The constitution of 1849 (art. 11, sec. 13) stated that taxes

History. The constitution of 1849 (art. 11, sec. 13) stated that taxes shou d be uniform and equal throughout the state and that all property should be taxed in proportion to its value. The statutes enac- ted about the same time (1849-50, c. 52, sec. 2, 4) provided that mortgages were to be taxed as personal property. In 1851 (c. 6, sec. 21) a special clause was incorporated, and money loaned at interest was made subject to a tax of one dollar for each one hundred dollars of value. This system was used for one year only, when change was made and mortgages were made taxable as an interest in the real estate (St. 1852, c. 3, sec. 13) the mortgagee to pay taxes on the money secured by the mortgage, and the mortgagor on the value of the property less the value of the mort- gage. The next year (1853) the mortgagor was re- quired (c. 167, art. 10, sec. 9) to pay taxes on the value of the property without deduction, and the mort- gagee on the amount of money lent (c. 167, art. 1, sec. 1). In addition to this persons engaged in the business of lending money were subject to a license tax of ten cents for every one hundred dollars of busi- ness estimated to have been done (c. 167, art. 3, sec. 1).

This system continued until 1870 when an effort was made to re ieve the owners of encumbered real estate from double taxation (St. 1869-70, c. 424, 485). The law read as follows : “No mortgage or lien given and held upon real estate, or the debt thereby secured, or promissory note secured by mortgage, shal be as- sessed upon the books of any assessor, state, county, or otherwise.” At first the courts held that mort- gages were property, and as such could not be exempt from taxation under the constitution (People v. Eddy, 43 Cal. 331, 1872; Lick v. Austin, 43 Cal. 590, 1872). Later the court practica’ly reversed these decisions and stated that mortgages should not be taxed because such action would violate the constitutional requirement providing that all taxation should be uniform and equal and that property should be taxed in proportion to its value. The court held that a tax on the mort- gage and on the property given as security was a case of double taxation, and, as such, forbidden by the con- stitution. (People v. Hibernia Bank, 51 Cal. 243, 1876). See Savings and Loan Society v. Austin, 46 Cal. 415, 1873).

The present constitution in California was adopted in 1879 and did contain two sections relating to the taxation of mortgages. Under sec. 4, art. 13, mort- gages were to be taxed as an interest in the real es- tate, and each party to the contract was to pay taxes on his respective interest ; sec. 5 stated that all con- tracts by which a debtor was obligated to pay any tax or assessment on money loaned, or on any mortgage, deed of trust or other lien, were to be null and void. Court decisions practical’y annulled that part of the law forbidding contracts, for in the case of London and San Francisco Bank v. Bandman (120 Cal. 220, 1898) the court held that an allegation and finding which did not state that the agreement of the mort- gagor to pay the taxes was part of the mortgage con- tract, was not broad enough to establish an agreement violative of the constitution.

Sec. 5 was actually repealed in November, 1906 (See Const. St., 1907) and the question of repealing sec. 4 is to be voted on by the people in November, 1908 (St. 1907, p. 1159).