40 S.W.2d 387 | Ky. Ct. App. | 1931
Affirming.
This is a suit under section 162, Kentucky Statutes, for refund of taxes paid by appellee under section 4019a-9, Kentucky Statutes, known as the Mortgage Recording Tax Act, which was declared unconstitutional by the Supreme Court of the United States, as violative of the equal protection clause of the Fourteenth Amendment to the federal Constitution, in Louisville Gas Electric Co. v. Coleman, Auditor,
In Coleman, Auditor, v. Inland Gas Corporation,
In the instant case it is contended that (1) the refusal to grant appellee a refund for the reasons stated in the Inland Gas Corporation case would contravene its right to equal protection of the law and deprive it of its property without due process of law in violation of the Fourteenth Amendment to the federal Constitution; (2) appellee's payment of the taxes for which it seeks refund was not voluntary, and, if that element is essential, it should therefore be accorded relief; (3) the question whether the payment was voluntary is itself a federal question, in that upon its decision depends whether or not appellee may have restitution of property of which it was deprived in violation of its right under the Fourteenth Amendment.
The Consolidated Realty Company paid a tax of $1,675.60 for the privilege of having recorded its mortgages which mature after five years when no such tax was required for the privilege of recording mortgages covering a lesser time. It is contended that the payment of this tax was exacted under compulsion of the summary power vested in the county clerk to refuse to record these mortgages unless the tax was prepaid, and that appellee was compelled either to pay the tax or lose the use of its lands as the bases of recorded mortgage credits. The lower court overruled a demurrer to the plaintiff's petition, and, the defendant having declined to plead further, adjudged that the plaintiff was entitled to recover from the commonwealth of Kentucky the sum of $1,675.60, and directed that the auditor of public accounts draw his warrant upon the state treasurer in favor of plaintiff for that amount.
In Middendorf v. Goodale, supra, it was held that a recording officer would not be compelled to record a mortgage until the tax was paid. In the Louisville Gas Electric Company case, the Supreme Court said:
*791"It is said that it is a tax upon a privilege which the owner or holder of the instrument creating a lien is free to accept or reject. But for practical purposes there is no such option, for, as this court recently held, there is a practical necessity to record such instruments because, if not recorded, the statute overrides them in favor of purchaser's without notice and creditors; and the choice is like one made under duress."
The substance of the Supreme Court's holding is that a mortgagee was placed by the state law under the compulsion of paying the recording tax or else losing the protection afforded by recording the mortgage. In Carpenter v. Shaw,
In determining whether a payment of taxes is voluntary or involuntary, the real question is whether there was such an immediate or urgent necessity for the payment as to imply that it was made under compulsion. Union Pacific Railroad Co. v. Dodge County,
"The officer, of course, could not certify that the taxes were paid while this tax stood undischarged, *792 and its validity undetermined. The register of deeds was prohibited by law from recording the deed until the fact of payment should be thus certified to him. The relator could not secure the recording of the deed by which she had acquired title to this land. If not recorded, she was liable, by force of our registry law, to be wholly divested of her title, either through a subsequent conveyance from her grantor to any innocent purchaser who might pay the tax, and place his deed on record, or through the recovery and docketing of judgments against her grantor. Such a possible result the relator was wholly powerless to prevent, except by the payment of the tax. The opportunity for her to interpose a defense to the tax in the tax proceedings, and to secure an adjudication as to its validity, would not occur for a considerable time after the conveyance to the relator, and almost always in such cases some interval must elapse between the time of the grant and the time when an adjudication could be secured upon that subject; and in the meantime the security of the title acquired must depend upon circumstances beyond the control of the grantee. The inducements which the law thus imposes upon a grantee of lands to pay a tax of inconsiderable amount, rather than to suffer his title to valuable lands to be thus jeopardized, may well be deemed to amount to compulsion. The coercion is certainly as real, and of substantially the same nature, as in the case of a distress of goods.
"Indeed, men of ordinary prudence would not generally hesitate to pay at once such a demand as is involved in this tax, rather than to incur the risk of losing their entire estates by not placing their deeds on record. Both upon the ground of reason and of authority such a payment, made under protest, should not be regarded as voluntarily made. The parties interested do not stand upon equal terms. The law, in effect, compels the payment."
Also see Swift C. B. Mfg. Co. v. United States,
In a business such as the one engaged in by appellee, the mortgagee must be in a position to record its mortgages immediately in order to enable it to continue in business. Unless it was permitted to record its mortgages promptly, it would be unable to carry on its business. The action of the clerk, therefore, in refusing to record the mortgage until the tax was paid, as he was authorized to do in Middendorf v. Goodale, supra, amounted to duress, and the appellee in paying the tax acted under compulsion. If payment of an illegal tax is made under duress, it need not be paid under protest to entitle the payer to recover it back. On the other hand, in the absence of a statutory provision, a mere protest, of itself, does not render a payment of taxes involuntary. City of Louisville v. Anderson,
It follows that the involuntary payment by appellee is recoverable under section 162 of our Statutes. In so far as the Inland Gas Corporation case held that the payment of taxes under the Mortgage Recording Tax Act was voluntary, it is overruled.
Wherefore the judgment is affirmed.
The whole court sitting.
DIETZMAN, J., dissents.