State ex rel. Lewis v. Smith

• Decision Date: 22 May 1902
• Citation: 158 Ind. 543,64 N.E. 18
• Parties: STATE ex rel. LEWIS et al. v. SMITH, Auditor.
• Court: Indiana Supreme Court

158 Ind. 543

64 N.E. 18

STATE ex rel. LEWIS et al.

v.SMITH, Auditor.

Supreme Court of Indiana.

May 22, 1902.

Petition for rehearing. Overruled.

For former opinion, see 63 N. E. 25, 214.

GILLETT, J.

Appellee's counsel have filed a petition for a rehearing in this cause, and we have given careful consideration to the views that find expression in their brief in support of such petition. After doing so, and upon a re-examination of, and further search for authorities, we adhere to the conclusion before announced that the law is valid. The original opinion stated at length the views of a majority of the court, but the importance of the case is a sufficient reason for a further opinion. It must not be forgotten that section 1, art. 10, of the state constitution, is not the source of the legislative power of taxation, for that section is only a curb upon the authority of the general assembly. Can it be said that a law that authorizes a deduction of mortgage debts from the value of the tracts of real estate to which they respectively attach provides for an unequal assessment, or that it is a regulation that prevents a just valuation of all property not authorized to be exempted by the constitution? It is true that the general assembly has not power to fix a valuation upon real estate, but this act is based upon a recognition of the fact that we have already shown upon the authorities, both federal and state, that he who makes a mortgage upon his real estate does an act that amounts to a conditional alienation of his title, and it is, of course, unquestionable that he thereby parts with a substantial part of his land value. Counsel for appellee may assert that a mortgage is a mere lien, and for most purposes we so recognize it; but if it be the law-and it does not admit of question that it is-that the mortgage wil be treated as a conveyance of title whenever necessary to protect the rights of the parties, the question arises whether the general assembly cannot seize upon this fact to avoid double taxation. As pointed out in our former opinion, the supreme court of the United States has declared that a mortgage may be treated as a conveyance of the land pro tanto, so that, with statutory authority, a nonresident mortgagee may be compelled to pay a ratable part of the assessment upon the land at the situs thereof. If it be asked, how do we justify the omission to place lands incumbered by vendors' liens, mechanics' liens, or judgment liens upon the same footing as lands subject to mortgage, we answer that such former demands are mere liens, while in the case of a mortgage the mortgagor has by deed, in no insubstantial sense, parted with a part of his interest in the land. Is this not reason enough to justify the general assembly in recognizing this as ground for distinction, when to do so would be, in its judgment, to accomplish justice? This court, in the Florer Case (36 N. E. 365, 23 L. R. A. 278), held that debts could be deducted from credits, because the constitutional mandates as to equality in the assessment and as to a just valuation of all property not authorized to be exempted by the constitution had no reference to mere fictitious values; and this case stands upon the same general footing, but it finds stronger support in reason, in that there is a separation of values by defeasible deed. Within a year after the taking effect of the present state constitution the general assembly passed an act concerning taxation, which contained, in section 23 thereof, the following words: “Provided, that each taxpayer may and is hereby authorized to deduct the amount of his indebtedness out of his solvent claims.” Acts Sp. Sess. 1852, pp. 44, 50. The force of a construction of the constitution by a session of the general assembly that had in its personnel a considerable number of the members of the constitutional convention is forcefully pointed out in City of Indianapolis v. Navin, 151 Ind. 139, 47 N. E. 525, 51 N. E. 80, 41 L. R. A. 337, 344. The validity of such enactments as the one last mentioned has been a number of times assumed by this court before the decision in the Florer Case. Matter v. Campbell, 71 Ind. 512;Wasson v. Bank, 107 Ind. 206, 8 N. E. 97;City of Indianapolis v. Vajen, 111 Ind. 240, 12 N. E. 311;Moore v. Hewitt, 147 Ind. 464, 46 N. E. 905. In the Florer Case the question was directly in judgment, and we must overrule that decision if we depart from our previous ruling in this case that the taxation law of 1899 is valid.

We will now call attention to a few authorities on the subject of mortgage deductions not cited in our previous opinion. The legislature of Oregon passed a law which provided for a taxation of real estate mortgages at the situs of the land, and authorized the deduction of the amount of such mortgages from the tracts of real estate to which they respectively attached. The constitution of Oregon upon the subject of taxation is in every material particular a precise counterpart of our constitutional provision on the subject, yet it was held in Crawford v. Linn Co., 11 Or. 482, 5 Pac. 738, upon a full consideration of the question, that the statute was valid. The statute referred to is the same one that the supreme court of the United States, in Savings & Loan Soc. v. Multnomah Co., 169 U. S. 421, 18 Sup. Ct. 392, 42 L. Ed. 803, held did not deny the equal protection of the laws. The case of State v. Runyon, 41 N. J. Law, 98, is to a considerable extent in point. In the year 1876 the legislature of New Jersey enacted a statute that provided that mortgages upon real estate should not be taxed unless the mortgagor made a claim for a deduction on such account. In that event, if the claim was allowed by the assessor, the mortgage was taxed at the situs of the land. In passing upon the validity of that law, the court, in the case cited, speaking by Depue, J.,...