Commerce-Guardian Trust & Savings Bank v. State , 228 Mich. 316 ( 1924 )

The purpose of the act in question (Act No. 91, Pub. Acts 1911) and the causes which led to its enactment are set forth very clearly in Union Trust Co. v. Detroit Common Council,170 Mich. 692, and Economy Power Co. v. Daskam, 174 Mich. 402. In the former case, the fact that the mortgage interests of residents of the State under the prior law were "concealed from assessing officers by putting them in the names of nonresidents" was pointed out, and in the latter it was said that —

"Primarily the legislation was doubtless enacted to correct an alleged economic fallacy, and secondarily to placeforeign and domestic loaners of money upon an equal footing."

The validity of this act or its enforcement, or both, has been before this court in the following cases: Union Trust Co. v. Detroit Common Council, supra; Economy Power Co. v. Daskam,supra; Union Trust Co. v. Radford, 176 Mich. 50; NorthernAssurance Co. v. Detroit Common Council, 176 Mich. 80;Bowen v. Moeller, 171 Mich. 547; Bank of Tustin v. Township ofBurdell, 184 Mich. 131; Nelson v. Breitenwischer, 194 Mich. 30;Lake Erie Land Co. v. Chilinski, 197 Mich. 214; Rodenhouse v. DeGolia, 198 Mich. 402; Ross v. Stoll,199 Mich. 561; Detroit Land Contract Co. v. Green, 202 Mich. 464; Marussa v. Temerowski, 204 Mich. 274; Shupert v. InghamCounty Treasurer, 214 Mich. 333; Security Investment Co. v.Meister, 214 Mich. 337; Krell v. Cohen, 214 Mich. 590.

In the Trust Company Case, the tax was spoken of as a "specific tax on such instruments" (real estate mortgages); in the Radford Case, as a "tax on account of the mortgage;" in theAssurance Company Case, it was said that the plaintiff had "paid a tax on mortgages;" in the Tustin Case, the act was said to apply to "specific tax-paid mortgages and contracts," and allusion was made to "securities of the kind mentioned;" in theBowen Case, it was said to be "known as the mortgage tax law," and that its purpose was to "change the method of taxing mortgages;" in the Chilinski Case, the "enforcement of a land contract upon which the specific tax has not been paid" was referred to; in the Rodenhouse Case, it was claimed that the "mortgage tax * * * had not been paid;" in the Ross Case, it was spoken of as "a mortgage tax law;" in the Krell Case, the court referred to "the land contract tax imposed by the statute," and in the Detroit Land Contract Company Case the "mortgage tax" and the "amount of the mortgage tax" were referred to.

The act itself, independent of the title, clearly evidences an intent on the part of the legislature to impose the tax upon the security, if in the nature of a lien on real estate, or, in other words, upon the mortgage or land contract. (The italics in the provisions quoted from are ours.)

"SECTION 1. For the purposes of this act all indebtednesssecured by liens upon real property shall constitute that classof credit upon which this act imposes a specific tax.

"SEC. 2. A tax of fifty cents for each one hundred dollars * * * of the principal debt or obligation * * * secured * * * is hereby imposed on each such mortgage."

It also provides that as to certain mortgages no tax shall be imposed.

Section 3 provides that, if a mortgage be given as an indemnity, the tax shall be paid on the "greatest amount forwhich it can * * * become security."

Section 6 provides that the owner of any existing recorded mortgage may take advantage of the provisions of the act.

Section 8 provides that —

"No mortgage or land contract, which is subject to the tax imposed by this act shall be released, enforced, discharged of record or received in evidence * * * until the tax imposedthereon by this act shall have been paid."

That the word "credits" is intended to be used as synonymous with the word "mortgages" is apparent from the tenth section, which reads:

"That class of credits other than the mortgages given prior to January first, nineteen hundred twelve, upon which this act imposes a specific tax shall be exempt from further general taxes under the laws of this State."

By Act No. 139, Pub. Acts 1913 (1 Comp. Laws 1915, § 4278 etseq.), the holders of negotiable bonds secured by mortgage or trust deed recorded prior to January 1, 1912, may pay a specific tax of one-half of one per cent. upon the principal thereof and be relieved from further general taxes thereon.

