Court Opinion

ID: 3238968
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:12:45.701529+00
Date Added: 2024-06-11T07:40:30.419899
License: Public Domain

The Federal Farm Loan Act (39 U.S. Stat. at Large, pt. 1, § 26, p. 380 [U.S. Comp. St. § 9835q]) provides:
"First mortgages executed to Federal Land Banks * * * shall be deemed and held to be instrumentalities of the government of the United States, and as such they, and the income derived therefrom, shall be exempt from federal, state, municipal, and local taxation."
Under this act this mortgage to the Federal Land Bank is exempt from federal, state, municipal, and local taxation, and it shall be deemed and held to be an instrumentality of the government of the United States. The following property shall be exempt from an ad valorem taxation under the revenue statute:
"All property, real and personal, of the United States. * * * All mortgages, together with the notes, debts and credits secured thereby on real and personal property, situated in this state, which mortgages have been filed for record and the privilege tax paid thereon." Section 2, Revenue Act 1919 (Gen. Acts 1919, p. 283).
A mortgage on real estate and the debt it secures are exempt from any other taxation, provided it has been filed for record and the privilege tax has been paid thereon. Under *Page 461 
the federal statute this mortgage is exempt from state, municipal, and local taxation. If it is unrecorded, it cannot be taxed by the state or county under the federal act. If it is recorded, and pays the privilege tax, it is clearly exempt from any further taxation by the state or county or city. Does the federal act, by exempting it (the mortgage) from state, municipal, and local taxation, thereby include this "privilege tax"? Does the state Revenue Act, by exempting all property of the United States from an ad valorem taxation, thereby exempt this mortgage from this "privilege tax"? Schedule 71 of section 361, Revenue Act of 1919 (Gen. Acts 1919, p. 420), declares in part:
No mortgage which is given to secure the payment of any debt, which conveys real estate within this state, shall be received for record unless the "privilege or license tax" of "fifteen cents for each hundred dollars of such indebtedness, or fraction thereof, which is secured by said mortgage" is paid "upon such instrument before the same shall be offered for record."
A tax of $4.50 — a tax of 15 cents on the $100 secured by it — must be paid on "this instrument," this mortgage, "before the same shall be offered for record," unless it is exempt. Shall the mortgagee, the Federal Land Bank, pay a tax of $4.50 on this instrument before it can receive the benefit of the recordation laws of Alabama? This tax is on the mortgage, if it is recorded, if it received the benefits of some of the statutes of Alabama. If it receives the benefits of our laws, the recording statutes, it must be taxed; the mortgage must be taxed, and the lender, the mortgagee — the Federal Land Bank — must pay the tax; and it is taxed according to the amount of the debt it secures, unless it is exempt. This revenue statute — schedule 71 — states: "The privilege tax must be paid by the lender." This schedule 71 also provides: When "the amount of the tax required under this schedule" is paid on the mortgage, the judge of probate will certify it on the instrument and such instrument shall be admitted to record, "without the payment of any further tax thereon except the fee to the probate judge for recording" it. When the $4.50 tax is paid on the mortgage, it shall be admitted to record "without the payment of any further tax thereon." This schedule 71 also states:
"There shall be no ad valorem tax collected on any such instrument, or the debt secured thereby which shall have paid the tax prescribed by this schedule, either state, county, or municipal."
The payment of this tax of $4.50 — 15 cents per $100 on the amount of the debt it secures — on this mortgage when recorded will exempt the mortgage and the debt from any direct ad valorem tax, state, county, or municipal. A similar statute declaring this principle and form of taxation by classifying debts or solvent credits, fixing one rate on recorded mortgage debts and another rate on solvent credits unsecured by mortgages, and debts secured by unrecorded mortgages, has been upheld and approved by this court. This court, speaking through Justice De Graffenried, in State v. Ala. Fuel  Iron Co.,188 Ala. 511, 66 So. 176 (L.R.A. 1915A, 185, Ann. Cas. 1916E, 752), said:
"While the Legislature, in the exercise of that reasonable latitude with respect to the classification of properties for taxation, and in the exercise of its reasonable powers of exempting properties from taxation — powers which all well-considered cases concede it to possess — had the undoubted right to require a privilege tax of all mortgages, deeds of trust, and written evidences of contracts of conditional sales, for their recordation, and to exempt such recorded instruments from an ad valorem tax, the imposition by the Legislature of an ad valorem tax upon all solvent credits not included in the above classification was not only not discriminatory, but it was, in fact, an effort on the part of the Legislature to meet the letter and the spirit of our Constitution, which intends, in so far as a healthy policy will permit, equality in taxation."
