. That determination, which is the subject of review in the present proceeding, has been confirmed at the Appellate Division, two Justices dissenting.
As to facts: The mortgagor, Park and 46th Street Corporation, paid a mortgage tax in full in 1935 when it recorded a mortgage executed to The Chase National Bank of the City of New York, as trustee, to secure a loan of $1,800,000 made by Metropolitan Life Insurance Company — to which reference will be made as "Metropolitan." The mortgage debt then *176 created was represented by 5% Serial Mortgage Bonds, all of which were held by Metropolitan. On two subsequent occasions the mortgage was so modified, by First and Second Supplemental Indentures, that on November 15, 1943, the debt — which then had been reduced to $1,075,000 — comprised 5% bonds in the amount of $915,000 and 4% bonds in the amount of $160,000. Of these so-called "Old Serial Bonds" $160,000 matured each year until 1947 when the balance of $595,000 matured. We are thus brought to the transaction which gave rise to the present proceeding.
On November 15, 1943, the mortgagor and the trustee executed the Third Supplemental Indenture whereby, upon the written consent and agreement of Metropolitan, the original mortgage as previously modified was further so modified as (a) to extend the maturities of the Old Serial Bonds and change the rate of interest payable thereon; (b) to provide for the issuance ofadditional bonds in the principal amount of $125,000 and (c) to provide for the exchange by Metropolitan — the registered holder of all the Old Serial Bonds — for an equal principal amount of textually revised bonds evidencing the same indebtedness. The Third Supplemental Indenture contained the provision that $1,075,000 of 4 1/2% bonds were to be issued "only to the registered holder of all of the Old Serial Bonds upon surrender to the Trustee by said registered holder of all the Old Serial Bonds for cancellation." Accordingly, following the execution of the Third Supplemental Indenture the mortgagor sold to Metropolitan the new or additionally issued 4 1/2% bonds in the amount of $125,000 and exchanged with Metropolitan $1,075,000 of the Old Serial Bonds for an equal amount of 4 1/2% bonds revised in text to conform to the change made by that indenture.
Upon the recording of the Third Supplemental Indenture the mortgagor paid without protest to the Register of the City of New York a mortgage tax concededly due upon the increased indebtedness of $125,000 secured by the mortgage as amended by that indenture. In addition the register exacted, and the mortgagor paid under protest, a mortgage recording tax of $5,375 which thus far in this proceeding has been ruled to be legally attributable to the balance of the mortgage debt owed by the mortgagor prior to the execution of the Third Supplemental *177 Indenture. We think that ruling was not in accord with those statutes which govern the imposition of the mortgage recording tax.
By section
Viewed in the light of the statutes quoted above, we think the recording of the Third Supplemental Indenture was taxable to the extent only that it made provision for an increase or addition to the principal debt or obligation owing by the mortgagor. True it is that by that instrument the date of maturity of the mortgage debt was extended, the rate of interest on bonds outstanding was reduced and it was provided that $1,075,000 of the new 4 1/2% bonds were to be delivered "* * * only to the registered holder [Metropolitan] of all of the Old Serial Bonds upon surrender to the Trustee by said registered holder of all the Old Serial Bonds for cancellation." But the mortgage recording tax, as we have seen, is measured under section
Both statutory enactment and judicial decisions support the mortgagor's resistence to a recording tax which, insofar as it is based upon a mortgage debt of $1,075,000, was paid when the original mortgage was recorded. Aside from alterations effected in the text of the mortgage which did not involve taxable consequences, *178 and except for an increase of $125,000 in the amount of the mortgage debt, the execution and recording of the Third Supplemental Indenture accomplished nothing more than to modify the maturity date and the interest rate of the bonded debt and to carry out an agreement by the parties that to the extent of a portion of the mortgage debt amounting to $1,075,000 an exchange of evidences of that portion of the debt should take place. A decisive fact is that to the extent of $1,075,000, and according to the agreement of the parties, the principal of the mortgage debt remained the same. The instrument recorded increased the principal debt or obligation of the mortgagor to the extent only of the new bonded debt in the amount of $125,000. That increase was the gauge by which is measured the recording tax legally to be imposed.
The conclusion we have reached is supported by the rule inMatter of New York State Gas Electric Corporation v.Gilchrist (
In People ex rel. Jewelers Building Corporation v. State TaxCommission (
The order of the Appellate Division should be reversed, the determination of the State Tax Commission annulled, and the State Tax Commission directed to refund to the petitioner so much of the mortgage recording tax as was paid under protest, with costs in this court and in the Appellate Division to the appellant.
LOUGHRAN, Ch. J., CONWAY, DESMOND, DYE and MEDALIE, JJ., concur; THACHER, J., taking no part.
Ordered accordingly. *180