Dundee Mortgage Trust Inv. Co. v. Parrish

• Citation: 24 F. 197
• Parties: DUNDEE MORTGAGE TRUST INVESTMENT CO. v. PARRISH, Chief of Police, and others. AMERICAN FREEHOLD LAND MORTGAGE CO., of London, v. GROVES, Sheriff, etc., and others. NEW ENGLAND MORTGAGE SECURITY CO. v. GROVES, Sheriff, etc., and others.
• Decision Date: 13 July 1885
• Court: United States District Courts. 9th Circuit. United States District Court (Oregon)

24 F. 197

DUNDEE MORTGAGE TRUST INVESTMENT CO. v. PARRISH, Chief of Police, and others.

AMERICAN FREEHOLD LAND MORTGAGE CO., of London, v. GROVES, Sheriff, etc., and others.

NEW ENGLAND MORTGAGE SECURITY CO. v. GROVES, Sheriff, etc., and others.

United States Circuit Court, D. Oregon.

July 13, 1885

John W Whalley, W. D. Fenton, and Raleigh Scott, for plaintiffs, for whom also a written argument by Thomas M. Cooley was filed.

R. S Strahan, John Burnett, James F. Watson, E. B. Watson, A. H Tanner, H. Hurley, and William B. Gilbert, for the several defendants.

DEADY J.

These suits are brought by the plaintiffs, who are foreign corporations, to have the several defendants enjoined, as sheriffs of their respective counties, from collecting certain taxes levied by such counties upon sundry mortgages belonging to them, under the act of October 26, 1882, (Sess Laws, 64,) commonly called 'the mortgage tax law,' by the sale of the same.

Motions for provisional injunctions on the bills and demurrers thereto, on the ground of the invalidity of the law and the illegality of the tax, were argued and submitted together. The bills are substantially the same, and from them it appears that the first two corporations are formed under the laws of Great Britain, the Dundee company having its principal office at the burg of Dundee, Scotland, and the London one at London, England; the third is formed under the laws of Connecticut, and has its principal office at Boston, Massachusetts,--and each is formed for the purpose of loaning money in this state on note and mortgage, which notes are made payable and kept without the state at such principal offices respectively; that the Dundee company, as assignee of two former companies of that place, and in its own right, is the owner of $645,317.29 in value of such notes and mortgages, for money loaned in this state prior to the passage of said act, except $90,000 thereof, upon which the various counties named in its bill levied a tax in 1884 amounting to $9,927.32; that the Connecticut and London companies are the owners of such notes and mortgages, for money loaned in this state prior to the passage of said act, upon which a tax was levied by the several counties named, in their respective bills for the years 1883 and 1884, as follows: The Connecticut company, of the value of $207,359 in 1883, and of the value of $213,274 in 1884; and the London company of the value of $112,368 in 1883, and of the value of $114,027 in 1884,-- upon the former of which a tax has been levied by said counties of $7,414.63, and on the latter of $3,914.77.

The objections made by the bills to the validity of the law and the legality of the tax may be summarized as follows: (1) The act is void because passed contrary to the constitution of the state in these particulars: (a) It is an act 'for raising revenue,' but originated in the senate instead of the house, contrary to section 18 of the article 4 thereof; (b) it was not read by sections on three several days in each house, as required by section 19 of said article; (c) it involves double taxation, and distinguishes between secured and unsecured notes, and one and two county mortgages, and permits the indebtedness of residents to be deducted from their assessments, and forbids the same in the case of non-residents, contrary to section 1, article 9 thereof; (d) it provides that debts and mortgages may be sold for the non-payment of taxes the same as land; (e) it is a special or local law for the assessment and the location of taxes contrary to section 23 of said article 4; (f) the plaintiffs' mortgages are assessed said counties at the nominal value of the debts secured thereby, while the other lands situated therein are assessed at but one-third of their value, thereby causing unequal and ununiform taxation of the same kind of property, contrary to section 1 of said article 9. (2) The act is void because in conflict with the constitution of the United States in these particulars: (a) It impairs the obligation of the contract whereby the mortgagor was to pay all taxes on the note and mortgage, and 'in that it undertakes to change the situs of notes and mortgages' which, prior to said act, were owned and held elsewhere than in Oregon; (b) it impairs the negotiability of promissory notes secured by mortgage on real property; (c) the sale of the debt and mortgage involves the taking of private property without due process of law. (3) The assessment in Yamhill county is made, or about to be made, by the sheriff, and is therefore void.

