Irving Independent School Dist. v. Packard Properties, CARROLLTON-FARMERS

Decision Date01 September 1992
Docket NumberNos. 91-1582,91-7397,CARROLLTON-FARMERS,s. 91-1582
Citation970 F.2d 58
Parties76 Ed. Law Rep. 678 IRVING INDEPENDENT SCHOOL DISTRICT, Plaintiff-Appellee Cross-Appellant, County of Dallas, Intervening Plaintiff-Appellee Cross-Appellant, v. PACKARD PROPERTIES, et al., Defendants, The Federal Deposit Insurance Corporation, as Receiver for Vernon Savings and Loan Association, FSA, Defendant-Appellant Cross-Appellee.BRANCH INDEPENDENT SCHOOL DISTRICT and City of Farmers Branch, Plaintiffs-Counter Defendants-Appellees, v. JOHNSON & CRAVENS, 13911, INC., et al., Defendants, Federal Deposit Insurance Corporation, as Manager of the FSLIC Resolution Fund, as Successor to the Federal Savings and Loan Insurance Corporation, as Receiver for First Savings Association of Burkburnett, Texas, Defendant-Counter Plaintiff-Appellant.
CourtU.S. Court of Appeals — Fifth Circuit

Arter & Hadden, Dallas, Tex., for appellant.

Lawrence H. Richmond, Atty., FDIC Legal Div., Ann S. Duross, Asst. Gen. Counsel, Colleen B. Bombardier, Sr. Counsel, Washington, D.C., for FDIC.

Christopher J. Caso, James W. Deatherage, Power, Deatherage, & Tharp & Blankenship, Irving, Tex., for Irving Ind. Schl.

Scott Kevin Joslove, Asst. Gen. Counsel, Texas Mun. League, Austin, Tex., for Amicus Texas Mun. League and Tx. City Atty's Ass'n.

Sydna H. Gordon, DeMetris A. Sampson, Michael W. Deeds, Heard, Goggan, Blair & Williams, Dallas, Tex., for County of Dallas.

Earl Luna, Tana K. VanHamme, Michael L. Atchley, Dallas, Tex., for Carrollton-Farmers.

S. Reid Heller, Hutchison, Boyle Brooks & Fisher, Dallas, Tex., for Farmers Branch.

Appeals from the United States District Court for the Northern District of Texas.

Before WISDOM, REYNALDO G. GARZA, and JONES, Circuit Judges.

WISDOM, Circuit Judge.

In these consolidated cases, the statutory privilege protecting the FDIC (Federal Deposit Insurance Corporation) from certain state tax penalties intersects the ability of state and local taxing authorities to enforce valid pre-existing liens on properties that the FDIC has acquired. When the FDIC acquires property, section 15(b) of the Federal Deposit Insurance Act, 12 U.S.C. § 1825(b), exempts the FDIC itself from having to pay penalties incurred by earlier property owners who have not paid their ad valorem taxes. Because this privilege does not absolve the property of liens related to the unpaid taxes, however, we hold that the liens in this case remain enforceable against the property. We therefore affirm the district court's finding that liens securing ad valorem taxes, penalties, and interest already in place when the FDIC acquired the property remain attached to that property and remain enforceable after the FDIC disposes of the property. We also affirm the district court's finding that the charges denominated as penalties, interest, and collection costs under Chapter 33 of the Texas Property Tax Code are in fact penalties for which the FDIC cannot be held liable.

A. Irving I and II

The property in question in FDIC v. Irving Indep. School Dist. and County of Dallas, No. 91-1582, has had successive yearly liens imposed on it to secure the payment of ad valorem taxes. Under Texas law, after 13 months of nonpayment, the lien securing the payment of ad valorem taxes also secures an additional sum to cover statutory interest, penalties, collection costs, and attorney's fees. On January 1, 1986, Irving Independent School District ("Irving") placed the first of its five liens on the property. On January 1, 1987, Dallas County placed the first of its four liens on the property. The ownership of the property itself has travelled the now familiar course from real estate developer to savings and loan to the Federal Savings and Loan Insurance Corporation (FSLIC) to the FDIC. The FDIC sold the property on December 31, 1990.

