¶1The terms of the purchase agreement dated March 12, 1968 were incorporated into the consolidation, modification and extension agreement of June 30, 1970, which specifically provided that the lien of the building loan mortgage merged into the right, title and interest of Hancock as the assignee of the ground lease, and by reason of such merger, the mortgage and its lien ceased to exist. Hancock as the holder of the unencumbered ground lease entered into a new contract for sale of the leasehold to petitioner as purchaser, for a purchase price of $5,500,000 which was payable in monthly installments over a period of 40 years and 9 months with interest at 7%%. Added to such payments was to be an annual variable payment representing a share of the operating profits.
¶2The agreements recorded on June 30, 1970 disclose an intention to extinguish the building loan mortgage by merging it with the ground lease when both were acquired by Hancock so that Hancock would be the owner of an unencumbered ground lease and not merely the owner of a mortgage thereon.
¶3The law is well settled that where the legal title and the ownership of the mortgage became vested in the same owner, the mortgage is thereby merged and extinguished unless the holder of both interests intends otherwise or equity requires it. (Central Hanover Bank Trust Co. v. Roslyn Estates, 266 App. Div. 244, affd. 293 N. T. 680; Dime Sav. Bank of Brooklyn v. Coleman, 267 App. Div. 828.)
¶4In the buy-sell agreement dated March 12, 1968 (mortgagor’s Exhibit 5), it is expressly stated that the “ Purchase Agreement contemplates that John Hancock will acquire the Construction Mortgage Loan simultaneously with its acquisition of the Leasehold on the Closing Date, that the lien of the Construction Mortgage will be consolidated and merged with the Leasehold, and that the Leasehold, as consolidated and merged with such lien, will be resold to the Corporate Nominee.”
¶5In completing this agreement, the construction mortgage was extinguished when acquired by Hancock and was nonexistent upon delivery of the Consolidation Agreement which effected an executory sale of the leasehold as merged with the mortgage to petitioner. This executory contract of sale was recorded as security for the obligations of the purchaser under that contract. Such a contract when recorded' is subject to the mort*19gage recording tax (Tax Law, § 250; Matter of Drobner v. Chapman, 275 App. Div. 520), unless it is exempt as a supplemental mortgage under section 255 of the Tax Law.
¶6The Consolidation Agreement does not, however, qualify as a supplemental mortgage because it fails to meet the requirements of any of the three categories set forth in section 255, namely: (1) to correct or perfect a prior recorded mortgage, or (2) pursuant to some provision or covenant in the prior recorded mortgage, or (3) to impose an additional mortgage on property gther than that covered by the prior recorded mortgage as additional security for the original indebtedness secured 'by the prior recorded mortgage.
¶7Clearly, this executory contract does not qualify as a supplemental mortgage but, being an instrument providing for the sale of realty and payment in installments over a period of years, and under which the purchaser was entitled to possession is clearly an executory contract of sale and subject to tax under section 250 of the Tax Law.
¶8The Consolidation Agreement replaced and was substituted as a security instrument for the construction mortgage. A mortgage which replaces or is a substitute for a prior recorded mortgage is not a supplemental mortgage entitled to exemption under section 255 of the Tax Law. (Matter of Sheraton Corp. of Amer. v. Murphy, 35 A D 2d 294.)
¶9The Consolidation Agreement provides that the purchaser shall make an annual variable payment to the seller in addition to the purchase price of $5,500,000. These additional annual payments are based upon net rental income of the property during the period that said agreement is in force. The parties provided in the Consolidation Agreement that the seller, upon recording the said agreement, would permit an appraisal of the property for the purpose of computing the value of the property covered by the agreement.
¶10Section 256 of the Tax Law provides, as follows: “ If the principal indebtedness secured or which by any contingency may be secured by a mortgage is not determinable from the terms of the mortgage … such mortgage shall be taxable
¶11under section [253 of the Tax Law based] upon the value of the property covered by the mortgage ”.
¶12Inasmuch as the provisions of the agreement provided for payments in addition to the sale price of $5,500,000 and interest, the amount due is not ascertainable on the face of the instrument and the tax must be computed upon the value of the property covered. (People v. Cass, 206 N. Y. 609.)
¶13*20The State Tax Commissioner properly determined that section 256 of the Tax Law applies to the computation of the mortgage tax due and that the appraisal value of the property should be used in the computation of the tax. The determination of the State Tax Commission should be confirmed.
¶14Sweeney and Main, JJ., concur with Greenblott, J.; Staley, Jr., J. P., and Kane, J., dissent and vote to confirm in an opinion by Staley, Jr., J. P.
¶15Determination annulled, and matter remitted for further proceedings not inconsistent herewith.