Hertel v. Bank of Am. N.A.

• Decision Date: 18 September 2012
• Docket Number: No. 1:11–CV–757.,1:11–CV–757.
• Citation: 897 F.Supp.2d 579
• Parties: Curtis HERTEL, Jr., et al., Plaintiffs, v. BANK OF AMERICA N.A., et al., Defendants.
• Court: U.S. District Court — Western District of Michigan

897 F.Supp.2d 579

Curtis HERTEL, Jr., et al., Plaintiffs,

v.BANK OF AMERICA N.A., et al., Defendants.

No. 1:11–CV–757.

United States District Court,

W.D. Michigan,

Southern Division.

Sept. 18, 2012.

Matthew Kenneth Payok, Lansing, MI, for Plaintiffs.

Michael L. Shiparski, U.S. Attorney, Grand Rapids, MI, Joseph Aviv, Honigman Miller Schwartz & Cohn LLP, Matthew Joseph Boettcher, Plunkett Cooney, Bloomfield Hills, MI, John D. Pirich, Honigman Miller Schwartz and Cohn LLP, Lansing, MI, Brian Clark Summerfield, Bodman LLP, I. W. Winsten, Brock Allen Swartzle, Nicholas Benjamin Gorga, Honigman Miller Schwartz and Cohn LLP, Ann Marie Uetz, Foley & Lardner LLP, Detroit, MI, David Barry Goroff, Foley & Lardner LLP, Chicago, IL, Asim Varma, Michael A.F. Johnson, Arnold & Porter LLP, Joseph F. Yenouskas, Goodwin Procter LLP, Michael J. Ciatti, King & Spalding LLP, Washington, DC, Clyde M. Metzger, III, Thomas J. Foley, Foley Baron & Metzger PLLC, Livonia, MI, for Defendants.

OPINION

ROBERT HOLMES BELL, District Judge.

This matter is before the Court on the motion for dismissal and summary judgment filed by Defendants the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) against the Plaintiff–Intervenors Michigan Attorney General and Department of Treasury (collectively, “State Plaintiffs”). (Dkt. No. 62.) Intervenor–Defendant the Federal Housing Finance Agency (“FHFA”) (collectively with Fannie Mae and Freddie Mac, the “Enterprise Defendants”) has joined in this motion. (Dkt. No. 72.) The State Plaintiffs have also moved for summary judgment against the Enterprise Defendants. (Dkt. No. 64.) Also pending, is Defendant Bank of America, N.A.'s motion to join the Enterprise Defendants' motion for dismissal and summary judgment.¹ (Dkt. No. 66.)

For the reasons that follow, the Enterprise Defendants' motion for dismissal and summary judgment will be granted and State Plaintiffs' motion for summary judgment will be denied. Bank of America's motion for joinder will be denied.

I.

On June 22, 2011, Plaintiff Curtis Hertel, Jr., Register of Deeds for Ingham County, commenced an action in state court against Fannie Mae, Freddie Mac, and six other defendants, seeking unpaid transfer tax pursuant to the State Real Estate Transfer Tax Act, Mich. Comp. Laws § 207.523 (1993), and the County Real Estate Transfer Tax Act, Mich. Comp. Laws § 207.502 (1993). Hertel contended that the statutory taxation exemptions previously relied upon by the defendants were invalid.

That case was removed to this Court on July 22, 2011. (Dkt. No. 1.) Subsequently, FHFA (made conservator of Fannie Mae and Freddie Mac in 2008) intervened as a defendant, (Dkt. No. 65), and the Michigan Attorney General and Department of Treasury intervened as plaintiffs (Dkt. No. 61). The State Plaintiffs, in concurring with Hertel's complaint, seek only the unpaid state real estate transfer tax (“SRETT”) from the Enterprise Defendants, along with judgment against Defendants Bank of America, N.A., BAC Home Loans Servicing, LP, Wells Fargo Bank, N.A., and Countrywide Home Loans Servicing, LP to the extent these entities relied upon the Enterprise Defendants' claimed exemptions. (Dkt. No. 67.) The State Plaintiffs raise no claims against Trott & Trott, PC or Orlans Associates, PC. ( Id.)

On February 24, 2012, 2012 WL 627695, this Court dismissed Plaintiff Hertel and all related motions. (Dkt. No. 82.) Still pending are the Enterprise Defendants' motion for dismissal and summary judgment, the State Plaintiffs' motion for summary judgment, and Bank of America's motion for joinder.

II.

