It is urged by respondent that the assessment of' the mortgage interest was void, because the mortgage was executed in 1872, and the Constitution operates prospectively, authorizing only the taxation of mortgages created subsequent to its adoption. But a mortgagee, prior to the adoption of the new Constitution, did not have a vested right of exemption from taxation which extended beyond the life of the former Constitution. Even if he had a contract with his mortgagor by which the latter agreed to pay all taxes, a change in the law which imposed the duty upon him to pay the tax on the mortgage interest in the first instance, would not violate the obligation of the contract. Mortgagee might still enforce his contract against mortgagor. His relation to the debtor would not be changed, but only his relation to the State. The plain intent of the new Constitution is to subject to taxation classes of property previously exempt. That one of the new classes consists of credits, secured or unsecured, no more violates any contract or vested right, of the creditor, than would a provision by which, for the first time, the owner of any tangible property should be taxed upon its value.
It is further urged that the tax upon the mortgage interest in the land is void, because the mortgage debt had been paid *372and the lien released. But Section 3678 of the Political Code provides: “Any assessment on a mortgage or deed of trust, which has been erroneously taxed to the mortgagee or the party loaning the money, when the same has been paid or satisfied prior to the first Monday in March, shall be valid only as against the real estate from the assessment on which a deduction has previously been made.” The real estate is appraised at its just valuation. An existing mortgage is deemed an interest in the real estate, and its value is assessed to the mortgagee or his assignee; the balance of value being assessed to the owner of the land. If, however, by mistake a mortgage which has been paid off shall be assessed, then, by operation of law, the tax on the mortgagee’s interest is valid only against the real estate, and payably by the owner of the land, whose estate has been enlarged by the release of the mortgage lien. Such is the system, in which we see nothing in conflict with any provision of the Constitution.
Judgment reversed.
McKee, J., dissented.