The title to Act No. 142, Pub. Acts 1913 (1 Comp. Laws 1915, § 4282), reads as follows:

"An act to provide for the assessment and the collection of a specific tax upon secured debts other than debts secured or evidenced by mortgages and liens upon real property, and which mortgages and liens are recorded in Michigan, and to repeal all acts and parts of acts in contravention thereto."

The provisions of this act are well expressed in the title. Its purpose was to permit the holders of certain "secured debts," for the taxation of which there was then no provision, to pay a specific tax and exempt them from further general taxes. In other words, to place them on the same footing as debts secured by real estate mortgages were placed by Act No. 91, Pub. Acts 1911.

In the administration of the act, the tax has been considered a tax on mortgages and land contracts, and many hundreds of thousands of dollars have been paid under it. We thus find that the act has been construed as a tax on such instruments by the legislative, judicial and administrative departments of the State government since its enactment in 1911. A different construction should not now be placed upon it by this court unless the language contained in it will admit of no other construction. People v. Railroad Co., 145 Mich. 140; Wright v.Banking Co., 216 U.S. 426 (30 Sup. Ct. 242); Attorney General v. Lumber Co., 164 Mich. 625.

For the first time the claim is here made that the title is conclusive on this court that the tax is imposed on credits and therefore inapplicable to nonresidents of the State. The Constitution (Art. 5, § 21) provides that —

"No law shall embrace more than one object, which shall beexpressed in its title."

This provision was adopted in our first Constitution, and has remained in the several subsequent revisions without change. Its purpose and the effect to be given to it by the legislature have been many times discussed and passed upon by this court. It may be said at the outset that the provision is designed to serve two purposes. First, to prevent action by the legislature without receiving the concurrence therein of the requisite number of members by —

"bringing together into one bill subjects diverse in their nature, and having no necessary connection, with a view to combine in their favor the advocates of all."

— what is commonly spoken of as log-rolling in legislation — and also to prevent clauses being —

"inserted in bills of which the titles gave no intimation, and their passage secured through legislative bodies whose members were not generally aware of their intention and effect."People v. Mahaney, 13 Mich. 481,494.

and, second, to "challenge the attention" of those affected by the act to its provisions. People v. Wohlford, 226 Mich. 166,168.

The duty of this court in passing upon the question presented is well expressed in Matter of Charles Hauck, 70 Mich. 396. At page 402, it is said:

"In testing acts of the legislature by this clause of the Constitution, we should not, on the one hand, be so hypercritical as to require every matter of detail to be stated in the title, nor, on the other hand, so liberal as to render the constitutional provisions nugatory. But regard should be had to the letter and spirit of the Constitution, the evils it was intended to prevent, the rights it was intended to preserve, and, so regarding it, to test the act which is claimed to be repugnant to this clause candidly and justly."

In People v. Bradley, 36 Mich. 447, the question as to the sufficiency of the title to an act was discussed. It was said:

"If the word used by the legislature can in any of its various uses or meanings be considered appropriate or applicable, then we cannot say that they did not have a right to use it in that sense, even although we might be of opinion that a better and more appropriate one might have been chosen, and one that people generally would have better understood."

In Bissell v. Heath, 98 Mich. 472, 477, the following from Cooley's Constitutional Limitations (6th Ed.), p. 175, was quoted approvingly:

"There has been a general disposition to construe the constitutional provision liberally, rather than to embarrass legislation by a construction whose strictness is unnecessary to the accomplishment of the beneficial purposes for which it has been adopted."

In 25 R. C. L., many pages (beginning at page 834) are devoted to the subject of titles to legislative acts. "The mischief sought to be remedied by the requirement" is discussed along the same line of treatment as in People v. Mahaney,supra. The fact that but few State constitutions contain the provision is alluded to. It is said that such provisions —

"should be reasonably and liberally construed, due regard being had to their object and purpose. They must receive a fair and reasonable construction which will repress the evil designed to be guarded against, but which, at the same time, will not render them oppressive or impracticable. * * *

"It is only a clear violation of the constitution which will justify the courts in overruling the legislative will. Every legislative act is presumed to be constitutional, and every intendment must be indulged by the courts in favor of its validity. The limitation must be liberally construed with a view to upholding legislation. * * *

"The title must be such at least as fairly to suggest or give a clew to the subject dealt with in the act; * * * The topics in the body of the act should be kindred in nature and have a legitimate and natural association with the subject of the title."

