County Commission of Hancock County et al v. Federal National Mortgage Association et al

Filing 52

MEMORANDUM OPINION AND ORDER granting defendant's 6 MOTION to Dismiss 1 Complaint; directing that this case is dismissed with judgment in favor of defendants. Signed by Judge John T. Copenhaver, Jr. on 6/9/2014. (cc: attys; any unrepresented parties) (tmh)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
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.

Civil Action No. 2:12-02083

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.

MEMORANDUM OPINION AND ORDER
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.

I.

Factual and Procedural Background

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.
2

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) (granting the FHFA the power to “operate”
Fannie Mae and Freddie Mac and “to conduct all [of their]
business”).
“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
1

“Am. Compl.” refers to the plaintiffs’ First Amended Class
Action Complaint, (ECF No. 15).
3

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.
Code § 11-22-1, et seq.

W. Va.

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.
4

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

2

“Defs.’ Mem.” refers to the defendants’ Memorandum of Law in
Support of Their Motion to Dismiss the Plaintiffs’ First Amended
Class Action Complaint, (ECF No. 26).
3

“Pls.’ Sum. J. Mem.” refers to Plaintiffs’ Memorandum of Law in
Support of Their Motion for Partial Summary Judgment on the
Issue of Liability, (ECF No. 44).
5

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.

II.

Motion to Dismiss

A.

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 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Monroe v.
City of Charlottesville, 579 F.3d 380, 386 (4th Cir. 2009).
6

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 (2007) (quoting Twombly, 550 U.S. at 555-56); 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).

B.

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.
seq.

W. Va. Code § 11-22-1, et

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
7

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] exempt from all taxation now
or hereafter imposed by any State, . . . county, municipality,
or local taxing authority, except that any real property of the
corporation shall be subject to State, . . . county, municipal,
or local taxation to the same extent as other real property is
taxed.”

Congress has granted Freddie Mac and the FHFA nearly

identical immunities from state and local taxation. 4

See 12

U.S.C. §§ 1452(e) (Freddie Mac), 4617(j)(2) (FHFA).

4

Freddie Mac, “including its franchise, activities, capital,
reserves, surplus, and income, shall be exempt from all taxation
now or hereafter imposed 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).
“The
[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
8

In short, these laws (hereinafter referred to as the
“Statutory Exemptions”) consist of two parts: an immunity
provision that makes the defendants “exempt from all taxation”;
and an exception, or “carve-out,” from that immunity which
subjects “any real property of [the defendants] . . . [to]
taxation to the same extent” as other real property is taxed.
See 12 U.S.C. §§ 1723a(c)(2) (Fannie Mae), 1452(e) (Freddie
Mac), 4617(j)(2) (FHFA).
Despite the existence of the Statutory Exemptions,
plaintiffs contend that the defendants must pay the real estate
transfer tax because: (1) the transfer tax does not fall within
the definition of “all taxation” as that term is used in the
immunity provision of the Statutory Exemptions; (2) the levy is
a tax on real property that falls within the carve-out from the
Statutory Exemptions; or (3) the Statutory Exemptions would be
unconstitutional as-applied if they are interpreted to bar the
imposition of the West Virginia tax.

These arguments were

recently discussed and either explicitly or implicitly rejected
by our court of appeals in Montgomery County II.

See generally

740 F.3d 914 (4th Cir. 2014) (holding that defendants are exempt

taxing authority, except that any real property
shall be subject to State, territorial, county,
local taxation to the same extent according to
other real property is taxed . . . .” 12 U.S.C. §
9

of the Agency
municipal, or
its value as
4617(j)(2).

from Maryland and South Carolina transfer taxes).

Nevertheless,

the court considers each in turn. 5

1.

Plaintiffs contend that the term “all taxation” as it
is used in the Statutory Exemptions does not include excise
taxes such as the real estate transfer tax at issue here.

A

straightforward reading of the statute forecloses this argument.
As always, statutory interpretation “necessarily
begins with an analysis of the language of the statute.”

In re

Coleman, 426 F.3d 719, 724 (4th Cir. 2005) (citing Landreth
Timber Co. v. Landreth, 471 U.S. 681, 685 (1985)).

The first

step is “to determine whether the language at issue has a plain
and unambiguous meaning with regard to the particular dispute in
the case.”

Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997).

“The plainness or ambiguity of statutory language is determined
by reference to the language itself, the specific context in
which that language is used, and the broader context of the
statute as a whole.”

Id. at 341.

