155 N.E. 84 | NY | 1926
The appellant seeks a reversal of an order confirming a determination of the State Tax Commission that a tax was properly demanded upon the recording of certain mortgages. Appellant's grantor being the owner of extensive premises made a contract with the City Mortgage Company for certain building loans and in accordance therewith executed four mortgages with bonds, each upon different premises and securing the sum of $65,000 to be advanced thereunder. On recording thereof the mortgagor was charged and paid a recording tax measured by the full amount to be advanced under and upon said mortgages. Thereafter and having received only about $20,000 upon each mortgage and loan it made a conveyance of the premises covered by the four mortgages to the appellant and under which the latter took title subject to the mortgages and the original mortgagor transferred to relator "all the right, title and interest in and to all further moneys which were to be advanced by the City Mortgage Company on each of the said mortgage loans."
When the relator attempted to procure from the mortgagee the balance secured by these mortgages and agreed to be advanced thereunder, the latter taking advantage of a clause in its agreement with the original mortgagor refused to advance such balance unless the relator should execute four new mortgages upon the same premises each in the sum of $44,750 to secure the balance which had not been advanced on the original mortgages.
I find nothing which brings into any dispute the correctness of the statement made in each of these new mortgages and which reads: "This mortgage and the *162
bond which it secures are given as collateral security for the payment of a bond for $65,000 * * * made by the Emanel Construction Corporation (appellant's grantor) to the City Mortgage Company and a mortgage given to secure the same covering the premises above described made by said Emanel Construction Corporation to City Mortgage Company." Thus we have the undisputed facts that each of the mortgages upon which a tax has now been imposed was not given to secure any new or additional loan but was given as collateral security to secure a bond and mortgage which had already been executed and taxed and upon and under which a balance of loan still remaining unpaid was to be advanced. There is some discussion of where the primary and personal responsibility for these loans rests and the materiality of which is not apparent. The respondent, of course, is wrong when it argues that the present appellant has become the primary source of repayment of the sums which had been advanced on the mortgages at the time when the conveyances were made to it. Those conveyances were made subject to the mortgages and not subject to the payment thereof and hence personal responsibility was not transferred from the original mortgagor to the appellant. (Wadsworth v. Lyon,
But, however this may be, the tax which has been imposed is upon the mortgage and not upon personal liability created by a bond and the point of this appeal to be constantly borne in mind is that the present mortgages *163 were executed upon the same lands as covered by the original ones and merely as collateral security to those original mortgages under which the advances were to be made and upon which taxes had been paid in full for the amount to be advanced. Thus, concededly, if the relator is taxed upon the present mortgages it will pay a double tax upon nearly two-thirds of the loan which was provided for and secured by the original mortgages and the question is whether the taxing statute requires or permits this. I do not think that it does.
Section
"Recording Tax. A tax of 50 cents for each one hundred dollars and each remaining major fraction thereof of principal debt or obligation which is, or under any contingency may be secured at the date of the execution thereof or at any time thereafter by a mortgage on real property situated within the State * * * is hereby imposed on each such mortgage. * * *"
It has been held by this court (People ex rel. U.S. Title,etc., Co. v. Tax Commission,
Certainly, in the present case, if the indebtedness of $65,000 in each case had been secured by two mortgages coincidently executed instead of by one the aggregate taxation upon the two mortgages would have been measured by the total indebtedness and would not have been increased because there were two mortgages, and by the same reasoning it seems clear that a second mortgage *164 collateral to the first one and securing the same loan ought not to be taxed when a tax has already been imposed upon the first mortgage for the full amount of indebtedness secured by the two mortgages.
I do not see anything in the cases relied on by the Appellate Division which is contradictory of this view. In the case ofPeople ex rel. U.S. Title, etc., Co. v. Tax Commission
(supra) the mortgage originally given had been discharged of record and a new mortgage, quite independent of the first one in its effect, had been given to secure a different and larger sum. Under those circumstances there was clearly a new transaction and it was simply held that the new mortgage was not supplemental within the provisions of section
It may also be urged with force that the new mortgages come within the spirit and fair interpretation of that provision of the Tax Law which reads:
"Supplemental Mortgages. If subsequent to the recording of a mortgage on which all taxes, if any, accrued under this article have been paid, a supplemental instrument or mortgage is recorded for the purpose of correcting or perfecting any recorded mortgage, * * * such additional instrument or mortgage shall not be subject to taxation under this article, unless it creates or secures a new or further indebtedness or obligation other than the principal indebtedness or obligation secured by or which under any contingency may be secured by the recorded primary mortgage, * * *."
As has been stated the mortgagee under its agreement with the first mortgagor had the right to refuse to make further advances because of the transfer by that mortgagor to the present mortgagor and by virtue of this right it insisted that the latter should execute the second mortgage as collateral before making the full advances under the first mortgages. For practical purposes the second mortgages were, therefore, executed for the purpose of "perfecting" the original mortgages. By the execution of the latter mortgages the first ones were so strengthened or perfected that the mortgagee was willing to proceed under them and make the advances which it had originally agreed to make.
Under these circumstances we think that the order of the Appellate Division and the determination of the Tax *166 Commission should be respectively reversed and annulled with costs in this court and in the Appellate Division, and the moneys paid under protest be returned to the relator, with fifty dollars costs and disbursements.
McLAUGHLIN, CRANE and LEHMAN, JJ., concur; CARDOZO, POUND and ANDREWS, JJ., dissent.
Ordered accordingly.