lender of this tax is a condition precedent to the filing of mortgages, etc., for record, and, if the tax is not paid as schedule 71 requires, the benefits secured by registration are denied the security holder. Can this tax be exacted of a Federal Land Bank as a condition precedent to the filing for record of that bank's mortgage, taken under the system provided by the Federal Farm Loan Act (39 U. S. Stat. at L. part 1, p. 360 et seq. [U. S. Comp. St. § 9835a et seq.])?

true, but is so declared by the Congress. The institution and its contemplated activities are public in nature, office, and effect. The institution is affected with no selfish or private design. It was not created for profit or for revenue purposes. With respect to such an institution, such an instrumentality of the United States, the states are not only powerless to subject the government's agency itself to taxation, but "the states have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control the operation of the constitutional laws enacted by Congress to carry into execution the powers vested" in the United States. Weston v. Charleston, 2 Pet. 449, 467, 7 L. Ed. 481; Nat. Bank, etc., v. Mayor, etc., 62 Ala. 284, 291, 292, 293, 34 Am. Rep. 15.

In creating the Federal Land Banks, Con

If only the local state law was the controlling factor, no debatable question would be presented. The act of Congress creating this institution, Federal Land Bank, is a law that must be obeyed. Indeed, within the sphere of its positive lawful authority, it is superior to the Alabama Revenue Law of 1919. If observance of the Alabama Revenue Law of 1919 involves offense to or dis-gress has not only not permitted the states to obedience of the act of Congress creating this institution, no agent or officer of the state should obey the state law, much less be compelled to do so. Likewise with respect to the officers or agents of the Federal Land Bank, whose observance of and obedience to the act of Congress is inescapably required. If there exists unavoidable inconsistency between provisions of the local state law and valid provisions of the act of Congress, such provisions of the state law are invalid. To avert that consequence it is the judicial duty to construe those provisions of the state law so as to harmonize the apparent conflict, if that may be reasonably done under the terms employed in the state law.

To exact this tax of the Federal Land Bank, under the Alabama Revenue Law of 1919, casts the state law into conflict, alternatively at least, with provisions of the act of Congress creating the institution, viz. provisions of section 26 (quoted below) or the ninth subdivision of section 13 of the Federal Farm Loan Act, to be hereinafter reproduced. Section 26 of the Federal Farm Loan Act (39 U. S. Stat. at L. p. 380 [U. S. Comp. St. § 9835q]), so far as presently material, provides:

"That every Federal Land Bank and every national farm loan association, including the capital and reserve or surplus therein, and the income derived therefrom, shall be exempt from federal, state, municipal, and local taxation, except taxes upon real estate held, purchased, or taken by said bank or association under the provisions of section 11 and section 13 of this act. First mortgages executed to Federal Land Banks, or to joint-stock land banks, and farm loan bonds issued under the provisions of this act, shall be deemed and held to be instrumentalities of the government of the United States, and as such they and the income derived therefrom shall be exempt from federal, state, municipal, and local taxation."

That the Federal Land Bank and mortgages taken thereby are "instrumentalities"

Nat.

As

subject them to taxation, or to impose the
burdens of taxation upon the results of their
activities in taking security for loans made,
but, to the contrary, Congress has declared,
expressly, that mortgages given to these
institutions shall be exempt from federal,
state, municipal, and local taxation.
Bank, etc., v. Mayor, etc., 62 Ala. 284, 293,
34 Am. Rep. 15. The validity of this feature
of the Federal Farm Loan Act has not been
questioned. Its validity is not questionable.
The exemption thus expressly declared by
Congress is from "taxation" by any govern-
mental authority, including the states.
respects mortgages taken under the system,
the intent avowed is to forbid the exertion
by the states, among other authorities, of the
power of taxation. To read these provisions
of section 26 as prescribing exemption from
either a license tax based on the right to do
business in Alabama or an ad valorem tax
only is unjustifiably to restrict the effect of
the plain terms of section 26. The nature of
this governmental instrumentality and the
public purpose it was designed to subserve
contribute to confirm the view that the Con-
gress entertained the particular intent to
deny the application of the power of taxa-
tion to mortgages taken by the Federal Land
Bank.

