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Federal Land Bank of New Orleans v. Crosland
Citations: 261 U.S. 374; 43 S. Ct. 385; 67 L. Ed. 703; 1923 U.S. LEXIS 2568; 29 A.L.R. 1Docket: 428
Court: Supreme Court of the United States; March 19, 1923; Federal Supreme Court; Federal Appellate Court
A petition for a writ of mandamus was filed by the Federal Land Bank of New Orleans to compel the recording officer of Montgomery County, Alabama, to record a first mortgage deed upon payment of the standard recording fee, without the additional state-imposed tax of fifteen cents for each hundred dollars of the secured principal. Under Alabama's General Revenue Act, a privilege tax must be paid on mortgages exceeding $100 prior to recording, and probate judges who fail to collect this tax face misdemeanor charges. However, the Federal Farm Loan Act exempts first mortgages to Federal Land Banks from federal and state taxation, a provision upheld by the Supreme Court. The Alabama Supreme Court dismissed the mandamus petition, asserting the payment of the tax was optional and that the bank could choose not to record the deed, thus incurring no obligation to pay the tax. The U.S. Supreme Court disagreed, stating that while the bank technically has a choice, the necessity to record the deed under Alabama law creates a coercive environment. The Court emphasized that the state cannot impose a tax indirectly through its control of the recording process if it is not allowed to levy such a tax directly. The Court acknowledged that while the state may charge reasonable fees for recording to cover costs, it must not conflate these fees with taxation. The Alabama law effectively imposes a tax on mortgages that the federal law prohibits. The Court rejected the argument that the lender could collect the tax from the borrower, affirming that the obligation rests on the lender per the statute. Consequently, the Supreme Court reversed the lower court's decree and dismissed the petition for certiorari.