5

“It is well established that,

The court will consider the statutory arguments first, in
keeping with the “usual practice” of avoiding the resolution of
constitutional questions “if there is some other ground upon
which to dispose of the case.” Nw. Austin Mun. Dist. No. One v.
Holder, 557 U.S. 193, 197, 205 (2009) (internal quotation marks
and citations omitted).
10

when the statutory language is plain, [courts] must enforce it
according to its terms.”

Jimenez v. Quarterman, 555 U.S. 113,

118 (2009).
The Statutory Exemptions state that defendants are
exempt from “all taxation” levied by state and local
governments, but the words “all” and “taxation” are not defined.
See 12 U.S.C. §§ 1723a(c)(2) (Fannie Mae), 1452(e) (Freddie
Mac), 4617(j)(2) (FHFA).

“In the absence of such a definition,

[courts] construe” statutory terms according to their “ordinary
or natural meaning.”

F.D.I.C. v. Meyer, 510 U.S. 471, 476

(1994); United States v. Mills, 485 F.3d 219, 222 (4th Cir.
2007) (“It is a cornerstone of statutory interpretation that an
undefined term is construed in accordance with its ordinary and
natural meaning.”)(internal quotation marks omitted).

When the

word “all” is used as an adjective preceding a defining word, it
ordinarily means “[t]he entire or unabated amount or quantity
of; the whole extent, substance, or compass of; the whole.”
Oxford English Dictionary 324, vol. I (2d ed. 1989).

“Taxation”

means “the action of taxing or the fact of being taxed.”

Oxford

English Dictionary 679, vol. XVII (2d ed. 1989).
In light of these definitions, it seems beyond dispute
that “the common-sense, non-technical interpretation of ‘all
taxation’ has to include” real estate transfer taxes “which
11

impose a tax . . . when a deed or other instrument of conveyance
is recorded during the transfer of real property.”

County of

Oakland v. Fed. Hous. Fin. Agency, 716 F.3d 935, 940 (6th Cir.
2013) (interpreting defendants’ immunity from Michigan real
estate transfer tax).

Courts around the country, have reached

the same conclusion when analyzing similar language.

See, e.g.,

Delaware County v. Fed. Housing Fin. Agency, 747 F.3d 215, 22223 (3d Cir. 2014) (“[W]e will join our sister circuits,
interpret the phrase ‘all taxation’ to mean precisely what it
says, and hold that the Enterprises are statutorily exempt from
paying state and local real estate transfer taxes.”); DeKalb
County v. Fed. Housing Fin. Agency, 741 F.3d 795, 798-99 (7th
Cir. 2013); Nicolai v. Fed. Hous. Fin. Agency, 928 F. Supp. 2d
1331, 1334-35 (M.D. Fla. 2013); Hertel v. Bank of Am. N.A., 897
F. Supp. 2d 579, 582 (W.D. Mich. 2012); Hager v. Fed. Nat’l
Mortg. Ass’n, 882 F. Supp. 2d 107, 111–12 (D.D.C. 2012). 6
Plaintiffs advance two arguments in an attempt to
muddy these seemingly clear waters.

6

Neither is persuasive.

Only one federal court to consider whether the defendants are
exempt from state and local excise taxes has reached a different
conclusion; however, that ruling was vacated by the Sixth
Circuit. Oakland County v. Fed. Hous. Fin. Agency, 871 F. Supp.
2d 662 (E.D. Mich. 2012), vacated, 716 F.3d 935 (2013).
12

a.

First, plaintiffs assert that United States v. Wells
Fargo Bank, 485 U.S. 351 (1988), establishes that “all taxation”
is a term of art that refers only to direct taxes, and not to
excise taxes such as the real estate transfer tax at issue here.
Plaintiffs misread Wells Fargo.

In that case, the Supreme Court

held that a clause in the Housing Act of 1937 that exempted
“Project Notes” (a form of municipal bond) from “all taxation”
did not protect Project Notes from excise taxes.

Id. at 353–55.

However, the Court’s holding was tailored to the specific
wording of the statute at issue in that case.

Specifically, the

Court explained that “an exemption of property from all
taxation” had historically been understood to mean that “the
property was exempt from direct taxation, but certain privileges
of ownership, such as the right to transfer the property could
be taxed.”

Id. at 355 (emphases added).

In other words, Wells

Fargo stands for the proposition that when the term “all
taxation” is used in a statute exempting property from taxation,
the term “has an understood meaning that does not include
exemption from excise taxes” such as a real estate transfer tax.
Nicolai, 928 F. Supp. 2d at 1335-36.