The question of the validity of the act of 1882 was before the supreme court of the state in Mumford v. Sewell, 11 Or. 67, S.C. 5 P. 738, and also before this court in Dundee Mortgage Trust Investment Co. v. School-dist. No. 1, 19 F. 359, and 21 F. 151.

In the cases decided in the state court it was held: (1) The state may tax a mortgage in the county where recorded without reference to the residence of the owner; (2) an act authorizing such a tax does not impair the obligation of any contract between the mortgagor and the mortgagee; (3) the original bill on file in the secretary of state's office shows that the act was read on three several days, as required by section 19 of article 4 of the state constitution, and that is sufficient; (4) the act is not in conflict with section 1 of article 9, nor section 32 of article 1 thereof, concerning uniformity and equality of taxation, and does not exempt two county mortgages from taxation, but leaves them subject thereto under previously existing laws; (5) the legislature may fix the situs of personal property for the purpose of taxation without violating the provision of the state constitution concerning equality of taxation; (6) the phrase 'special law,' as used in section 23 of article 4 of the state constitution is synonymous with 'private law,' and whether a law is public or private depends on the subject-matter; and (7) the act in question is a public one, and therefore not a private or 'special' one.

In the case before this court it was held: (1) Equity has jurisdiction to enjoin the collection of a tax levied under an invalid law, when necessary to prevent a multiplicity of suits; (2) the act in question does not impair the obligation of any contract between a mortgagor and a mortgagee concerning the payment of the tax on the mortgaged premises, or the debt secured thereby,--the state is no party to such contract, and its power to impose and collect taxes on persons, property, and business within its jurisdiction cannot be affected or restrained thereby; (3) the state may, so long as it does not trench on the constitution of the United States, tax all persons, property, and business within its jurisdiction or reach, and whether any person, property, or business is within its jurisdiction is not a federal question, and must be determined by the state for itself.

This court also held in that case that the act was void because in conflict with section 1 of article 9 of the state constitution, requiring uniformity in assessment for taxation; and also that the act was a special one, and therefore void, because in conflict with subdivision 10 of section 23 of article 4 thereof; and that the enforcement by the state of a tax levied under such an act is a deprivation of property without due process of law, contrary to section 1 of the fourteenth amendment of the constitution of the United States.

This court will follow the decisions of the state court touching the validity of this act when compared with the constitution of the state, and therefore all objections to the enforcement of this tax on that ground are out of place, and will be overruled without further consideration. Greene v. Neal's Lessee, 6 Pet. 291; Stone v. Wisconsin, 94 U.S. 181; Town v. Perkins, Id. 267; Burgess v. Seligman, 107 U.S. 33; S.C. 2 S.Ct. 10.

Conceding, then, that the judgments of the state court in Mumford v. Sewell and Crawford v. Linn Co., so far as they declare the act to be in conformity with the state constitution, furnish the rule of decision in this case, and assuming that the rulings heretofore made by this court in Dundee Mortgage Trust Investment Co. v. School-dist. No. 1., so far as the same relate to federal questions, will be followed, there are but two objections to the enforcement of the tax left for consideration: (1) The act is one for raising revenue, and therefore void because it did not originate in the house; and, (2,) admitting the law to be valid, the tax is illegal because of the unlawful conduct of the persons who made the assessment of property in these counties, whereby the plaintiff's mortgages are valued and taxed at two-thirds more than the lands in the said counties.

In Mumford v. Sewell, supra, 71, Justice WALDO, speaking for the court, said: 'Some of us have had considerable doubt whether the bill is not properly a bill for raising revenue, and therefore in violation of section 18 of article 4 of the state constitution because it originated in the senate,' and concludes that the point is not sufficiently clear, as then advised, to warrant the court in declaring the law unconstitutional on that ground. In Crawford v....