The Federal Rules of Civil Procedure require the Court to 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). In evaluating a motion for summary judgment the Court must look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). If a defendant carries its burden of showing there is an absence of evidence to support a claim, a plaintiff must demonstrate by affidavits, depositions, answers to interrogatories, and admissions on file, that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324–25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In considering a motion for summary judgment, “the district court must construe the evidence and draw all reasonable inferences in favor of the nonmoving party.” Martin v. Cincinnati Gas and Elec. Co., 561 F.3d 439, 443 (6th Cir.2009) (citing Jones v. Potter, 488 F.3d 397, 403 (6th Cir.2007)). Nevertheless, the mere existence of a scintilla of evidence in support of a plaintiff's position is not sufficient to create a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The proper inquiry is whether the evidence is such that a reasonable jury could return a verdict for the non-moving party. Id.; see generally Street v. J.C. Bradford & Co., 886 F.2d 1472, 1476–80 (6th Cir.1989).

III.

The facts of the present matter are not in dispute. A Michigan state statute provides as follows: “There is imposed, in addition to all other taxes, a tax upon [certain] written instruments executed within this state when the instrument is recorded.” Mich. Comp. Laws § 207.523. This tax, the STRETT, is a recording tax that all parties agree constitutes an excise tax. (Dkt. Nos. 62, at 1, 64, at 3.) The statute further states that “[t]he person who is the seller or grantor of the property is liable for the tax imposed under this act.” Id. All parties agree that certain transfers of foreclosed properties undertaken by the Enterprise Defendants as grantors are covered by the plain language of the SRETT, and no one disputes that the Enterprise Defendants have not been paying this tax. Instead, the dispute centers on whether the Enterprise Defendants' exemptions to taxation under federal statutes apply to an excise tax like the SRETT as a matter of law.

The exemptions in question come from three separate, but parallel federal statutes. For Fannie Mae:

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). The statutes regarding Freddie Mac and the FHFA contain virtually identical language. See12 U.S.C. § 1452(e) (exempting Freddie Mac from “all taxation now or hereafter imposed ... by any State”); 12 U.S.C. § 4617(j)(2) (exempting the FHFA from “all taxation imposed by any State”). Each federal statute contains an exception for “real property,” which may be taxed by the state. 12 U.S.C. §§ 1723a(c)(2), 1452(e), 4617(j)(2).

The Enterprise Defendants contend that they are exempt from the SRETT as a matter of law as a result of these federal statutes. In support they rely on the rules of statutory interpretation and Supreme Court decisions. Each will be discussed in turn.

A. Statutory Interpretation

The Supreme Court has explained the process of statutory construction and the importance of the text as follows:

[The Court's] first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case. [The Court's] inquiry must cease if the statutory language is unambiguous and “the statutory scheme is coherent and consistent.”

Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997) (quoting United States v. Ron Pair Enter., Inc., 489 U.S. 235, 240, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)). See also, e.g., Schindler Elevator Corp. v. United States ex rel. Kirk, ––– U.S. ––––, 131 S.Ct. 1885, 1893, 179 L.Ed.2d 825 (2011); Carcieri v. Salazar, 555 U.S. 379, 387, 129 S.Ct. 1058, 172 L.Ed.2d 791 (2009); United States v. Washington, 584 F.3d 693, 695 (6th Cir.2009).

The Enterprise Defendants contend that the language of the exemptions in the statutes at issue is unambiguous. As they read the statutes, “all taxation” means exactly what it says, and there is no need for the Court to continue its inquiry. They contend that under the construction advanced by the State Plaintiffs, the Court would have to rewrite “all taxation” as “some taxation, but not recording taxes,” when there is no evidence in the text supporting such a reading. (Dkt. No. 62, at 4.)

As a textual matter, the Enterprise Defendants are correct. There is no possible reading of the statutes other than that Fannie Mae, Freddie Mac, and the FHFA are exempt from all state taxation, regardless of whether it is termed a recording or excise tax. “All” is an inclusive adjective that does not leave room for unmentioned exceptions. Indeed, the fact that one exception is explicitly included further supports this conclusion. Each statute contains an exception for the taxation of real property. See12 U.S.C. §§ 1723a(c)(2), 1452(e), 4617(j)(2). “Where Congress explicitly enumerates certain exceptions to a general prohibition, additional exceptions are not to be implied, in the absence of evidence of a contrary legislative intent.” Andrus v. Glover Constr. Co., 446 U.S. 608, 616–17, 100 S.Ct. 1905, 64 L.Ed.2d 548 (1980); see also, e.g., TRW Inc. v. Andrews, 534 U.S. 19, 28, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001); United States v. Johnson, 529 U.S. 53, 58, 120 S.Ct....