State v. Castle Garage Corp.

Mahoney, P. J., and Casey, J.,

concur in part and dissent in part in a memorandum by Casey, J. Casey, J. (concurring in part and dissenting in part). We agree with the majority that Supreme Court erred in awarding summary judgment in favor of Castle Garage over against Greenwich House. We disagree, however, with the majority’s affirmance of that portion of Supreme Court’s order which denied the motion of Greenwich House for summary judgment dismissing the complaint and the third-party complaint against it. In our view the undisputed facts of this case establish that Greenwich House has no liability to any party in these actions for the retroactive mortgage recording tax increase. Accordingly, Greenwich House’s motion for summary judgment should have been granted.

Tax Law § 266 authorizes plaintiff to enforce the mortgage recording tax by an action against certain parties. In its brief on appeal, plaintiff asserts that as applied to the facts of this *799case, Tax Law § 266 authorizes an action only against the original mortgagee, Castle Garage, and its assignees or successors in interest. Plaintiff sued Castle Garage but did not sue any of the assignees or successors in interest. Conceding that Greenwich House is not a mortgagee subject to enforcement under Tax Law § 266, plaintiff nevertheless asserts that Greenwich House is liable to it pursuant to the terms of an agreement between Greenwich House and the Bank, which acquired the mortgage from Castle Garage’s assignees. It is plaintiff’s claim that the Bank is liable to plaintiff for the mortgage recording tax as a successor mortgagee under Tax Law § 266 and that since Greenwich House agreed to hold the Bank harmless for any mortgage recording tax due under the agreement, Greenwich House is liable to plaintiff. The contractual provision upon which plaintiff relies was clearly intended to protect the Bank from having to pay any mortgage recording tax. Since plaintiff elected not to pursue its statutory enforcement remedy against the Bank, the Bank is not subject to any liability for the mortgage recording tax and, therefore, Greenwich House has no obligation to the Bank. Tax Law § 266 provides the mechanism whereby plaintiff can enforce payment of the tax, and there is no justification for permitting plaintiff to seek enforcement of a provision of a contract to which it was not a party as an alternative method of compelling payment of the tax.

Tax Law § 266 also authorizes plaintiff to enforce payment of the tax in an action against the mortgagor or his successor in interest where the mortgage contains a stipulation requiring the mortgagor to pay the tax or where Tax Law article 11 imposes the obligation on the mortgagor. There is no claim that the latter provision is applicable in these circumstances, and the original mortgage on which the tax is due contains no stipulation concerning the payment of mortgage recording taxes. Although the agreement between Greenwich House and the Bank contains a provision concerning the payment of mortgage recording taxes, that agreement is not the mortgage which was subject to the retroactive mortgage recording tax increase. Indeed, plaintiff concedes that the agreement itself is not subject to any mortgage recording tax. Accordingly, Greenwich House is not a mortgagor subject to the enforcement provisions of Tax Law § 266.

As to the respective liabilities of the defendants and third-party defendants to each other for the mortgage recording tax, we must look to the parties’ agreements (see, Seamen’s Bank for Sav. v Fell, 166 App Div 271, 273). The unappealed *800portions of the order and judgment establish that Castle Garage is liable to plaintiff as the original mortgagee, pursuant to Tax Law § 266, and that Castle Associates is liable over to Castle Garage pursuant to a provision in the contract of sale between Castle Garage and Castle Associates. As to Castle Garage’s third-party claim against Greenwich House, there was no contractual relationship between these two parties whereby Greenwich House could have assumed Castle Garage’s liability or agreed to hold it harmless for any mortgage recording tax. Greenwich House and Castle Associates did have a contractual relationship, whereby Greenwich House acquired the property subject to the mortgage. The mortgage itself contained no provision concerning the mortgage recording tax and there is no evidence in the record that Greenwich House assumed any of Castle Associates’ liabilities, including the retroactive mortgage recording tax increase which was a personal liability of Castle Associates due and owing when Greenwich House bought the property. As to Greenwich House’s subsequent agreement with the Bank concerning the payment of mortgage recording taxes arising out of that agreement, there is no evidence that the parties to the agreement (Greenwich House and the Bank) intended to benefit any third-party by relieving it of the responsibility for overdue mortgage recording taxes and imposing liability instead on Greenwich House.

Nor does Tax Law § 265 have any bearing on the liability of Greenwich House to plaintiff or any other party to these actions for the retroactive mortgage recording tax increase. That statute creates a lien for unpaid taxes, and does not impose personal liability for the taxes where none otherwise exists. In addition, the lien attaches to the mortgage (see, Tax Law § 265), not to the property, and Greenwich House does not appear in the chain of title of the mortgage.

Supreme Court’s order and judgment should be modified by reversing so much thereof as granted judgment in favor of Castle Associates over against Greenwich House and denied Greenwich House’s motion for summary judgment, and summary judgment dismissing the complaint and the third-party complaint should be granted to Greenwich House.