Commerce-Guardian Trust & Sav. Bank v. State

• Decision Date: 06 October 1924
• Docket Number: No. 82.,82.
• Citation: 200 N.W. 267,228 Mich. 316
• Court: Michigan Supreme Court
• Parties: COMMERCE-GUARDIAN TRUST & SAVINGS BANK v. STATE et al.

228 Mich. 316

200 N.W. 267

COMMERCE-GUARDIAN TRUST & SAVINGS BANK

v.STATE et al.

No. 82.

Supreme Court of Michigan.

Oct. 6, 1924.

Error to Circuit Court, Lenawee County; Burton L. Hart, Judge.

Action by the Commerce-Guardian Trust & Savings Bank against the State of Michigan, County of Lenawee, and Harry C. Osgood, Treasurer of such county. Judgment of dismissal, and plaintiff brings error. Affirmed.

Argued before CLARK, C. J., and McDONALD, BIRD, SHARPE, MOORE, STEERE, FELLOWS, and WIEST, JJ. Ritter & Schminck, of Toledo, Ohio, and H. Thane Bauman, of Adrian, for appellant.

Andrew B. Dougherty, Atty. Gen., Clare Retan, Deputy (Atty. Gen., and Henry I. Bourns, Pros. Atty., of Adrian, for appellees.

WIEST, J.

August 15, 1921, a mortgage of real property, situated in Lenawee county, this state, authorizing the issuance, in the state of Ohio, of first mortgage bonds in the sum of $600,000, was executed in Ohio by the National Dairy Company, an Ohio corporation, and delivered to the Commerce-Guardian Trust & Savings Bank, also an Ohio corporation. All bonds thereunder have been issued in Ohio to, and are owned and held by, residents of the states of Ohio and West Virginia. In March, 1923, the mortgage was presented to the register of deeds for Lenawee county for record, $20.35 fees tendered and registry refused, unless 50 cents on each $100 of the principal debt stated in the mortgage was paid, under the provisions of Act No. 91, Public Acts 1911, as amended. C. L. 1915, § 4268 et seq., 1922 Supp. § 4271 et seq. Thereupon $3,000 was paid by plaintiff, under written protest, setting up the facts relative to the mortgage and bonds and residence of owners thereof, claiming the demand was in violation of the Constitution of the United States and constituted a taking of property without due process of law, and demanding return of the money exacted.

This action was brought to recover the $3,000 paid to the treasurer for the county of Lenawee, and held one-half by the county of Lenawee and the other one-half by the state of Michigan. On motion of defendants, the suit was dismissed, and plaintiff prosecutes review by writ of error.

Plaintiff contends the act imposes a specific tax upon credits, founded upon and evidenced by mortgages and liens upon real property, and not upon mortgages, and is in violation of the Constitution of the United States and the Fourteenth Amendment, in so far as it purports to tax credits owned and in the possession of nonresidents of the state of Michigan.

Counsel for defendants contend the act does not impose a tax on credits, but imposes a specific tax on mortgages and other instruments creating a lien on real property within this state; that the situs of such instruments is within the state of Michigan, and the act is valid. The act was before this court in Union Trust Co. v. Detroit Common Council, 170 Mich. 692, 137 N. W. 122;Bowen v. Moeller, 171 Mich. 547, 137 N. W. 245;Economy Power Co. v. Daskam, 174 Mich. 402, 140 N. W. 466.

The question here presented seems not to have been decided in this state. The title to the act is:

‘An act to provide for the assessment and the collection of a specific tax upon the class of credits founded upon the evidenced by mortgages and liens upon real property, and to repeal all acts and parts of acts in contravention thereto.’

The difficulty we experience in determining the issue at bar is not in considering the power of the Legislature to impose a tax for the privilege of registry of mortgages, with its accompanying protection of the security and availability of our laws in enforcement thereof, but whether the act admits of such construction or confines us to a holding that it imposes a specific tax upon credits designated as founded upon and evidenced by mortgages and liens upon real property. The legislative purpose, expressed in the title, is an exercise of unquestioned power over credits evidenced by mortgages and liens upon real property within the state, where the credits so founded and evidenced are owned or held by residents of the state. But such is not the case here presented. Has the Legislature, by the enactment, imposed the specific tax upon credits, identified as founded upon and evidenced by mortgage liens upon real property in this state, even in cases where the mortgage is given without this state, by one nonresident to another, to secure a principal indebtedness due upon bonds owned by nonresidents and never within this state? If the act is held to do this, then does it overreach legitimate bounds?

