State v. American Trust Co.

• Decision Date: 20 January 1919
• Parties: STATE, BY HAUK, REVENUE AGENT, v. AMERICAN TRUST CO. ET AL.
• Court: Tennessee Supreme Court

208 S.W. 611

141 Tenn. 243

STATE, BY HAUK, REVENUE AGENT, v. AMERICAN TRUST CO. ET AL.

Supreme Court of Tennessee.

January 20, 1919

Appeal from Chancery Court, Greene County; Hal. H. Haynes Chancellor.

Bill by State of Tennessee, by O. S. Hauk, Revenue Agent, against the American Trust Company and others. Decree for defendants and plaintiff appeals. Affirmed and bill dismissed.

GREEN J.

The bill in this cause was filed by the state, through one of its revenue agents, to collect from the defendant what is known as the "mortgage registry" tax imposed by chapter 70 of the Acts of 1917. The chancellor held this section of the statute invalid, and the state has appealed.

The section is as follows:

" Tax on Mortgages, etc. That prior to the recording by the registers of the several counties of the state of any mortgage, or deed of trust, * * * executed as a pledge mortgage, or conveyance in trust of any real or personal property situated in the state of Tennessee, or any interest in any real or personal property situated in the said state, to secure the payment of any indebtedness, there shall be levied and paid, in lieu of all other taxes, a state tax of 15¢ on each $100.00 or portion thereof, of the amount of the indebtedness so secured, which tax shall be collected by the clerk of the county court of the county in which said property is located, and the county registers of the several counties of the state are hereby required not to record any such instrument until the clerk of the county court of the county in which said instrument is offered for record certifies on said instrument that said tax has been paid. The tax herein prescribed shall be paid by the holder or owner of the indebtedness secured by the instrument offered for record; provided that this tax shall not apply to loans under $1,000.00."

We regret that we are unable to agree with the legislative department as to the constitutionality of this enactment.

After a full consideration, we are forced to the conclusion that the result attained by the chancellor was inevitable.

In view of the difficulty in reaching mortgages or the owners thereof for the assessment of such property, several of the states have passed statutes similar to the above, and in a number of the states, these statutes have been upheld.

Such acts have been sustained in Michigan, Union Trust Co. v. Detroit, 170 Mich. 692, 137 N.W. 122; in Minnesota, Mutual Benefit Life Ins. Co. v. Martin County, 104 Minn. 179, 116 N.W. 572; in New York, People v. Gass, 206 N.Y. 609, 100 N.E. 404; in Virginia, Pocahontas Consolidated Collieries v. Commonwealth, 113 Va. 108, 73 S.E. 446; in Alabama, State v. Alabama Fuel & Iron Co., 188 Ala. 487, 66 So. 169, L. R. A. 1915A, 185, Ann. Cas. 1916E, 752.

In Kansas, a similar statute has been held invalid in view of a constitutional provision requiring a uniform and equal rate of assessment and taxation. Wheeler v. Weightman, 96 Kan. 50, 149 P. 977, L. R. A. 1916A, 846.

In Michigan, Minnesota, and doubtless in New York, this tax is sustained as a property tax. It is conceded by the attorneys for the state herein that the tax cannot be sustained as a property tax in Tennessee.

In Alabama and Virginia, the tax is sanctioned as a privilege tax, which the courts of these states are able to do by reason of constitutional provisions differing from ours.

It will be observed that the statute quoted provides that this mortgage registry tax shall be "in lieu of all other taxes." It therefore exempts mortgages and deeds of trust from all other taxation. The act can have no other construction. In several sections of the act it is provided that privilege taxes imposed shall be in lieu of all other taxes except ad valorem taxes. In this section, however, the tax is unqualifiedly declared to be in lieu of all other taxes, and we must conclude that it was the intention to exempt registered mortgages and deeds of trust from ad valorem taxation. Such is the provision of similar statutes in other states to which reference has been made, and after which this legislation is fashioned.

In Alabama, the Constitution is construed to permit the exemption of all property of a particular kind from taxation, and the validity of an exemption there is only a question of reasonable classification. State v. Alabama Fuel & Iron Co., supra.

Likewise, the Virginia Constitution provides that "all taxes, whether state, local, or municipal, shall be uniform upon the same class of subjects." Const. 1902, § 168.

Our constitutional provision on the subject of taxation, as will be recalled, is quite different, and the Legislature is without power to exempt from taxation any property except as specified in that instrument.

Section 28 of article 2 of the Constitution of Tennessee is as follows:

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