Middendorf v. Goodale

• Decision Date: 13 November 1923
• Citation: 202 Ky. 118,259 S.W. 59
• Parties: MIDDENDORF, CLERK, ETC. v. GOODALE ET AL.
• Court: Kentucky Court of Appeals

259 S.W. 59

202 Ky. 118

MIDDENDORF, CLERK, ETC. v. GOODALE ET AL.

Court of Appeals of Kentucky.

November 13, 1923

Rehearing Denied March 28, 1924.

Appeal from Circuit Court, Kenton County, Criminal, Common Law, and Equity Division.

Mandamus by Levi C. Goodale and others, trustees, against John W Middendorf, Clerk of Kenton County Court, to compel the recording of a mortgage without payment of tax. Judgment for plaintiffs, and defendant appeals. Reversed and remanded with directions.

Chas I. Dawson, Atty. Gen., for appellant.

Mackoy & Mackoy, of Cincinnati, Ohio, for appellees.

SETTLE J.

The sole question presented for decision on this appeal is whether a certain typewritten instrument marked "Exhibit A", appearing in the record, is subject to the recording tax of 20 cents upon each $100, or fraction thereof of indebtedness, secured thereby, imposed by Kentucky Statutes, § 4019a9 (Carroll's Ed. 1922), and by its provisions required to be paid the county clerk in whose office the instrument is first recorded, when it is lodged for record.

The parties to the writing in question are the appellees Levi C. Goodale and others, acting as trustees of the Cincinnati Southern Railway of the one part, and the Cincinnati, New Orleans & Texas Pacific Railway Company of the other. It will be unnecessary to explain the scope or meaning of the many stipulations and covenants contained in this voluminous writing further than to say that, while much of it relates to the sale or leasing to one of the parties by the other of the property therein described and the reciprocal duties and obligations thereby imposed upon both, it is admittedly and undoubtedly a mortgage given upon the same property to secure the payment of the large indebtedness therein mentioned.

Following its execution, the instrument was delivered by the appellees to the appellant, John W. Middendorf, clerk of the Kenton county court, in his office, with the request that it be duly recorded by him, accompanied by a tender of the required legal fees for the filing and recording of same; the latter refused, however, to receive or record the instrument without the prepayment by appellees of the tax required by the statute, supra, which they refused to pay. Immediately thereafter this action was brought against the appellant by the appellees in the court below, for the procurement of a writ of mandamus compelling him to record, without the payment by the appellees of the tax imposed by the statute, supra, the instrument of writing lodged with him by the latter for that purpose. The appellant filed in the court below a general demurrer to the petition as amended, which the court overruled; and, upon his excepting to this ruling and refusing to further plead, the court entered judgment granting the appellees the writ of mandamus prayed in the petition. The appellant's complaint of this judgment, and of the court's previous overruling of his demurrer to the petition, resulted in the granting to him and his prosecution of the present appeal.

Although the judgment rendered in the court below fails to indicate the reasons, or any of them, actuating that court's granting of the writ of mandamus prayed by the appellees, it is manifest from the record and conceded by counsel that it was because of its concurrence in the objections, or some of them. urged by the latter to the constitutionality of the section of the statute, supra, under which the appellant claimed authority to collect the tax demanded by him of the appellees. The objections made in that court, and yet urged, to the constitutionality of the section, by the appellees, are stated by the brief of their counsel as follows:

(1) That it violates section 171, Constitution, as amended in 1914-1915, which requires that taxes "shall be uniform upon all property of the same class subject to taxation within the territorial limits of the authority levying the tax; and all taxes shall be levied and collected by general laws."

(2) That it violates section 3, Bill of Rights, Constitution, which provides that "no grant of exclusive, separate public emoluments * * * shall be made to any man or set of men, except in consideration of public services."

(3) That it violates section 59, Constitution, which prohibits the General Assembly from passing any local or special act to "authorize or to regulate the levy, the assessment or the collection of taxes."

