Missouri Pac. R. Co. v. Deering

• Citation: 184 Kan. 283,336 P.2d 482
• Decision Date: 07 March 1959
• Docket Number: No. 41210,41210
• Parties: MISSOURI PACIFIC RAILROAD COMPANY, a Corporation, Appellee, v. Rufus A. DEERING, as Register of Deeds of Sedgwick County, Kansas, and Marie Warden, as County Treasurer of Sedgwick County, Kansas, Appellants.
• Court: United States State Supreme Court of Kansas

Page 482

336 P.2d 482

184 Kan. 283

MISSOURI PACIFIC RAILROAD COMPANY, a Corporation, Appellee, v. Rufus A. DEERING, as Register of Deeds of Sedgwick County,

Kansas, and Marie Warden, as County Treasurer of

Sedgwick County, Kansas, Appellants.

No. 41210.

Supreme Court of Kansas.

March 7, 1959.

Rehearing Denied April 15, 1959.

Syllabus by the Court

1. In an action to recover money paid under protest by the Missouri Pacific Railroad Company to satisfy the amount of mortgage registration fees due as to two mortgages made by the railroad company, it is held: (a) The federal court sitting in bankruptcy and in putting into operation a plan for reorganization of the railroad did not order, and did not have the authority to order that no mortgage registration fees or taxes should be paid to state authorities upon the recording of the mortgages made by the railroad company under the reorganization plan; (b) The collection of the mortgage registration fees upon the recording of said railroad mortgages did not constitute a violation of the Fourteenth Amendment to the United States Constitution nor impose a burden upon interstate commerce; (c) The tax provided upon the recording of mortgages by G.S.1949, 79-3101 et seq. in no way violates the provisions of article 11, section 4 of the state constitution.

2. The statute providing for the collection of mortgage registration fees creates a tax which is normally paid by the mortgagee of a mortgage of real property. This tax replaces all other forms of taxation as to the obligations secured by the mortgage.

Robert H. Nelson, Wichita, argued the cause, and W. A. Kahrs and Patrick F. Kelly, Wichita, were with him on the briefs for the appellants.

Ralph M. Hope, Wichita, argued the cause, and W. F. Lilleston, George C Spradling, Henry V. Gott, George Stallwitz, Richard W. Stavely, Charles S. Lindberg and Ronald M. Gott, Wichita, were with him on the brief for the appellee.

JACKSON, Justice.

This is an appeal from the decision of the district court holding that the Missouri Pacific Railroad Company need not pay the sum of $262,969.96 to the Register of Deeds of Sedgwick County to cover the mortgage registration 'fees' due on two mortgages made by the railroad on all of its property. The suit was one filed by the railroad to recover these taxes which had been paid to the defendant county officials under protest and the county officials appeal from the adverse decision in the district court.

The case below was submitted to the court upon an agreed statement of facts which we shall condense to a certain extent. The Missouri Pacific, for approximately twenty-three years prior to March 1, 1956, had been in re-organization proceedings in the United States District Court for the Eastern District of Missouri, Eastern Division, under the provisions of Section 77 of the Bankruptcy Act (U.S.C.A., Title 11, Section 205) and all of the property of the railroad had been owned and operated by the trustees appointed by the court and under the jurisdiction of the court.

The bankruptcy proceeding as to the Missouri Pacific Railroad was terminated by a consummation order and final decree signed by the court on March 1, 1956. Paragraph numbered 5 of the agreed statement of facts reads as follows:

'5. Under the provisions and requirements of said plan of reorganization and under the provisions and requirements of said Consummation Order and by approval and authority of the Interstate Commerce Commission and said court, two mortgages were executed and issued by plaintiff, such mortgages being a First Mortgage dated January 1, 1955, in favor of Boatmen's National Bank of St. Louis as Trustee, and a General (Income) Mortgage dated January 1, 1955, in favor of Manufacturers' Trust Company and Charles Herman as Trustees, which said mortgages covered and described said railroad and other property owned by plaintiff in Kansas and other states.'

A copy of Section 10.04 of the federal court's final order is made a part of the agreed statement of facts and will be referred to later in this opinion.

