People ex rel. Westbrook-Buffalo, Inc. v. State Tax Commission

Bliss, J. On December 9, 1935, there was recorded in the Erie county clerk’s office a document which by its own terms was designated as a “ mortgage indenture,” dated November 1, 1935, between Westbrook-Buffalo, Inc., and the Continental Bank and Trust Company of New York. It recited that the mortgagee had authorized an issue of bonds aggregating $707,500 in principal amount to be known as its fifteen-year income bonds, and the principal of and interest on these bonds were to be secured by the execution and delivery of this mortgage. The bonds contained a promise on the part of the mortgagor to pay the principal thereof with interest at certain specified rates out of the available net income of the company from the operation of the property covered by the mortgage. The mortgagor paid the mortgage recording tax thereon under protest. It is to be noted that the only claim made by the mortgagor at that time was that this mortgage was exempt because it was being given in a reorganization proceeding and was in effect an extension or refunding of a previous mortgage. The original mortgage of July 5, 1923, had been made by West-brook Corporation for $900,000. Thereafter the mortgaged property was conveyed through four various successive grantees to Westbrook-Buffalo, Inc., the last conveyance being made in the reorganization proceeding. Upon the execution of the mortgage of November 1, 1935, the lien of the old mortgage was discharged by a release duly recorded and a new lien created by the new [707] mortgage. Thus we have a new mortgage, made by a new mortgagor, to a new mortgagee, containing new terms of payment and new conditions and a new lien created on the premises. On December 6, 1935, this mortgage was clearly subject to the payment of the mortgage recording tax. (People ex rel. Williamsburgh Savings Bank v. Tax Commission, 245 N. Y. 414; People ex rel. U. S. Title G. Co. v. Tax Commission, 230 id. 102.) It did not fall within the definition of a supplemental mortgage under section 255 of the Tax Law and the relator did not so contend at that time. It is now urged, however, that this mortgage is exempt from the mortgage recording tax by reason of the enactment of chapter 373 of the Laws of 1936, in effect May 1, 1936. It was recorded and the tax paid before chapter 373 of the Laws of 1936, which amended section 252 of the Tax Law, was enacted or became effective. Consequently the tax should not now be refunded. (Matter of Gramott Corp. v. Graves, 255 App. Div. 255; affd., 280 N. Y. 588.) As to the exemption created by chapter 373 of the Laws of 1936, this mortgage is in exactly the same position as the one in the Gramott case save for the protest. The tax was perfectly legal when collected and, therefore, the protest was of no effect. The determination should be confirmed, with costs. Ceapsee and Schenck, JJ., concur; Postee, J., dissents, with an opinion in which Hill, P. J., concurs.