The probate judge receives 5 per cent. commissions on and out of the tax as his compensation for collecting and remitting it to the proper officials; the balance of this $4.50 tax will be divided between the state and county, two-thirds to the former and one-third to the latter. Schedule 71, § 361, Revenue Act 1919, p. 421. This schedule 71 of section 361 of the Revenue Act of 1919, p. 420, also provides:
"When the property described in said instrument is situated within different counties within this state, then the judge of probate who collects said taxes shall pay over the amount due the county treasurer to the county treasurer of each of the different counties in which said property is situated, an amount of said taxes that would be in proportion to the value of the property therein as compared to the value of the whole property within this state described in said instrument."
It appears, if the mortgage is on property in different counties, the tax one-third (less commissions) belonging to the counties shall be prorated among the counties in which the property is located according to the value of the property in each county, as compared to the value of the whole property in the mortgage. The tax is fixed on the face value of the debt secured by the mortgage, and the tax is divided among the counties according to the value of the property in each county in the mortgage as compared to the value of the whole property in the mortgage.
When a mortgage is recorded, embracing property in different counties, the amount of the secured debt regulates the amount of *Page 462 
the tax; but the value of the land in each county in the mortgage determines the division of the tax to the counties. This section 361, schedule 71, of said Revenue Act of 1919, p. 420, also provides:
"If any part of the property embraced or described in any instrument which is required under this schedule to pay a record privilege tax is located without this state, the indebtedness upon which the tax shall be paid for the privilege of recording such instrument shall be that proportion of the indebtedness secured by the instrument which the value of the property located in this state bears to the whole property described in said instrument. The state tax commission may ascertain the value of the whole property, and of that part of it which is located within this state, for the purpose of ascertaining the amount of the indebtedness upon which said tax shall be paid."
When a mortgage is filed for record in this state, embracing property within and without the state, the tax is not based on the total amount of the mortgage debt. The state tax commission, under rules fixed by the statute, ascertains the value of the whole property in the mortgage and the value of that part of the property located in Alabama, for the purpose of determining the proportion of the secured indebtedness upon which said tax shall be paid. The value of the whole property and the value of the property in Alabama in the mortgage, aids and guides in prorating the amount of the secured debt, and thus determines the amount of the tax to be collected on the mortgage debt.
These provisions in the statute indicate the tax of 15 cents on each $100 of the face value of the debt secured by the mortgage is in its very nature ad valorem. It is not unconstitutional as the property (recorded mortgage debt) is classified, and all of that class is taxed uniformly and equally. State v. Ala. Fuel  Iron Co., 188 Ala. 511, 66 So. 169. L.R.A. 1915A, 185, Ann. Cas. 1916C, 752. And the rate, 15 cents on each $100 of the mortgage debt, is less than the maximum rate fixed by the Constitution. Section 214 of the Constitution of 1901 reads:
"The Legislature shall not have power to levy in any one year a greater rate of taxation than 65/100 of 1 per centum on the value of taxable property within this state."
The Constitution permits a maximum annual tax of 65/100 of 1 per cent. on the value of taxable property. This mortgage debt is taxable property; it is taxed 15 cents on each $100 of its full face value. A real estate mortgage debt is subject to this annual tax on its value, unless this registration tax on its face value is paid. Sections 2 and 5 and section 361, schedule 71, Acts 1919, pp. 283, 284, 420.
This registration tax is a tax on the value of the property; it is on the face value of the amount of the mortgage debt, and the mortgage debt is property. This registration tax is on the mortgage debt when the mortgage is recorded, and it is based on its value, the face value of the debt secured by it. The mortgagee of a real estate mortgage is forced by this law to file for record his mortgage and pay the registration tax on the face value of the debt secured by it, or to pay an annual tax on the assessed cash value of the mortgage debt. The former tax is small, and is paid only once during the life of the mortgage; and the latter tax is large, and must be paid annually during the life of the mortgage.
This tax law is in the Revenue Act for revenue purposes, to raise revenue to be used for the public. It is not in the recordation statute for recording purposes, to pay recording expenses. It is in no sense a fee or cost. It is called in name "privilege or license tax." The court must look beyond the name to the substance of the statute for the real purpose of it, and to determine its true intent. Its name may prove a misnomer. 26 R. C. L. p. 36, § 19, headnote 19 and 1; State of Washington v. Case, 39 Wn. 177, 81 P. 554, 1 L.R.A. (N.S.) 152, 109 Am. St. Rep. 874.
