Gerald C. Mann
HonorableCharleyLockhart
State Treasurer
Austin, Texas
Bear Sir: OpinionRo. O-1787
Re: Whether certaininstrlrments
must
be stampedunder Arti~ole~704i'e.
V.C.S.
to be entitledto record.
In your letterof December19, 1939, you requestour opinion
relativeto'drtiole7047e,~Vernon*s AnnotatedCivil Statutes,being Senate
Bill Ro. 24, 46th Legislature,in responseto the followingquestions:
"1. If an obligationis securedprimarilybg'chattelslisted as being
exempt,but also is scouredby propertyof negligiblevalue that is not
listed as being exempt,shouldthe instrumentevidencingthe lien be
subjeotto being stamped?
'2. 'Ifan instrumentis for a specifiedamount,and any and all future
indebtedness,should the 'any and all future indebtedness'
be considered
when determiningthe amount of tax due9
"3. Should the term agriculturalproductsbe extendedto foodshifTs in
the stage of prooessingor curingwhen not owned bythe produoer2 For
instance: A bank t#es a mortgageon 20,000bushels of sweet potatoes
owed by a produoe&omgeny;'potatoes being~5.n.a~
storagedehydratorplant.
lfouldthe instrumentbe auljeotto being stamped?
"4. A motor oompany‘eAesell8 sn automobileto "Be, the ohattelmortgage
being properlytaxed. *A" 'eitherrepossessesthe automobilesor agrees
to a transferof equitJI(presumably,there being no record of such repos-
sessionor agreementin the CourP+Clerk*s office),and sells same to
sCe. '0n the chattelmortgage~~given
%y eC" to "As (whioh eB* does not
sign), there-isnoted: 'Transferof equity of “An’. Should the latter
chattelmortgagebe tared?
"5. Should stampesbs placedon aninstnmrent signedby a nationalbank
acting in the oapaoitiof executorof an estate or as a guardian2
'6. When a line instrumentrecites&at a speoifiedportionof the mono
borrowedhas been or will be used for the paymentof State, County,and/
or City taxes,should the specifiedportionbe deductedfrom the total to
arrive at the amount to be tared?
"7. If so, should a transferof tsx lien be recordedwith the instrument,
or would it make any differenoewhether or not the tax lien is recordedt"
HonorableCharleyLockhart,page 2 (C-1787)
The applicablepart of said Article 7047e reads as fol-
lows,
e(a) Except as'hereinotherwiseprovidedthere is hereby levied and
assesseda tax of Ten (lo+) Cents oa each One Hundred.($lOO.OO) Dollars
or fractionthereof,over the first'lkro Hundred(&DX.CC) Dollars,cn
all notes and obligationssecuredby chattelmortgage,deed of trust,
mechanic'slien contract,vendor'slien, conditionalsales contractand
all instrumentsof a similarnaturewhich are filed or recordedin the
offioe of the CountyClerk under the RegistrationLaws of this State;
providedthat no tar-shallbe levied on instrumentssecuringan amount
of TWO Hundred ($200.00)Dollarsor lessi After the effectivedate of
this Act, exceptas hereinafterprovided,no suoh instrumentshall be
filed or recordedby any County Clerk in this State until there has been
affixed tc such instrumentstampsin aoocrdanoewith the provisionsof
this section;providingfurther tiat shouldthe instrumentfiled in the
office of the County Clerk be securityof an obligationtthat~has proper-
ty pledgedas securityin a State or States other than Texas, the tax
shall bs based upon the reasonablecash value of all propertypledged
in Texas in the proportionthat'saidpropertyin Texas bears to the total
value of the propertysecuringthe obligaticn;.and, providingfurther
that, exceptas to renewalsor exb4nsionsof accruedinterest,the pro-
visions of this sectionshall not apply to instruments given in renewals
or extensionsof instsumentstheretoforestampedunder the provisionsof
this Aot or the one amendedhereby,and shall not apply to instruments
given in the retiding of existingbonds or obligationswhere the preced-
ing tistrumentof securitywas stampedin aooordenoewiIh this Act or the
one amendedherebgtprovided-further that the tsx levied in tile Act shall
apply to only one instrument,the one of the greatestdenomination, where
severalinstrtientsare contemporaneously executedto secureone obliga-
tion; and providedfurther that when oaoe stampedas provieded-herein, an
instrumentmay be recordedin any number of countiesin this State without
agaixbing so stamped. This sectionshallnot apply to instruments,
notes, or other obligationstaken by cr oa behalf of the United States or
of the State of Texas,~orany corporateagency or instrumentality of the
UnitedStates, or of the State of Texas in carryingout a governmentel
purposeas expressedin any act of the Congressof the UnitedStates or
of the Legislatureof:the State of Texas, nor *half the provisionsof thZs
sectionapply to obligationsbr~instruments seouredby liens on crops and
farm or agriculturalproducts,or to livestookor farm implements,or 81
abetraotof judgment.
"If the amount securedby an instrumentis not expressedtherein,or if any
part of the securitydescribedin any such instrumentappearsto bs located
withoutthe State of Texas, the County Clerk shall requireproof by written
affidavitsof such facts as may be necessarytc determinethe smounf of the
tax due."
