Court Opinion

ID: 5359134
Source: CourtListenerOpinion
Date Created: 2022-01-08 07:16:22.698791+00
Date Added: 2024-06-11T08:29:51.046087
License: Public Domain

Foster, J.
(dissenting). On July 5, 1923, the Westbrook Corporation executed a trust mortgage to secure bonds in the sum of $900,000. When the same was recorded a tax of $4,500 was paid thereon. The premises covered were thereafter conveyed to the Westbrook Operating Co., Inc., whose stock was all owned by a bondholders’ committee. Subsequently the Continental Bank and Trust Company became successor trustee, and began an action to foreclose the mortgage.
On May 23, 1935, and after -foreclosure proceedings had been commenced, the Westbrook Operating Co., Inc., instituted proceedings in the United States District Court for reorganization under section 77B  of the National Bankruptcy Act. Under this proceeding the holder of the record title was directed to convey the premises to a corporation known as the Westbrook-Buffalo, Inc. (petitioner herein), which was created by order of the court under the reorganization plan, As a part of the plan a new mortgage was given to secure $707,500 of bonds of the Westbrook-Buffalo, Inc. (the new corporation), that being the principal amount out*708standing at that time of the bonds secured by the first trust mortgage. The old bonds are to be exchanged for the new, and the new bonds provided extended terms of payment. The old bonds are to be retained by the trustee as additional security, and not canceled until the new bonds are paid. Likewise the old mortgage was not discharged, but surrendered and held as additional security for the new issue.
Upon presentation of the new mortgage the recording clerk demanded and collected a new recording tax. Such tax was paid under protest and the mortgage was recorded December 9, 1935.
When the transaction is viewed as a whole under the plan of reorganization and the court orders in connection therewith, the effect of the proceeding was merely to reduce the old mortgage to the amount of bonds outstanding, and substitute the new mortgage therefor. No money .changed hands, no new indebtedness was created and no additional property was covered.
The mortgage in question was substituted for the original mortgage in pursuance of a plan of reorganization under the Federal Bankruptcy Act and the statute (Tax Law, § 252) applies, and is conclusive. (People ex rel. Metropolitan Playhouses, Inc., v. Graves, 251 App. Div. 655.)
The statute reads in part: “ No mortgage of real property situated within this State * * * shall be exempt, from the taxes imposed by this article * * * and except that mortgages of real property situated within this State which are executed, given or made subsequent to June seventh, nineteen hundred thirty-four, and which are substituted for other mortgages as a part of and in compliance with a plan of reorganization pursuant to the provisions of section seventy-seven-b of the Federal Bankruptcy Act, are and shall be exempt from taxes imposed by this article to an amount not exceeding the amount of such mortgage indebtedness outstanding at the time of the consummation of such reorganization, and any person or corporation owning any debt or obligation secured by such a mortgage of real property situated within this State is and shall be exempt from the taxes imposed by this article.”
The instrument involved here comes within the legislative exemption.
The determination in the case should be annulled. ■
Hill, P. J., concurs.
Determination confirmed, with fifty dollars costs and disbursements.