It is conceded that the charge imposed by schedule 71 of the Alabama Revenue Law of 1919 is a privilege tax-a tax upon the privilege of availing of the registration laws of Alabama-a tax that must be paid if a lender would receive the important advantages, the protection the registration laws of the state afford. Being an exertion of the power of taxation, the state's charge is offensive to the provisions of section 26 (quoted ante) of the Federal Farm Loan Act which forbid the states and other authorities to subject its mortgages to taxation in any form or through any method not excepted by other (presently unimportant) provisions of the Federal Farm

(93 So.)

1

71) should not be so construed as to institute, ments. Such addition to the loan shall not be such a conflict with the federal act. As permitted to increase said loan above the limmay be reasonably done, it should be read itations provided in section 12." as not applying to mortgages taken by the The carefully guarded definitions of auFederal Land Bank, thereby bringing the thority conferred on the Land Banks and the state law (schedule 71) into harmony with limitations with respect to the monetary the superior authority of the federal act. elements of the debt for which mortgages Furthermore, the Federal Land Bank's may be taken (sections 12, 13, and 14 of the function is to lend money on the security of Federal Farm Loan Act [U. S. Comp. St. land mortgages. Such a business cannot be §§ 9835ff-9835gg]) affirmatively exclude the safely conducted without the benefits, the right or power of the bank, the lender, itself protection, of the registration laws of this to pay any charge or tax of the character state. Indeed, without recourse to these in question, except, as the quoted subdiviregistration laws the continuing primacy sion provides, the bank may "advance the of the security taken for a loan on land in same" to the "borrower" and include that this state cannot be assured. Protection of sum in the mortgage debt. The federal act the right and interest of a first-mortgagee imposes upon the borrower from the Land is, in the absence of notice thereof otherwise, Bank the payment of "legal fees and reafforded alone through the constructive no-cording charges," except the bank may lend tice that results from seasonable registration the borrower the money to pay the "legal of the instrument in the proper county or fees and recording charges," and make such counties. Code Ala. 1907, §§ 3368-3373. An advancement a part of the mortgage debt. unrecorded mortgage has not the advantage These are of the "expenses" of the loan, and of the rules of evidence provided by section are made, expressly, obligations of the bor3374 of the Code. Aside from another conrower. Manifestly, to observe the state law sideration to be adverted to, the Federal (schedule 71) would require the Land Bank, Land Bank has not a fair or unembarrassed the lender, to pay that which the Federal choice to pay or not to pay this privilege tax Farm Loan Act requires the borrower to as a condition to the registration of its mortgage. The consequence to attend the pay. Both laws cannot be obeyed. In this particular the state law must yield to the Land Bank's declination to pay the privisupremacy of the Federal Farm Loan Act. lege tax is to deny the bank mortgagee measures of protection and remedy under Alabama's registration laws that would leave the Land Rank no alternative but to suspend its function of loaning money in Alabama. Hence, in this view, the imposition of the privilege tax is an illegal burden upon, an impediment to, the exercise of the government's power and function under the Federal Farm Loan Act. Weston v. Charleston,

"Ninth. To charge applicants for loans and borrowers, under rules and regulations promulgated by the Federal Farm Loan Board, reasonable fees not exceeding the actual cost of appraisal and determination of title. Legal fees and recording charges imposed by law in the state where the land to be mortgaged is located may also be included in the preliminary costs of negotiating mortgage loans. The borrower may pay such fees and charges or he may arrange with the Federal Land Bank making the loan to advance the same, in which case said expenses shall be made a part of the face of the loan and paid off in amortization pay

The deliverance in Pocahontas Co. v. Virginia, 113 Va. 108, 73 S. E. 446, is without application to the materially different circumstances here involved. No act of Congress-containing provisions of the nature and effect of sections 26 and 13 (subdivision 9) of the Federal Farm Loan Act-was a factor of compelling influence in that cause. Likewise with respect to the subject-matter of Attorney General Garland's opinion. 18 Ops. of Atty. Gen. pp. 491, 492.