The courts should not hold the title insufficient "because, in its opinion, a better title might have been provided."

"The court should not resort to critical or technical construction of the language of the title. * * * If the words used in a title, taken in any sense or meaning they will reasonably bear, are sufficient to cover the provisions of the act, the act will be sustained even though such meaning may not be the most common meaning of the words. In doubtful cases, courts will consider long acquiescence in the constitutionality of an act in respect of its title, but this cannot control where there is no doubt but that the constitutional provision has been violated. * * * A very good test to apply is whether it is within the mischiefs intended to be remedied. * * * It is enough that the title is so phrased as to convey to the mind an indication of the subject or object to which it relates. * * * The office of the title is to apprise the legislators as to what the subject of legislation is, so as to put them on inquiry."

Many cases are cited in the footnote in support of the text. See, also, State v. Evans, 154 Minn. 95 (191. N.W. 425, 27 A.L.R. 1165).

It is urged that the right to tax a mortgage owned by a nonresident is dependent upon the legislative declaration constituting the mortgage an interest in real property and fixing the situs thereof in the State where the land lies. The first section of the act is declaratory of the purpose to include in the word "mortgage" every instrument by which "a lien is created over or imposed upon real property," and it is the indebtedness secured by such liens that the tax is imposed upon. To say that a lien upon real estate is not an interest therein is narrowing the construction of these words and refining to an extent which the average legislator would fail to grasp. In Detroit Common Council v. Board of Assessors,91 Mich. 78 (16 L.R.A. 59), the holding in State Tax onForeign-Held Bonds, 15 Wall. (U.S.) 300, referred to in People v. Trust Co., 205 N.Y. 74 (98 N.E. 207), quoted from by Mr. Justice WIEST, was discussed at length. Mr. Justice MONTGOMERY, who wrote for the court, referred to the claim made "that in Michigan a mortgage is a mere incident to the debt, and conveys no title to the land," and said:

"It is urged that, as this is so, the taxation of such mortgage interest amounts to a taxation of the debt, and brings the case within the case of State Tax on Foreign-Held Bonds."

He further said:

"But while it is true that the mortgage is a mere security for the debt, yet it conveys a qualified property in the land; while it is not an estate which entitles the mortgagee to possession before foreclosure, it is nevertheless an estate or interest in lands, which is protected by our registration laws as fully as any other title or interest."

While the act there under consideration imposed the tax upon the mortgage interest in the lands, this provision was not under consideration when the language quoted above was used.

While more appropriate language might have been employed in the title to express the legislative intent as to the purpose and object of the enactment, we think a fair construction of that used clearly indicates that it was intended to impose a specific tax on real estate mortgages and land contracts. The act is said to be one "to provide for the assessment and the collection of a specific tax upon the class of credits foundedupon and evidenced by mortgages and liens upon real property." Clearly, this is but another way of expressing an intent to impose a specific tax upon such securities. If any person were enumerating his credits, he would list among them the notes or bonds secured by mortgages possessed by him. A note or bond, in itself, has no taxable value. The value is in the indebtedness of another, of which the note or bond is written evidence. No matter how described in the provision for taxation, the tax must be imposed upon the moneys owing to the taxpayer, of which the note or bond is the evidence and the mortgage the security. The act so provides. The tax is computed on the moneys for which the security is pledged. If the mortgage secures a bond issue, the tax need only be paid on the amount of the bonds issued or to be issued. If it secures a note, and a payment has been made on it before it is recorded, the tax will be computed on the amount yet unpaid at the time of its record. The mortgage conveys to the mortgagee an interest, equitable if you please, in the real estate described therein. The tax imposed is, under the law, a tax upon such interest. It is, however, none the less, a tax upon the monetary obligation of the mortgagor, evidenced by the note or bond, the payment of which is secured by the mortgage on his real estate. It is, therefore, a tax upon that class of credits which a man possesses, for the payment of which he holds real estate security. The requirement of payment at the time of recording the mortgage and the provision that the security may not be received in court as evidence unless the tax be paid is but a method or means provided by the legislature for enforcing payment. These provisions give it the legal effect of a recording tax, and it is frequently spoken of as such. It contains no other provision for enforcing payment.

