Dundee Mortgage Trust Inv. Co. v. School Dist. No. 1, Multnomah County

• Decision Date: 06 March 1884
• Citation: 19 F. 359
• Parties: DUNDEE MORTGAGE, TRUST INVESTMENT CO. v. SCHOOL-DIST. NO. 1, MULTNOMAH CO.,, others.
• Court: U.S. Court of Appeals — Ninth Circuit

19 F. 359

DUNDEE MORTGAGE, TRUST INVESTMENT CO. v. SCHOOL-DIST. NO. 1, MULTNOMAH CO.,, others.

United States Circuit Court, D. Oregon.

March 6, 1884

William H. Effinger, Charles B. Bellinger, and W. D. Fenton, for plaintiff.

William B. Gilbert, H. Hurley, and Walter W. Thayer, for defendants.

DEADY J.

This is an application for a provisional injunction on the bill filed herein, on December 31, 1883, to restrain the defendants hereinafter named, and others, from selling and disposing of sundry notes and mortgages belonging to the plaintiff, for the non-payment of taxes levied thereon, in the district and counties where the mortgaged premises are situate, under the provisions and by the authority of the act of the legislature of Oregon, entitled 'An act to define the terms 'land' and 'real property' for the purposes of taxation, and to provide when the same shall be assessed and taxed,' etc., approved October 26, 1882. The defendants-- the school district No. 1, and George C. Sears the sheriff of Multnomah county-- were duly served with a subpoena to answer, and an order to show cause why the provisional injunction should not issue; and the defendant E B. Collard, the sheriff of Yamhill county, appeared and showed cause against the application, without service. None of the other defendants were served with the subpoena or order, or appeared.

From the bill it may be gathered that the plaintiff is a foreign corporation, duly incorporated under the laws of Great Britain, with its 'principal office at the burg of Dundee, Scotland. ' That for some years it has been and now is carrying on in this state, and by the permission thereof, the business of loaning money upon promissory notes secured by mortgage or real property therein, and payable in a certain period of years, with lawful interest, at Dundee,-- each of such notes containing, in addition to the ordinary promise to pay, these words: 'This note is given on an actual loan secured by a mortgage, by the terms and conditions of which this note is to be governed. ' That the money thus loaned is obtained from residents of Great Britain 'on bonds or mortgage debentures' that entitle the holders thereof to be paid out of the assets of the plaintiff, including these notes and mortgages. That the plaintiff, as the successor and assignee of sundry similar corporations heretofore organized in Dundee, and engaged in the like business in Oregon, is the 'owner and holder' of certain notes and mortgages made and executed to said corporation for money loaned in Oregon, and is also the 'owner and holder' of certain other notes and mortgages made and executed to itself for money loaned therein, amounting in the aggregate to two and half millions of dollars; upon all of which said 'bond and debenture holders' have a lien for the money advanced by them to the plaintiff and its said assignors. That the said loans were all made before October 26, 1882, except one in Marion county for the sum of $19,000, and that they will become due and payable at periods varying from one to five years hence. That the notes and mortgages aforesaid were made and executed within this state, and afterwards transmitted to the 'home office, Dundee,' where they are kept until the borrower desires to pay the same, when they are returned here for that purpose. That the defendants, the school districts No. 1 and No. 18, and the several counties of which the other defendants are the sheriffs, respectively, have assessed said notes and mortgages, under the act of 1882 aforesaid, for taxation, within the respective districts and counties, so far as the mortgaged premises are therein situate-- said district No. 1 having assessed the same within its limits at $165,510, and levied a tax thereon of $827.55; the county of Multnomah at $209,600, and levied a tax thereon of $3,269.76; and the county of Yamhill at $-- -- --, and levied a tax thereon of $834.46. And said defendants have demanded payment of the same, and are about 'to coerce the payment' thereof, by the sale of the notes and mortgages so assessed. And that said assessment and levy are unlawful, because the act under which they were made, and the defendants are proceeding, is void and of no effect, for the reason that it is contrary to the constitution of the United States, and the state; and that such debts and mortgages are beyond the jurisdiction of the state.

