#### The Equitable Life Assurance Society of the United States, Plaintiff, *v.*Harry L. Toplitz et al., Defendants.

(Supreme Court, New York Special Term,

November, 1910.)

Foreclosure of mortgages on *land*— Foreclosure by action and sale — Sale — Amount due and payment of liens —Taxes.

Taxes — Lien of taxes — When lien accrues.

Unconfirmed taxes in the city of New York do not constitute any lien against real property.

The duty of a referee appointed to sell real property under a judgment in foreclosure is to sell the property, pay off existing *458liens and incumbrances and convey tbe property free and clear of all encumbrances to the purchaser.

Where the contract of sale, dated September, 1910, between a referee appointed to sell real property under a foreclosure judgment and the purchaser of the premises provides that “All taxes, assessments and water rates which at the time of sale are liens or incumbrances upon said premises will be allowed by the referee out of the purchase money, provided the purchaser shall, previous to the delivery of the deed, produce to the referee proofs of such liens and duplicate receipts for the payment thereof,” and the notice of sale duly published as required by law contained - the following: “The approximate amount of the taxes, assessments and water rates or other liens which are to be allowed to the purchaser out of the pui’chase money, or paid by the referee, is *”*a certain sum which coneededly did not include the taxes for the year 1910 which, at the time of sale, had not been confirmed, the purchaser is entitled to an allowance only of such taxes as constituted a lien or incumbrance against the property on the day of sale; and the referee, upon an application to the court for instructions, will be advised to refuse to comply with the demand made upon him 'by the purchaser to allow her any part of the tax of 1910 which was confirmed after the date of the foreclosure sale.

Application by referee appointed to sell mortgaged premises for instructions.

Norton & Gregory, for petitioner.

Xenophon P. Huddy, for Hortense B. Fischer, the purchaser.

Holm, Whitlock & Scarff, for Hudson Trust Co.

Guy, J.

This action was brought to foreclose a first mortgage upon premises in East Eighty-sixth street, borough of Manhattan; and the premises in question were sold pursuant to judgment in foreclosure on September 15, 1910. The contract of sale entered into between the referee and the purchaser contained the following provision: *“All taxes, assessments and water rates which at the time of sale are liens or incumbrances upon said premises*will be allowed by the referee out of the purchase money, provided the purchaser shall, previous to the delivery of the deed, produce *459to the referee proofs of such liens and duplicate receipts for the payment thereof.” The notice of sale duly published, as required by law, contained the following provision : “ The approximate amount of the taxes, assessments and water rates or other liens which are to be allowed to the purchaser out of the purchase money, or paid by the referee, is $3,859.98.” It is conceded that this approximate amount did not include the taxes for the year 1910, which, at the time of the sale, had not been confirmed. Upon the day of the closing of title.the purchaser after being allowed, as provided by the terms of sale, the amount of taxes, assessments and water rates which had been paid by her, and which constituted liens or incumbrances against the property before the date of sale, demanded that the referee in addition should allow and pay to her, out of the surplus moneys remaining in his hands after the payment of all such liens and incumbrances, the sum of $1,196.55, *as the proportionate amount of the taxes assessed against the premises in question to and including the 15th day of September,*1910. The referee applied to this court for instruction as to whether this payment should be allowed; an order was subsequently entered directing the referee to pay the amount of the judgment and expenses of sale, the question of the apportionment of said taxes for 1910 and the payment to the purchaser on account thereof being reserved for further consideration. It appears also that the Hudson Trust Company, one of the defendants, holds a subsequent mortgage upon said premises for $25,000, which is past due and the payment of which, with interest, would more than consume the surplus in the hands of the referee.

Under the terms of her contract with the referee, as embodied in the terms of sale, the purchaser would be entitled to an allowance only of such taxes as constituted a lien or incumbrance against the property on the date of sale. The contract is not indefinite or ambiguous on this point, but the taxes and assessments or other incumbrances which are to be paid by the seller, the referee, or allowed to the purchaser, upon the closing of title are clearly and definitely stated. The purchaser, however, claims that as, upon the confirma*460tion of the tax, it would relate back to tbe time of tbe entering of the property on tbe assessment roll, i. e., January 9, 1910, and become a personal charge, or debt against tbe mortgagor, as tbe owner of tbe property on that date, and as, under tbe terms of tbe mortgage, tbe mortgagee was authorized to pay all taxes against tbe property and to recover back tbe same from tbe mortgagor, tbe purchaser was subrogated ,in that respect to all rights of tbe mortgagee under tbe mortgage, and is therefore entitled to pay tbe tax of 1910, when due, and receive from tbe referee tbe proportionate amount thereof up to tbe date of sale. Tbe difficulty with this fanciful theory is that tbe purchaser did not contract to purchase tbe mortgage and all rights of tbe mortgagee thereunder, but did contract to purchase tbe property itself, free and clear of all liens and incumbrances; and tbe seller was not tbe mortgagor, but an officer of tbe court appointed to sell tbe property under foreclosure by reason of the mortgagor’s default in payment. What tbe individual liability of .the mortgagor as tbe owner of tbe property at tbe time of tbe making of tbe assessment roll might be, or whether tbe purchaser upon payment of any taxes confirmed subsequent to tbe sale would have any right of recovery on an apportionment of tbe taxes, as against tbe owner of record'at.tbe time of tbe entering of the property upon tbe assessment roll, is not material to this inquiry. Tbe referee was not appointed, nor was it any part of his duty to discharge personal liabilities of tbe mortgagor, except as set forth in tbe judgment. His duty was, under tbe forms prescribed by law, to sell tbe property, pay off existing liens and incumbrances and convey tbe property free and clear of all incumbrances to tbe purchaser. When tbe referee performed this duty and complied fully with tbe terms of sale, bis obligation ended, and tbe purchaser under her contract is not entitled to make any further demand upon him. That unconfirmed taxes do not constitute any lien against real property has been established by numerous authorities, so that the point seems beyond controversy.

