Court Opinion

ID: 5280938
Source: CourtListenerOpinion
Date Created: 2022-01-06 21:56:48.891628+00
Date Added: 2024-06-11T08:28:22.971409
License: Public Domain

Hinman, J.
Upon the facts set up in the complaint above stated the issues of law presented by this appeal are:
(1) Is the instrument in question an executory contract for the sale of real property and, therefore, a mortgage as defined in section 250 of the Tax Law?
*265(2) If it be a mortgage, is appellant, who is not alleged to have caused it to be recorded or to have consented to that being done, liable, or her interest under the agreement subject to sale, for the payment of the mortgage tax?
It is the respondent’s contention as to the first proposition that the instrument is an “ executory [contract] for the sale of real property under which the vendee has or is entitled' to possession ” (Tax Law, § 250, as amd. by Laws of 1916, chap. 323) and, therefore, is taxable as a mortgage. By the same section 250, “real property,” as used in article 11 of the Tax Law, is defined as including “ every thing a conveyance or mortgage of which can be recorded as a conveyance or mortgage of real property under the laws of the State.” Real property includes a lease for a term exceeding three years and it may be recorded as a conveyance of real property. (Real Prop. Law, §§ 290, 291.) The court below has held that the instrument in question contains an agreement to assign and sell the lease of the defendant at a future time upon the payment of a certain sum of money and is an “ executory contract for the sale of real property,” the lease being for a term exceeding three years.
The contention of the appellant as to this first proposition is that the instrument is nothing but a sublease of real property and a lease of the personal property with an option to the sublessee to acquire the parent lease; that it is not an “ executory contract for the sale of real property ” because, as to the sale of the parent lease, it is not a “contract” at all, but merely an option, there being contained in it no agreement by the sublessee (Martino) to purchase or take an assignment of the parent lease with its renewal privilege; that the $85,000 is clearly what it is designated as being, viz., additional rent which appellant required should be paid in advance but which, because of Martino’s inability to pay it all in advance, she obtained, to the amount of $3,000 in advance and the balance ($82,000) in installments with interest from the beginning of the term.
The language of the instrument bears out the contention of the appellant. Throughout the contract, which is designated therein as a sublease, the $85,000 is designated as “ additional rent.” No ulterior purpose is suggested. Considering the length of term and the regular rent reserved of $18,000 a year, together with taxes, insurance and other payments required, the sum of $85,000 was not a proportionately large amount to be exacted as additional rent and the appellant had the right to require that it be paid in advance or the equivalent. The transaction also included the leasing of personal property the value of which is not shown in *266the record. Appellant’s protection required that she retain control of the property as landlord until the additional rent was paid and until the obligations of the lease were performed for such a substantial portion of the lease that she could rely upon complete performance for the balance of the term by Martino to protect his then heavy investment. If Martino failed to exercise his option in the time allowed, namely, ten months before the expiration of the demised term, she would have the right, if she so elected, to take the fourteen years’ renewal in her own name, free from, any claims on his part. It would seem that the intention of the appellant as reflected in the instrument was clearly to grant a sublease with an option to acquire the parent lease.
It is equally clear that it was not the intention of the parties to make an executory contract of sale of the lease. There was no covenant by'Martino to take an assignment of the lease so as to make it a contract to assign. At most appellant agreed to assign the parent lease if Martino demanded it and Martino covenanted that if he desired to obtain an assigmnent and was otherwise entitled to do so he would give notice of such desire. The assignment would be of slight value to him except in so far as it would entitle him to the renewal privilege foi fourteen years upon certain conditions set up in the parent lease. It is conceivable that he might not, after experience under the sublease, wish to have the lease renewed. It is evident from the language used in his covenants that all Martino desired was an option to purchase the parent lease, of which he might or might not avail himself when the time for his election arrived.
The term “ executory contracts for the sale of real property ” as used in section 250 of the Tax Law does not relate to a mere option. In Thompson on Real Property (Vol. 5, § 4287-g), options are defined and distinguished as follows: “An option is not an actual or existing contract, but merely a right reserved in subsisting agreement. It is a continuing offer of a contract, and if the offeree decides to exercise his right to demand the conveyance, he must signify that fact to the offerer. The option is not a sale. It is not even an agreement for a sale. At best, it is but a right of election in the party securing the same to exercise a privilege, and only when that privilege has been exercised by acceptance does it become a contract to sell. It is a continuing offer to sell which may or may not, within the time specified at the election of the optionee, be accepted. The owner parts with the right to sell to another for such time and gives to the optionee the exclusive privilege to buy on the terms set forth in the option. A contract of sale imposes upon the vendee an obligation to buy. An option *267confers a privilege or right to elect to buy, but it does not impose any obligation to buy.” This is the commonly accepted distinction between an option and an executory contract for the sale of real property and since the instrument in question before us did not impose any obligation upon Martino to take an assignment of the parent lease, the instrument was not an executory contract for the sale of the lease and was not taxable under section 250 of the Tax Law. Having resolved the main issue in favor of the appellant, there is no occasion to pass upon the secondary issue presented upon the appeal.
The order should be reversed, with ten dollars costs and disbursements, and the motion to dismiss the complaint should be granted, with ten dollars costs.
All concur.
Order reversed on the law, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.