The rulings of the trial court were not in accordance with the above views, and the judgment of the trial court is therefore reversed, and the cause is remanded to the trial court for further proceedings in accordance with the views above expressed.

Reversed and remanded. All the Justices concur, except Anderson, C. J., who dissents.

NOTE.

Validity of Exemption from Taxation of Money Loaned on Mortgage Security.

Legislation by which money loaned on mortgage security has been exempted from ad valorem taxation has been enacted in certain jurisdictions for two main reasons, viz.: First, to induce capital to come into the state for the benefit of landowners, and second, to make known the existence of mortgages for the purpose of a specific or registration tax. The validity of such an exemption from taxation depends primarily of course on whether it is deemed to be based on such a classification as will avoid conflict with the provisions of the various state constitutions requiring uniformity of taxation. The reported case establishes the validity of a revenue bill which levies an ad valorem tax on "all money lent," except when it is secured by a mortgage, deed of trust or written contract of conditional sale, and in those cases grants an exemption from the payment of the ad valorem tax if a recording tax has been paid and the privilege of registering the mortgage has been taken advantage of. Any contrary opinion as to the constitutionality of the statute expressed in Barnes v. Moragne, 145 Ala. 313, 41 So. 947, must be considered to have been made obiter, and is now absolutely overruled by the holding of the reported case.

In Kansas the courts have declared to be unconstitutional an act which by its terms levied a "registration fee" on mortgages, and granted an exemption from all general taxes levied on an ad valorem basis where the provisions of the act were complied with. Wheeler v. Weightman, 96 Kan. 50, 149 Pac. 977, L.R.A. 1916A 846. The constitutional provision which the act was held in that case to contravene provided as follows: "The legislature shall provide for a uniform and equal rate of assessment and taxation; but all property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes, and personal property to the amount of at least two hundred dollars for each family, shall be exempted from taxation." Const. art. 11, § 1. The court said: "The statute undertakes to classify the property of the state for the purposes of taxation, to place

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real estate mortgages, or, speaking accurately, some real estate mortgages, in a class by themselves, and to subject such mortgages to a specific tax, all contrary to the express command of the constitution. It is not inconceivable that a people having the information and the experience and imbued with the ideas and sentiments of those who voted for the adoption of the constitution would be amazed at a proposal to exempt from taxation an entire class of property now estimated to be worth $300,000,000, and by the very act of exemption to be enormously increased, which is owned chiefly by capitalists and money lenders." The court commented on the statute discussed in the reported case as follows: "The supreme court of Alabama described the tax as one imposed for the privilege of recording mortgages (State v. Alabama Fuel & Iron Co. [Ala. 1914] 66 So. 169) and it is a genuine privilege tax. The tax itself is very low, fifteen cents per hundred dollars no matter what the duration of the instrument. The collecting officer retains a part of the tax for his services. The inducement to record and pay the tax, besides the advantages secured by recording, consists in exemption from the usual ad valorem taxes, and a mortgage holder may withhold his instrument from record if he see fit, without any kind of coercion. Stated in another way, the privilege of recording a mortgage, which as property is subject to ad valorem taxes, is denied unless a small tax is paid. the privilege be exercised an additional privilege is extended, that of exemption from ad valorem taxation; but the mortgage holder has a free choice to take or to renounce the privilege. If he renounce the privilege he loses nothing but the benefits it affords. He is not driven to swallow his 'privilege' under pain of forfeiting his security, as section 6 of the Kansas statute and statutes like it require."

If

In Michigan a statute has been enacted with the evident purpose of changing the method of taxing mortgages from the ad valorem system to a specific one. It provides as follows: "Sec. 2. A tax of fifty cents for each one hundred dollars and each remaining major fraction thereof of the principal debt or obligation which is, or under any contingency may be, secured by a mortgage upon real property situated within this state recorded on or after the first day of January, nineteen hundred twelve, is hereby imposed on each such mortgage, and shall be collected and paid as hereinafter provided: Provided, that no tax shall be imposed upon any debt or obligation which is, or under any contingency may be, secured by a mortgage upon such real estate as shall be owned and occupied by library, armory, benevolent, charitable, educational and scientific institutions, in

The tax imposed by this section shall be in addition to the recording fee now provided for by law." Pub. Acts 1911, Act No. 91. The statute was declared constitutional in Union Trust Co. v. Detroit, 170 Mich. 692, 137 N. W. 122, the court holding that the statute did not infringe the uniform tax provision of the constitution by exempting all mortgages held by various educational, charitable, and religious societies. The court reviewing the cases wherein it was held that the property of those organizations was properly exempted from taxation, said that the same reason which impelled that rule applied also to their obligations, namely, mortgages.