Several courts have

reached the conclusion that Wells Fargo is limited to this
understanding.

See Delaware Cnty., 747 F.3d at 222-23; DeKalb
13

Cnty., 741 F.3d at 800-01; Montgomery County v. Fed. Nat’l
Mortg. Ass’n (“Montgomery Cnty. I”), No. 13- 66, 2013 WL
1832370, at *6 (D. Md. Apr. 30, 2013) (collecting cases), aff’d,
Montgomery Cnty. II, 740 F.3d 914. 7
For their part, defendants urge that when a statutory
exemption applies to an entity such as one of the defendants,
rather than to property, the meaning of “all taxation” includes
both direct taxes and excise taxes.

In support of their

argument, defendants cite Federal Land Bank of St. Paul v.
Bismarck Lumber Co., 314 U.S. 96 (1941).

In that case, the

Supreme Court considered whether a provision of the Federal Farm
Loan Act exempted the Federal Land Bank of St. Paul from a state
sales tax.

The language at issue provided that “every Federal

land bank and every national farm loan association, including
the capital and reserve or surplus therein and the income
derived therein, shall be exempt from . . . State, municipal,
and local taxation . . . .”
931–933 (repealed 1971)).

Id. at 96 n.1 (citing 12 U.S.C. §§
The Court concluded, based on the

language of the statute, that the Bank was indeed exempt from
the tax because “[t]he unqualified term ‘taxation’ . . . clearly
encompasse[d]” a sales tax. Id. at 99.
7

In other words, Bismarck

Although our court of appeals recently confirmed that Fannie
Mae and Freddie Mac are immune from State transfer taxes, it did
not specifically address the plaintiffs’ “term of art” argument.
See Delaware Cnty., 747 F.3d at 223 n.2.
14

stands for the proposition that “when Congress broadly exempts
an entity from ‘taxation’ or ‘all taxation’ it means all
taxation[,]” including excise taxes like the one at issue here.
Cnty. of Oakland v. Fed. Hous. Fin. Agency, 716 F.3d 935, 941
(6th Cir. 2013) (interpreting Michigan transfer tax) (first
emphasis added).
In an effort to avoid the import of the Court’s
holding in Bismarck, plaintiffs contend that the decision was
premised on the Federal Land Bank of St. Paul’s status as a
federal instrumentality, and not the language of the statutory
exemption.

However, the statutory analysis in Bismarck “does

not mention the federal instrumentality status of the Federal
Land Banks[;] instead it relies specifically, and solely, on the
statutory exemption written by Congress.”

Fannie Mae v. Hamer,

No. 12-502301, 2013 WL 591979, at *6 (N.D. Ill. Feb. 13, 2013);
see also Montgomery Cnty. I, 2013 WL 1832370 at *8 (“This
argument misapprehends Bismarck.

The Bismarck Court very

clearly divided its opinion into a statutory analysis, which
examined [the statutory exemption], and a constitutional
analysis[.]”).
Next, plaintiffs assert that this court should
disregard Bismarck inasmuch as Wells Fargo postdates Bismarck,
and therefore provides the more apposite authority.
15

But Wells

Fargo did not address Bismarck, let alone overturn it.

The two

cases treat fundamentally distinct issues -- exemptions from
taxation of property on the one hand, and the unqualified
exemption of entities from taxation on the other hand.

See

Nicolai, 928 F. Supp. 2d at 1337 (“Wells Fargo did not overturn
the holding of Bismarck.

It simply addressed a different

issue.”); see also DeKalb Cnty., 741 F.3d at 800-01 (rejecting
argument that Wells Fargo overruled Bismarck).
Bismarck, like this case, dealt with a state’s attempt
to subject a corporate entity to an excise tax despite the
existence of a statute, remarkably similar to the statutes at
issue here, 8 which exempted that entity from state and local
taxation.
this case.

Accordingly, the Bismarck Court’s holding controls
Just as the unqualified statutory “exempt[ion] from

. . . [state and local] taxation” in that case barred the
state’s efforts to impose an excise tax, 314 U.S. at 99, the

8

Compare, e.g., 12 U.S.C. § 1723a(c)(2) (Fannie Mae “including
its franchise, capital, reserves, surplus, mortgages or other
security holdings, and income, [is] exempt from all taxation now
or hereafter imposed by any state, . . . county, municipality,
or local taxing authority, except that any real property of the
corporation shall be subject to State, . . . county, municipal,
or local taxation to the same extent as other real property is
taxed.”), with Bismarck, 314 U.S. at 96 n.1 (“[E]very Federal
land bank and every national farm loan association, including
the capital and reserve or surplus therein and the income
derived therein, shall be exempt from . . . State, municipal,
and local taxation, except upon real estate held, purchased or
taken by said bank. . . .”).
16

Statutory Exemptions at issue here bar the imposition of the
real estate transfer tax. Cf. Delaware Cnty., 747 F.3d at 22223; DeKalb Cnty., 741 F.3d at 800 (“Fannie’s tax exemption, like
that of the federal land banks in Bismarck, exempts an entity -Fannie -- and not just its property . . . .

