This action was brought to recover from defendant as mortgage trustee under a corporate mortgage taxes on account of the certification and issue of $400,000 of bonds out of an issue of $5,000,000 of bonds secured by said mortgage and for which taxes defendant is supposed by the People to be liable under the provisions of section 301, chapter 532, Laws of 1906, relating to mortgage taxation.
Plaintiff's original complaint in connection with other *Page 470 proper allegations alleged that in June, 1905, the Union Bag and Paper Company, a domestic corporation, executed and delivered a mortgage to the defendant as trustee to secure an issue of not to exceed $5,000,000 par value of bonds and that the defendant accepted the trust and was still acting as trustee; that the mortgage was duly recorded at said date, and prior to July 1, 1906 bonds to the amount of $3,200,000 secured by said mortgage had been issued, and that on February 15, 1907 a further amount of $400,000 of bonds secured by said mortgage were issued and that on account of said last transaction a tax of $2,000 had become due from defendant to the state.
Defendant's demurrer to this complaint on the ground that it did not disclose any liability on its part was finally sustained by this court in an opinion written by the chief judge. (People v. Trust Co. of America, 205 N.Y. 74.) Under permission granted to it the plaintiff has served the present amended complaint wherein, in addition to previous allegations, the mortgage in question is referred to and made a part of the complaint, and also it is alleged that after July 1, 1906, defendant, as such trustee as aforesaid, duly certified $400,000 of bonds in addition to those theretofore issued under said mortgage, and "duly delivered such bonds so certified to the mortgagor, the Union Bag and Paper Company, for issue," it not being alleged that the moneys realized on the new loan in any manner passed into its possession. Thus the inquiry becomes whether by grouping these additional facts with those before presented we yet have the statement of a good cause of action under the statute.
Said act took effect July 1, 1906. Prior to that date, chapter 729 of the Laws of 1905 provided for an annual tax "upon each and every debt and obligation and upon the mortgage securing the same," in the case of mortgages recorded after July 1, 1905. Chapter 532 of the Laws of 1906 provided for a new scheme of mortgage *Page 471 taxation in the shape of a recording tax and generally speaking was only applicable to mortgages recorded on and after July 1, 1906. A variation from the general scheme of the act was contained in section 301 specifically relied upon. This section attempted to provide for a case where a mortgage had been executed and recorded before it took effect, but where part of the amount secured thereby was not advanced until after it became a law. It enacts as follows: "A tax is imposed hereby on each mortgage of real property recorded prior to the first day of July, nineteen hundred and six, when any part of the amount of principal indebtedness which is or under any contingency may be secured by any such mortgage is advanced, after the first day of July, nineteen hundred and six. The tax imposed by this section shall be at the rate of fifty cents for each one hundred dollars, and each remaining major fraction thereof which is, or under any contingency may be secured by any mortgage taxed under this section, deducting therefrom however any tax paid on such mortgage under chapter seven hundred and twenty-nine of the laws of nineteen hundred and five. The tax imposed by this section shall be paid to the recording officer of the county in which the mortgage is first recorded, and shall be paid when at any time any part of the said amount of principal indebtedness is advanced after the first day of July, nineteen hundred and six."
Manifestly this provision does not in explicit terms impose upon the defendant a liability for taxes in respect of the bonds which it certified, and in an attempt to reach a proper interpretation of its provisions much reference is made to prior and subsequent statutory provisions concerning taxation directly or indirectly of mortgages as tending to throw light on legislative intent and purpose. I do not deem it necessary to follow this discussion, for, in my opinion, the determination of the question now presented to us is dependent on an application of the provisions of the particular section which has been quoted *Page 472 and of general principles of law which can be little aided by reference to other statutes. In fact the counsel for the People asserts that the tax provided for in this section is no part of the general scheme of the statute, and that it "may be considered either a direct property tax on mortgages or a tax on the benefits of recordation after July 1, 1906, with reference to advances already made and the future advances, or a tax on the advances." Then, facing the omission of the statute to specify any one as liable for the tax, or to provide any method of collection, he further argues that where a taxing statute provides no method of collection of the tax thereby imposed it is not for that reason to fail, but that an action in personam may be brought against the person who is liable for the tax. These contentions thus made will be accepted for the purposes of this discussion and the issue thus narrowed to the one whether the defendant should be held to be a person properly liable.