In Minnesota the courts have established the constitutionality of an act which provides for the imposition of a tax of fifty cents on each one hundred dollars, or major fraction thereof, of the principal debt or obligation secured by a mortgage of real property, and exempts from all other taxes all mortgages on which that tax shall be paid. Laws 1907, c. 328, p. 448. In 1906 an amendment to the constitution was adopted with the apparent purpose of opening the way for legislation of this character. The amendment provides that "taxes shall be uniform upon the same class of subjects and shall be levied and collected for public purposes." The act has been sustained in several cases. Mutual Benefit L. Ins. Co. v. Martin County, 104 Minn. 179, 116 N. W. 572; State v. Farmers', etc. Sav. Bank, 114 Minn. 95, 130 N. W. 445, 851, 232 U. S. 516, 34 S. Ct. 354, 58 U. S. (L. ed.) 706; State v. Fitzgerald, 117 Minn. 192, 134 N. W. 728; Orr v. Sutton, 119 Minn. 193, 137 N. W. 973, 42 L.R.A. (N.S.) 146. As to the reason for and the wisdom of the legislation the court said in Mutual Benefit L. Ins. Co. v. Martin County, supra: "There were good and sufficient reasons why a special method should be devised for the taxation of this kind of property. It is a notorious fact that the owners of securities in the form of bonds and notes have not been in the habit of paying their proportionate share of the taxes. This has been due in a measure to the ease with which the existence of such property can be concealed from the tax officials. But when the owner of a note takes a mortgage on real estate as security, and places it upon the public records, he exposes his ownership-at least, his ostensible owner

ship and enables the assessor to reach him. The perfect security afforded by a good real estate mortgage makes it necessary for the owner to accept a low rate of interest, and the adequate net returns, after paying taxes in the ordinary way, often result in practical confiscation. The owner is thus tempted to seek some devious method for escaping taxation, in order that he may be on an equality with the owner of an unsecured note or bond which rests undiscovered in a safety deposit vault. The mortgage is therefore taken in the name of a nonresident, or the money is sent to another state, and there loaned in the name of the true owner. Experience has shown that it is very difficult, if not impossible, to fairly and successfully tax this kind of property under the system ordinarily applied to personal property. ... By requiring a registration tax, every mortgage security pays a moderate tax, and this, in the judgment of the legislature, is preferable to the certain uncertainties of the old system." In State v. Farmers', etc Sav. Bank, 114 Minn. 95, 130 N. W. 445, 851, affirmed 232 U. S. 516, 34 S. Ct. 354, 58 U. S. (L. ed.) 706, the court held that neither the state nor the federal constitutional prohibitions against class legislation were infringed, though the act while imposing the registry tax on mortgages owned by banks failed to exempt them along with persons and other corporations from being otherwise taxed. The court considered that this class of institutions enjoyed privileges of taxation that were accorded to no other person or corporation subject to taxation and that they might properly be treated as a class by themselves. In State v. Fitzgerald, 117 Minn. 192, 134 N. W. 728, the court said that to hold that the law did not impose a tax on a mortgage of fifty dollars or less because the unit named therein was "one hundred dollars, or major fraction thereof," would endanger its constitutionality, for such a construction would result in taking from the class founded by the law a subject that properly belonged there.

In Oklahoma the validity of an act, similar in purpose and substance to the statute which is declared to be constitutional in the reported case was established by the decision in Trustees', etc. Ins. Corp. v. Hooton (Okla.) 157 Pac. 293. As to the motive for the enactment of such legislation the court said in that case: "The history of the adoption of this act is a matter of common knowledge. It is well claimed by relator that mortgages and like instruments had been concealed from assessing officers by putting them in the names of nonresidents, withholding them from record, and other familiar means, and it was urged that, if a special tax could be imposed upon these instruments when they were recorded, and therefore foreclosure made de

pendent upon their having been recorded, and the tax made sufficiently low in amount, there would be an inducement to disclose mortgages to the assessing officers rather than to hide them as theretofore. An additional reason sometimes given for the passage of legislation of this character is that by exempting mortgages from ordinary ad valorem taxes and placing this similar tax in lieu of all other taxes that capital would be attracted to the state and would be induced to invest in securities of this nature." The act under consideration in that case provided for a registration tax rate which increased proportionately with the number of years the mortgage had to run. While no question was raised therein that the act was unconstitutional for lack of uniformity in granting an exemption from an ad valorem tax to those who availed themselves of the recording provision, it was, however, contended that the classification as to the rate of the registration tax infringed section 5 of article 10 of the constitution which declared that "taxes shall be uniform upon the same class of subjects." It was held that the constitutional provision did not apply. But the court said that even if it had been applicable, the objection was not well taken for in its judg ment the taxes imposed for registration were uniform on the various classes designated. The court expressed its views as follows: "It is admitted that a classification according to the amount of indebtedness secured by the mortgage may be made by the legislature, as has been done; and, this being true, we see no good reason why an additional classification may not be made, based upon the time for which the indebtedness secured by said mortgage is to run; in other words, regulating this additional classification by the date of maturity of the obligation secured. The act does not make the tax exacted a lien upon the mortgage affected thereby, or upon the property embraced therein, nor upon the debt or obligation which it secures, nor is any procedure provided by which same may be collected, other than denying the owner the benefits of the registration laws of the state, and denying him relief in the courts upon the instrument not recorded. The benefits to be obtained by a registration under the act are that such instrument when so recorded shall be notice to all the world of the rights of the mortgagee therein, and entitles such mortgagee to maintain an action in the courts of this state for the foreclosure of said instrument, and an exemption from ad valorem and all other taxation by the state and all of its subdivisions. The difference between the exaction for registration, which is nomi