[T]he Fannie Mae

statute exempts Fannie from real estate transfer taxes[.]”);
Cnty. of Oakland, 716 F.3d at 940-43 (rejecting plaintiffs’
reading of Wells Fargo and holding that Statutory Exemptions
apply to property transfer taxes).

b.

In their next attempt to avoid the plain meaning of
the Statutory Exemptions, plaintiffs point to a separate
provision of the Housing and Economic Recovery Act (“HERA”), the
law that created the FHFA.

See generally Pub. L. No. 110–289,

122 Stat. 2654 (2008) (providing, among other things, for the
FHFA to exert regulatory control over Fannie Mae and Freddie
Mac).

Specifically, plaintiffs note that § 4617(j)(4) of HERA

exempts the FHFA from “penalties or fines, including those
arising from the failure of any person to pay any . . .
recording tax[.]”

The plaintiffs claim that such language would

be unnecessary if the defendants were already individually
exempt from paying recording taxes such as West Virginia’s real
17

estate transfer tax.

Invoking the canon against surplusage,

which instructs courts “to give effect, if possible, to every
clause and word of a statute,”

Duncan v. Walker, 533 U.S. 167,

174 (2001) (internal quotation marks omitted), plaintiffs assert
that the Statutory Exemptions must be read narrowly to exclude
the tax at issue here in order to avoid rendering § 4617(j)(4)
superfluous.
“The canon against surplusage is not an absolute
rule,” Marx v. Gen. Revenue Corp., 133 S. Ct. 1166, 1177 (2013),
and “[r]edundancies across statutes are not unusual events in
drafting,” Ct. Nat’l Bank v. Germain, 503 U.S. 249, 253 (1992).
But more importantly, a straightforward reading of the plain
text of § 4617(j)(4) demonstrates that it is not at all
superfluous in the manner that plaintiffs suggest.

Rather, the

text of the statute states that the FHFA is not liable for “the
failure of any person to pay” a recording tax.
§ 4617(j)(4) (emphasis added).

12 U.S.C.

“The phrase ‘any person’ is

broader than . . . ‘the FHFA’ or [Fannie Mae or Freddie Mac].
Therefore, it does not apply solely to the [defendants’] failure
to pay taxes on time, but also includes non-exempt previous
owners of property who may have failed ‘to pay taxes on real
estate now owned or managed by the FHFA as conservator of Fannie
Mae and Freddie Mac.’”

Nicolai, 928 F. Supp. 2d at 1334-35
18

(quoting Hertel v. Bank of Am. N.A., 897 F. Supp. 2d 579, 583
(W.D. Mich. 2012)).

Accordingly, interpreting the Statutory

Exemptions to bar the real estate transfer tax does not render §
4617(j)(4) superfluous.

***

In sum, having determined that the ordinary and
natural understanding of the term “all taxation” as it is used
in the Statutory Exemptions includes the tax at issue, and
finding no merit in the plaintiffs’ arguments to the contrary,
the court concludes that the West Virginia real estate transfer
tax is barred by the immunity provision of the Statutory
Exemptions.
2.

The plaintiffs’ remaining arguments were expressly
foreclosed by the Fourth Circuit’s decision in Montgomery County
II, and warrant only a short discussion.

Briefly summarized,

the plaintiffs contend that the real estate transfer tax falls
within the Statutory Exemptions’ carve-out for taxes on “real
property”; alternatively, they argue that the Statutory
Exemptions would be unconstitutional as-applied if they were
19

interpreted to bar the application of the real estate transfer
taxes.
a.

As our court of appeals has explained, exclusions like
the carve-out, that allow “for the taxation of real property as
‘other property is taxed,’ undoubtedly refer to real property
taxes imposed on the ownership of real property and not to
transfer taxes imposed on the transfer of real property[.]”
Montgomery Cnty. II, 740 F.3d at 920 (internal citations
omitted) (emphases in the original).