From the affidavit of the defendant George C. Sears, filed at the hearing, it appears that 'several' of the notes and mortgages assigned to the plaintiff and assessed for taxation in school-district No. 1 and the county of Multnomah 'were made to William Reid, manager,' and payable in the state of Oregon; that the corporation of whose notes and mortgages the plaintiff has become the owner by assignment, as aforesaid, during all the time they did business in Oregon had a managing agent residing herein, and duly appointed under the laws of Oregon, concerning foreign corporations doing business here, (Or. Laws, p. 617, Secs. 7, 8;) and the plaintiff, during the period it has done business here, has had a like agent in the state, whose business, in either case, it was and is to receive applications for loans and make the same; that in the course of such business such agents have retained in this state all money received on said loans, whether of principal or interest, and reloaned the same herein; and that a 'large proportion' of the mortgages, upon which the collection of the tax is by this suit sought to be enjoined, were made to secure loans of money so received and reloaned within this state.

The act of 1882 provides that a mortgage, 'whereby land or real property, situate in no more than one county of this state, is made security for the payment of a debt, together with such debt, shall, for the purpose of assessment and taxation, be deemed and treated as land or real property,' (section 1,) and 'shall be assessed and taxed to the owner of such security and debt in the county, city, or district in which the land or real property affected by such security is situated;' and 'the taxes so assessed and levied on such security and debt shall be a lien thereon, and the debt, together with the security, may be sold for the payment of any taxes due thereon, in the same manner and with like effect that real property or land is sold for the payment of taxes. ' Section 2. The owner of such mortgage, 'for the purpose of assessment and taxation' shall 'be deemed to be the person to whom the security was given in the first instance,' unless the contrary appears on the record thereof; and 'all assignments and transfers of a debt' so secured shall, for the purposes aforesaid, 'be null and void,' unless the same 'is made in writing upon the margin of the record of the security;' and all mortgages 'hereafter executed, whereby land situated in more than one county in this state is made security for the payment of a debt, shall be void. ' Section 3. For the purposes aforesaid, no payment on any debt so secured shall hereafter be considered by the assessor unless indorsed 'on the margin of the record of such security;' and 'the assessor shall assess such debt and security for the full amount of such debt that appears from the record of such security to be owing,' unless in his judgment the property by which such debt is secured is not worth that amount, in which case he shall assess the same 'at their real cash value.' Section 4. A debt so secured on 'property situated in no more than one county in this state, shall, for the purposes of taxation,' be considered 'as indebtedness within this state,' and the person owing the same may deduct the amount from his assessment as such indebtedness. ' Section 8. No 'writing which is the evidence of a debt,' wholly or partly so assessed, 'shall be taxed for any purpose in this state,' but such debt and 'the instrument by which it is secured, shall, for the purpose of assessment and taxation,' be deemed real property, and 'together be assessed and taxed' as therein provided. Section 10.

Sections 5, 6, and 7 of the act relate to the duties of the county clerk in furnishing the assessor with a statement of the unsatisfied mortgages on record in his office, and recording the assignments of such mortgages and of all payments thereon.

The real purpose and intent of this act is not far to seek or hard to find. And, first, it is not, as suggested in the brief of counsel for the defendants, to tax the mortgagee's interest in the land to the mortgagee and the remainder to the mortgagor. But the purpose is to tax the 'debt' of the mortgagee and 'the instrument by which it is secured,' and by deducting the amount thereof from the value of the land so far exempt it from taxation. In other words, it is a scheme to tax the debt of the mortgagee, and so far exempt the land of the mortgagor; and not only this, but to tax the debt, not at the residence of the creditor, but the debtor, in the county or district where the mortgaged premises are situate. The debt and mortgage are not the land, and not even a legislative act can make them so; but they are to be deemed and considered such, as a matter of convenience, for the purpose of assessment and taxation, and the collection of the tax.

For many years prior to this act the law was such that a debt was taxed, or supposed to be, at the residence of the creditor and the debtor was allowed to deduct the amount thereof from his assessment, provided the debt was owing in the state. The result was that the par value of the domestic indebtedness of the country, being deducted from the value of the land, as appraised for taxation, about one-third of its cash value, the value of lands left subject to taxation was very much reduced. In the rural...