nal as compared to the amount of taxes that would be paid upon an ad valorem basis, shows at once the value of the benefits and privileges which the act accords and the exemptions which it grants. These differences certainly justify the classification complained of. . . The power of the legislature to distinguish, select, and classify objects of taxation has a wide range of discretion, and, while the classification must be reasonable, and not arbitrary, there is no precise application of the rule of reasonableness, and there cannot be an exact exclusion or inclusion of persons or things. The question is, when a classification has been made, whether there is any reasonable ground for it, or whether it is only simply arbitrary, based upon no real distinction and entirely unnatural. If the classification be proper and legal, then there is the requisite uniformity in that respect. We think there is such a difference in the different classes of instruments affected by the act as to justify the legislature in prescribing a different rate therefor, and that it cannot be said that such classification is arbitrary and without such distinction as to render same beyond the power of the legislature to make."

In Virginia a statute has been enacted which provides for the payment of a so-called privilege tax as a prerequisite to the right to record a deed of trust or a mortgage. It contains the provision that "on deeds of trust or mortgages, the tax shall be assessed and paid on the amount of bonds or other obligations secured thereby," and that "on deeds of trust or mortgages upon the works and property of a railroad or other internal improvement company, lying partly in this state and partly in another state, the tax shall be on such proportion of the consideration as the number of miles of the line of such company in this state bears to the whole number of miles of the line of such company conveyed by such deed." It was held in Pocahontas Consol. Collieries Co. v. Com. 113 Va. 108, 73 S. E. 446, that the exemption made in favor of internal improvement companies by exacting a tax for the value only of the property within the state, while in other cases the amount of tax was based on all the property conveyed whether located within the state or not, was not such as to render the act void as being in violation of the provision of the state constitution requiring uniformity of taxation. The court regarded the act as granting a civil privilege and said that the right of the legislature to fix the amount of a tax thereon and to classify the subjects on which the tax was imposed was well-nigh unlimited.

[127] BROWN, C. J.-Action to determine the title to real property in which plaintiff had judgment and defendant appealed from an order denying a new trial.

The facts are as follows:

The land in controversy was conveyed to the Duluth Transfer Railway Co. for right of way purposes, by the executors of the estate of George W. Norton, deceased, who was the owner of the larger track out of which the land in question was taken. The grantee in that conveyance was a corporation duly organized under the laws of the state in the year 1890, for the purpose of operating transfer lines of railroad within the city of Duluth and points beyond the boundaries thereof, and it was granted to use of certain streets of the city, and of West Duluth, upon condition that it serve all

railroad lines entering the city, and to permit such other railroad companies to use its tracks and facilities upon payment therefor.

The transfer company thereafter constructed its lines of road [128] within and without the city, one of which extends from within the city to West Duluth and from a point near Spirit Lake to a connection with the old Duluth & Winnipeg Railroad. The company conducted its affairs for some time but finally became insolvent, and in receivership proceedings, all its property rights, and privileges were, some time in the year 1896, transferred to a receiver of the corporation, who continued the operation of its affairs until January, 1902, when in foreclosure proceedings the property, franchises and privileges werer sold to the bondholders of the company, who thereupon organized the Duluth Transfer Railroad Co., and all rights so acquired by them were transferred and set over to the new corporation. The organization of this corporation was for the sole purpose of taking over the property and affairs of the insolvent concern, and of continuing the conduct of its business, and the new company acquired the same, subject to the obligations which had theretofore become attached to the franchise and privileges so transferred. Thereafter, in May, 1902, the Transfer Railroad Co. sold and conveyed to the defendant Northern Pacific Railway Co., all lines of railroad, tracks, switches and other property previously acquired by it through the foreclosure and receivership proceedings from the insolvent Transfer Railway Co., and said Northern Pacific Co. has since owned and controlled the same. This sale included the right of way in question, which formed a part of the transfer company line, and for a considerable distance paralleled the right of way of the St. Paul & Duluth Railroad Co., the line of which extends between Duluth and St. Paul and Minneapolis. Prior to the purchase of the transfer company line the Northern Pacific Co. had acquired by purchase the St. Paul & Duluth line, and has at all times since operated trains between Duluth and Fond du Lac over a line which parallels the line of the transfer company. Subsequent to acquiring both these lines of road and in the fall of the year 1902, defendant Northern Pacific Co. abandoned the transfer line. The facts in reference to which abandonment are stated clearly in the findings of the trial court, and a stipulation of facts submitted by the parties on the trial below which, as therein stated, are substantially as follows: That upon the acquisition of said lines of road the Northern [129] Pacific Co. caused all the rails of the transfer line, together with the bridges and trestles thereof, to be taken up, dismembered and wholly removed therefrom.

