The question presented for review is whether or not the case is governed by the decision in People v. Boston & Maine Railroad (202 App. Div. 54) or by Matter of New York State Gas & Electric Corporation v. Gilchrist (209 id. 771).
*362After quoting the statute, Cochrane, P. J., said in Peop e v. Boston & Maine Railroad: “ There is no provision in the mortgage or otherwise requiring the original bondholders to accept new bonds in place of those matured. They were entitled to have their bonds paid. The transaction was in no sense an exchange of bonds. The new bonds were placed on the market and the proceeds thereof used to pay and discharge the old bonds. The indebtedness, therefore, was not the same. The transaction consisted of the substitution of one ‘ principal indebtedness ’ in place of another. The defendant would read the statute as if it applied to an indebtedness which might be secured by the mortgage at any one time. The statute by its phraseology gives no intimation of such a purpose. * * * An old debt or obligation existed in respect to which the tax was formerly paid. A new debt or obligation has now come into existence which is equally subject to taxation. * * . * In any event it is a new debt or obligation which the mortgage secures. The old debt has been destroyed. A new one has been created.”
In Matter of New York State Gas & Electric Corporation v. Gilchrist, Mr. Justice Kellogg, writing for the Appellate Division, said: “ The present case differs from the Boston & Maine case in that the new bonds were delivered directly into the hands of the old bondholders who thereupon canceled prior bonds to the extent of an aggregate principal sum equaling that of the new bonds. The new bonds were issued for the purpose, not' of sale, but of direct substitution. The mortgagor, by an agreement made in advance of the issue, was obliged to give new bonds for old, while the mortgagee was obliged to make the exchange. * * * There was here the creation of no new relationship; there was no new creditor, no new debtor, no new loan. It must be remembered that it is the principal sum of a loan, not the interest to be paid thereupon, which measures a mortgage tax. Here there was no new principal sum. * * * No ‘ further amount ’ was advanced under this mortgage. In this respect the case is essentially different from the Boston & Maine case.”
It is apparent from reading these excerpts from these two cases that the fact which controlled the later decision was whether or not the debt remained the same.
It appears in People v. Boston & Maine Railroad (supra) that the trust mortgage was executed December 1, 1919, and was given to secure bonds in the aggregate principal amount of over $95,000,000. When the mortgage was recorded the recording tax on that amount was paid.
The $95,000,000 of bonds paid included the $40,490,000, measured *363by which the State department has now imposed a mortgage recording tax of $12,512.96.
Under the trust mortgage there is a provision for the exchange of bonds providing that the bonds issued shall be designated by a distinctive letter or otherwise. (Exhibit 3, § 6.)
The plan and agreement provides that the $43,522,000 falling due 1925 to 1932, inclusive, will be extended or refunded. (Art. 4.)
The scheme of the trust mortgage, the plan and reorganization agreement, the resolution of the board of directors, the notice to bondholders, the assent of the bondholders, and the order of the Massachusetts Department of Public Utilities all comprehend that the bonds of the underlying corporation made by agreement of the bondholders the obligation of the consolidation corporation, the new corporation, contemplate an exchange of bonds.
The fact is established that prior to the issue of $40,490,000 bonds the depositing bondholders secured by the trust mortgage agreed to exchange their bonds for certain new series of the bonds of the consolidated company.
“ The new bonds were delivered directly into the hands of the old bondholders * * * to the extent of an aggregate principal sum equaling that of the new bonds. The new bonds were issued for the purpose, not of sale,” but of exchange. (Matter of New York State Gas & Electric Corporation v. Gilchrist, supra.)
There was, so far as this $40,490,000 bonds are concerned, a direct substitution.
It seems to me that the case falls within New York State Gas & Electric Corporation v. Gilchrist (supra). The cited case has been quoted with approval in People ex rel. Banner Land Co. v. State Tax Commission (244 N. Y. 159, 164).
It is argued that the series of bonds issued under the trust mortgage to take up the underlying bonds constitute a new bond because there is a provision in the reorganization agreement providing for the conversion of trust mortgage bonds into preferred stock. It is apparent that if the old bonds had been refunded or exchanged for preferred stock there would have been no tax on the issue of preferred stock, or, if the bonds had been assigned, the assignment to a new ownership would not have been followed by an additional tax.
It is the mortgage that is taxed and a new debt that comes under the mortgage and increases the amount of the mortgage that provides the measure of the tax. (Tax Law, § 253, as amd. by Laws of 1916, chap. 323.) Here the mortgage is not increased or affected by the conversion feature. (People ex rel. Banner Land Co. v. State Tax Commission, supra.)
*364Further it is provided in the notice to bondholders under the plan and agreement: “ It is not proposed that the agreement to convert into stock shall be in the form of a collateral agreement referred to by a notation on the back of the bonds, but not forming a part of the bonds themselves and not secured by the mortgage, and providing, first, that the Railroad will convert the bonds into stock as provided in the Plan and Agreement if it is legally able to do so by the direct issue of new shares to the bondholders.”
Therefore, the existence of the conversion feature not made part of the bond, is not a matter which enters into' decision of the case.
It follows that in the issue of the $40,490,000 bonds there is no advance under the mortgage such as the tax statute contemplates. There is no new debt. The debt secured by the issue of the series of the bonds described is the same debt. There is the same debtor by virtue of the agreement dated November 28, 1918, for consolidation. The consolidated corporation assumed all of the outstanding obligations of the seven constituent railroad corporations. The consolidated corporation being a debtor to the underlying bondholders at the time of the payment of the tax on the $95,000,000 of bonds has not changed its position as debtor for the debt is the same as that it assumed to pay.
The fact that Mr. Justice Kellogg laid stress upon in Matter of New York State Gas & Electric Corporation v. Gilchrist (209 App. Div. 771) was that there had been an exchange or substitution of bonds contemplating no new debt.’
The reliance of Cocheane, P. J., in the Boston & Maine Case {supra) was based upon the proposition that the bonds issued by the consolidated company constituted new debt because the prior debt had been absolutely paid and satisfied.
The relator has established the fact by the record that the old debt has not been paid but that there was an exchange* or substitution of securities made in accordance with an agreement between the bondholders and the consolidated company. The fact that some of the underlying bonds were due at the time of the exchange did not deprive the owners of the power to agree to extend the time of the payment of the debt such due bonds represented or to replace them or exchange them — one evidence of debt for another evidence of the same debt. The debt remaining- unpaid did not become a new debt by the acceptance of new evidence of it.
What the State Tax Commission is required to do is to collect the recording tax on mortgages. It has already collected such tax on the mortgage in question. The tax collected was measured by the bonded debt secured by it at the time of its filing, December 1, 1919. The bonds of the several consolidated companies which *365became by the agreement of the consolidated companies the debt of that corporation have been exchanged without increase or diminution of said amount. There was no further amount advanced under the mortgage. (People ex rel. Banner Land Go. v. State Tax Commission, supra, 164, 165.)
The tax imposed by the Commission is a second tax measured by the same indebtedness. Double taxation is a burden upon the citizen unfavored in the law. {People ex rel. Banner Land Co. v. State Tax Commission, supra.)
The determination of the State Tax Commission should be modified by reducing the amount of the tax to that imposed upon bonds CC, together with the penalty thereon as fixed by the Commission; and as so modified confirmed, with fifty dollars costs and disbursements.
Hinman, J., concurs; Van Kirk, P. J., also, with an opinion in which Hinman and Hasbrouck, JJ., concur; Davis, J., dissents, with an opinion in which Whitmyer, J., concurs.