Griffith v. Fed. Nat'l Mortg. Ass'n
| Decision Date | 09 June 2014 |
| Docket Number | Civil Action No. 2:12–02083. |
| Citation | 25 F.Supp.3d 902 |
| Court | U.S. District Court — Southern District of West Virginia |
| Parties | Craig A. GRIFFITH, in his capacity as West Virginia Tax Commissioner; and The County Commission of Hancock County, a public corporation of the State of West Virginia, Eleanor Straight, in her capacity as Clerk of the County Commission of Hancock County, County Commission of Marshall County, a public corporation of the State of West Virginia, Jan Pest, in her capacity as Clerk of the County Commission of Marshall County, County Commission of Kanawha County, a public corporation of the State of West Virginia, Vera McCormick, in her capacity as Clerk of the County Commission of Kanawha County, County Commission of Putnam County, a public corporation of the State of West Virginia, Brian Wood, in his capacity as Clerk of the County Commission of Putnam County, County Commission of Wyoming County, a public corporation of the State of West Virginia, D. Michael Goode, in his capacity as Clerk of the County Commission of Wyoming County, County Commission of Summers County, a public corporation of the State of West Virginia, and Mary Beth Merritt, in her capacity as Clerk of the County Commission of Summers County, On behalf of themselves and all others similarly situated, Plaintiffs, v. FEDERAL NATIONAL MORTAGAGE ASSOCIATION, a federally chartered corporation and Federal Home Loan Mortgage Corporation, a federally chartered corporation and Federal Housing Finance Agency, as Conservator for the above defendants, Defendants. |
Benjamin L. Bailey, Jonathan S. Deem, Marc R. Weintraub, Michael L. Murphy, Bailey & Glasser, Harry F. Bell, Jr., Jonathan W. Price, The Bell Law Firm, Charleston, WV, Debra Brewer Hayes, Charles Hunter, Reich & Binstock, Houston, TX, Michael D. Hausfeld, Nathaniel C. Giddings, James Pizzirusso, Hausfeld, Washington, DC, for Plaintiffs.
Ann Marie Uetz, Foley & Lardner, Detroit, MI, Carrie Goodwin Fenwick, Goodwin & Goodwin, Charleston, WV, Jill L. Nicholson, Foley & Lardner, Chicago, IL, Michael A. Johnson, Arnold & Porter, Michael J. Ciatti, King & Spalding, Washington, DC, for Defendants.
Pending is the defendants' motion to dismiss, filed December 20, 2012, and the plaintiffs' motion for partial summary judgment as to defendants' tax liability, filed August 14, 2013.
In this case, one of several similar actions filed throughout the United States, Plaintiffs, Craig A. Griffith in his capacity as West Virginia Tax Commissioner (“Commissioner Griffith”) and the County Commissions and County Clerks (“County Plaintiffs”) of Hancock, Kanawha, Marshall, Putnam, Summers, and Wyoming Counties in West Virginia, seeking to represent all similarly situated counties across West Virginia, allege that defendants, the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the Federal Housing Finance Agency (“FHFA”), have refused to pay excise taxes imposed on recorded real estate transfers under West Virginia law.
Fannie Mae and Freddie Mac are federally chartered private corporations that own or guarantee a substantial portion of the mortgages on single-family homes in the United States. Am. Compl. ¶¶ 36, 39–40.1 Fannie Mae was created by the federal government in order to “establish secondary market facilities for residential mortgages,” to “provide stability in the secondary market for residential mortgages,” and to “promote mortgage investments throughout the Nation ... by increasing the liquidity of mortgage investments and improving the distribution of investment capital available for residential mortgage financing.” 12 U.S.C. § 1716 (2012). Freddie Mac was created for a substantially similar purpose, as well as to compete with Fannie Mae in the secondary market for mortgages. See 12 U.S.C. § 1451 note (2012) (describing Freddie Mac's mission to “increas[e] the liquidity” of the mortgage market and to “promote access to mortgage credit throughout the Nation”). The FHFA is a federal agency that was created on July 30, 2008 to, among other things, act as conservator for, and oversee the operations of, Fannie Mae and Freddie Mac. See 12 U.S.C. § 4617(b)(2)(B) (2012) ().
