Maricopa County v. Valley Nat. Bank of Phoenix

• Citation: 130 F.2d 356
• Decision Date: 16 November 1942
• Docket Number: No. 10025.,10025.
• Parties: MARICOPA COUNTY et al. v. VALLEY NAT. BANK OF PHŒNIX.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

130 F.2d 356 (1942)

MARICOPA COUNTY et al. v. VALLEY NAT. BANK OF PHŒNIX.

No. 10025.

Circuit Court of Appeals, Ninth Circuit.

August 7, 1942.

Writ of Certiorari Granted November 16, 1942.

Richard F. Harless, Co. Atty., and Leslie C. Hardy, Deputy Co. Atty., both of Phoenix, Ariz., for appellant Maricopa County et al.

J. M. Johnson, Co. Atty., and Conner & Jones, all of Tucson, Ariz., for appellant Pima County et al.

J. L. Gust, Charles L. Rawlins, Gust, Rosenfeld, Divelbess, Robinette & Coolidge, and Rawlins & Rawlins, all of Phoenix, Ariz., (William C. Fitts, of Washington, D. C., of counsel), for appellee.

Before GARRECHT, MATHEWS, and HANEY, Circuit Judges.

Writ of Certiorari Granted November 16, 1942. See ___ U.S. ___, 63 S.Ct. 201, 87 L.Ed. ___.

MATHEWS, Circuit Judge.

In two suits (Nos. 333 and 350) brought by appellee, a national banking association, against Maricopa County, Arizona, Pima County, Arizona, and the county treasurer, the county assessor and the members of the board of supervisors of each of said counties,¹ appellee obtained judgments enjoining appellants from collecting State, county, municipal and school district taxes on shares of preferred stock of appellee owned by Reconstruction Finance Corporation. Appellants seek reversal.

Suit No. 333, commenced on October 23, 1935, involved taxes for 1935 aggregating $43,598.45,² of which Maricopa County and its officers sought to collect $31,872.77 and Pima County and its officers sought to collect $11,725.68. Suit No. 350, commenced on October 31, 1936, involved taxes for 1936 aggregating $45,075.40,³ of which Maricopa County and its officers sought to collect $29,927.88 and Pima County and its officers sought to collect $15,147.52. All the taxes involved were on the same shares — 198,400 shares of preferred stock issued by appellee on February 11, 1935, pursuant to § 301 of the Act of March 9, 1933, c. 1, 48 Stat. 5, as amended by the Act of June 15, 1933, c. 79, 48 Stat. 147, 12 U.S.C.A. § 51a, and acquired by Reconstruction Finance Corporation on February 11, 1935, pursuant to § 304 of said Act of March 9, 1933, as amended by § 2 of the Act of March 24, 1933, c. 8, 48 Stat. 20, 12 U.S.C.A. § 51d.

Until March 9, 1933, national banking associations were not empowered to issue preferred shares. They were, however, empowered to issue shares of common stock, and Congress, by § 5219 of the Revised Statutes, 12 U.S.C.A. § 548, had consented to the imposition of State taxes thereon, subject to the conditions prescribed in § 5219. Whether such consent should be construed to embrace preferred shares issued pursuant to § 301, supra, and acquired by Reconstruction Finance Corporation pursuant to § 304, supra, was a debatable — and much debated — question until February 3, 1936, when the Supreme Court, in Baltimore National Bank v. State Tax Commission, 297 U.S. 209, 56 S.Ct. 417, 80 L.Ed. 586, decided that it should be so construed. Thereupon Congress, by § 1 of the Act of March 20, 1936, c. 160, 49 Stat. 1185, amended § 304 by adding thereto the following provision:

"Notwithstanding any other provision of law or any privilege or consent to tax expressly or impliedly granted thereby, the shares of preferred stock of national banking associations * * * acquired before or after March 20, 1936 by Reconstruction Finance Corporation * * * shall not, so long as Reconstruction Finance Corporation shall continue to own the same, be subject to any taxation * * * by any State, county, municipality, or local taxing authority, whether imposed, levied, or assessed on, before or after March 20, 1936, and whether for a past, present, or future taxing period."

Applying this provision, the court below held that the shares here involved were not subject to taxation, and that, therefore, the taxes here involved were illegal and void. Appellants contend that the provision was inapplicable for the following reasons:

The taxes involved in suit No. 333 were levied and assessed before the date (March 20, 1936) on which the above quoted provision was enacted and were for a taxing period (the calendar year 1935) which commenced and ended before March 20, 1936. The taxes involved in suit No. 350 were for a taxing period (the calendar year 1936) which commenced before March 20, 1936. All the taxes involved were levied under the authority of chapter 75 (§§ 3056-3192) of the Revised Code of Arizona 1928, of which § 3101, as amended by § 1 of chapter 106, Session Laws of Arizona 1931, provided:

"Every tax levied under the authority of this chapter upon real or personal property shall be a lien upon the property assessed. The lien shall attach on the first Monday in January in each year, and shall not be satisfied or removed until such taxes, penalties, charges and interest are all paid, or the property has finally vested in a purchaser under a sale for taxes. * * *"

Therefore appellants say that the 1935 taxes here involved became a lien upon the assessed property (appellee's preferred stock) on the first Monday in January, 1935, and that the 1936 taxes here involved became a lien upon the assessed property on the first Monday in January, 1936. Thus, appellants say, the lien of all the taxes had attached before the enactment of the above quoted provision of § 304.⁴ That fact — assuming it to be a fact — did not, however, render the provision inapplicable; for, by its terms, the provision applies to all taxation of preferred stock of national banking associations owned by Reconstruction Finance Corporation, "whether imposed, levied, or assessed on, before or after March 20, 1936, and whether for a past, present, or future taxing period."

Appellants contend that, in so far as it applies to the taxes here involved, the provision is unconstitutional in that, by destroying the lien of and right to collect these taxes, it deprives the State of Arizona and its political subdivisions of their property without due process of law, in violation of the Fifth Amendment. Appellants further contend that the lien of and right to collect these taxes were acquired through the exercise of the State's reserved powers. Therefore they contend that, in destroying said lien and right, the provision violates the Tenth Amendment. These contentions are rejected for the following reasons:

Among the powers which the Constitution delegates to the United States is the power to create Federal instrumentalities such as national banking associations and to exempt such instrumentalities, their shares and shareholders from taxation. McCulloch v. State of Maryland, 4 Wheat. 316, 400-437, 4 L.Ed. 579; Osborn v. Bank of United States, 9 Wheat. 738, 859-871, 6 L.Ed. 204; Van Allen v. Assessors, 3 Wall. 573, 581-588, 18 L.Ed. 229; Bradley v. People of Illinois, 4 Wall. 459, 18 L.Ed. 433; People of New York v. Weaver, 100 U.S. 539, 543, 25 L.Ed. 705; Owensboro National Bank v. City of Owensboro, 173 U.S. 664, 667-669, 19 S.Ct. 537, 43 L.Ed. 850; Bank of California v. Richardson, 248 U.S. 476, 482-484, 39 S.Ct. 165, 63 L.Ed. 372; Smith v. Kansas City Title Co., 255 U.S. 180, 208-213, 41 S. Ct. 243, 65 L.Ed. 577; ...