Meridian Mortg. Co., Inc. v. State
| Decision Date | 09 October 1979 |
| Docket Number | No. 2-378A85,2-378A85 |
| Parties | MERIDIAN MORTGAGE COMPANY, INC., Appellant (Plaintiff Below), v. STATE of Indiana, Indiana Department of State Revenue, Intangibles Tax Division and Theodore Sendak, as Attorney General of Indiana, Appellee (Defendant Below). |
| Court | Indiana Appellate Court |
Arthur H. Northrop, Indianapolis, for appellant.
Theodore L. Sendak, Atty. Gen., Victoria R. Van Duren, Deputy Atty. Gen., Indianapolis, for appellee.
Plaintiff-appellant Meridian Mortgage Company, Inc. (Meridian) is appealing from a declaratory judgment which held that Meridian was the owner of certain mortgages and not entitled to a refund for Indiana intangibles taxes paid in 1971, 1972, and 1973 on such intangibles.
We affirm in part and reverse in part.
The facts are not in dispute:
Meridian is a mortgage broker with its principal place of business in Marion County, Indiana. Its business consists of finding home buyers in need of financing and securing temporary and permanent mortgage loans and servicing the mortgage loans after mortgages are placed. It never advances funds of its own for mortgage purposes and is not in the business of lending money.
Since 1959 Meridian has participated in various agreements with American Fletcher National Bank (the Bank) and various title companies (primarily Commonwealth Title, Chicago Title, Lawyers Title, and Pioneer Title). 1 These agreements are all essentially However, the execution of the mortgage by the borrower to Meridian occurs simultaneously with Meridian's assignment 3 of the mortgage to the Bank. Both transactions take place at the time of closing. This assignment is pursuant to the three party agreement which obligates Meridian to assign the mortgage at this time; the Bank transfers directly to the title company's escrow account the money for the mortgagor upon Meridian's assignment of the mortgage. Meridian, therefore, never has any control or right to control the mortgage, the proceeds of the loan, nor any discretion in the performance of the transactions which are controlled exclusively by the Bank and the title company.
the same and provide for Meridian to seek out individuals interested in financing their [182 Ind.App. 330] homes usually either through VA or FHA loans. The Bank provides temporary financing by advancing the money needed for closing to the title company in exchange for a pledge of the mortgage as security. The title company prepares the documents and holds the notes and mortgage for the Bank. Title to the mortgage is initially negotiated and remains [182 Ind.App. 331] in the name of Meridian until the mortgage is sold by the Bank to a permanent investor. 2
The verbiage of these "loan" agreements does not accurately describe the actual transaction which occurs. They recite that the Bank "loans" the money to Meridian, but Meridian never receives any such loan. Meridian, in fact, is not even a conduit; the money goes directly from the Bank to the title company for disbursement to the Seller.
The evidence indicates that Meridian lends its credit to the Bank to assist the mortgage borrower to secure a temporary During 1973 this method of individual assignment of mortgages by Meridian to the Bank was substituted by an agreement providing for blanket assignment. This change in agreement was merely for convenience, to eliminate paper work; it did not change the interests or positions of the parties.
loan. Even though Meridian transfers to the Bank its note as well as the note of the mortgagor, there is only one loan and that loan goes to the mortgagor, not Meridian. Meridian's note is relied upon only if the mortgagor defaults on the mortgage. Thus, the Bank would appear to have two parties to look to upon default.
Once the mortgage is created, Meridian services the mortgage as an agent for the Bank. The money Meridian collects on the mortgage while owned temporarily by the Bank, is turned over to the title company to be held in their escrow account until the mortgage is sold to a permanent investor. When the mortgage is sold these funds are removed from the escrow account and used in settlement.
Meridian concludes the transaction by locating a permanent investor. The mortgage and not are sold to the permanent investor who sends the funds for purchase directly to the Bank. The title company sends the note and mortgage directly to the permanent investor. Usually Meridian continues as servicing agent for collection for the permanent investor.
Throughout these transactions Meridian never exercises possession or dominion over the mortgages or the mortgage agreement. The notes and mortgages are executed at the title companies which have continuous possession of them until they are sold directly to the permanent investors. Until the mortgage is sold to the permanent investor the power to control the mortgage is with the Bank. The Bank receives the income from the mortgage, receives the proceeds from the sale and has the right to approve the sale to the permanent investor.
Meridian receives a commission for its part in these mortgage transactions. It is paid at one (1%) percent commission on each mortgage and a one (1%) percent commission at closing. If Meridian continues to service the loans for the permanent investor it receives a fee for collecting monthly payments.
Meridian has paid an intangible tax on these mortgages from 1959 (the time these agreements were first entered into) until 1974, when Meridian protested and refused payment for the intangible tax assessed for 1973 on these mortgages. 4
In December of 1974 a hearing was held and the Department found that Meridian was liable for the intangible tax.
On July 21, 1975, Meridian filed with the Revenue Department a claim for refund for the intangible taxes paid for 1971, 1972 and 1973. Upon the denial of its claim, Meridian unsuccessfully filed a complaint for declaratory judgment with the Marion Superior Court on August 28, 1975.
