Opinion
February 10, 1971
Proceeding under CPLR article 78 (transferred to the Appellate Division of the Supreme Court in the Third Judicial Department by an order of the Supreme Court, Albany County) to review a determination of the State Tax Commission which held that the recording officer of New York County erroneously collected a mortgage recording tax in the sum of $5,800. After a series of prior related financial transactions dating back to January 4, 1957, on September 29, 1961 a "second supplemental loan agreement" was entered into by which the Irving Trust Company agreed to lend Columbia Pictures Realty Corporation an additional $1,640,000. Pursuant to the provisions of that agreement a new note for $2,800,000 was given merging the new and existing indebtedness and all the former notes involved in the transaction were technically canceled. Further a new indenture was entered into again assigning to Irving Trust the rents receivable from a leasehold interest on the premises located at 711 Fifth Avenue, New York City, as security for the indebtedness. When this indenture of assignment of rents was submitted to the Register of the City of New York, for the County of New York, to be recorded a check in the amount of $8,200, computed upon the $1,640,000 increase in indebtedness, was tendered in payment of the mortgage recording tax. The Register refused to accept the check, contending that the total tax was $14,000, computed upon the basis of the total $2,800,000 indebtedness. The mortgage recording tax in the amount of $14,000 was paid, and Columbia Pictures Realty Corporation commenced a proceeding before the State Tax Commission seeking a determination that the mortgage recording tax was due only on $1,640,000. The State Tax Commission determined that the instruments involved constituted an extension of indebtedness and secured new or further indebtedness to the extent of $1,640,000. It therefore concluded that the mortgage recording tax was erroneously collected to the extent of $5,800 and directed the Register of New York County to refund that amount to Columbia Pictures Realty Corporation. The instant proceeding was then instituted by the City of New York. While the indenture cannot properly be considered a "supplemental" mortgage within the meaning of section 255 Tax of the Tax Law since the original indenture clearly was not supplemented but superseded ( People ex rel. United States Tit. Guar. Co. v. State Tax Comm., 230 N.Y. 102, 104-106; People ex rel. Jewelers Bldg. Corp. v. State Tax Comm., 214 App. Div. 99, affd. 241 N.Y. 524; see Matter of Brodsky v. Murphy, 26 A.D.2d 225, 229, affd. 20 N.Y.2d 828), we find that under section 250 Tax of the Tax Law the indenture herein was correctly held taxable only upon the amount of the increase ( Matter of Park 46th St. Corp. v. State Tax Comm., 295 N.Y. 173, 178). The crucial issue under section 250 is whether the new note contained a cancellation of the indebtedness ( People ex rel. Jewelers Bldg. v. State Tax Comm., supra) or whether it was "merely an exchange of one form of evidence of the indebtedness for another form" ( Matter of Fifth Ave. 46th St. Corp. v. Bragalini, 4 A.D.2d 387, 390; Matter of Park 46th St. Corp. v. State Tax Comm., supra). Under the facts herein the terms of the original mortgage were to be merged in the new instrument. And, although the prior notes were to be canceled, the indebtedness remained; there was merely an exchange of the form of the evidence of indebtedness. The clear intent of the parties was simply to increase the existing indebtedness. Accordingly, the determination is confirmed. Determination confirmed, with costs. Reynolds, J.P., Staley, Jr., Greenblott, Cooke and Sweeney, JJ., concur.