It is contended the tax is not upon credits, but upon mortgages. We must accept the language of the act upon this. The title to the act must be considered as truly indicative of the legislative purpose under the mandate of the Constitution. The title to the act clearly limits the specific tax to an assessment upon, and collection from, the class of credits founded upon and evidenced by mortgages and liens upon real property. To say this imposes a tax upon the collateral security, and not upon the class of credits evidenced by mortgages, is to read the title without considering the meaning of legal terms therein employed.

The debt of a mortgagor is the credit held by a mortgagee and usually evidenced by note or bond to which the mortgage lien is collateral security only. Notes and bonds secured by mortgage constitute no interest in the mortgaged premises, in the nature of real property. Section 1 of the act provides:

‘For the purposes of this act all indebtedness secured by liens upon real property shall constitute that class of credit upon which this act imposes a specific tax. The word ‘mortgage’ as used herein shall include every mortgage or other instrument by which a lien is created over or imposed upon real property, notwithstanding it may also be a lien upon other property, or there may be other security for the debt, and shall also include executory contracts for the sale of real property, and deeds or other instruments that are given to secure debts.'

Section 2 provides:

‘A tax of fifty cents for each one hundred dollars and each remaining major fraction thereof of the principal debt or obligation which is, or under any contingency may be, secured by a mortgage upon real property situated within this state recorded on or after the first day of January, nineteen hundred twelve, is hereby imposed on each such mortgage, and shall be collected and paid as hereinafter provided. * * *’

Does this law undertake to assess the creditor upon credits secured by mortgage? It contains definitions and provisions clearly demonstrating such purpose, or at least result; whether so by intention or inadvertence is immaterial. While the act, in the main, speaks of the principal indebtedness as the basis for assessing the tax, it must be remembered that the tax is exacted of the mortgagee on the credit he holds when he seeks registry of the security collateral thereto.

Section 1 of the act imposes the specific tax upon a class of credit. To state it by question and answer: Upon what class of credit is the specific tax imposed? Upon all indebtedness secured by liens upon real property.

The act runs true to its title, and credits founded upon and evidenced by mortgages and liens upon real property constitute the basis for the assessment and collection of the specific tax. This is manifested by the provision in section 4 of the act, which, in substance, provides that if the mortgage covers real property, situated partly within and partly without this state, then the tax commission is to determine the relative value of the mortgaged property within this state, as compared with the total value of the entire mortgaged property, and determine the proportion of the principal indebtedness secured by the mortgage on property within the state and use the same to measure the tax.

Section 5 provides, in substance, that if the mortgage is made in trust to secure payment of bonds, and only a partial amount of the ‘indebtedness' has been advanced when the mortgage is presented for record, the tax is to be computed only upon the amounts advanced thereon and secured thereby, and when further amounts are advanced the tax is imposed thereon. It is apparent all through the act that the credit extended measures the tax. It is true section 6 permits the owner of any mortgage, recorded before the act, to show the amount of the principal unpaid thereon, pay the specific tax on such amount, and thereafter the mortgage, for the purpose of taxation, is treated the same as other mortgages under the act, and ‘mortgages given prior to January 1, 1912, and on which the registry tax provided for in this act shall not be paid, shall remain under the present ad valorem system of taxation and shall be assessed and taxed under the present law.’ If it be considered that this constitutes the tax one for the privilege of registry of mortgages, and not one upon credits evidenced by mortgages, then the title will have to be extended to say so. The only place in the whole act where the tax is designated a ‘registry tax’ is the one just mentioned. Section 10 provides:

‘That class of credits other than the mortgages given prior to January first, nineteen hundred twelve, upon which this act imposes a specific tax shall be exempt from further general taxes under the laws of this state.’

Counsel for defendants state:

‘While the title to the act is somewhat ambiguous and might be open to the interpretation which counsel for plaintiff places upon it, nevertheless, when read in connection with the body of the act, and in view of the fact that a mortgage in this state is not an evidence of indebtedness, but merely a security for a debt, and the credit is evidenced by the note or bonds secured thereby, any ambiguity in the title disappears and the legislative intent, both as expressed in the title and the body of the act itself, is to impose a specific tax on the security, which is...