
    Louis Leavitt and Mortimer Bartlett, Plaintiffs, v. Waldemar Co. et al., Defendants.
    (Supreme Court, New York Special Term,
    December, 1914.)
    Statutes — requirements of, in relation to recording mortgages — taxation ot mortgages.
    Landlord and tenant — assignment of lease — foreclosure of lease as equitable mortgage.
    Mortgages — foreclosure of — who entitled to be reimbursed on foreclosure.
    The statute relating to taxation of mortgages does not require a defeasance which converts an otherwise absolute grant into an equitable mortgage to be recorded or the mortgage tax paid on delivery of such defeasance which may be and often is executed and delivered long after the execution of the absolute grant.
    
      All the statute requires is the recording of the defeasance and the payment of the mortgage tax at any' time before the mortgage is sought to be enforced.
    The tenant of certain premises for twenty-one years agreed to expend a certain amount in alterations and improvements during the first year of the term and to pay all taxes and assessments. Within the year the tenant assigned his lease to defendant W. Co. which being unable to raise the amount agreed to be paid for alterations and improvements assigned the lease to plaintiff L by an instrument absolute in form. In an action to foreclose the lease as an equitable mortgage, held:
    That notwithstanding an alleged defeasance, showing that B had advanced a certain sum to the W. Co. and that the assignment of the lease was given as collateral security therefor, was not produced, an agreement thereafter made between L and E, a subsequent assignee of the lease, was sufficient evidence that the assignment to L was really an equitable mortgage to secure him for advances which said agreement recited had been reduced in amount.
    As neither the state nor the register of the county was a party to the action it would be inequitable to determine the sufficiency or insufficiency of the mortgage tax paid on the reduced amount of advances, it being conceded that L had at one time advanced a sum in excess thereof, and that in the circumstances L’s possession: under the assignment of the lease and the defeasance, with the actual consent of all parties in .interest, was that of a mortgagee in possession.
    A mortgagee, whether in possession or not, who pays rent and taxes to preserve the value of his security is entitled to tack their several amounts to the mortgage and recover them upon a foreclosure in addition to the amount otherwise due on his mortgage.
    Plaintiff B, who was the legal owner of a small interest in the L mortgage, was entitled to recoupment for rent actually advanced and was also entitled to pay the taxes and tack the amount so paid to the share of the mortgage he owned, because under the lease the tenant was required to pay all taxes, water rates and assessments.
    Plaintiff L was entitled to • foreclose his share of the equitable mortgage for the entire amount due thereunder because the agreement establishing the terms of the lost defeasance made the failure to make any payment as therein provided for a breach which entitled the mortgagee to enforce at once the entire amount due or to become due.
    The provision of the twenty-one year lease obligating the lessee to expend a certain amount in alterations and improvements during the first year of the term, such improvements and alterations being as much for the landlord’s benefit as for the tenant’s, made a mechanic’s lien filed for such improvements a charge on the property superior to plaintiff’s equitable mortgage on the lease, except so far as B’s share of the mortgage represented the payment of taxes.
    Any person interested in the equity of a building, whose owner fails or refuses to pay taxes, upon paying such taxes to protect his security is entitled to be reimbursed on foreclosure in priority over all claimants except those having paid similar taxes.
    Action to foreclose a paper in the form of an assignment of a lease, which is alleged to be in reality an equitable mortgage.
    Max D. Steuer, for plaintiffs.
    Gf. H. Brevillier, Lindsay, Kalish & Palmer (Edwin L. Kalish, of counsel), for defendants.
   Gtut, J.

Action to foreclose a paper in form an assignment of a lease, which is alleged, however, to be in reality an equitable mortgage thereof.