Deeds are not choses in action. They are not property that is made subject by statute to an ad valorem tax. This "privilege or license tax" for recording instruments does not apply to deeds. It does not apply to wills. Real estate mortgage debts are choses in action. They are personal property. They are subject to an ad valorem tax, if not recorded and the recording tax paid. This "privilege or license tax" for recording instruments applies to them. They are taxed according to the value of the property, the value of the debt, the full face value of the debt they secure, when presented for recordation. Chattel mortgages and the debts they secure, and conditional sales and the debts secured are choses in action; they are personal property, subject to an ad valorem tax, if not recorded and the recording tax paid, under this revenue statute. It appears this Revenue Act taxes as a "privilege or license" for being recorded only those instruments securing debts, which are choses in action; they are property, and they are subject to an ad valorem tax, if not recorded. Is it a bona fide recordation "privilege or license tax"? Is it a bona fide "privilege tax" or "license tax," to obtain the privileges secured by recording? If so, then why were not all instruments taxed by the Revenue Law that reap benefits from being recorded? Deeds and wills pay no privilege tax to be recorded. Just those instruments which are personal property, choses in action, subject to an annual direct ad valorem tax, are placed under the name of "privilege or license tax," and required to pay a small tax if recorded, and a large tax if not recorded. Is the name a misnomer? Does it not look like the Legislature intended by this revenue statute to place a small ad *Page 463 
valorem tax based on the full face value of the secured debts of these instruments if recorded, or to place a larger annual ad valorem tax on them, based on their assessed cash value, if not recorded? This court in the case of State v. Ala. Fuel 
Iron Co., 188 Ala. 487, 66 So. 169, L.R.A. 1915A, 185, Ann. Cas. 1916E, 752, in effect declared it could be done under our Constitution. It appears the Legislature by this statute was following that opinion.
Ad valorem means literally "according to value"; as applied to the subject of taxation, it means "a tax or duty upon the value of the article or thing subject to taxation." 2 Corpus Juris, p. 30. It is true this law was first enacted in Alabama in 1903. Gen. Acts 1903, p. 227. It is similar in many respects to the present revenue statute on that subject. In Barnes v. Moragne, 145 Ala. 313, 41 So. 947, this court, by divided vote of four to three, wrote on the subject of the act of 1903:
"In fact, it only provides for a 'privilege tax' on recorded mortgages, once for the life of the mortgage, which is in no sense an ad valorem tax."
If this is a correct interpretation of the statute, then a mortgage debt can be taxed for the recordation of the mortgage at the will of the Legislature, on the full face value of the secured debt, without limitation as to the amount of the "privilege or license tax"; and the Legislature can, if they so desire, also levy an ad valorem tax annually to the constitutional limit (section 214 of the Constitution of 1901) on the same mortgage debt. We cannot approve of this interpretation of this statute. It is dangerous. It would permit mortgage debts to be taxed beyond the constitutional maximum. The will of the Legislature should be controlled by the Constitution; the taxes levied and collected should be within its limits, and no property should be taxed twice. The case of Barnes v. Moragne, 145 Ala. 313, 41 So. 947, was modified and overruled in part by State v. Ala. Fuel  Iron Co., 188 Ala. 487, 66 So. 169, L.R.A. 1915A, 185, Ann. Cas. 1916E, 752.
In 26 R. C. L. p. 36, § 19, headnote 1, we find this:
"A tax on mortgages, though purporting to be a registration fee, is really a tax on the mortgages themselves, and so is a property tax."
This tax on mortgages purports to be and is called a "privilege or license tax"; yet it really taxes each $100 secured by it 15 cents. This is in reality a property tax. It gives you the privilege of the recordation statutes, and it gives you the privilege of exempting your secured debt from an annual ad valorem tax, if you record your mortgage and pay a small tax of 15 cents on each $100 secured by it; yet, if you do not accept the privilege offered, present for record the mortgage and pay that small tax on its debt, you are met face to face with a real and larger tax — a direct annual ad valorem tax — on the assessed cash value of the mortgage debt. It purports to be a "privilege or license tax," but it is a tax on the mortgage debt, and is a property tax.
This mortgage of the Federal Land Bank is an instrumentality of the federal government, it is personal property of the United States, and it is exempt from this $4.50 tax by the federal statute (39 U.S. Stat. at Large, pt. 1, § 26, p. 380 [U.S. Comp. St. § 9835q]), and by the state revenue statute (section 2, Gen. Acts 1919, p. 283).