School Dist. of Warminster Tp. v. Reconstruction Fin. Corp., Civ. No. 6394.

• Decision Date: 02 June 1947
• Docket Number: Civ. No. 6394.
• Citation: 72 F. Supp. 149
• Parties: SCHOOL DIST. OF WARMINSTER TP. v. RECONSTRUCTION FINANCE CORPORATION.
• Court: U.S. District Court — Western District of Pennsylvania

72 F. Supp. 149

SCHOOL DIST. OF WARMINSTER TP. v. RECONSTRUCTION FINANCE CORPORATION.

Civ. No. 6394.

District Court, E. D. Pennsylvania.

June 2, 1947.

Arthur M. Eastburn, of Doylestown, Pa., and W. Richardson Blair and Ballard, Spahr, Andrews & Ingersoll all of Philadelphia, Pa., for plaintiff.

Edwin J. Feeny, of Philadelphia, Pa., for Reconstruction Finance Corporation, defendant.

McGRANERY, District Judge.

Plaintiff, a fourth class school district of Bucks County, Pennsylvania, brought suit on July 30, 1946, against the Reconstruction Finance Corporation for $584.20, an amount allegedly due for late payment of taxes. The taxes had originally been assessed against the Defense Plant Corporation for the school tax year 1944 on real estate it owned in the district and amounted to $11,683.80. Later in 1944, Defense Plant Corporation conveyed the real estate upon which the taxes had been levied to the United States Navy, a tax-exempt instrumentality of the United States. The taxes were due on or before September 1, 1944, but the Defense Plant Corporation declined to pay, as did the Navy, which by that time had title to the property. Finally, on March 3, 1945, the Navy paid one half of the amount of the 1944 school tax and on March 21, 1945, Defense Plant Corporation paid the remaining one half. Plaintiff contends that Defense Plant Corporation, by reason of the late payment, became subject to an additional tax of $584.20, representing five percent of the principal amount of the tax originally due, under a Pennsylvania statute of 1911. 24 P.S. § 608. On July 1, 1945, Defense Plant Corporation was dissolved by joint resolution of Congress, 59 Stat. 310, 15 U.S.C.A. § 606b note, and all of its functions, powers, duties and liabilities were transferred to the Reconstruction Finance Corporation. Therefore, this suit is against Reconstruction Finance Corporation.

Plaintiff originally started suit in the Court of Common Pleas of Bucks County, but defendant obtained removal to this court. Plaintiff filed a motion to remand, and following argument, Judge Welsh of this court overruled the motion. Meanwhile, defendant had filed a motion to dismiss the complaint on the ground that it failed to assert a claim on which relief could be granted. Defendant did not claim timely payment but argued alternatively that the United States had not consented to the levying of local tax penalties upon the Reconstruction Finance Corporation, and that, in any event, the applicable statute had been repealed. By stipulation, the parties agreed that defendant's motion to dismiss be considered its answer, and plaintiff would file a motion for judgment on the pleadings to enable the court to make a final decision. It is upon that motion that the case is now before the court.

Defendant contends that the waiver of its immunity to local taxation contained in section 10 of the Reconstruction Finance Corporation Act, 15 U.S.C.A. § 610, does not extend to penalties for late payment and that, therefore, this suit must fail. Missouri Pacific R. Co. v. Ault, 1921, 256 U.S. 554, 41 S.Ct. 593, 65 L.Ed. 1087. That section provides, inter alia, 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. * * *" The court feels that, whatever the merits of defendant's contention that waivers of governmental immunity should be strictly construed, the exact question in this case has been foreclosed by the language of the Supreme Court in Reconstruction Finance Corporation v. County of Beaver, 328 U.S. 204, 66 S.Ct. 992, 995, 90 L.Ed. 1172. Reconstruction Finance Corporation there contested the right of a Pennsylvania taxing authority to include certain machinery as real property to be assessed and levied upon. In rejecting defendant's contention that state definitions of real property should not control, the court said: "We think the Congressional purpose can best be accomplished by application of settled state rules as to what constitutes `real property' so long as it is plain, as it is here, that the state rules do not effect a discrimination against the government, or patently run counter to the terms of the Act. Concepts of real property are deeply rooted in state traditions, customs, habits, and laws. Local tax administration is geared to those concepts. To permit the states to tax, and yet to require them to alter their long-standing practice of assessments and collections, would create the kind of confusion and resultant hampering of local tax machinery, which we are certain Congress did not intend. The fact that Congress subjected Defense Plant Corporation's properties to local taxes `to the same extent according to its value as other real property is taxed' indicated an intent to integrate Congressional permission to tax with established local tax assessment and collection machinery." (Emphasis supplied.)

The applicability of nondiscriminatory local "practice of assessments and collections" to the Reconstruction Finance Corporation is the specific issue before this court and the Beaver case indicates that Congress has consented to its use in the waiver of the agency's immunity contained in section 10 of the Reconstruction Finance Corporation Act. That the Pennsylvania Supreme Court interprets the waiver similarly is apparent in Borough of Homestead v. Defense Plant Corporation and Reconstruction Finance Corporation, 1947, 356 Pa. 500, 52 A.2d 581.

The Reconstruction Finance Corporation further contends that if it is not held immune, nevertheless, under Pennsylvania law it is not liable for the tax because the statute authorizing its imposition was repealed in 1945. 72 P.S. § 5511.1 et seq. The 1911 Act, 24 P.S. § 608, by the authority of which the plaintiff imposed the 5% additional tax provided: "On all school taxes assessed and levied in all districts of the second class a rebate of one per centum shall be allowed if paid before the first day of August in the year in which they are assessed and levied. To all such taxes in school districts of the second class which are not paid before the first day of October of the year in which they are assessed and levied there shall be added a penalty of five per centum, and on the first day of January of the year following and on the first day of each month thereafter succeeding during which the said taxes remain unpaid, an additional penalty of one-half of one per centum shall be added, which penalty shall be collected at the same time and in addition to the school taxes of which it is made a part. To all school taxes assessed and levied in all school districts of the third and fourth class in this Commonwealth, which are not paid on or before the first day of October in the year in which they are assessed and levied, there shall be added a penalty of five per centum, which shall be collected at the same time as and in addition to the school taxes of which it is made a part."

The 1945 statute specifically repealed the 1911 Act but section 3(b) of the 1945 statute, 72 P.S. § 5511.3(b), states that its provisions "* * * shall apply to all taxes covered by the provisions of this act heretofore levied and remaining uncollected." (Emphasis supplied.) Section 10 of the 1945 statute, 72 P.S. § 5511.10, sets up a scheme for collecting tardy taxes similar to that contained in the applicable section of the 1911 Act....