The general rule is that the right of the government to recover a personal judgment for a tax, whether it be regarded strictly as a debt or not, is dependent upon the existence of a duty to pay. (U.S. v. Chamberlin, 219 U.S. 250, 262; City of Dubuque v.Ill. Cent. R.R. Co., 39 Iowa 56.)
When we attempt to find somewhere an obligation or a duty on the part of this defendant to pay these taxes we search in vain in spite of the additional facts now alleged.
Concededly the statute by its terms imposes upon it no such obligation either in specific or general terms. It does not directly tax certification and it does not, as it might have done and as later statutes do, make the trustee indirectly responsible for the payment of the tax as a condition of its right to certify the bonds.
The mortgage itself under which the defendant is acting contains no provision which has been called to our attention which permits or, much less, requires it to pay this tax in behalf of the mortgagor or bondholders with the *Page 473 right to recover it over from one or both or to have a superior lien on the mortgage property for repayment. Thus there is no agreement or covenant of the parties on which this action may indirectly rest.
And finally there is, in my opinion, no fact outside of the statute or the mortgage which makes a basis for such an obligation or duty. The duty to pay taxes on a transaction must rest on some privilege or benefit derived from the transaction. Whatever we may regard as the technical subject of the present tax, there can be no doubt that the thing that serves as its substantial foundation is the loan of $400,000 on bonds issued under the mortgage after the statute was passed. The real parties to and beneficiaries under that transaction were the mortgagor who secured the loan and the bond purchasers who advanced it. The defendant was not a principal in the transaction or in a direct sense interested therein or benefited thereby. It had no property right whatever in the mortgage which secured the loan, the money not even passing through its possession as trustee. It was of no direct concern to it whether the loan was made, and will be of no consequence to it whether it be paid when due. As a matter of convenience it was selected as the trustee and agent of the bondholders and intrusted with the discharge of certain duties for their protection and for the performance of which presumably it will receive compensation as its only interest in the entire matter. Amongst these duties was that of certification of bonds, but this like others was one of protection to bondholders by authentication of securities. Certification possesses no peculiar efficacy as a means of casting liability on the trustee. It was not an integral element in the substantial transaction, for bonds might conceivably be certified without consummation of any loan and a loan might be made on bonds which were not certified. In short, unless this tax is to be regarded as one upon the right to act as trustee, which, I suppose, will hardly be claimed, I see *Page 474 no privilege enjoyed or act performed by the defendant which fairly imposes upon it a duty to pay the same.
It is a well-settled principle that taxing statutes are to be construed strictly in favor of the taxpayer. The statute which we are now considering might easily have been so framed and worded as to require payment of the taxes thereby sought to be imposed at the time when the bonds were issued and protection given to the trustee for the recovery of any sums which it might pay or advance for that purpose. But this was not done, and so far as appears there is now no ready or secure method by which it may recover over from the mortgagor or bondholders, if it shall pay the taxes in question. While the amount involved in this action is not a large one, it may easily happen that establishment of a liability such as is now urged, will throw on some other mortgage trustee an unexpected burden of no light proportions, and it does not occur to us that we should by construction so enlarge the provisions of an obscure and incomplete statute as to impose upon a party a liability which could not have been reasonably anticipated, and for which there is no equitable basis.
We are not called upon to indicate any opinion concerning the liability of the mortgagor, or of the bondholders, for the payment of these taxes, and we are all agreed that there is nothing in the opinion on the former appeal in this case which is controlling of the question now being decided.
The judgment should be reversed, and judgment given for the defendant on demurrer, with costs in all courts.
CULLEN, Ch. J., WILLARD BARTLETT and HOGAN, JJ., concur with CHASE, J.; WERNER and COLLIN, JJ., concur with HISCOCK, J.
Judgment affirmed. *Page 475