1. The Maryland tax on mortgages, graded according to the amount
of the loan secured and imposed in addition to the ordinary
registration fee as a condition to the recordation of the
instrument, cannot be applied to a mortgage tendered for record by
the Home Owners' Loan Corporation and securing one of its loans, in
view of the provisions of the Home Owners' Loan Act, which declare
the Corporation to be an instrumentality of the United States, and
that its loans shall be exempt from all state and municipal taxes.
Federal Land Bank v. Crosland, 261 U.
S. 374. P.
308 U. S.
29.
2. Assuming that the creation of the Home Owners' Loan
Corporation was a constitutional exercise of the power of Congress,
the activities of the Corporation through which the Government
lawfully acts must be regarded as governmental functions and
entitled to whatever immunity attaches to those functions when
performed by the Government itself through its departments. P.
308 U. S.
32.
The power of Congress to create a corporation to facilitate the
performance of governmental functions implies a power to protect
the operations thus validly authorized, which comes within the
range of the express power conferred by Const. Art. I, § 8, cl. 18,
to make all laws necessary and proper for carrying into execution
all powers vested by the Constitution in the Government. In the
exercise of this power to protect, Congress has the dominant
authority, which necessarily inheres in its action within the
national field.
175 Md. 512, 2 A.2d 689, affirmed.
Certiorari, 306 U.S. 628, to review a judgment affirming the
issuance of a mandamus by Baltimore City Court requiring the Clerk
of the Superior Court of Baltimore to record a mortgage.
Page 308 U. S. 29
MR. CHIEF JUSTICE HUGHES delivered the opinion of the Court.
The Home Owners' Loan Corporation brought this proceeding in the
Baltimore City Court for a writ of mandamus requiring the Clerk of
the Superior Court of Baltimore to record a mortgage executed to
the Corporation upon the payment of the ordinary recording charge
and without affixing stamps for the state recording tax. Demurrer
to the petition was overruled, the Clerk did not avail himself of
the opportunity to answer, and mandamus was granted. The order was
affirmed by the Court of Appeals of Maryland. 175 Md. 512, 2 A.2d
689. We granted certiorari. 306 U.S. 628.
The Maryland statute imposes a tax upon every mortgage, recorded
or offered for record, at the rate of 10 cents for each $100, or
fraction thereof, of the principal amount of the debt secured by
the mortgage. [
Footnote 1] As
the Home Owners' Loan Corporation is expressly declared to be an
instrumentality of the United States, Home
Page 308 U. S. 30
Owners' Loan Act of 1933, c. 64, 48 Stat. 128, and the mortgage
was acquired in that capacity, the Court of Appeals held the tax,
as thus applied, to be invalid.
The court relied upon our decision in
Federal Land Bank v.
Crosland, 261 U. S. 374. The
question there related to a tax imposed by Alabama as a condition
for the recording of a mortgage executed to a Federal Land Bank.
The Federal Farm Loan Act of 1916 provides that first mortgages
executed to Federal Land Banks shall be deemed
"instrumentalities of the Government of the United States, and,
as such, they and the income derived therefrom shall be exempt from
Federal, State, municipal, and local taxation."
39 State, 360, 380 § 26. We held that the state tax, as
distinguished from a reasonable fee to meet the expenses of the
registry, constituted a general tax on mortgages, using the
condition attached to registration as a practical mode of
collecting it, and that the tax on the mortgage in question was
beyond the power of the State.
Petitioner suggests that the
Crosland case may be
distinguished; that the Alabama tax was imposed on the lender,
whereas the Maryland tax is on the privilege of recording the
instrument and the statute is silent as to
Page 308 U. S. 31
the one who shall pay the tax; also, that the Federal Farm Loan
Act expressly declared the mortgages of Federal Land Banks to be
instrumentalities of the Federal Government. The Court of Appeals
thought these differences to be immaterial. As to the first, the
court rightly observed that, in the
Crosland case, the
provision for the payment of tax by the lender was regarded as
having no determining significance. We said that "whoever pays it,
it is a tax upon the mortgage, and that is what is forbidden by the
law of the United States." 261 U.S. pp.
261 U. S.
378-379. Here also, the tax is imposed upon the
mortgage, and is graded according to the amount of the loan,
[
Footnote 2] and the condition
attached to the registration is a practical method of collection.
The recording sought was for the protection of the interest of the
Home Owners' Loan Corporation. In fact, the mortgage in the instant
case was offered for record by the Corporation, and the tax was
demanded from the Corporation.
The second suggested distinction rests upon the terms of the
Home Owners' Loan Act. That provides [
Footnote 3] that the Home Owners' Loan Corporation, its
franchise, capital, reserves, and surplus, and its loans and
income, shall be exempt from all state or municipal taxes. The
critical term, in the present relation, is "loans." We think that
this term, in order to carry out the manifest purpose of the broad
exemption, should be construed as covering the entire process of
lending, the debts which result therefrom, and the mortgages given
to the Corporation as security. The Home Owners' Loan Act requires
that the loans made by the Corporation "shall be secured by
Page 308 U. S. 32
a duly recorded home mortgage." [
Footnote 4] Both the mortgage and its recordation were
indispensable elements in the lending operations authorized by
Congress. We agree with the state court that there is no sound
distinction which makes inapplicable the reasoning which was
decisive in the
Crosland case.
