Savings Loan Soc v. Multnomah County, or

Decision Date07 March 1898
Docket NumberNo. 69,69
Citation42 L.Ed. 803,169 U.S. 421,18 S.Ct. 392
CourtU.S. Supreme Court

Milton W. Smith, for appellant.

John H. Hall, for appellees.

Mr. Justice GRAY delivered the opinion of the court.

This was a bill in equity, filed in the circuit court of the United States for the district of Oregon, by the Savings & Loan Society, a corporation and citizen of the state of California, against Multnomah county, a public corporation in the state of Oregon, and one Kelly, the sheriff and ex officio the tax collector of that county, and a citizen of that state, showing that in 1891 and 1892 various persons, all citizens of Oregon, severally made their promissory notes to secure the payment of various sums of money, with interest, to the plaintiff at its office in the city of San Francisco and state of California, amounting in all to the sum of $531,000, and, to further secure the same debts, executed to the plaintiff mortgages of divers parcels of land owned by them in Multnomah county; that the mortgages were duly recorded in the office of the recorder of conveyances of that county; that the notes and mortgages were immediately delivered to the plaintiff, and had ever since been without the state of Oregon, and in the possession of the plaintiff at San Francisco; that afterwards, in accordance with the statute of Oregon of October 26, 1882, taxes were imposed upon all the taxable property in Multnomah county, including the debts and mortgages aforesaid; that, the taxes upon these debts and mortgages not having been paid, a list thereof was placed in the hands of the sheriff, with a warrant directing him to collect the same as upon execution, and he advertised for sale all the debts and mortgages aforesaid; and that the statute was in violation of the fourteenth amendment of the constitution of the United States, as depriving the plaintiff of its property without due process of law, and denying to it the equal protection of the laws. The bill prayed for an injunction against the sale, and for a decree declaring that the statute was contrary to the provisions of the constitution of the United States, and therefore of no effect, and that all the proceedings before set out were null and void, and for further relief.

The defendants demurred generally, and the court sustained the demurrer, and dismissed the bill. 60 Fed. 31. The plaintiff appealed to this court.

The ground upon which the plaintiff seeks to maintain this suit is that the tax act of the state of Oregon of 1882, as applied to the mortgages, owned and held by the plaintiff in California, of lands in Oregon, is contrary to the fourteenth amendment of the c nstitution of the United States, as depriving the plaintiff of its property without due process of law, and denying to it the equal protection of the laws.

The statute in question makes the following provisions for the taxation of mortgages: By section 1, 'a mortgage, deed of trust, contract or other obligation whereby land or real property, situated in no more than one county in this state, is made security for the payment of a debt, together with such debt, shall, for the purposes of assessment and taxation, be deemed and treated as land or real property.' By section 2, the mortgage, 'together with such debt, 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 may be sold, like other real property, for the payment of taxes due thereon. By section 3, that person is to be deemed the owner who appears to be such on the record of the mortgage, either as the original mortgagee, or as an assignee by transfer made in writing upon the margin of the record. By section 4, no payment on the debt so secured is to be taken into consideration in assessing the tax, unless likewise stated upon the record; and the debt and mortgage are to be assessed for the full amount appearing by the record to be owing, unless, in the judgment of the assessor, the land is not worth so much, in which case they are to be assessed at their real cash value. By sections 5, 6, 7, it is made the duty of each county clerk to record, in the margin of the record of any mortgage, when requested so to do by the mortgagee or owner of the mortgage, all assignments thereof and payments thereon, and to deliver annually to the assessor abstracts containing the requisite information as to unsatisfied mortgages recorded in his office. By section 8, a debt secured by mortgage of land in a county of this state 'shall for the purposes of taxation, be deemed and considered as indebtedness within this state, and the person or persons owing such debt shall be entitled to deduct the same from his or their assessments in the same manner that other indebtedness within the state is deducted.' And by section 9, 'no promissory note, or other instrument of writing, which is the evidence of a debt that is wholly or partly secured by land or real property situated in no more than one county in this state, shall be taxed for any purpose in this state; but the debt evidenced thereby, and the instrument by which it is secured shall, for the purpose of assessment and taxation, be deemed and considered as land or real property, and together be assessed and taxed as hereinbefore provided.' Laws Or. 1882, p. 64. All these sections are embodied in Hill's Ann. Code Or. §§ 2730, 2735-2738, 2753-2756.

