202 A.D. 54 | N.Y. App. Div. | 1922
Lead Opinion
The question is whether the mortgage recording tax imposed by section 253 of the Tax Law (as amd. by Laws of 1916, chap.
The defendant on December 1, 1919, executed to Old Colony Trust Company and S. Parkman Shaw, Jr., as trustees a trust mortgage covering its real property to secure bonds in the aggregate principal amount of over $95,000,000. When the mortgage was recorded the recording tax was paid on the amount mentioned. Subsequently at different times the defendant under the provisions of said trust mortgage issued thereunder three series of bonds aggregating $21,558,000. The proceeds of these bonds were used to pay and discharge an equal amount of the former bonds.
The statute applicable to the question is section 259 of the Tax Law (as amd. by Laws of 1917, chap. 573) which so far as material provides as follows: “ Trust mortgages. In the case of mortgages made by corporations in trust to secure payment of bonds or obligations issued or to be issued thereafter, if the total amount .of principal indebtedness which under any contingency may be advanced or accrue or which may become secured by any such mortgage which is subject to this article has not been advanced or accrued thereon or become secured thereby before such mortgage is recorded, it may contain at the end thereof a statement of the amount which at the time of the execution and delivery thereof has been advanced or accrued thereon, or which is then secured by such mortgage; thereupon the tax payable on the recording of the mortgage shall be computed on the basis of the amount so stated to have been so advanced or accrued thereon or which is stated to be secured thereby. * * * Whenever a further amount is to be advanced under the original mortgage, or shall accrue thereon or become secured thereby, the corporation making such mortgage shall pay the tax on such amount,” etc.
There is no provision in the mortgage or otherwise requiring the original bondholders to accept new bonds in place of those matured. They were entitled to have their bonds paid. The transaction was in no sense an exchange of bonds. The new bonds were placed on the market and the proceeds thereof used to pay and discharge the old bonds. The indebtedness, therefore, was not the same. The transaction consisted of the substitution of one “ principal indebtedness ” in place of another. The defendant would read the statute as if it applied to an indebtedness which might be secured by the mortgage at any one time. The statute by its phraseology gives no intimation of such a purpose. The defendant says: “ The tax is to be measured by the total debt
If this trust mortgage contained no refunding provisions and the defendant were required to resort to another mortgage to secure its new bonds there would be no question about its liability for the tax. This court has said: “The statute does not con-' template that if a man pays one mortgage with money borrowed upon another mortgage, the latter mortgage is exempt from taxation.” (People ex rel. Astor Trust Co. v. State Tax Commission, 174 App. Div. 320, 326.) A party may not indirectly accomplish that which by direct methods the law does not permit.. The parties to a mortgage may not by inserting therein appropriate provisions constituting the mortgage a security for a new indebtedness to take the place of the old evade the provisions of the Tax Law. The method adopted may be entirely appropriate for the purposes of the mortgagor but it should not be used as a device to escape taxation.
I think judgment should be directed in favor of the plaintiff as demanded by it in the submission, without costs.
All concur, except Kiley, J., dissenting, with a memorandum.
Dissenting Opinion
Section 253 of the Tax Law of this State provides as follows: “ A tax of fifty 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 recorded on or after the first day of July, nineteen hundred and six, is hereby imposed on each such mortgage, and shall be collected and paid as provided in this article. If the principal debt or obligation which is or by any contingency may be
Judgment directed in favor of the plaintiff as demanded by it in the submission, without costs.