(4) That it violates article 1 of the Fourteenth Amendment to the Constitution of the United States, in that it denies to all persons within the jurisdiction of the state of Kentucky the equal protection of the laws of the state.

The section of the statute in question reads as follows:

"Sec. 4019a-9. Mortgage Recording Tax.--The word 'mortgage' as used in this section shall include any instrument creating or evidencing a lien of any kind upon property given or taken as security for debt and shall include vendor's liens and executory contracts for the sale of property under which the vendee is entitled to the possession thereof.

A tax of twenty cents (20c) is hereby imposed upon each one hundred dollars ($100.00) or fraction thereof of indebtedness which is, or may be, in any contingency secured by any mortgage of property in this state, which mortgage shall be lodged for record after this act goes into effect where the indebtedness does not mature within five years. If any such mortgage includes property outside of the state such tax shall be imposed upon such proportion of the whole debt secured thereby as the value of the property in this state included therein bears to the whole of the property included therein. The county clerk first receiving such instrument for record shall determine the amount of such tax from affidavits of the mortgagor or its officers as to such proportionate value or from other satisfactory evidence.

If a mortgage is made to a mortgagee in trust to secure the payment of bonds or other obligations to be issued thereafter, a statement may be incorporated therein of the amount and description of such obligations already issued or to be issued forthwith, and the tax to be paid on filing such mortgage for record or registration shall be computed upon the amount so stated. Such statements shall be binding and conclusive upon all persons claiming through or under the mortgage, and no additional obligations shall be issued or certified by the trustee until the additional tax thereon shall have been paid and the receipt of the proper county clerk issued therefor and recorded upon the margin of the record of said mortgage.

If any such mortgagor shall issue or if any such trustee shall certify or aid in the issuance of any such obligations without the payment of the tax as herein provided, they shall each be subject to a penalty of five times the amount of such tax that should have been paid.

The tax imposed by this act shall be paid to the clerk of the county court in whose office said mortgage is first lodged for record at or before the time of lodging same for record. The clerk shall thereupon indorse his receipt upon said instrument and such receipt shall be recorded with said instrument and shall be conclusive proof of the payment of said tax and shall authorize the further record of such instrument in any other county without repayment of such tax. The form of such receipt shall be in substance: 'Recording tax hereon of ______ dollars paid.'

The clerk on or before the tenth day of each month (shall) transmit to the auditor the amount of such taxes collected by him within the preceding calendar month, less the amount of his commissions now allowed him on collections of revenue. And the entire revenue from the mortgage recording tax shall be credited to the sinking fund.

The recording tax herein provided shall be in addition to the annual tax for state purposes provided in the preceding sections of this act; provided, however, the recording tax herein provided shall be the only tax paid on mortgages beneficially owned by persons or corporations not resident in this State; provided, however, the provisions of this section shall not apply to mortgages executed to building and loan associations."

It will be observed from the foregoing statement of them that the objections of the appellees to the constitutionality of the section of the statute, supra, are all bottomed upon the meaning and effect they insist should be given to the exception contained in its concluding clause, which declares that "the provisions of this section shall not apply to mortgages executed to building and loan associations."

It is argued by counsel for the appellees that this provision placing mortgages executed to building and loan associations in a distinct class and exempting them from the payment of the mortgage recording tax imposed by the preceding provisions of the same section upon all other mortgages and instruments creating liens as security for debt, is not a reasonable classification; and the exception, it is insisted, makes the entire section repugnant to the state and federal Constitutions in the particulars set forth in the appellees' several above contentions, and therefore renders the whole thereof void.

So the important question to be determined is whether the provision contained in the last clause of the section of the statute in question, by which mortgages executed to building and loan associations are exempted from the tax imposed by the previous provisions thereof is a reasonable classification or regulation, not prohibited by the state or federal Constitution, or should be declared an artificial or capricious one, violative of both of those instruments, as insisted by the appellees.

In undertaking the consideration of this question,...