As a result, “the real

property exclusions from the general tax exemptions of 12 U.S.C.
§§ 1723a(c)(2) and 1452(e) do not include transfer and
recordation taxes.”

Id. at 920-21; Delaware Cnty., 747 F.3d at

223-24 (“The transfer taxes are an excise tax, not a direct tax
on real estate, and therefore are not within the scope of the
exemption.”); DeKalb Cnty., 741 F.3d at 801 (“A deed is not real
estate any more than a car title is a car.”); Cnty. of Oakland,
716 F.3d at 939 n.6 (“[T]he transfer tax, as a privilege tax,
does not fit into the carve out allowing for taxes on real
property.”); see also Pittman v. Home Owners’ Loan Corp., 308
U.S. 21, 31 n.3 (1939) (holding that a tax on recording

20

mortgages did not fall within similar real property carve-out
from statutory tax exemption).
The text of the real estate transfer tax at issue
here clearly demonstrates that it is a tax upon “the use or
transfer of property” and not a tax on “property itself.”

The

statute provides that “[e]very person who delivers, accepts or
presents for recording any document” transferring real estate is
subject to the transfer tax.

See W. Va. Code § 11-22-2. In

other words, the tax falls on the person seeking to record a
transfer, rather than on the property itself.

Indeed, even the

plaintiffs admit in their amended complaint that the West
Virginia tax is a tax “on the privilege of transferring real
estate.”

Am. Compl. ¶ 17.

Accordingly, the real estate

transfer tax does not fall within the real property carve-out.

b.

Plaintiffs’ fallback assertion that the Statutory
Exemptions are unconstitutional is similarly unavailing.
Specifically, they contend that Congress did not have the
authority under the Commerce Clause to enact the Statutory
Exemptions, and that the Statutory Exemptions violate the Tenth
Amendment.

They also claim that even if the Statutory
21

Exemptions might be constitutional under certain circumstances,
they are unconstitutional here because Fannie Mae and Freddie
Mac are not federal instrumentalities.
As the Fourth Circuit explained in Montgomery County
II, “Congress acted well within its Commerce Clause power in
establishing Fannie Mae and Freddie Mac for the purpose” of
promoting and regulating the nationwide secondary mortgage
market, and the Statutory Exemptions were a permissible means of
attaining that legitimate end.

Montgomery Cnty. II, 740 F.3d at

923-25 (explaining that Congress could “rationally have believed
that state taxation would substantially interfere with or
obstruct the legitimate purposes of Fannie Mae and Freddie
Mac”).

As a result, the Statutory Exemptions stand on sound

constitutional footing.

Id.; Delaware Cnty., 747 F.3d at 227;

DeKalb Cnty., 741 F.3d at 801-03.
Moreover, it cannot be said that the Statutory
Exemptions impermissibly “commandeer” state employees in
violation of the Tenth Amendment.

It is true that Congress does

not have authority under the Commerce Clause to “commandee[r]
the legislative processes of the States by directly compelling
them to enact and enforce a federal regulatory program.”

New

York v. United States, 505 U.S. 144, 161 (1992) (quoting Hodel
v. Va. Surface Mining & Reclamation Ass’n, Inc., 452 U.S. 264,
22

288 (1981)).

But Congress may preempt state laws that

contravene national policy priorities by legislating “in full
view of the public” so that “federal officials [] suffer the
consequences if the decision turns out to be detrimental or
unpopular.”

Id. at 168.

done in this case.

That is precisely what Congress has

The Statutory Exemptions do not covertly

require state and local officials to enforce a federal
regulatory regime; they preempt those officials from imposing a
state and local tax.

Montgomery Cnty. II, 740 F.3d at 925

(holding that Statutory Exemptions do not commandeer local
employees because “[t]he federal statutes in question . . . do
not impose upon the states or local officers any affirmative
obligation”); Delaware Cnty., 747 F.3d at 228 (“The Enterprise
exemptions do not run afoul of Printz or New York for the simple
reason that they do not issue directives requiring the States to
address particular problems, nor command the States’ officers .
. . to administer or enforce a federal regulatory program”
(internal quotation marks and citation omitted)).
Finally, whether Fannie Mae and Freddie Mac are
federal instrumentalities has no bearing on Congress’s power to
exempt them from taxation by statute.