We deem the issues 5 to be:
1. Does the statute of limitations bar Meridian's claim for the intangible taxes paid in 1971?
2. Is it necessary for Meridian to own or control the mortgages to be taxed thereon?
3. Does Meridian own or control the mortgages?
Does the statute of limitations bar Meridian's claim for intangible taxes paid in 1971?
PARTIES' CONTENTIONS While neither party addresses this issue, the trial court did state a conclusion of law that Meridian's claim for refund for 1971 is barred by the statute of limitations.
CONCLUSION Meridian's claim for refund for intangible taxes paid in 1971 is barred by the three year statute of limitations.
The statute of limitations for refund of intangible tax paid is found in Ind.Code 6-5-1-7 and provides as follows:
Any person aggrieved by any order, judgment or determination of the commission, after paying the tax, may, within three (3) years from the end of the calendar year in which said tax was paid, file with said commission a claim for refund of said tax. Said commission shall duly consider said claim and determine whether or not said claim shall be allowed or disallowed.
Meridian paid its intangible taxes quarterly and the payment of taxes for the years we are considering were made as follows:
April 19, 1971 $ 793.89
June 13, 1971 2,406.03
October 14,1971 2,932.95
January 19, 1972 2,817.41
April 14, 1972 2,984.15
July 21, 1972 3,235.02
October 17, 1972 3,656.68
January 22, 1973 3,518.12
February 25, 1974 18,830.70
Interest 1,713.75
Penalties 1,883.07
----------
TOTAL $44,771.77
As indicated, three payments of the 1971 intangible tax were made in 1971. According to the statute a claim for refund should have been made within three (3) years of the end of 1971, that is by the end of 1974. The record shows that the claim for refund was filed with the Commission on July 21, 1975. Thus Meridian's filing was not timely.
Meridian does argue in its Motion to Correct Errors that the hearings which were held in December of 1974 concerning Meridian's liability for intangible taxes tolled the statute of limitations. This argument is meritless, the hearings held in December of 1974 were merely a consideration of Meridian's protest. It was not until 1975 that the actual claim for refund was filed. This filing was timely for claims for taxes paid in 1972 and 1973.
We therefore affirm the decision of the trial court in denying Meridian a refund for intangible taxes paid on mortgages in the year 1971.
Is it necessary for Meridian to own or control the mortgages to be taxed thereon?
PARTIES' CONTENTIONS The parties do not argue this issue as such. They seem to assume that ownership is necessary for taxation under the Intangible Tax Statute.
However, from even a careful reading of the statute it is not immediately clear whether actual ownership or control is necessary. And such a determination is essential to draw a conclusion as to Meridian's liability for the tax.
CONCLUSION In order to be taxed under the Intangible Tax Statute, it is necessary for the taxpayer to either own or control the intangible (mortgage).
Our concern is with one statute, Ind.Code 6-5-1-2: 6
On and after the passage of this act, every person residing in and/or domiciled in this state, shall pay a tax to the state of Indiana at the rate and in the manner provided in this act, for the right to exercise any one (1) or more of the following privileges:
(a) Signing, executing and issuing intangibles;
(b) Selling, Assigning, transferring, renewing, removing, consigning, mailing, shipping, trading in and enforcing intangibles.
(c) Receiving the income, increase, issues and profits of intangibles.
(d) Having and possessing the right to transmit the same by...
To continue reading
Request your trial
-
Bethlehem Steel Corp. v. Indiana Dept. of State Revenue
... ... Aetna Ins. Co. v. Rodriguez (1986), Ind.App., 496 N.E.2d 1321, 1323; Ind.Rules of ... Convenient Indus. of Am., Inc. (1973), 157 Ind.App. 179, 181-85, 299 N.E.2d 641, 643-45; accord Miami ... v. Department of Treasury (1953), 232 Ind. 147, 110 N.E.2d 284; Meridian Mortgage Co. v. State (1979), 182 Ind.App. 328, 341, 395 N.E.2d 433, ... ...
-
Reynolds Metals Co. v. Indiana Dept. of State Revenue, Gross Income Tax Division
... ... interstate commerce to which that state bears a special relation." Central Greyhound Lines, Inc. v. Mealey, (1948) 334 U.S. 653, 661, 68 S.Ct. 1260, 1265, 92 L.Ed. 1633; Goodrich, supra. Courts ... 147, 110 N.E.2d 284; Meridian Mortgage Company, Inc. v. State, (1979) Ind.App., 395 N.E.2d 433. Reynolds contends that the ... ...
-
Monarch Beverage Co., Inc. v. Indiana Dept. of State Revenue
... ... Tax consequences are generally determined by the substance rather than the form of a transaction. See Meridian Mortgage Co. v. State (1979), 182 Ind.App. 328, 341, 395 N.E.2d 433, 440 (citing Thompson v. Arnold (1958), 238 Ind. 177, 147 N.E.2d 903; Madding v ... ...
-
National Serv-All, Inc. v. Indiana Dept. of State Revenue
... ... United Home Life Ins. Co. (1990), Ind.App., 549 N.E.2d 67, aff'd (1990), Ind., 563 N.E.2d 609). "In construing a contract ... See Meridian Mortgage Co. v. State (1979), 182 Ind.App. 328, 339, 395 N.E.2d 433, 439-40 ... In ... ...