Court Opinion

ID: 5353850
Source: CourtListenerOpinion
Date Created: 2022-01-08 06:52:11.481388+00
Date Added: 2024-06-11T08:29:46.304783
License: Public Domain

Crapser, J.
(dissenting). This is a certiorari proceeding to review a final determination of the State Tax Commission assessing a mortgage tax, payable upon the recordation of a certain written instrument.
The State Tax Commission have held that a written instrument dated July 15, 1922, is taxable as a mortgage under article 11 of the Tax Law.
The instrument in question is a ninety-nine-year lease containing an agreement by the lessee to buy and by the lessor to sell the leased premises at the end of the ninety-nine-year term.
The question arises under section 250 of the Tax Law which provides in part as follows: “ Executory contracts for the sale of real property under which the vendee has or is entitled to possession shall be deemed to be mortgages for the purposes of this article and shall be taxable at the amount unpaid on such contracts.”
The sole question presented is whether the instrument in question was an executory contract for the sale of real property and whether the vendee was in possession thereunder.
Charles B. Rogers and P. C. J. DeAngelis, as trustees under the will of Elizabeth B. Rogers, deceased, leased certain premises in the city of Utica, N. Y., to the First National Bank of Utica (later First National Bank and Trust Company of Utica, now First Citizens Bank and Trust Company of Utica) for a term of ninety-nine years from July 15, 1922, and the lessee agreed to pay the net yearly rent of $40,000 for the use of said premises.
Among other clauses said instrument contains the following clause: “ Said party of the second part further covenants and agrees that at the end of the term of this lease it will purchase from the parties of the first part, their successors or assigns, all their interest in the premises at the sum of eight hundred thousand dollars ($800,000) in gold coin of the United States of America of or equal to the present standard of weight and fineness or its equivalent, and said parties of the first part covenant and agree for themselves, their successors and assigns, that they will sell *474and convey their said interest to the party of the second part for said sum of eight hundred thousand dollars ($800,000) in such coin or its equivalent.”
The lessee bank and its successors entered into possession under the lease on July 15, 1922, and remained there until March 2, 1925, when it assigned the said instrument to the First National Holding Corporation which has since been in possession of the said property under the lease.
The bank was seeking a new site for a new building and among the other sites that it was considering was the leased premises which was made up of two properties but it considered the cost of the property too great for the erection thereon of such a building as the bank desired to put up, if it was obliged to pay for the property immediately, but it was willing to lease the properties for a long term of years and to erect its building thereon during the term providing it could purchase the land at the end of the term at a specified cost.
As the result the property was purchased by Charles B. Rogers and Judge DeAngelis as trustees under the last will and testament of Elizabeth B. Rogers, deceased, and the lease in question was entered into with the bank.
The lease in question was assigned to the First National Holding Corporation on March 2, 1925, and recorded in the Oneida county clerk’s office March 17, 1925, and on March 2, 1925, the First National Holding Corporation, as mortgagor, mortgaged it to the Oneida County Trust Company, as trustee and mortgagee, the said lease to secure the issuance of $1,000,000 first mortgage leasehold five and one-half per cent gold bonds due from 1930 to 1965.
The description covered all the company’s right, title and interest as tenant in the indenture of lease dated the 15th day of July, 1922, and recorded the 5th day of September, 1922, which is the instrument in question herein.-
The holding corporation undertook the erection of a fourteen-story bank and office building on the leased premises at a cost of $1,200,000 and sublet the first four floors of the building to the bank until September 1, 1965. This together with the other rentals received from the building was sufficient to pay the principal and interest on the bonds and the sublease was assigned to the trust company as security for the bondholders.
The original lease was recorded in the Oneida county clerk’s office on September 5, 1922. No mortgage tax was demanded or paid at the time and it was not until the year 1934 that the question of a mortgage tax was raised by the State Tax Commission.
The bank went into possession of the leased property under *475the lease as lessee and not as vendee. One of the purposes of the agreement was to lease the property and to postpone its purchase for ninety-nine years.
The testimony taken in the case shows that it was the bank’s desire to lease the property for a long term of years provided that it could arrange to purchase it at the end of the lease for a specified cost. It was agreed that there was no attempt being made by the parties to this transaction to evade any tax.
The language of the instrument itself is so clear that no construction is necessary. The bank went into possession as lessee and not as vendee, it transferred its interest as lessee to the holding corporation which mortgaged its leasehold interest to secure the necessary funds with which to build a building on the property leased. There was no provision in the lease by which if a default was made by the lessee the lessor could advance the date of purchase or by which the lessee could advance the date of purchase. The date of purchase was fixed at the end of the lease, ninety-nine years, and, therefore, White v. Walsh (62 Mise. 423), relied upon by the respondents, is clearly distinguishable and is not an authority that will support the action taken by the State Tax Commission herein.
For ninety-nine years this was a strict, straight lease, under which the lessee and its successors in interest had the right to occupy the property upon complying with the terms; at the end of that time, it had the right to purchase the property for the sum of $800,000. To hold otherwise would be to do violence to the plain language set forth in the lease and the assignment and the mortgage given by the holding corporation. In my mind the matter is not open to debate. The lessee became entitled to possession under the instrument as lessee and not as vendee.
The length of time that the lease stood recorded in the county clerk’s office of Oneida county without being questioned is of itself convincing proof that the attempt to treat it as an executory contract of sale of real property under which the vendee has or is entitled to possession is an afterthought on the part of the Tax Commission which cannot be sustained upon the facts presented by the record.
The order and determination of the State Tax Commission should be reversed, with fifty dollars costs and disbursements.
Determination confirmed, with fifty dollars costs and disbursements.