The taxing authorities brought suit against the FDIC in state court to recover unpaid ad valorem real property taxes as well as additional statutory charges associated with that nonpayment (penalties, interest, costs of collection, and attorneys' fees). The FDIC removed the case to federal district court. In a memorandum decision filed July 18, 1990 (Irving I ), 1 the district court granted partial summary judgment in favor of the FDIC, holding that the FDIC was not liable for the additional charges denominated as penalties and interest. In a later decision issued April 18, 1991 (Irving II ), 2 the district court held that the liens securing unpaid taxes, penalties, and interest for the years 1986 through 1988 were not extinguished by the later FDIC acquisition. In spite of the federal ownership of the property during 1989 the district court also preserved the lien for unpaid 1989 ad valorem taxes. The district court reasoned that, although the FDIC held title to the property on January 1, 1989, the applicable amendments to § 1825 were enacted after the lien date, and could not be applied retroactively. The only year for which all liens were abolished was 1990. The FDIC has filed a timely appeal from the court's holding in Irving II. Although the FDIC does not contest the validity of the liens as security for the taxes themselves, it does contest them insofar as they secure the payment of charges constituting penalties. Irving and Dallas County appeal the holdings in Irving I. They argue that the charges for nonpayment are not penalties but charges representing the cost to them of nonpayment of ad valorem taxes. The FDIC has not paid any local property tax on the Irving property since it became the owner.

B. Carrollton

In Carrollton-Farmers Branch Indep. School Dist. v. FDIC, No. 91-7397, the School District and the City of Farmers Branch sued the owner of the property and the holder of a second lien on the property, the First Savings and Loan Association of Burkburnett, Texas, for unpaid ad valorem taxes, interest, penalties, and collection costs due on property for the years 1983 through 1986. On January 16, 1987, the FSLIC was appointed receiver for First Savings and Loan. The FSLIC foreclosed on the lien, acquired the property, and then sold it. A condition of that sale was the FSLIC's indemnification of the buyer for "any and all claims, costs, and expenses arising out of" tax claims made by the School District or the Town. The property was also sold "subject to all liens which survived Lone Star's foreclosure and subject to any and all tax liens on the property". The FDIC, which replaced the FSLIC in 1989, has tendered payment of the delinquent base taxes.

After lengthy proceedings in federal district court, to which the FSLIC had removed the taxing authorities' suit, the sole question in Carrollton was condensed to the same question at issue in Irving: Whether 12 U.S.C. § 1825(b) required the extinction of liens securing penalties for the nonpayment of ad valorem taxes on property later acquired by the FDIC? The district court granted summary judgment in favor the taxing authorities based on its opinion in Irving. The FDIC appeals.


The FDIC argues that 12 U.S.C. § 1825(b)(3) requires that pre-existing liens, to the extent that they support penalties, be extinguished once the FDIC obtains ownership of the property. "It is axiomatic that '[t]he starting point in every case involving construction of a statute is the language itself' ". 3

A. Reading § 1825(b)

It is well established that "a State may not, consistent with the Supremacy Clause, U.S. Const, Art VI, cl 2, lay a tax 'directly upon the United States' ". 4 It is also well established that Congress may waive this immunity by statute.

The 1989 amendments to 12 U.S.C. § 1825 extended the FDIC's immunity from state taxation, previously limited to its corporate function, to its role as receiver. As for real property held by the FDIC as receiver, the amendment subjected the property to state and local ad valorem taxation.

As amended, § 1825(b)(1) provides in pertinent part:

(b) Other exemptions

When acting as a receiver, the following provisions shall apply with respect to the Corporation:

(1) The Corporation including its franchise, its capital, reserves, and surplus, and its income, shall be exempt from all taxation imposed by any State, county, municipality, or local taxing authority, except that any real property of the Corporation shall be subject to State, territorial, county, municipal, or local taxation to the same extent according to its value as other real property is taxed.... 5

The FDIC does not contest the obvious meaning of subsection § 1825(b)(1) or its own responsibility for paying the base taxes on property it owns. 6 What it does contest is the scope of subsections 1825(b)(2) and 1825(b)(3).

§ 1825(b)(2) reads:

No property of the corporation shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Corporation, nor shall any involuntary lien attach to the property of the Corporation. 7

We find, as did the district court, that "[t]he plain language of this statute means no involuntary lien attaches to property held by the FDIC when the FDIC is acting as a receiver". 8 The wording of the statute is inherently prospective in scope. It does not exclude liens attached to the property before the FDIC owned it.

Congress used the future tense to exclude only those liens that would otherwise attach after the FDIC acquired a property. As this Court has noted:

When the FDIC assumes control of an institution, the assets are what they are--negotiable instruments, contracts, real property, and so on. We agree that the FDIC should not be disadvantaged by the circumstances of its assumption of control, but this policy does not require giving the FDIC the ability to transmute lead into gold. 9

The result of § 1825(b)(2) is that liens may not attach to that property while the FDIC owns it, but a property previously encumbered must remain so.

Finally, we look at § 1825(b)...

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