In Coudert v. Huerstel, 60 App. Div. 83, the court, in passing upon this question, said: “At tbe time that this *461notice of sale was prepared, therefore, and at the time of the actual sale of the premises, the taxes for the year 1900 were not payable, nor was the amount of the tax ascertained so that it could be allowed by the referee as a lien upon the property. This notice of sale, therefore, must have referred to taxes that had accrued and become a lien upon the premises prior to the time of the notice of sale, and no purchaser could have been actually misled into supposing that a tax thereafter to be ascertained was to be deducted and paid by the referee.”

In Lathers v. Keogh, 109 N. Y. 584, the court passing upon the same- question said: “ That the property was the subject of taxation does not control the question. Until the amount of the tax is ascertained and determined no lien or incumbrance exists by reason thereof, and we think *that the proper construction of this covenant merely calls for the freedom of the property, at the lime of conveyance, from what can be considered an incumbrance upon the property.** * * We do not think, therefore, that an assessment or a tax exists as an incumbrance, or as a charge upon lands in the roll, within the meaning of a covenant in a deed against charges, taxes, assessments and incumbrances, until it has been confirmed and the amount thereof has been determined in the methods prescribed.” And in a preceding part of the opinion the court said: “ Until these requirements of the law have been fulfilled the tax is not due or payable and no lien attaches to the property *nor can any, legal charge for any tax be said to rest upon it.”*

Again in Barlow v. St. Nicholas Nat. Bank, 63 N. Y. 399, the court has said: “If the plaintiff had brought his action the day after he took his -deed eo-uld he hav-e maintained it? I think not The answer would have been perfect, that the entry of the land in the assessment roll constituted no incumbrance.”

In the more recent case of Buckhout v. City of New York, 176 N. Y. 363, where the city had acquired title to plaintiff’s property by condemnation, title having vested in the city by virtue of a resolution of the board of estimate on July 6, 1897, and the report of the commissioners having *462been confirmed December 23, 1897, awarding plaintiff the value of his land as of the time of such vesting of title, and the city having claimed the right to deduct from the amount of the award the taxes for 1897, which became due and payable in October, 1897, the court in rejecting the city’s claim said: “After the 6th of July, 1897, when the city took the property as its own, *it could not lawfully fix the amount of the tax or extend it to the column opposite the*valuation, *or talce any step to convert the assessment or valuation previously made into a complete*tax, *definite in amount and capable of enforcement.*Taxation cannot create a debt until there is a tax fixed in amount and perfected in all respects. It is not enough to lay the foundation, but the structure must be built. There cannot be a complete tax laid upon real estate until it is so perfected as to become a lien, because until then the *amount cannot be lenown.”*In Burr v. Palmer, 53 App. Div. 358, the learned Appellate Division in confirming this doctrine have said: “ Emphasis is given to this view by the suggestion that if for any .reason the computation should never be carried out there would be no authority for the collection of the taxes on any particular parcel by the receiver of taxes.”

The purchaser, however, urges that, while the terms of sale are silent as to unconfirmed taxes, .they must be construed in the light of existing law, -and invokes in support of her claim chapter 512, Laws of 1875, now embodied in section 2720 of the Code of Civil Procedure, which provides that: “All rents reserved on any lease made after June seven, eighteen hundred and seventy-five, and all annuities, dividends and other payments of every description made payable or becoming due at fixed periods under any instrument executed after such date * * * shall he apportioned * * * according to the time which shall have elapsed from the commencement or last, period of payment thereof.” The omission of all reference to taxes and other charges of like character against real estate is significant. The purchaser herein cites various English authorities in support of her contention that unconfirmed taxes which, when confirmed, would be a charge *463against the property should he apportioned; hut the English statute with which the authorities so cited deal differs in very material respects from our statute, and the authorities cited throw little light upon the question involved herein. The purchaser’s contention that in this instance the mortgage constitutes the written instrument within the meaning of section 2720 is not tenable. The charge against the property which results from the confirmation of the tax does not arise by reason of any provision in the mortgage, but results from the exercise of the taxing power of the government. It seems clear, therefore: Eirst, that section-2720 of the Code of Civil Procedure does not provide for an apportionment of unconfirmed taxes as between the seller and the purchaser of real property, and the statute therefore cannot he deemed to have in any way modified the terms of sale entered into herein between the purchaser and the referee. Second, that no duty rests upon the referee to discharge the personal obligation of the mortgagor, if any such there be, to reimburse the purchaser for taxes which may have become due subsequent to the date of sale. Third, that the purchaser having, by the terms of sale, entered into an express contract of purchase with the referee, and such contract having been fully complied with by the referee, and, upon payment of the purchase price to the referee, the purchaser having received a deed of the property in question free and clear of all incumbrances, the purchaser is not entitled to make any further claim or demand upon the referee.

The referee is, therefore, advised to refuse to comply with the demand made upon him by the purchaser of the property to allow her any part of the tax of' 1910, which was confirmed after the date of sale.

Ordered accordingly.