“Fannie Mae and Freddie Mac carry out their missions” to increase the funds available for home lending throughout the country “by purchasing mortgages originated by third-party lenders, pooling the mortgages into investment instruments, and selling those mortgage backed securities to raise capital for further purchases.” Montgomery County v. Fed. Nat'l Mortg. Ass'n (“Montgomery Cnty. II ”), 740 F.3d 914, 918 (4th Cir.2014). When one of those mortgages becomes delinquent and enters into foreclosure, Fannie Mae or Freddie Mac may acquire title to the property secured by the mortgage and may, in turn, seek to find a buyer for the property. Am. Compl. ¶¶ 38–41. When either Fannie Mae or Freddie Mac obtains or transfers title to a foreclosed property, it records the change in ownership with the government of the county in which the property is located. Am. Compl. ¶ 38. West Virginia imposes an excise tax on the privilege of making and recording such transfers. W. Va.Code § 11–22–1 et seq. This real estate transfer tax requires any person who desires to record a deed or other document transferring real estate to pay a statutorily prescribed amount to both the State and to the county in which the document is filed. Id. § 11–22–2.
In this case, plaintiffs, State and county officials responsible for levying and collecting West Virginia's real estate transfer tax, claim that Fannie Mae and Freddie Mac have repeatedly acquired and transferred title to property in West Virginia but have refused to pay the tax. Am. Compl. ¶¶ 41–43. In their amended class action complaint, plaintiffs seek a declaration, pursuant to 28 U.S.C. § 2201, that defendants must pay the West Virginia tax, and also seek damages in the amount of the real estate transfer tax that defendants have thus far refused to pay, as well as “interest for failure to pay” past taxes when they were allegedly due. Plaintiffs claim that they are entitled to money damages under either 28 U.S.C. § 2202 or under a state-law theory of “equitable estoppel/detrimental reliance.”
The defendants have moved to dismiss, arguing that they are immune from paying the tax either because they are federal instrumentalities, or because federal law exempts them from paying the tax. Defs.' Mem. at 5–17 n. 10.2 Plaintiffs maintain that the defendants are not exempt, and have moved for partial summary judgment on the issue of defendants' tax liability. See generally Pls.' Sum. J. Mem.3 In their motion for summary judgment, the plaintiffs also assert that any statutory exemption claimed by the defendants would be unconstitutional as applied. Id. at 4–18. Specifically, they claim that Congress does not have the power to exempt a private corporation such as Fannie Mae or Freddie Mac from state or local taxation. Id.
The motion to dismiss and the motion for partial summary judgment both turn on the issue of defendants' immunity from state and local taxation. If defendants are indeed immune, then plaintiffs' claims and motion for partial summary judgment fail as a matter of law. The court has jurisdiction to resolve the issue under 12 U.S.C. § 1452(f), which provides that “all civil actions to which [Freddie Mac] is a party shall be deemed to arise under the laws of the United States,” and under 28 U.S.C. § 1367.
In order to survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ); see also Monroe v. City of Charlotesville, 579 F.3d 380, 386 (4th Cir.2009).
Application of the Rule 12(b)(6) standard requires that the court “ ‘accept as true all of the factual allegations contained in the complaint....’ ” Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (quoting Twombly, 550 U.S. at 555–56, 127 S.Ct. 1955 ); see also South Carolina Dep't of Health & Envtl. Control v. Commerce & Indus. Ins. Co., 372 F.3d 245, 255 (4th Cir.2004) (quoting Franks v. Ross, 313 F.3d 184, 192 (4th Cir.2002) ). The court must also “draw[ ] all reasonable ... inferences from th[e] facts in the plaintiff's favor....” Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir.1999).
Under West Virginia law, any person who desires to record a deed or other document transferring real estate is subject to a real estate transfer tax. W. Va.Code § 11–22–1, et seq. The tax has three components: (1) a State tax assessed at a statutory rate of $1.10 for every $500 dollars, or fraction thereof, in value stated on the transferring document; (2) a county tax assessed at a rate of not less than $0.55 and not more than $1.10 for every $500 dollars, or fraction thereof, in value stated on the transferring document; and (3) a flat tax of $20 per transfer. Id. § 11–22–2. In the ordinary course of business, the tax is assessed by the clerk of the county in which the transferring document is filed, and paid by the grantor listed on the transferring document. Id. If the grantor fails to pay the tax but the grantee nevertheless accepts title to the property, the grantee then becomes liable for the tax. Id.
Pursuant to federal statute, all three defendants are exempt from certain forms of state and local taxation. For example, under 12 U.S.C. § 1723a(c)(2), Fannie Mae, “including its franchise, capital, reserves, surplus, mortgages or other security holdings, and income, [is]...
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