The judge of probate of Montgomery county refused to receive and file for record a mortgage by Ashley to secure a loan from the Federal Land Bank; this for the reason, alone, that the sum of $4.50 was not paid as exacted or imposed by schedule 71 of section 361 of Alabama's Revenue Law of 1919. Gen. Acts Ala. 1919, p. 420. This schedule of the Revenue Law provides:
That "no mortgage * * * shall be received for record unless" the privilege or license taxes stipulated therein have been paid "upon such instrument before the same shall be offered for record. * * *"
It is further provided therein that these privilege or license taxes shall be —
"paid for by the lender, and no such paper shall be received for record unless there is filed therewith a certificate that the privilege tax was paid by the lender."
Manifestly the "certificate" there prescribed is a certificate made by the lender, or by some agent of the lender. The office of that certificate is to advise the judge of probate, the registration officer, of the fact that the lender has paid the privilege tax there exacted. Its design consists with the law's just-stated imposition of the tax upon thelender, excluding its exaction of the borrower.
The majority of this court declares, in response on rehearing, ante, that the "certificate" required at the time of filing for record, viz. that the tax "was paid by the lender," is a duty enjoined upon the judge of probate, the registration officer. This view is wholly erroneous. A reading of schedule 71 of the Revenue Law will readily disclose the mistake. The "certificate" required of the judge of probate is that prescribed by subdivision "d" of schedule 71 (Acts 1919, pp. 420, 421), and its function is to confine the payment of the privilege tax in question to one county only where the mortgage describes property situate in more than one county. That is the "certificate" to which reference is made in the penalty provisions of subdivision "h" of schedule 71 (Acts 1919, pp. 422, 423), and not the "certificate" of lender payment that must be presented when the instrument is filed for record. This certificate by the judge of probate enables the mortgagee to have the benefit of registration in the other counties in which some of the property is situate. This error becomes more important in its consequences when provisions of the act of Congress creating the Federal Land Bank are considered.
The charge imposed upon mortgages, etc., by schedule 71 of the Alabama Revenue Law of 1919, is not an ad valorem tax; it is not a property tax. It is, however, a tax upon the exercise or enjoyment of the privilege, afforded by Alabama, of gaining the benefits of the state's registration statutes. Under the laws of Alabama, the payment by the 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.])?
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 disobedience 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, *Page 459 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" of the United States is not only inherently 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, Congress has not only not permitted the states to 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. Nat. 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 governmental authority, including the states. As 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 Congress entertained the particular intent to deny the application of the power of taxation 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 Loan Act. The state's Revenue Act (schedule 71) should not be so construed as to institute such a conflict with the federal act. As may be reasonably done, it should be read as not applying to mortgages taken by the Federal Land Bank, thereby bringing the state law (schedule 71) into harmony with the superior authority of the federal act.
Furthermore, the Federal Land Bank's function is to lend money on the security of land mortgages. Such a business cannot be safely conducted without the benefits, the protection, of the registration laws of this state. Indeed, without recourse to these registration laws the continuing primacy of the security taken for a loan on land in this state cannot be assured. Protection of the right and interest of a first-mortgagee is, in the absence of notice thereof otherwise, afforded alone through the constructive notice that results from seasonable registration of the instrument in the proper county or counties. Code Ala. 1907, §§ 3368-3373. An unrecorded mortgage has not the advantage of the rules of evidence provided by section 3374 of the Code. Aside from another consideration *Page 460 to be adverted to, the Federal Land Bank has not a fair or unembarrassed choice to pay or not to pay this privilege tax as a condition to the registration of its mortgage. The consequence to attend the Land Bank's declination to pay the privilege tax is to deny the bank mortgagee measures of protection and remedy under Alabama's registration laws that would leave the Land Bank 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, supra.
2. The Federal Land Bank is without power or authority to pay the privilege tax in question. In unmistakable terms the Alabama Revenue Law of 1919 (schedule 71, quoted ante) requires this tax to be paid by the lender. Section 13, ninth subdivision, of the Federal Farm Loan Act (39 Stat. p. 372 [U.S. Comp. St. § 9835g]) provides:
"Sec. 13. That every Federal Land Bank shall have power, subject to the limitations and requirements of this act —
* * * * * *
"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 payments. Such addition to the loan shall not be permitted to increase said loan above the limitations provided in section 12."
The carefully guarded definitions of authority conferred on the Land Banks and the limitations with respect to the monetary elements of the debt for which mortgages may be taken (sections 12, 13, and 14 of the Federal Farm Loan Act [U.S. Comp. St. §§ 9835ff-9835gg]) affirmatively exclude the right or power of the bank, the lender, itself to pay any charge or tax of the character in question, except, as the quoted subdivision provides, the bank may "advance the same" to the "borrower" and include that sum in the mortgage debt. The federal act imposes upon the borrower from the Land Bank the payment of "legal fees and recording charges," except the bank may lend the borrower the money to pay the "legal fees and recording charges," and make such advancement a part of the mortgage debt. These are of the "expenses" of the loan, and are made, expressly, obligations of the borrower. Manifestly, to observe the state law (schedule 71) would require the Land Bank, the lender, to pay that which the Federal Farm Loan Act requires the borrower to pay. Both laws cannot be obeyed. In this particular the state law must yield to the supremacy of the Federal Farm Loan Act.
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.