Court Opinion

ID: 3484384
Source: CourtListenerOpinion
Date Created: 2016-07-05 21:09:26.988199+00
Date Added: 2024-06-11T14:13:32.248102
License: Public Domain

I cannot agree with the conclusion of the court in this case that the instrument offered for record "merely * * * modifies or supplements an instrument previously recorded". The previous instrument contained a clause limiting the amount of bonds that could be issued thereunder to 75% of the initial cost of the project. It is conceded that this cost was less than $50,000,000, so that the limit is about $37,000,000 of bonds. The company issued and sold to the public $36,000,000 of bonds, and issued $2,000,000 more, which were retained by the trustee. It is perfectly clear on the record, indeed conceded in argument, that no new or additional bonds could be issued under the original instrument. It follows that the present instrument creates a new debt and is indispensable to the creation of such debt. The retention of the lien of the first instrument can only be regarded as further security for the new debt created. The new instrument is not supplemental but original; certainly notmerely supplemental.
Nor can I find an exemption in the language of section 220(k). That section does not purport to cover all *Page 191 
refunding operations. It is limited, in the first instance, to cases where "the total amount of the debt which may become secured by any instrument securing a debt shall not have been incurred at the time such instrument is offered for record". As pointed out above, all of the bonds authorized by the first instrument were issued, so that no additional debt could be incurred under that instrument. The section contemplates that where additional bonds are issued under an "open-ended" instrument, the debtor shall file "a duly verified statement showing the amount of such additional debt," not a new instrument. In computing the tax on "such additional debt" credit is allowed for bonds previously issued, on which the tax was calculated and paid, which are "paid or refunded out of the proceeds of such additional debt". This is the only reference to refunding in the whole statute, and it seems to be clearly limited to a case where additional bonds are issued under one original instrument. I find no room for construction in the language quoted. It is not for this court to say that it is absurd for the legislature to limit the exemption to such refunding as can be done through an original mortgage alone. Indeed as I read the cases cited, that is precisely the distinction drawn by the New York Courts. I think the order of the lower court should be reversed. *Page 192