On December 8, 1910, the Gfirard Trust Company of Philadelphia, as trustee, leased the then Albany apartments to one Murray for twenty-one years from October 1, 1911, at an aggregate rental of $1,260',000 on a sliding scale ranging from $25,000 for the first year of the term, to $75,000 for each of the last six years of the term. The lessee agreed to expend $100,000- in alterations and improvements, in the enlargement and betterment of stores, and the construction of stores, offices and lofts, during the first year of the term, and to pay all taxes and assessments. On August 7, 1913, the tenant Murray assigned his lease to the Waldemar Company. The Waldemar Company being unable to raise the $100,000 for alterations and improvements, on September 20, 1911, assigned the lease to the plaintiff Leavitt by an instrument which in form was an absolute assignment. Notwithstanding that the alleged defeasance showing that Leavitt had advanced $82,500 to the Waldemar Company and that the assignment of the lease was given as collateral security therefor was not produced, I find from the agreement of March 1, 1913, between plaintiff Leavitt and one Beeder, a subsequent assignee of the lease, sufficient evidence to satisfy me that the assignment to Leavitt was and really is an equitable mortgage to secure Leavitt for advances which the agreement says have been reduced from $82,500 to $56,197.25. Real Prop. Law, § 320; Kraemer v. Adelsberger, 122 N. Y. 467, 474; Matter of Mechanics’ Bank, 156 App. Div. 343, 347; affd., 209 N. Y. 526. The Mortgage Tax Law does not require a defeasance which converts an otherwise absolute grant into an equitable mortgage to be recorded or the mortgage tax paid upon the delivery of such defeasance, which may be and often is executed and delivered long after the execution of the absolute grant (Kraemer v. Adelsberger, 122 N. Y. 467, 473, 474); but it only requires the record of the defeasance and the payment of the mortgage tax at any time before the mortgagee seeks to enforce the mortgage. Mutual Life Ins. Co. v. Nicholas, 144 App. Div. 95, 98, 99; Matter of Mechanics’ Bank, supra.

As neither the state nor the register of New York county is a party, it would not be equitable to determine the sufficiency or insufficiency of the mortgage tax paid upon the reduced amount of advances, viz., $56,197.25, although it is conceded in plaintiff’s connsel’s brief that Leavitt had at one time advanced $82,500. In the absence in this action of the. public authority entitled to collect a deficient tax, if any (Osterhoudt v. Supervisors, 98 N. Y. 239, 243, 245), Leavitt’s possession, under the assignment of the lease and the defeasance, with the actual consent of all parties in interest, was that of a mortgagee in possession. Becker v. McCrea, 193 N. Y. 423, 427.

The plaintiff Bartlett was the legal owner of a small interest in the Leavitt mortgage. Whether he holds this in his individual right, or as a dummy for the ground landowner, he paid $26,996.67 for taxes and rent, to prevent tax sales and dispossess proceedings from destroying the value of his security in the mortgaged property, while he was a comortgagee in possession thereof.

A mortgagee, whether in possession or not, who pays rent and taxes to preserve the value of his security, is entitled to tack their amount to his mortgage and recover it upon a foreclosure, in addition to the amount otherwise due upon his mortgage. Robinson v. Ryan, 25 N. Y. 320, 325, 327; Marshall v. Davies, 78 id. 414, 421, 422; 27 Cyc. 1255.

If, as claimed by some of the defendants, Bartlett was the dummy of the ground landlord, he was nevertheless entitled to recoupment for rent he actually advanced, and he was also entitled to pay the taxes and tack the amount so paid to the share of the mortgage he owned, because the lease required the tenant to pay all taxes, water rates and assessments.

Plaintiff Leavitt is entitled to foreclose his share of the equitable mortgage for the entire amount now due thereunder, because the agreement of September 20, 1911, establishing the terms of the lost defeasance, makes the failure to make any payment as therein provided for a breach which entitled the mortgagee to enforce at once the entire amount that may become due.

The provision in the lease obligating the lessee to spend. $100,000 for improvements and alterations during the first year of the term, such improvements and alterations being as much for the landlord’s benefit as for the tenant’s, made the mechanic’s lien filed by the Lustbader Construction Company for $21,564.26, with interest, for such improvements, a charge upon the property, which is a prior lien to plaintiff’s equitable mortgage upon the lease (Jones v. Menke, 168 N. Y. 61, 63-65; New York Elevator Supply Co. v. Bremer, 74 App. Div. 400, 402-403; affd., 175 N. Y. 522), except in so far as Bartlett’s share of the mortgage represents the payment of taxes.

Defendant Kinbark holds a mortgage representing $7,701.79 of taxes paid by his assignor upon the premises in question as well as $745.46 accrued rent paid by his assignor to prevent a dispossess proceeding. His assignor was a subcontractor which had an interest in protecting its contract against a tax lien foreclosure or dispossess proceeding.

Any person interested in the equity of a building whose owner fails or refuses to pay taxes, upon paying-such taxes to protect his security is entitled to be reimbursed on foreclosure in priority over all claimants except those having paid similar taxes. Sidenburg v. Ely, 90 N. Y. 257, 262-265; Dunlop v. James, 174 id. 411. 414-416.

Proposed findings passed upon and filed.

Submit decision in accordance herewith. All questions as to costs will be determined on settlement of judgment.

Judgment accordingly.  