Pittman v. Home Owners' Loan Corp.

Citations: 308 U.S. 21; 60 S. Ct. 15; 84 L. Ed. 11; 1939 U.S. LEXIS 128; 124 A.L.R. 1263Docket: 10

Court: Supreme Court of the United States; November 6, 1939; Federal Supreme Court; Federal Appellate Court

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The Home Owners' Loan Corporation sought a writ of mandamus from the Baltimore City Court to compel the Clerk of the Superior Court to record a mortgage without imposing the state recording tax, which is set at 10 cents per $100 of the mortgage amount. The petition was granted, and the decision was upheld by the Court of Appeals of Maryland. The key legal issue centered on the validity of the tax, considering that the Home Owners' Loan Corporation is an instrumentality of the United States under the Home Owners' Loan Act of 1933. The Maryland court found the tax invalid, referencing the precedent set in Federal Land Bank v. Crosland, which ruled that a state tax on mortgages executed to Federal Land Banks constituted a general tax prohibited under federal law.

The petitioner argued that the Crosland case was distinguishable because the Alabama tax was on the lender, while the Maryland tax was on the privilege of recording, and that the Federal Farm Loan Act specifically declared Federal Land Bank mortgages as governmental instrumentalities. However, the Court of Appeals deemed these distinctions irrelevant, noting that the essence of the tax remained on the mortgage itself, irrespective of who paid it. The recording was necessary for protecting the interests of the Home Owners' Loan Corporation, which initiated the recording process and was subject to the tax demand.

The Home Owners' Loan Act exempts the Home Owners' Loan Corporation (HOLC) and its associated loans from state or municipal taxes, with the term "loans" interpreted to include the entire lending process, the resulting debts, and the mortgages as security. The Act mandates that loans must be secured by a duly recorded home mortgage, making both elements essential to the lending operations authorized by Congress. The petitioner argues against the Crosland decision, asserting that the tax is not discriminatory and does not burden the HOLC, contending that if the Act grants immunity, it exceeds Congress's constitutional power.

The court assumes that the establishment of the HOLC was a constitutional exercise of congressional authority and that its activities are governmental functions entitled to corresponding immunities. The court notes that Congress's power to create a corporation for governmental functions includes the power to preserve its operations, as established in precedent cases. Congress has the authority to enact laws necessary for executing its constitutional powers, which includes safeguarding its agencies from state taxation. The court holds that Congress has effectively provided immunity for the HOLC's operations, rendering the state tax invalid, and affirms the state court's judgment.

Mr. Justice Butler did not participate in the case's consideration or decision. The Act imposes a tax on the recordation of various written instruments with Circuit Court Clerks from June 1, 1937, to September 30, 1939. This includes mechanics liens, deeds, and mortgages, except for specific exemptions such as purchase money mortgages and assignments of mortgages. The tax rate is set at 10 cents for each $100 (or fractional part) of the actual consideration for property transfers or the principal amount of secured debts. Additionally, Clerks will charge a recording fee of 50 cents for each instrument. The Act mandates the affixing of stamps to cover the tax, prohibiting the recording of any written instrument without payment of the tax. Section 4(c) of the Home Owners' Loan Act states that bonds issued by the Corporation are exempt from all taxation, except for certain taxes like estate and inheritance taxes. The Corporation's properties are also subject to taxation based on their value, similar to other real estate.