The statute applies only to mortgages of land in not more than one county. By the last clause of section 3, 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.' The mortgages now in question were all made since the statute, and were of land in a single county, and it is not suggested in the bill that there existed any untaxed mortgage of lands in more than one county.

The statute, in terms, provides that 'no promissory note or other instrument in writing, which is the evidence of' the debt secured by the mortgage, 'shall be taxed for any purpose within this state'; but that the debt and mortgage 'shall, for the purposes of assessment and taxation, be deemed and treated as land or real property' in the county in which the land is situated, and be there taxed, not beyond their real cash value, to the person appearing of record to be the owner of the mortgage.

The statute authorizes the amount of the mortgage debt to be deducted from any assessment upon the mortgagor, and does not provide for both taxing to the mortgagee the money secured by the mortgage, and also taxing to the mortgagor the whole mortgaged property, as did the statutes f other states, the validity of which was affirmed in Augusta Bank v. City of Augusta, 36 Me. 255, 259; Insurance Co. v. Lott, 54 Ala. 499; Appeal Tax Court v. Rice, 50 Md. 302, and Goldgart v. People. 106 Ill. 25.

The right to deduct from his assessment any debts due from him within the state is secured as well to the mortgagee as to the mortgagor, by a provision of the statute of Oregon of October 25, 1880 (unrepealed by the statute of 1882, and evidently assumed by section 8 of this statute to be in force), by which 'it shall be the duty of the assessor to deduct the amount of indebtedness, within the state, of any person assessed, from the amount of his or her taxable property.' Laws Or. 1880, p. 52; Hill's Ann. Code, § 2752.

Taking all the provisions of the statute into consideration, its clear intent and effect are as follows: The personal obligation of the mortgagor to the mortgagee is not taxed at all. The mortgage and the debt secured thereby are taxed, as real estate, to the mortgagee, not beyond their real cash value, and only so far as they represent an interest in the real estate mortgaged. The debt is not taxed separately, but only together with the mortgage; and is considered as indebtedness within the state for no other purpose than to enable the mortgagor to deduct the amount thereof from the assessment upon him, in the same manner as other indebtedness within the state is deducted. And the mortgagee, as well as the mortgagor, is entitled to have deducted from his own assessment the amount of his indebtedness within the state.

The result is that nothing is taxed but the real estate mortgaged, the interest of the mortgagee therein being taxed to him and the rest to the mortgagor. There is no double taxation. Nor is any such discrimination made between mortgagors and mortgagees, or between resident and nonresident mortgagees, as to deny to the latter the equal protection of the laws.

No question between the mortgagee and the mortgagor, arising out of the contract between them, in regard to the payment of taxes or otherwise, is presented or can be decided upon this record.

The case, then, reduces itself to the question whether this tax act, as applied to mortgages owned by citizens of other states and in their possession outside of the state of Oregon, deprives them of their property, without due process of law.

By the law of Oregon, indeed, as of some other states of the Union, a mortgage of real property does not convey the legal title to the mortgagee, but creates only a lien or incumbrance as security for the mortgage debt; and the right of possession, as well as the legal title, remains in the mortgagor, both before and after condition broken, until foreclosure. Gen. Laws Or. 1843-1872, § 323; Hill's Ann. Code, § 326; Anderson v. Baxter, 4 Or. 105, 110; Semple v. Bank, 5 Sawy. 88, 394 Fed. Cas. No. 12,659; Teal v. Walker, 111 U. S. 242, 4 Sup. Ct. 420; Sellwood v. Gray, 11 Or. 534, 5 Pac. 196; Watson v. Mortgage Co., 12 Or. 474, 8 Pac. 548; Thompson v. Marshall, 21 Or. 171, 27 Pac. 957; Adair v. Adair, 22 Or. 115, 29 Pac. 193.

Notwithstanding this, it has been held, both by the supreme court of the state, and by the circuit court of the United States for...

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