The considerations stated lead to these

conclusions: That the indicated feature of schedule 71 of the Alabama Revenue Law of

1919 should be construed to harmonize with the Federal Farm Loan Act; that, when so

construed, Alabama's Revenue Law of 1919

does not exact the payment by the Federal Land Bank of the privilege tax in question as a condition precedent to the right to file Ashley's mortgage for record; and that the judge of probate should be compelled by mandamus to accept the instrument for recordation without the precedent exaction of the tax's payment.

I therefore dissent from the denial of the relief sought by the Federal Land Bank, the appellee. I would award the writ prayed.

MILLER, J. (dissenting). The Federa! Farm Loan Act (39 U. S. Stat. at Large, pt. 1, § 26, p. 380 [U. S. Comp. St. § 9835q]) provides:

"First mortgages executed to Federal Land shall be deemed and held to be Banks

12

states: "The privilege tax must be paid by the lender." This schedule 71 also provides: When "the amount of the tax required under this schedule" is paid on the mortgage, the judge of probate will certify it on the instrument and such instrument shall be admitted to record, "without the payment of any further tax thereon except the fee to the probate judge for recording" it. When the $4.50 tax is paid on the mortgage, it shall be ad

instrumentalities of the government of the United States, and as such they, and the income derived therefrom, shall be exempt from federal, state, municipal, and local taxation." Under this act this mortgage to the Federal Land Bank is exempt from federal, state, municipal, and local taxation, and it shall be deemed and held to be an instrumentality of the government of the United States. The following property shall be exempt from an ad valorem taxation under the revenue stat-mitted to record "without the payment of

ute:

* *

"All property, real and personal, of the United States. * All mortgages, together with the notes, debts and credits secured thereby on real and personal property, situated in this state, which mortgages have been filed for record and the privilege tax paid thereon." Section 2, Revenue Act 1919 (Gen. Acts 1919, p. 283).

A mortgage on real estate and the debt it secures are exempt from any other taxation, provided it has been filed for record and the privilege tax has been paid thereon. Under the federal statute this mortgage is exempt from state, municipal, and local taxation. If it is unrecorded, it cannot be taxed by the state or county under the federal act. If it is recorded, and pays the privilege tax, it is clearly exempt from any further taxation by the state or county or city. Does the federal act, by exempting it (the mortgage) from state, municipal, and local taxation, thereby include this "privilege tax"? Does the state Revenue Act, by exempting all property of the United States from an ad valorem taxation, thereby exempt this mortgage from this "privilege tax"? Schedule 71 of section 361, Revenue Act of 1919 (Gen. Acts 1919, p. 420), declares in part:

No mortgage which is given to secure the payment of any debt, which conveys real estate within this state, shall be received for record unless the "privilege or license tax" of "fifteen cents for each hundred dollars of such indebtedness, or fraction thereof, which is secured by said mortgage" is paid "upon such instrument before the same shall be offered for

record."

A tax of $4.50-a tax of 15 cents on the $100 secured by it-must be paid on "this instrument," this mortgage, "before the same shall be offered for record," unless it is exempt. Shall the mortgagee, the Federal Land Bank, pay a tax of $4.50 on this instrument before it can receive the benefit of the recordation laws of Alabama? This tax is on the mortgage, if it is recorded, if it received the benefits of some of the statutes of Alabama. If it receives the benefits of our laws, the recording statutes, it must be taxed; the mortgage must be taxed, and the lender, the mortgagee-the Federal Land Bank-must pay the tax; and it is taxed according to the amount of the debt it secures, unless it is exempt. This revenue statute-schedule 71

any further tax thereon." This schedule 71 also states:

"There shall be no ad valorem tax collected on any such instrument, or the debt secured thereby which shall have paid the tax prescribed by this schedule, either state, county, or municipal."