It was further agreed between the parties that the defendants were the duly elected, qualified and acting register of deeds and county treasurer of Sedgwick County; that the defendants refused to accept the two mortgages issued under the terms of the consummation order of the federal court for registration without the payment of the mortgage registration fees as provided in G.S.1949, 79-3101 et seq.; that the plaintiff thereupon paid to the register of deeds the sum of $262,969.96, being the amount of fees due to the various counties in Kansas where the property of the plaintiff is located, together with a written protest which was delivered to the register of deeds and to the county treasurer; a true copy of the written protest is attached to the agreed statement of facts. The parties further agreed that the money so paid under protest has been held by the defendant county treasurer and has not been distributed to any of the counties to which the monies would be apportioned under the provisions of the statute (G.S.1949, 79-3105).

There was no dispute about the amount of the taxes collected, if said tax was due, nor about the manner in which the same would be apportioned among the fifty-six counties in Kansas where the property of the railroad is located. The sole question decided by the district court upon the agreed statement of facts appears to have been the liability of the Missouri Pacific Railroad under the law to pay this tax. The county officers appeal from the decision holding that the railroad mortgages might be registered without payment of the mortgage registration fees due on the proportion of the amount of the railroad notes or bonds secured by liens on real estate in Kansas.

There is a preliminary matter which must be disposed of before we can reach the merits of this appeal. Appellants' assignment of errors herein were as follows:

'1. The court erred in granting judgment in favor of the plaintiff and against the defendants.

'2. The court erred in overruling defendants' motion for a new trial.'

Appellee earnestly urges that the above assignments are wholly insufficient to bring the questions in the instant appeal before the court. As to the first assignment, the case of Cimarron Co-Operative Equity Exchange v. Warner, 166 Kan. 190, 200 P.2d 283, is cited together with many others to like effect. In the Warner case, supra, this court said:

'This court has repeatedly held that an assignment of error to the effect the trial court erred in rendering its judgment amounts to nothing more than a statement the decision is wrong, does not specify any error and presents no reviewable ruling to an appellate court. (See Hamilton v. Binger, 162 Kan. 415, 176 P.2d 553, and cases there cited.)' (166 Kan. at page 192, 200 P.2d at page 285.)

It will be noted that the Warner case was appealed to this court 'after a full and complete trial' in which evidence had been introduced by both parties. In the case now before the bar, the matter was submitted to the trial court upon an agreed statement of facts and the court's decision thereon was very similar to a ruling on a demurrer. As we noted above, only a question of law can be involved in this case. Perhaps, appellants would have been more specific, if the first specification of error had read, 'the trial court erred as a matter of law in granting judgment in favor of the plaintiff.' But, since an error in law is the only error which could be appealed in this case, we are disposed to hold the first assignment of error sufficient to raise the questions here involved.

In considering the important questions raised by the appeal, we shall first consider the nature of the so-called mortgage registration 'fee.' The lending of funds secured by liens on real estate has been an important business from the beginning of the history of this state. There has always been a companion question as to the method and means by which these funds so secured, as well as other invested funds, should be taxed by the state. It will be remembered that in the early history of the state, the chief revenue of all governmental units came from ad valorem property taxes. It will be remembered that article 11, section 1, of the state constitution was amended by the people in 1924 to read in part: 'Mineral products, money, mortgages, notes and other evidence of debt may be classified and taxed uniformly as to class as the legislature shall provide.'

After the adoption of the above amendment and as authorized thereby the legislature enacted the statute providing for the mortgage registration fee (Laws 1925, ch. 273, now appearing as G.S.1949, 79-3101 to 79-3107a). Neither the legislature nor this court has shown any disposition to disguise the evident fact that the mortgage registration fee is a tax. In section 79-3103, it is provided that after the payment of the tax of twenty-five cents on each one hundred dollar valuation of the secured note 'the note secured thereby shall not be otherwise taxable.' Thus, the legislature not only recognized the 'fee' to be a tax, but provided that it should be in lieu of all present and future taxes.

This court has always recognized that the mortgage registration fee constituted a tax (see Davis-Wellcome Mortgage Co. v. Haynes, 119 Kan. 1, 237 P. 918; Voran v. Wright, 129 Kan. 1, 281 P. 938, on rehearing, 129 Kan. 601, 284 P. 807; Citizens Bank of Galena v. Tax Commission 132 Kan. 5, 294 P. 940; Home Owners' Loan Corp. v. Anderson, 145 Kan. 209, 64 P.2d 14; Assembly of God v. Sangster, 178 Kan. 678, 290 P.2d 1057).

In the early cases just cited, it may be noted the mortgage registration fee was objected to not on the ground of discrimination against money invested in real estate mortgages, but as amounting to a discrimination in favor of such funds and against other invested capital. We believe that the present case is the first time...