In our ConferenceOpinionNo. 3061, dated June 17, 1939, ad-
dressedto you, we expressedthe view that a mcrtga&eis subjeotto the
tax where +&hesame is primarilyupon real~estateor chattelsother than
Hon. CharleyLookhart,page 3 (O-1787)
livestook,farm or agriculturalcrops or productsor farm implements
althoughsuch mortgagealso coverspropertiesof the kinds last mentioned.
It is our furtheropinionthat it is immaterialas towhioh class of prop-
erty includedin the mortgageis greaterin value. If the mortgageCovers
propertyother than crops, farm or agricuturalproducts,livestook,or farm
implements,then'thesame must be stampedto be entitledto record. Our
answerto your first questionis an affirmativeone.
3inoe the statuteprovidesno measure for laying the tax
upon a mortgage securing"any and all future indebtedness"
your second
questionis answeredin the negative"
We answeryour third auestionin the negative. The exemption
was evidentlyintendedfor the benefit of the agriculturalindustry. We do
not believethe &egislaturecontemplatedthat a mortgageshouldbs relieved
of tie tax merely by reason of the fact that t&e propertycoveredby the
same had its origin in agriculture" Section19 of Article 5 of the Constitu-
tion of Texas providesthat "farm productsin the hands of the producer. "
. are exempt from all taxation." This sectionof the Constitutionwould not,
of course,apply to the questionbefore us, since the tax leviedby said
Article 7047e is not upon the proper,@Lnoludedin a mortgagebut is upon
the privilegeof recordingsuch an instrument. However,it is a matter of
o-on knowledgethat in many if not nearly all instanoesthe costs involv-
ed in recordingmortgagesare as a practicalmatter borne by the mortgagor,
and we think it not at all improbablethat the Legislaturewas giving
effeot to the spiritof Section-19of Article 8 of the Constitution when the
exemptionhere involvedwas placed in said Article 7047e. In our said
ConferenceOpinion No. 3061~" held that the exemptionof farm implements
was intendedto apply to implementsused for farming~U~~OSSSand was
never intendedto apply to an implementwhich had never come into the hands
of a person who would devote it to a farmingpurpose. We regard cur answer
to your third questionas being in accordwith that holding"
We do not fully understandyour fourth question. We under-
stand from the SCOW that "C" executesa new mortgage to "A" who presents
the same for record. If ?A!’ had repossessedthe automobilefrom "3" under
authority@'en in the first mortgageand sold to"C" under the powers also
containedthereinor with the consentof "I?"then, of Course,the first
mortgagehas been extinguishedand the mortgagegiven by "C" to "A" is to
all intentsand purposesa mm mortgateand would be requiredto be stamp
ed in aooordsnoewith the Aot. The same would be true if by oonsentof
all partiesupon a sale frcan"B" to "C" of the former'sequity in t,h"
automobile,the first mortgageis cancelledand "C" gives to "A" a ncv
mortgage. If this does not answeryour question,pleaseexplainmore
fully the problemwith which you are concerned.
Hon. CharleyLockhart,page 4 (o-1787)
Addressingourselvesto your_fifth question,it is pointedout
. . .. -
that the Act itselfwould not exemptan instrumenttaken Ly an instru-
mentalityof the UnitedStates unless the same bs taken in carryingout
a governmental purpose. Such Act containsno exemptionof instruments
signedby Rationalbanks. We have heretoforeexpressedthe opinionthat
Nationalbanks are exemptfrom payin, e the taxes leviedunder Article 70479,
VerncntsAnnotatedCivil Statutes. OpinionNoO.O-1486,addressedto Hone
Tom S ay, CouatyAttoraey, Amaril10,Texas~ In that opinionwe directed
atte&on tc tilefaot that such exemptioncomes from the inabilityof the
State to levy such tax againstNationalbanks. The tax is leviedupon the
recordingof lien instrumentsand the person ordinarilypresentingthe
seme to the clerkfor reocrdingwculd be the mortgagee.,It does not ap
pear From your questionthat the mortgageeis en instrumentality of the
UnitedStates. The mere fact that a mortgafeis signedby a National
bank acting in the oapaoiiyof executorof an estate or as a guardian
wculd not entitleit to be exemptfrom the requirementof being stamped
as providedin said Article 7047e.
The use to whioh the prooeedsof a mortgagemay be put has no bear-
ing upon the questionas to whether the mortgagemust bs stampedin order
to be reoordede Qsnthough the mortgagebs taken upon propertywhich the
taxes so paid were againstsuoh instrumentmust stillbe stampedas provid-
ed-in the Act. The averagedeed of trust or chattelmortgage confers
widely differentrightsfromthose usuallyacquiredthroughsubrogationto
a tax lien. Sinoe we answer your sixth questionby saying that the amount
to be used for tie paymentof taxes shouldnot be deduotedfrom the totel
to arrive at the auount tc be taxed, it bsoomesunneoessaryto snsweryour
seventhquestion.
Yours very truly
ATlCRR!lYGRNkXALOFTEXA3
w /s/Glenn R. Lewis
Glenn R. Lewis
Assistant
Approved
OpinionCommittee
I$BSPB
Chairman