Alive to this consideration, petitioner advances a broader
contention, asking us to review and overrule the
Crosland
decision as being out of harmony with correct principle. Petitioner
insists that the tax is not discriminatory; that it does not impose
a burden upon the Home Owners' Loan Corporation, and that, if the
Act of Congress be construed as conferring an immunity, it went
beyond the power of Congress, as Congress cannot "grant an immunity
of greater extent than the constitutional immunity."
We assume here, as we assumed in
Graves v. New York ex rel.
O'Keefe, 306 U. S. 466,
that the creation of the Home Owners' Loan Corporation was a
constitutional exercise of the congressional power, and that the
activities of the Corporation through which the national government
lawfully acts must be regarded as governmental functions, and as
entitled to whatever immunity attaches to those functions when
performed by the government itself through its departments.
McCulloch v.
Maryland, 4 Wheat. 316,
17 U. S.
421-422;
Smith v. Kansas City Title Co.,
255 U. S. 180,
255 U. S.
208-209;
Graves v. New York ex rel. O'Keefe,
supra. Congress has not only the power to create a corporation
to facilitate the performance of governmental
Page 308 U. S. 33
functions, but has the power to protect the operations thus
validly authorized. "A power to create implies a power to
preserve."
McCulloch v. Maryland, supra, p.
17 U. S. 426.
This power to preserve necessarily comes within the range of the
express power conferred upon Congress to make all laws which shall
be necessary and proper for carrying into execution all powers
vested by the Constitution in the Government of the United States.
Const. Art. I, sec. 8, cl. 18. In the exercise of this power to
protect the lawful activities of its agencies, Congress has the
dominant authority which necessarily inheres in its action within
the national field.
The Shreveport Case, 234 U.
S. 342,
234 U. S.
351-352. The exercise of this protective power in
relation to state taxation has many illustrations.
See, e.g.,
74 U. S.
Supervisors. 7 Wall. 26,
74 U. S. 31;
Choate v. Trapp, 224 U. S. 665,
224 U. S.
668-669;
Smith v. Kansas City Title Co., supra,
p.
255 U. S. 207;
Trotter v. Tennessee, 290 U. S. 354,
290 U. S. 356;
Lawrence v. Shaw, 300 U. S. 245,
300 U. S. 249.
In this instance, Congress has undertaken to safeguard the
operations of the Home Owners' Loan Corporation by providing the
described immunity. As we have said, we construe this provision as
embracing and prohibiting the tax in question. Since Congress had
the constitutional authority to enact this provision, it is binding
upon this Court as the supreme law of the land.Const. Art. VI.
The judgment of the state court is
Affirmed.
MR. JUSTICE BUTLER took no part in the consideration and
decision of this case.
[
Footnote 1]
The Act provides for a "Tax on the Recordation of Instruments in
Writing" as follows:
"A tax is hereby imposed upon every instrument of writing
recorded or offered for record with the Clerks of the Circuit
Courts of the respective Counties, or the Clerk of the Superior
Court of Baltimore City, on and after June 1, 1937, to and
including September 30th, 1939, including mechanics liens, deeds,
mortgages (except purchase money mortgages), chattel mortgages,
bills of sale, conditional contracts of sale, leases, confessed
judgments, magistrates' judgments, crop liens, deeds of trust, and
any and all other instruments of writing, so recorded or offered
for record, which create liens or encumbrances on real or personal
property, or convey title to real or personal property; provided,
however, that said tax shall not apply to assignments of mortgages,
purchase money mortgages, absolute or partial releases, or orders
of satisfaction."
"The tax hereby imposed shall be at the rate of 10� for each
$100, or fractional part thereof, of the actual consideration paid
or to be paid, for the property transferred, in the case of
instruments conveying title, and at the rate of 10� for each $100,
or fractional part thereof, of the principal amount of the debt
secured, in the case of instruments securing a debt, or reserving
title as security for a debt."
"In addition to the tax hereby imposed, the Clerks shall collect
a charge of 50� for each such instrument recorded or offered for
record."
Acts of 1937, Ex.Sess., Chap. 11, Code of Maryland, Art. 81, §
213.
The same Act, in § 214, provides for the affixing of stamps to
cover the tax ,and makes it unlawful for any person to record any
written instrument without providing for the payment of the tax, as
stated.
[
Footnote 2]
See Note 1
[
Footnote 3]
Section 4(c) of the Home Owners' Loan Act provides:
"The bonds issued by the Corporation under this subsection shall
be exempt, both as to principal and interest, from all taxation
(except surtaxes, estate, inheritance, and gift taxes) now or
hereafter imposed by the United States or any District, Territory,
dependency, or possession thereof, or by any State, county,
municipality, or local taxing authority. The Corporation, including
its franchise, its capital, reserves, and surplus, and its loans
and income, shall likewise be exempt from such taxation, except
that any real property of the Corporation shall be subject to
taxation to the same extent, according to its value, as other real
property is taxed."
48 Stat. 128, 130, 12 U.S.C. § 1463.
[
Footnote 4]
Section 4(e)(f), 48 Stat. 131, 12 U.S.C. § 1463(e)(f).