It is apparent that there was no purpose to tax credits generally. That class of credits only is proposed to be taxed which are "founded upon and evidenced by mortgages." The words "founded upon" clearly indicate an intent to impose the tax upon the foundation upon which the credit or security rests, the mortgage.

In 1896 the legislature of the State of New York enacted a general tax law (chapter 908, Laws of 1896). Under its provisions, real estate mortgages were taxed as other personalty. In 1905 (chapter 729), an act was passed, entitled, "An act to amend the tax law in relation to the taxation of debts secured by mortgages." The first section of this act reads as follows:

"The words real property and real estate as used in this article, shall be understood to include everything a conveyance or mortgage of which can be recorded as a conveyance ormortgage of real property under the laws of this State."

In the first section of our act, a mortgage is thus defined:

"The word 'mortgage' as used herein shall include every mortgage or other instrument by which a lien is created over or imposed upon real property," etc.

In the New York act, a real estate mortgage is to be treated as real estate. In our act, a mortgage includes every instrument by which a lien on real estate is created. The purpose of both is to treat mortgages on real estate as real estate for the purpose of taxation. The purpose and effect of the New York act is thus stated in People, ex rel. Eisman, v.Ronner, 185 N.Y. 285, 288 (77 N.E. 1061):

"This act amended the general tax law of 1896, by imposing a tax upon all debts and obligations for the payment of money, which should thereafter be secured in whole, or in part, by mortgage of real property situated within this State."

It was further said:

"The scheme of this enactment was, clearly, to provide further revenue for the State treasury and, also, for the relief of the particular political divisions of the State. An annual tax was imposed upon mortgages," etc.

"The tax under this law is, in effect, upon the interest of the mortgagee in the real estate. The 'situs' of all mortgages is fixed within this State by section 291, thus operating upon nonresidents, as well as residents, and their record evidences the liability to the tax. It was one way of reaching personal property through one of its visible forms and with the justice, or propriety, of the legislation the court has no concern."

Section 2 of our act fixes the "situs" as does the New York act. The question there presented was, as here, —

"as to the right, as a condition of recording the mortgage, to exact from the relator the tax imposed by the law on the amount of the principal indebtedness.

The New York act was amended in 1906, chapter 532. The title was, "An act to amend the tax law in relation to the taxation of mortgages of real property." The provision imposing the tax was changed so as to read:

"A tax of fifty cents for each one hundred dollars and each remaining major fraction thereof of principal debt or obligation which is, or under any contingency may be secured by mortgage of real property situated within the State recorded on or after the first day of July, nineteen hundred and six, is hereby imposed on each such mortgage, and shall be collected and paid as provided in this article."

It will be noticed that this language is used in section 2 of our act. In the New York act, the tax is paid to the recording officer; in ours, it is paid to the county treasurer and a certificate of the payment indorsed on the mortgage, without which it is not entitled to record. Many of the other provisions are similarly worded. The New York law was again amended in 1907, chapter 340. The title reads "An act to amend the tax law, in relation to the recording tax on mortgages." The language above quoted from chapter 532 remained unchanged.

Any ordinary person on reading the title to this act would understand that its purpose was to impose a tax on the interest created by a real estate mortgage in the land described in it. Most lawyers would also do so. This is apparent from the fact that although, as before stated, hundreds of thousands of dollars of taxes have been paid under conditions similar to that here presented, no question of the sufficiency of the title has before been raised. In my opinion, it sufficiently meets the requirements heretofore referred to.

The order appealed from is affirmed, with costs to appellees.

CLARK, C.J., and McDONALD, MOORE, and STEERE, JJ., concurred with SHARPE, J.