Equity Jurisdiction, Subrogation. Tax, Collection. Receiver. A corporation, organized under the laws of the State of New York, had made a mortgage to secure its bonds covering certain real estate in this Commonwealth. In the mortgage the corporation covenanted with the trustee to pay and discharge all taxes and assessments lawfully imposed upon the mortgaged property. The corporation became insolvent, and a receiver was appointed in the State of New York, who also was appointed ancillary receiver of the property of the corporation in this Commonwealth. The trustee under the mortgage instituted proceedings in this Commonwealth to sell the real estate here at foreclosure sale. Before the trustee took possession of the real estate in this Commonwealth under the mortgage, the city in which it was situated assessed a tax upon it and threatened to sell it for non-payment of taxes. The ancillary receiver refused to pay the tax, although he had in his hands in the ancillary proceedings in this Commonwealth assets more than sufficient to pay it. While the foreclosure proceedings still were pending and the tax remained unpaid, the trustee under the mortgage brought a bill in equity against the receiver and the collector of taxes, alleging the foregoing facts and that a sale by the plaintiff of the property subject to the tax lien would be to the detriment of the bondholders, and praying that the receiver might be ordered to pay the tax or that the plaintiff might pay it and be subrogated to the rights of the collector of taxes against the receiver. The defendant receiver demurred. Held, that the demurrer must be overruled, because the plaintiff in order to protect the trust property from an incumbrance, which it was the duty of the insolvent corporation under its covenant with the trustee to pay, was compelled to pay the debt of the corporation to the city, and, upon such payment, the plaintiff was entitled to be subrogated, not only to the rights of the taxpayer as respected the lien on the land, but also to the rights of the tax collector against the fund held by the receiver in this Commonwealth; and that the fact that the tax collector under St. 1909, c. 490, Part II. § 64, might collect the tax by an action against the plaintiff was immaterial.
HAMMOND, J.
The tax was assessed to the Standard Cordage Company, hereinafter called the company; and although there was a lien upon the land the primary liability was upon the company. Webber Lumber Co. v. Shaw, 189 Mass. 366. By the terms of the mortgage, as between the company and the plaintiff, it is the duty of the company to pay the tax. The tax collector can collect the tax by proving it as a preferred claim against the fund held by the receiver in this Commonwealth (R.L.c. 150, § 29), or by taking measures to enforce the lien upon the land. He threatens to take the latter course. The plaintiff therefore in order to protect its own property from an incumbrance which it is the duty of the company, as between it and the plaintiff, to pay, is compelled to pay a debt of the latter. Upon the payment of the tax the plaintiff is clearly entitled to be subrogated to the rights of the taxpayer so far as respects the lien upon the land. Eagle Fire Ins. Co. v. Pell, 2 Edw. Ch. 631, 634. Farmer v. Ward, 5 Buch. 33. Jones on Mortgages, (6th ed.) § 358. And to render complete justice he is also entitled to the rights of the tax collector against the fund held by the receiver in this Commonwealth. In re Moller, 8 Bened. 526. As bearing upon the general principle see In re Lord Churchill, 39 Ch. D. 174; Orem v. Wrightson, 51 Md. 34; Zell's appeal, 111 Penn. St. 532. The fact that the tax collector may under St. 1909, c. 490, Part II. § 64, collect the tax by an action against the plaintiff is immaterial. The company is still liable as is the fund in the receiver's hands.
There is nothing in this conclusion inconsistent with Swan v. Emerson, 129 Mass. 289, upon which the receiver relies. It is apparent that in that case the purchaser at the foreclosure sale bought subject to the taxes and that the person to whom the tax was assessed owed to the purchaser no duty in the matter.
Demurrer overruled.