through the entire length of the transfer line from a point on the main line thereof at or near Sixty-third avenue in West Duluth, to the terminal or end of the same; and the line so taken up included the right of way in dispute. The track has never been relaid, or the right of way used by defendant for railroad or other purposes. The trial court found that on or about December 1, 1912, two days prior to the commencement of the action, the defendant Northern Pacific Co. entered upon the land, not for the purpose of restoring or relaying the track thereon, but in an effort to prevent another railroad company from acquiring the same for railroad purposes in condemnation proceedings. Whether this finding is fully sustained by the evidence is not of controlling importance, for the fact remains that for 10 years the company made no use of the land for right of way or other purposes, and during that time made no attempt to relay its tracks thereon, until the appearance of the other railroad. This fact clearly appears.

The trial court found, from the facts stated, and other facts and circumstances not necessary to here repeat, that there was a complete abandonment of the land by the Northern Pacific Co., that all rights and interests acquired under and through the deed to the transfer company terminated, and that the estate of Norton, the grantor, became fully reinvested with the title to the same free and clear of any claim on the part of the defendant railroad company.

It is contended on the part of appellants: (1) That the Norton deed to the transfer company conveyed an absolute fee title limited only as to use, namely, railroad right of way purposes, and that a failure to use it for that purpose or at all would not terminate the absolute title thus granted; (2) that the findings of the court to the effect that the land was abandoned by defendant Northern Pacific Co. thereby terminating its easement and title, are not sustained by the evidence; and (3) that the court erred in excluding certain evidence, offered by defendant for the purpose of showing the intent of its officers in removing the track, ties, and bridges from the land, [130] and abandoning the use thereof for railroad purposes during the period stated, namely, from 1902 to December, 1912.

1. The first contention involves an examination of the Norton deed, its terms and provisions, for the purpose of ascertaining the intent of the parties in its execution. This intent is to be gathered, not from any particular clause or provision thereof taken by itself, but from the whole instrument, construing all its provisions together. 13 Cyc. 605; Flaten v. Moorhead, 51 Minn. 518, 53 N. W. 807, 19 L.R.A. 195; Witt v. St. Paul,

etc. R. Co. 38 Minn. 122, 35 N. W. 862. The deed, after naming and describing the parties, provides as follows:

"Witnesseth: That the said parties of the first part, in consideration of the sum of thirteen hundred and twenty-five dollars to them in hand paid by the said party of the second part, the receipt of which is hereby acknowledged, do, by these presents, grant, bargain, sell and convey unto the said party of the second part, its successors and assigns, all that tract or parcel of land lying and being in the county of St. Louis, and state of Minnesota, described as follows to wit: (here follows a description of the land conveyed).

"To have and to hold the same, Together with all the hereditaments and appurtenances thereunto belonging or in anywise appertaining, unto the said party of the second part, its successors and assigns, for the uses and purposes of said party of the second part for and so long as the same shall be used as a right of way for tracks and side tracks and a railroad way for its railroad cars, locomotives and trains and for proper appendages to such track or tracks and railway, and for any other uses consistent with or embraced in the purposes and general nature of the business of said grantee, as expressed in its articles of incorporation."

Aside from the names of the parties and the description of the land this quotation includes all the provisions of the conveyance. A reading of the same leaves in our minds no fair doubt of the intention of the parties. The land conveyed was taken from a larger tract and was a narrow strip 75 feet wide by about 3,000 in length. The railroad company desired it for a particular purpose, namely, as a right of way, and the grantors were willing to convey for that [131] use. The deed contains no language indicative of an intention that an absolute and unqualified title should pass to the grantee. The significant word, generally found in deeds of real property, "forever," does not follow the clause "to have and to hold the same," but instead thereof it reads "to have and to hold the same for and so long as

the same shall be used as a right of way." This language appears in the habendum clause, where usually all limitations upon the estate granted are found, if any be imposed. And no other language or clause is found which in any way impairs or detracts from the clause "for and so long as the same shall be used as a right of way." The only conclusion, as it seems to us, is that the parties intended by the deed to convey to the company an easement only, and to vest in the company the right to hold and use the land so long as it was devoted to the purpose stated, and no longer. Such seems to be the