The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1895-04-13
THE STOCK TAXABLE
ILLINOIS SUPREME COURT BUILDING
AND LOAN DECISION.
Attorney-GeneraI Ketchnm Presents
1t to the Indiana Supreme Bench
Its Importance.

A decision by the Illinois Supreme Court
of wide interest and probable great infiu-
ence upon Indiana Building and Loan AS
sociations came to light yesterday In the
current issue of the Northeastern Reporter,
law publication. The decision was carried
at once to the judges of the Supreme Court
by Attorney general Ketcham. who recently
argued case exactly in point The case is
entitled Peoples Loan and Homestead As
ISOLATION of Joliet vs. Keith, Tax Collector"
The digest of the opinion, which declares
that all stock of building and loan assoeia-
lions is not entitled to the exemption of the
law from taxation, is as follows
r. S. 1893, 80, Section IS, which exempts
from taxation shares OF stock Ia nomesteaa
on loans, Is in conflict with the constitu-
ton of Illinois, Article 8, Sections l-3, which
declares that taxes shall be levied so that
every person and corporation shall pay
tax in proportion to the value OF his, her or
its PROPERTY and that such property as
may be used exclusively for agricultural and
horticultural societies, for scnool, renglods,
cemetery and charitable purposes may De
exempted from taxation.
This decision was rendered in an appeal
from VIII county Circuit Court. 1t deals
with the right to tax all building and loan
stock while the litigation argued, last week,
in the Indiana Supreme Court, only oeais
with the question of taxing paid-up ana pre-
paid building and loan stock. me laws Oh
the two States are quite similar in their ec-
emptions of this kind of property and the
Indiana Constitution is even more specihc
in it's requirements as to what is taxable
than the Constitution of Illinois. The de-
cision, therefore, becomes exceedingly per-
tinent to the case pending in Indiana and it
is not at all unlikely that the Indiana court
will give the Illinois decision a great deal
OF consideration and some WelShl aS
precedent. c..
1t quotes the section of the Illinois statue
which was intended to give the associations
the right to the exemption OIL stoSh' ieau-
Corporations organized under this act be-
ing of the nature of cooperative associa-
lions therefore no interest, premiums, fines
or interest on such premiums that may ~
crue to said corporation accoruins W 80, ,me
provisions of this act shall be deemed usurl-
Gus and the same may be collected as otner
debts of like amount may be coneclea py
slch corporations being at once loaned out
and placed into taxable properly anu tne
shares Of stock and notes plosiag to Where
such money mas been placed, therefore sucn
stock and notes shall not be SUBJECT 10
The attorneys for the validity of the act
contended that If building and loan as
sociation stock were taxed ii would cause
double and UNEQUAL taxation, which would.
therefore, be Invalid. But tne court, dlleh
quoting from the rules OF the loan ass So
t traesuo ,hess generations and others who
loan money is that the associations WIN
loan only to their own members, II Is
true. Continues the opinion, that the time
of payment is not fixed to certslh uay,
but it is fixed at such a time as lne s. .;eta
held nv the borrower in the corporation
shall mature. The mortgage may be lore
closed the same as any other moI.sase.
80 far as the nature OF the transact .ett is
concerned" continued the court, 1T is
simply loan of money made by tne ds-
ISOLATION, and the note ana r morssaee debt
due from the borrower to the assoclatlon
for the money loaneds' The court oisposes
of the assertion that the money is a sale or
stock saying that the money borrowed
under the associations own rules cannot
be otherwise regarded than as io ,ssas t the
terms borrower, note ana mortsaSe.
why" asks the court, are these EXPIRES
sions in the act under which the assocla-
ton derives all its peYers, If the transac G
ton is not a ioan3 And If the transaction IS
a loan, and the note or contract ana mort
what principle can it be claimed tnat
credit of that character sn1Iia pe eYi-
denced by the same security is not! IL
stockholder in an ordinary corporation De,
order to secure the Indebtedness he exc
cutes his note and mortgage payaple TO
signs his stock as collateral security, the
proposition is a plain one that the credlt
is liable to be assessed in the handS OF the
CORPORATION for taxes, and the Legislature
would have no power to exempt such credlL
from taxation If we are correct In regard
to the case supposed, upon what principle
can it be claimed that the note or con-
tract and mortgage given to the homestead
Association for a loan can be exempted
from taxation? The credits in the two
cases stand upon an equality, and any rule
established which will subject one credit TO
taxation, and relieve the other, will violate
that rule of uniformity in taxation re-
quired by. Section Of Article 9 OF the Con-
The court deals with the argument of
double taxation directly IN the following
language:
corporation is taxed on the obligations it
holds against borrowers, the borrowing
stakeholder will be taxed twice on the
same property-once on the real estate
mortgaged and again on the credit arising
from the loan.. and the result is douole
taxation. We do not concur in this view.
Where a person owning a farm procures
a loan, and mortgages the land, 1T rs sub
ject to taxation as the property or the
owner, and the note and mortgage are sub
ject to taxation as a credlt IN the handS
where loan is procured from a homestead
loan association, the borrower and the as
ISOLATION occupy a similar position; and,
if the note and mortgage and the land upon
which the mortgage is given are both tax
able in the one case, we see no good reason
why they should not in the other. The
note or account and mortgage held by
loan association is in no sense a credit OF
the borrower, but 1t Is credit belonging
to the corporation. If the credit is taxed,
the tax falls the corporation, and not
upon the borrower. 1t is true that por-
ton of the tax may ultimately fall on the
borrower, as a stockholder of the corpora
ton; but that amount whatever it may be,
falls upon him as stockholder, having an
investment for profit in corporation.