The payment of this tax of $4.50-15 cents per $100 on the amount of the debt it secures -on this mortgage when recorded will exempt the mortgage and the debt from any direct ad valorem tax, state, county, or municipal. A similar statute declaring this principle and form of taxation by classifying debts or solvent credits, fixing one rate on recorded mortgage debts and another rate on solvent credits unsecured by mortgages, and debts secured by unrecorded mortgages, has been upheld and approved by this court. This court, speaking through Justice De Graffenried, in State v. Ala. Fuel & Iron Co., 188 Ala. 511, 66 South. 176 (L. R. A. 1915A, 185, Ann. Cas. 1916E, 752), said:

"While the Legislature, in the exercise of that reasonable latitude with respect to the classification of properties for taxation, and in the exercise of its reasonable powers of exempting properties from taxation-powers which all well-considered cases concede it to

possess-had the undoubted right to require a privilege tax of all mortgages, deeds of trust, and written evidences of contracts of conditional sales, for their recordation, and to exempt such recorded instruments from an ad valorem tax, the imposition by the Legislature of an ad valorem tax upon all solvent credits not included in the above classification was not only not discriminatory, but it was, in fact, an effort on the part of the Legislature to meet the letter and the spirit of our Constitution, which intends, in so far as a healthy policy will permit, equality in taxation."

The probate judge receives 5 per cent. commissions on and out of the tax as his compensation for collecting and remitting it to the proper officials; the balance of this $4.50 tax will be divided between the state and county, two-thirds to the former and onethird to the latter. Schedule 71, § 361, Revenue Act 1919, p. 421. This schedule 71 of section 361 of the Revenue Act of 1919, p. 420, also provides:

"When the property described in said instrument is situated within different counties within this state, then the judge of probate who collects said taxes shall pay over the amount

(93 So.)

due the county treasurer to the county treas- L. R. A. 1915A, 185, Ann. Cas. 1916C, 752. urer of each of the different counties in which And the rate, 15 cents on each $100 of the said property is situated, an amount of said mortgage debt, is less than the maximum rate taxes that would be in proportion to the value fixed by the Constitution. Section 214 of the of the property therein as compared to the Constitution of 1901 reads: value of the whole property within this state described in said instrument."

"The Legislature shall not have power to levy in any one year a greater rate of taxaIt appears, if the mortgage is on property |tion than 65/100 of 1 per centum on the value in different counties, the tax one-third (less of taxable property within this state." commissions) belonging to the counties shall be prorated among the counties in which the property is located according to the value of the property in each county, as compared to the value of the whole property in the mortgage. The tax is fixed on the face value of the debt secured by the mortgage, and the tax is divided among the counties according to the value of the property in each county in the mortgage as compared to the value of the whole property in the mortgage.

Ad valorem means literally "according to value"; as applied to the subject of taxation, it means "a tax or duty upon the value of the article or thing subject to taxation." 2 Corpus Juris, p. 30. It is true this law was first enacted in Alabama in 1903. Gen. Acts 1903, p. 227. It is similar in many respects to the present revenue statute on that subject. In Barnes v. Moragne, 145 Ala. 313, 41 South. STATE ex rel. MILAN v. MASTERS. (7 Div. 947, this court, by divided vote of four to three, wrote on the subject of the act of 1903: "In fact, it only provides for a 'privilege tax' on recorded mortgages, once for the life of the mortgage, which is in no sense an ad valorem tax."

If this is a correct interpretation of the statute, then a mortgage debt can be taxed for the recordation of the mortgage at the to create a new school district by including The county board of education has no power will of the Legislature, on the full face value therein territory lying within the corporate of the secured debt, without limitation as to limits of a town of less than 2,000 population, the amount of the "privilege or license tax"; in view of Code 1907, § 1693, providing that and the Legislature can, if they so desire, each incorporated town shall constitute a sepalso levy an ad valorem tax annually to the arate school district, and section 1355, as constitutional limit (section 214 of the Con- amended by Acts 1915, p. 559, providing that stitution of 1901) on the same mortgage debt. the "management and control of public schools" We cannot approve of this interpretation of in towns of less than 2,000 population shall this statute. It is dangerous. It would per- section 1693, providing that the boundaries of be vested in a county board of education, and mit mortgage debts to be taxed beyond the any public school district may be changed by constitutional maximum. The will of the adding to or taking from any district composLegislature should be controlled by the Con- ed of an incorporated town such contiguous stitution; the taxes levied and collected territory as the board may deem just; "con