Case Information

*1 Gerald C. Mann

Honorable Charley Lockhart

State Treasurer

Austin, Texas Opinion Ro. O-1787

Bear Sir:

Re: Whether certain instrlrments must be stamped under Arti~ole~704i'e. V.C.S. to be entitled to record.

In your letter of December 19, 1939, you request our opinion relative to'drtiole 7047e,~Vernon*s Annotated Civil Statutes, being Senate Bill Ro. 24, 46th Legislature, in response to the following questions: "1. If an obligation is secured primarily bg' chattels listed as being exempt, but also is scoured by property of negligible value that is not listed as being exempt, should the instrument evidencing the lien be subjeot to being stamped?

'2. 'If an instrument is for a specified amount, and any and all future indebtedness, should the 'any and all future indebtedness' be considered when determining the amount of tax due9

"3. Should the term agricultural products be extended to foodshifTs in the stage of prooessing or curing when not owned bythe produoer2 For instance: A bank t#es a mortgage on 20,000 bushels of sweet potatoes owed by a produoe &omgeny;'potatoes being~5.n.a~ storage dehydrator plant. lfould the instrument be auljeot to being stamped?

"4. A motor oompany‘eAe sell8 sn automobile to "Be, the ohattel mortgage being properly taxed. *A" 'either repossesses the automobiles or agrees to a transfer of equitJI (presumably, there being no record of such repos- session or agreement in the CourP+Clerk*s office), and sells same to sCe. '0n the chattel mortgage~~given %y eC" to "As (whioh eB* does not sign), there-is noted: 'Transfer of equity of “An’. Should the latter chattel mortgage be tared?

"5. Should stampes bs placed on aninstnmrent signed by a national bank acting in the oapaoiti of executor of an estate or as a guardian2 '6. When a line instrument recites&at a speoified portion of the mono borrowed has been or will be used for the payment of State, County, and / or City taxes, should the specified portion be deducted from the total to arrive at the amount to be tared?

"7. If so, should a transfer of tsx lien be recorded with the instrument, or would it make any differenoe whether or not the tax lien is recordedt"

Honorable Charley Lockhart, page 2 (C-1787)

The applicable part of said Article 7047e reads as fol- lows,

e(a) Except as'herein otherwise provided there is hereby levied and assessed a tax of Ten (lo+) Cents oa each One Hundred.($lOO.OO) Dollars or fraction thereof, over the first'lkro Hundred (&DX.CC) Dollars, cn all notes and obligations secured by chattel mortgage, deed of trust, mechanic's lien contract, vendor's lien, conditional sales contract and all instruments of a similar nature which are filed or recorded in the offioe of the County Clerk under the Registration Laws of this State; provided that no tar-shall be levied on instruments securing an amount of TWO Hundred ($200.00) Dollars or lessi After the effective date of this Act, except as hereinafter provided, no suoh instrument shall be filed or recorded by any County Clerk in this State until there has been affixed tc such instrument stamps in aoocrdanoe with the provisions of this section; providing further tiat should the instrument filed in the office of the County Clerk be security of an obligationtthat~has proper- ty pledged as security in a State or States other than Texas, the tax shall bs based upon the reasonable cash value of all property pledged in Texas in the proportion that'said propertyin Texas bears to the total value of the property securing the obligaticn;.and, providing further that, except as to renewals or exb4nsions of accrued interest, the pro- visions of this section shall not apply to instruments given in renewals or extensions of instsuments theretofore stamped under the provisions of this Aot or the one amended hereby, and shall not apply to instruments given in the retiding of existing bonds or obligations where the preced- ing tistrument of securitywas stamped in aooordenoe wiIh this Act or the one amended herebgt provided-further that the tsx levied in tile Act shall apply to only one instrument, the one of the greatest denomination, where several instrtients are contemporaneously executed to secure one obliga- tion; and provided further that when oaoe stamped as provieded-herein, an instrument may be recorded in any number of counties in this State without agaixbing so stamped. This section shall not apply to instruments, notes, or other obligations taken by cr oa behalf of the United States or of the State of Texas,~or any corporate agency or instrumentality of the United States, or of the State of Texas in carrying out a governmentel purpose as expressed in any act of the Congress of the United States or of the Legislature of:the State of Texas, nor *half the provisions of thZs section apply to obligations br~instruments seoured by liens on crops and farm or agricultural products, or to livestook or farm implements, or 81 abetraot of judgment.

"If the amount secured by an instrument is not expressed therein, or if any part of the security described in any such instrument appears to bs located without the State of Texas, the County Clerk shall require proof by written affidavits of such facts as may be necessary tc determine the smounf of the tax due."

