Fannie Mae v. Hamer
| Decision Date | 13 February 2013 |
| Docket Number | CASE NUMBER 12 C 50230 |
| Parties | Fannie Mae, et al. v. Hamer, et al. |
| Court | U.S. District Court — Northern District of Illinois |
DOCKET ENTRY TEXT:
Defendants Gillette and Wegman's motions to join [85] [87] in the cross motion for summary judgment are granted. Defendants' motion to dismiss for lack of jurisdiction [66] is denied. Plaintiffs' motion for summary judgment [44] is granted in part and denied in part. Defendant Hamer's cross motion for summary judgment [78] is granted in part and denied in part. Defendant Acardo's motion for summary judgment [82] is denied. The declaratory judgment shall issue. This case is closed.
[X] [ For further details see text below.]
Docketing to mail notices.
Plaintiffs, the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac"), and the Federal Housing Finance Agency ("FHFA") as conservator for the other two, sued defendants, Brian Hamer, the director of the Illinois Department of Revenue; John Acardo, the DeKalb County Clerk and Recorder; Karen Stukel, the Will County Recorder; Nancy McPherson, the Winnebago County Recorder; Dawn Young, the Whiteside County Recorder; Debbie Gillette, the Kendall County Recorder; and Sandy Wegman, the Kane County Recorder, seeking a declaratory judgment that Fannie Mae and Freddie Mac (collectively the "Enterprises") are exempt from defendants' recent attempts to enforce real estate transfer taxes against the Enterprises. Currently before the court is plaintiffs' motion for summary judgment, defendant Hamer's cross motion for summary judgment, defendant Acardo's cross motion for summary judgment, defendant Hamer's motion to dismiss for lack of jurisdiction, and defendants Gillette and Wegman's motions to join defendant Acardo's cross motion for summary judgment. For the reasons that follow, plaintiffs' motion is granted in part and denied in part, defendant Hamer's cross motion for summary judgment is granted in part and denied in part, defendant Acardo's cross motion for summary judgment is denied, Hamer's motion for to dismiss is denied, and Gillette and Wegman's motions to join are granted. The court enters a declaratory judgment that the Enterprises are exempt from the real estate transfer taxes.
The Enterprises are private corporations that were chartered by the federal government to create stability in the financial sector dealing with mortgages. Following the subprime mortgage crisis in 2008, FHFA took control of the Enterprises as their conservator. In the charters of both Enterprises, and FHFA's charter as conservator, Congress exempted the Enterprises from all state and local taxation, with exceptions not relevant here. See 12 U.S.C. § 1723a(c)(2) (); 12 U.S.C. § 1452(e) (); 12 U.S.C. § 4617(j)(2) ().
Despite that language, beginning in early 2012, defendants began attempting to enforce real estate transfer taxes when one of the Enterprises sought to record a document with a county recorder's office. See 35 ILCS 200/31-10 (); 55 ILCS 5/5-1031 (); 55 ILCS 5/5-1031.1 & 65 ILCS 5/8-3-19 (). Specifically, defendants Gillette and Wegman currently refuse to record a document that lists the Enterprises as exempt from the taxes. Defendants Acardo, Stukel, McPherson, and Young also sent the Enterprises a demand letter requesting that the Enterprises pay several years worth of transfer taxes and threatening litigation if the Enterprises failed to pay.
In reply, plaintiffs filed the instant suit seeking a declaratory judgment that the Enterprises are exempt from the transfer taxes. Shortly thereafter, plaintiffs filed for summary judgment based on the exemption statutes.1 After plaintiffs filed their motion for summary judgment, defendant Acardo, joined now by defendants Gillette and Wegman, filed a cross motion for summary judgment arguing that the exemption from "all taxation" does not include real estate transfer taxes. Defendant Hamer also filed a cross motion for summary judgment, based largely on the same theory as Acardo, but argued in the alternative that even if the exemption applies to the Enterprises, Illinois law permits the tax to be assessed against either party to a real estate transaction, therefore this court should not grant the plaintiffs' request to immunize the transactions as a whole, but rather just the exempt party. Finally, Hamer, joined by Wegman and Gillette, filed a motion to dismiss for lack of jurisdiction based on the Tax Injunction Act ("TIA"), 28 U.S.C. § 1341.
Before addressing the merits of the parties' summary judgment motions, the court must first address defendants' motion to dismiss for lack of jurisdiction. See India Breweries, Inc. v. Miller Brewing Co., 612 F.3d 651, 657 (7th Cir. 2010) (). In their motion, defendants do not contest that the Enterprises' charters permit this court to exercise jurisdiction over cases brought by the Enterprises in general, but argue instead that the TIA serves to prevent this court from exercising jurisdiction. The TIA provides that "[t]he district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State." 28 U.S.C. § 1341. Defendants point out that the instant declaratory judgment seeks to prevent the assessment of tax under state law and that Illinois courts can provide the same adequate remedy to the Enterprises. Accordingly, they argue, this court lacks jurisdiction.
The TIA is "first and foremost a vehicle to limit drastically district court jurisdiction to interfere with so important a local concern as the collection of taxes." Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc., 651 F.3d 722, 726 (7th Cir. 2011) (en banc) (quotation marks omitted). "The requirement serves to minimize the frictions inherent in a federal system of government, and is considered so important that the duty of federal courts to cede litigation seeking to enjoin state tax statutes to the state courts (a duty of 'comity'—that is, of respect for another sovereign) extends beyond the limits of the Tax Injunction Act." Id. at 725. There are two circumstances that courts have recognized in which the TIA gives way, though. First, when it is the United States, or, in limited circumstances, one of its instrumentalities that is being taxed. See Arkansas v. Farm Credit Servs., 520 U.S. 821, 823-24 (1997). Second, when Congress, who passed the TIA in the first place, has passed another statute that indicates that its grant of jurisdiction functions notwithstanding the TIA. See City & Cnty. of S.F. v. Assessment Appeals Bd. for City & Cnty. of S.F., 122 F.3d 1274, 1276-77 (9th Cir. 1997).
In this case, jurisdiction for Freddie Mac is predicated primarily on its charter, which states that "[n]otwithstanding section 1349 of Title 28 or any other provision of law . . . all civil actions to which [Freddie Mac] is a party shall be deemed to arise under the laws of the United States, and the district courts of the United States shall have original jurisdiction of all such actions . . . ." 12 U.S.C. § 1452(f) (emphasis added). By the plain language of Freddie Mac's charter, this court has original jurisdiction over any civil action to which Freddie Mac is a party notwithstanding any other provision of law, which includes the TIA. This conclusion is reinforced by the fact that Congress added the TIA in its current form to the United States Code in 1948 while Freddie Mac was not chartered until 1970. Congress would have known of the TIA in 1970 when it created Freddie Mac, or in 1979, 1984, 1989, 1992, or 2008 when it amended Freddie Mac's charter, but still provided district courts with jurisdiction "notwithstanding . . . any other provision of law." Id.; see also City & Cnty. of S.F., 122 F.3d at 1276-77 ( ).
Indeed, § 1452(f) functions to provide this court with jurisdiction over the claims made by all of plaintiffs, as its plain language gives this court jurisdiction over "all civil actions to which [Freddie Mac] is a party," not just Freddie Mac's claims. § 1452(f) (emphasis added); see Huntingdon Valley Club Condo. Ass'n v. Pa. Hous. Fin. Agency, No. Civ.A.04-4770, 2005 WL 44524, at *6 (E.D. Pa. Jan. 10, 2005) (...
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