Oakland Cnty. v. Fed. Hous. Fin. Agency

• Decision Date: 11 May 2012
• Docket Number: Case No. 11–12666.
• Citation: 871 F.Supp.2d 662
• Parties: OAKLAND COUNTY, et al., Plaintiffs, v. FEDERAL HOUSING FINANCE AGENCY as Conservator for Federal National Mortgage Association and Federal Home Loan Mortgage Company; Federal National Mortgage Association; and Federal Home Loan Mortgage Company, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

871 F.Supp.2d 662

OAKLAND COUNTY, et al., Plaintiffs,

v.FEDERAL HOUSING FINANCE AGENCY as Conservator for Federal National Mortgage Association and Federal Home Loan Mortgage Company; Federal National Mortgage Association; and Federal Home Loan Mortgage Company, Defendants.

Case No. 11–12666.

United States District Court,

E.D. Michigan,

Southern Division.

May 11, 2012.

Elizabeth A. Favaro, William H. Horton, Giarmarco, Mullins, Troy, MI, Keith J. Lerminiaux, Pontiac, MI, Kenneth J. Robinson, Bloomfield Hills, MI, for Plaintiffs.

Adam J. Wienner, Ann Marie Uetz, Detroit, MI, Clyde M. Metzger, Thomas J. Foley, Foley, Baron & Metzger, PLLC, Livonia, MI, Michael J. Ciatti, Washington, DC, for Defendants.

AMENDED ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

VICTORIA A. ROBERTS, District Judge.

I. INTRODUCTION

This matter is before the Court on cross-motions for summary judgment filed, on the one hand, by Plaintiffs Oakland County and Andrew E. Meisner, Oakland County Treasurer (“Plaintiffs”), Intervenor–Plaintiffs the Michigan Department of Attorney General and the Michigan Department of Treasury (“State Plaintiffs”), and, on the other hand, by Defendants the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (together, the “Enterprises”), and Intervenor–Defendant Federal Housing Finance Agency (“FHFA” or “Conservator,” and, together with the Enterprises, “Defendants”).

Plaintiffs claim that Defendants failed to pay the Michigan real estate transfer tax when they conveyed property in Oakland County. They seek a judgment that Defendants are liable for unpaid taxes in an amount to be determined. Defendants claim they are exempt from the tax.

Oral argument was heard on February 10, 2012.

For the reasons that follow, Plaintiffs' and State Plaintiffs' motions for summary judgment are GRANTED. Defendants' motion for summary judgment is DENIED.

II. BACKGROUND

This case involves the Enterprises' claimed exemption from the Michigan State Real Estate Transfer Tax, MCL § 207.521 et seq., and the County Real Estate Transfer Tax, MCL § 207.501 et seq. (the “Transfer Taxes”). The statutes impose a tax by the State of $7.50 per $1,000 in value on the property sold, and by the County of $1.10 per $1,000. Id.§§ 502, 523. These taxes are not taxes on real property; rather, they are excise taxes (not direct taxes), paid on the recording of deeds, when ownership of property is transferred. An “excise tax” is a tax levied upon the use and transfer of property.

Congress chartered the Enterprises to “establish secondary market facilities for residential mortgages,” to “provide stability in the secondary market for residential mortgages,” and “to promote access to mortgage credit throughout the Nation.” Defs. Resp. Br., Doc. 40, p. 3 (quoting 12 U.S.C. § 1716). Though originally created as federal entities, both Fannie Mae and Freddie Mac later became private corporations, which publicly traded. They were required to file reports with the Securities and Exchange Commission. Pltfs. Br., Doc. 5, p. 1.

FHFA is a federal agency created by the Housing Economic Recovery Act of 2008 (“HERA”) to regulate the Enterprises. 12 U.S.C. § 4501 et seq. On September 6, 2008, the Director of FHFA placed the Enterprises into FHFA's conservatorship “for the purpose of reorganizing, rehabilitating or winding up [their] affairs.” Defs. Resp. Br., Doc. 40., p. 4 (quoting 12 U.S.C. § 4617(a)(2)). FHFA, as Conservator, “ ‘immediately succeed[ed] to ... all rights, titles, powers, and privileges of [the Enterprises], and of any stockholder, officer,or director of [the Enterprises]’ ” and all rights (i) to the assets of the Enterprises; (ii) to collect all obligations and money due the Enterprises; (iii) to perform all functions of the Enterprises, in their name, consistent with appointment of the Conservator; and (iv) to exercise such incidental powers as may be necessary to carry out all powers and authorities specifically granted.” Id. (citing 12 U.S.C. §§ 4617(b)(2)(A), (B), (J)).