Statutory tax immunity

and the constitutional tax immunity afforded to federal
instrumentalities are not coterminous.
23

Montgomery Cnty. II, 740

F.3d at 925 (“[C]onstitutional and statutory tax exemptions are
distinct concepts.”); see also United States v. City of Detroit,
355 U.S. 466, 475 (1958) (“Of course this is not to say that
Congress, acting within the proper scope of its power, cannot
confer immunity by statute where it does not exist
constitutionally.”); United States v. County of Fresno, 429 U.S.
452, 460 (1977) (noting that nondiscriminatory state tax “not
directly laid on the Federal Government [is] valid . . . until
Congress declares otherwise.”).

Indeed, the Supreme Court has

made it clear that Congress may broaden the scope of immunity
from State taxation beyond its “narrow constitutional limits,”
even where private entities are involved, see United States v.
New Mexico, 455 U.S. 720, 737 (1982), and the validity of such
statutorily conferred immunity does not turn on the character of
the entity to be exempted, or its status as an instrumentality,
see Carson v. Roane-Anderson Co., 342 U.S. 232, 234 (1952)
(“Certainly the policy behind the power of Congress to create
tax immunities does not turn on the nature of the agency doing
the work of the government.”); see also First Agric. Nat’l Bank
of Berkshire County v. State Tax Comm’n, 392 U.S. 339, 341
(1968) (“Because of pertinent congressional legislation in the
banking field, we find it unnecessary to reach the
constitutional question of whether today national banks should
be considered nontaxable as federal instrumentalities.”).
24

Thus,

“[b]ecause Congress may provide for immunity from state taxation
irrespective of an entity’s status as a federal instrumentality
and because Congress has done so in the present case, it is
unnecessary to address whether Fannie Mae and Freddie Mac indeed
qualify as federal instrumentalities.”

Montgomery Cnty. II, 740

F.3d at 925.

C.

The defendants are statutorily immune from the West
Virginia real estate transfer tax, and the Statutory Exemptions
are constitutionally sound.

These determinations are fatal to

the plaintiffs’ claims.
Under 28 U.S.C. § 2201, any court of the United States
may declare the rights of any interested party seeking a
declaration.

Except in certain categories of cases not at issue

here, this statute grants courts the authority to adjudicate
constitutional questions that bear on the rights of interested
parties.

See, e.g., Gov. Suppliers Consolidating Servs., Inc.

v. Bayh, 975 F.2d 1267 (7th Cir. 1992) (deciding Commerce Clause
challenge to state regulation).

Here, having determined that

the Statutory Exemptions apply, and having further determined
that those laws are constitutional, plaintiffs cannot plausibly
25

claim that they are entitled to a declaration that “Defendants
violated West Virginia law by failing to pay real estate
transfer taxes.”

Am. Compl. at Prayer for Relief.

Likewise, under 28 U.S.C. § 2202, a court may impose
“[f]urther necessary or proper relief based on a declaratory
judgment . . . against any adverse party whose rights have been
determined by such judgment.”

But having determined that

defendants are not liable for the West Virginia real estate
transfer tax, plaintiffs cannot state a plausible claim for
further relief including money damages in the amount of unpaid
real estate transfer taxes.
Plaintiffs also claim that they are entitled to
damages under a state-law claim of “equitable
estoppel/detrimental reliance.”

In order to prove equitable

estoppel,
there must be a false representation or a concealment
of facts; it must have been made with knowledge,
actual or constructive of the facts; the party to whom
it was made must have been without knowledge or the
means of knowledge of the real facts; it must have
been made with the intention that it should be acted
on; and the party to whom it was made must have relied
on or acted on it to his prejudice.
Syl. Pt. 3, Cleaver v. Big Arm Bar & Grill, Inc., 502 S.E.2d 438
(W. Va. 1998).

Having determined that defendants are not liable

for the real estate transfer tax, plaintiffs cannot show that
defendants made any false representation regarding their tax
26

exempt status.

Accordingly, plaintiffs cannot establish the

first element of their state-law claim, and therefore cannot
state a plausible claim for damages on that ground. 9

III. Conclusion

Defendants’ motion to dismiss is hereby GRANTED and
this case is ordered dismissed with judgment in favor of
defendants.
The Clerk is requested to transmit this memorandum
opinion and order to all counsel of record and to any
unrepresented parties.
DATED: June 9, 2014
John T. Copenhaver, Jr.
United States District Judge

9

The determination that the defendants are immune from the real
estate transfer tax disposes of the plaintiffs’ motion for
partial summary judgment on the issue of defendants’ tax
liability. Inasmuch as defendants are immune from the West
Virginia real estate transfer tax as a matter of law,
plaintiffs’ contrary claim that defendants are liable to pay the
tax fails.
27