In our Conference Opinion No. 3061, dated June 17, 1939, ad- dressed to you, we expressed the view that a mcrtga&e is subjeot to the tax where +&he same is primarily upon real~estate or chattels other than *3 Hon. Charley Lookhart, page 3 (O-1787)

livestook, farm or agricultural crops or products or farm implements although such mortgage also covers properties of the kinds last mentioned. It is our further opinion that it is immaterial as towhioh class of prop- erty included in the mortgage is greater in value. If the mortgage Covers property other than crops, farm or agricutural products, livestook, or farm implements, then'the same must be stamped to be entitled to record. Our answer to your first question is an affirmative one.

3inoe the statute provides no measure for laying the tax upon a mortgage securing "any and all future indebtedness" your second question is answered in the negative"

We answer your third auestion in the negative. The exemption was evidently intended for the benefit of the agricultural industry. We do not believe the &egislature contemplated that a mortgage should bs relieved of tie tax merely by reason of the fact that t&e property covered by the same had its origin in agriculture" Section 19 of Article 5 of the Constitu- tion of Texas provides that "farm products in the hands of the producer . " . are exempt from all taxation." This section of the Constitution would not, of course, apply to the question before us, since the tax levied by said Article 7047e is not upon the proper,@ Lnoluded in a mortgage but is upon the privilege of recording such an instrument. However, it is a matter of o-on knowledge that in many if not nearly all instanoes the costs involv- ed in recording mortgages are as a practical matter borne by the mortgagor, and we think it not at all improbable that the Legislature was giving effeot to the spirit of Section-19 of Article 8 of the Constitution when the exemption here involved was placed in said Article 7047e. In our said Conference Opinion No. 3061~" held that the exemption of farm implements was intended to apply to implements used for farming ~U~~OSSS and was never intended to apply to an implement which had never come into the hands of a person who would devote it to a farming purpose. We regard cur answer to your third question as being in accord with that holding"

We do not fully understand your fourth question. We under- stand from the SCOW that "C" executes a new mortgage to "A" who presents the same for record. If ?A!’ had repossessed the automobile from "3" under authority @'en in the first mortgage and sold to"C" under the powers also contained therein or with the consent of "I?" then, of Course, the first mortgage has been extinguished and the mortgage given by "C" to "A" is to all intents and purposes a mm mortgate and would be required to be stamp ed in aooordsnoe with the Aot. The same would be true if by oonsent of all parties upon a sale frcan "B" to "C" of the former's equity in t,h" automobile, the first mortgage is cancelled and "C" gives to "A" a ncv mortgage. If this does not answer your question, please explain more fully the problem with which you are concerned.

Hon. Charley Lockhart, page 4 (o-1787) Addressing ourselves to your fifth question, it is pointed out _ . . . . -

that the Act itself would not exempt an instrument taken Ly an instru- mentality of the United States unless the same bs taken in carrying out a governmental purpose. Such Act contains no exemption of instruments signed by Rational banks. We have heretofore expressed the opinion that National banks are exempt from payin, e the taxes levied under Article 70479, Verncnts Annotated Civil Statutes. Opinion NoO. O-1486, addressed to Hone Amaril10,Texas~ In that opinion we directed Tom S ay, CouatyAttoraey, atte&on tc tile faot that such exemption comes from the inability of the State to levy such tax against National banks. The tax is levied upon the recording of lien instruments and the person ordinarily presenting the seme to the clerk for reocrding wculd be the mortgagee., It does not ap pear From your question that the mortgagee is en instrumentality of the United States. The mere fact that a mortgafe is signed by a National bank acting in the oapaoiiy of executor of an estate or as a guardian wculd not entitle it to be exempt from the requirement of being stamped as provided in said Article 7047e.

The use to whioh the prooeeds of a mortgage may be put has no bear- ing upon the question as to whether the mortgage must bs stamped in order to be reoordede Qsnthough the mortgage bs taken upon property which the taxes so paid were against suoh instrument must still be stamped as provid- ed-in the Act. The average deed of trust or chattel mortgage confers widely different rights fromthose usually acquired through subrogation to a tax lien. Sinoe we answer your sixth questionby saying that the amount to be used for tie payment of taxes should not be deduoted from the totel to arrive at the auount tc be taxed, it bsoomes unneoessary to snswer your seventh question.

Yours very truly ATlCRR!lYGRNkXALOFTEXA3 w /s/Glenn R. Lewis Glenn R. Lewis Assistant Approved Opinion Committee I$BSPB Chairman