not in itself property, but, like a deed or lease, is a species of conveyance or acknowledgment of a conditional interest or right in the property, is not equal and uniform taxation, but an unequal and double tax on the property mortgaged.
The importance of this decision, considered as an act reformatory of the popular theory of local taxation, does not require to be proved and illustrated; but as it was unquestionably a step in advance of any heretofore taken by either our Federal or State courts, and as, by reason of it, not only were mortgages exempted from taxation in California, but also all promissory notes and other evidences of indebtedness, it is desirable briefly to ask attention to the reasoning by which the court was led to its conclusions.
The opinion was given by the Chief Justice—Crockett—who, after reviewing the history of the case, is reported to have used the following language:
"I come now to the point, whether a tax on land at its full value, and a tax on a debt for money loaned, secured by a mortgage on the land, is in substance and legal effect a tax on the same property. We all know, as a matter of general notoriety, that almost universally, by a stipulation between parties, the mortgagor is obliged to pay the tax both on the land and on the mortgage. Practically he is twice taxed on the same value, if he has still in his possession the borrowed money to secure which the mortgage was made. The law taxes in his hand both money and land; and by his stipulation he is required to pay tax on the mortgage debt, and also, if the money has pased out of his hands into the possession of some other taxpayer, it is taxed in the hands of the latter, so that the money bears its share of taxation, and the land its share, in the hands of whomsoever they may happen to be.
"It is very true that a voluntary agreement on the part of the mortgagor to pay the tax on the mortgage debt can not improve its situs. The State was no party to the contract, and is not bound by stipulation inter alias. The burdens of taxation can not be shifted from those on whom the law imposes them by stipulations between private persons; but in the absence of such a stipulation, an inexorable law of political economy would impose upon the mortgagor the burden, in a different form, of paying the tax on the mortgage debt. Interest on money loaned is paid as a compensation for the use of the money, and a rate of interest as agreed on is the amount which the parties stipulate will be the just equivalent to the lender. If, however, by the imposition of a tax on the debt, the Government diminishes the profit which the lender would otherwise receive, the rate of interest will be sufficiently increased to cover the tax, which in this way will be ultimately paid by the borrower.