The Enterprises own a large number of mortgages in Oakland County and throughout the country. As mortgages become delinquent and properties enter into foreclosure, the Enterprises take ownership of the properties and attempt to locate buyers. Once the Enterprises locate a buyer for a foreclosed property, they convey the property and record the deed. When the Enterprises present the deed for recording, they do not pay the transfer tax; they claim they are exempt under state law or federal law, or both, because transfer taxes are taxes on them as corporations.

During the foreclosure crisis of the past several years, the number of properties the Enterprises took ownership of ballooned. The Enterprises' potential transfer tax liability increased accordingly. Oakland County alone claims the Enterprises owe it in excess of millions of dollars.

Plaintiffs filed suit against the Enterprises on June 20, 2011. On July 20, 2011, FHFA moved to intervene as defendant; Magistrate Judge Michelson granted the motion on September 20, 2011, 276 F.R.D. 491 (E.D.Mich.2011). On November 10, 2011, the State Plaintiffs moved to intervene; the parties stipulated to the intervention on November 23, 2011. Plaintiffs and State Plaintiffs filed separate motions for summary judgment raising substantially the same arguments. Defendants filed joint responses and cross-motions for summary judgment.

Plaintiffs allege that the Enterprises are liable for the Transfer Taxes because they are private corporations, not federal entities, and because their federal statutory exemptions from certain taxes do not include the Transfer Taxes. Plaintiffs say that the Supreme Court has long interpreted an exemption from “all taxation” to cover only direct taxation, not excise taxes such as the Transfer Taxes. Defendants respond that federal statutes granting them immunity from “all taxation” exempt them from payment of Transfer Taxes. Defendants further argue that their status as private entities or federal instrumentalities is irrelevant since Congress expressly exempted them from “all taxation.” Therefore, Defendants say the Court need not decide whether they are constitutionally immune from all state and local taxation; the Court need only interpret federal statutes to conclude that they are immune from the Transfer Taxes.

III. LAW AND ANALYSISA. Standard of Review

The Court will grant summary judgment if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). When reviewing cross-motions for summary judgment, the court must assess each motion on its own merits. Federal Ins. Co. v. Hartford Steam Boiler Insp. and Ins. Co., 415 F.3d 487, 493 (6th Cir.2005). “The standard of review for cross-motions for summary judgment does not differ from the standard applied when a motion is filed by only one party to the litigation.” Lee v. City of Columbus, 636 F.3d 245, 249 (6th Cir.2011). “[T]he filing of cross-motions for summary judgment does not necessarily mean that an award of summary judgment is appropriate.” Spectrum Health Continuing Care Group v. Anna Marie Bowling Irrevocable Trust, 410 F.3d 304, 309 (6th Cir.2005). However, summary judgment is particularly appropriate where “the case turns upon an issue of law, such as the construction of a statute.” Salazar v. Brown, 940 F.Supp. 160, 161 (W.D.Mich.1996).

B. Federal Statutes Exempt Defendants from “All Taxation”

The Court begins its analysis by examining the language of the statutory exemptions Congress granted Defendants. See Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Found., Inc., 484 U.S. 49, 56, 108 S.Ct. 376, 98 L.Ed.2d 306 (1989) (“It is well settled that the starting point for interpreting a statute is the language of the statute itself.”).

Fannie Mae's federal charter provides that:

The corporation, including its franchise, capital, reserves, surplus, mortgages or other security holdings, and income, shall be exempt from all taxation now or hereafter imposed by any State, territory, possession, Commonwealth, or dependency of the United States, or by the District of Columbia, or by any 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 as other real property is taxed. 12 U.S.C. § 1723a(c)(2) (emphasis added)

In nearly identical terms, Freddie Mac's charter states:

The Corporation, including its franchise, activities, capital, reserves, surplus, and income, shall be exempt from all taxation now or hereafter imposed by any territory, dependency, or possession of the United States or 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. 12 U.S.C. § 1452(e) (emphasis added).

Lastly, HERA provides that FHFA:

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 Agency 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 ... 12 U.S.C. § 4617(j)(2) (emphasis added).

In addition, HERA provides that FHFA, as Conservator, shall not be liable for any fines or penalties “including those arising from the failure of any person to pay any real property, personal property, probate, or recording tax or any recording or filing fees when due.” 12 U.S.C. § 4617(j)(4).

The three statutes exempt each of the Defendants (the Corporations) from “all...