City of Chicago v. Elm State Propoerty LLC
410 Ill. Dec. 165
| Ill. App. Ct. | 2016Background
- Two Chicago LLCs (Halsted West and Elm State Property) purchased defaulted loans and were assigned mortgages on Chicago real estate, then later received deeds in lieu of foreclosure (DIL).
- The City assessed transfer taxes on the mortgage assignments, treating them as transfers of a “beneficial interest in real property” under the Chicago Real Property Transfer Tax Ordinance.
- Both defendants protested; the Department of Administrative Hearings (ALJ) vacated the assessments, finding mortgage assignments are not transfers of a beneficial interest and that the DILs (where relevant) were exempt.
- The City petitioned for certiorari; the Cook County circuit court reversed the ALJ, holding mortgage assignments are taxable as beneficial interests and exemptions did not apply.
- The appellate court reviewed de novo whether a mortgage assignment qualifies as a “beneficial interest” and reinstated the ALJ, holding mortgage assignments are not taxable transfers of a beneficial interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether assignment of a mortgage is a taxable transfer of a "beneficial interest in real property" under Chicago ordinance | Mortgage assignments convey a beneficial interest and are therefore taxable under the transfer tax (City) | A mortgage is a security lien, not equitable title or control; assignment of a mortgage does not transfer a beneficial interest | Assignment of a mortgage is not a transfer of a beneficial interest; not taxable under the ordinance |
| Whether interpreting "beneficial interest" to exclude mortgages renders exemptions (e.g., C & G) superfluous | If mortgages are excluded, exemptions for mortgage-related transfers would be meaningless; thus mortgages must be included | Exemptions cover other types of transfers that secure or release debt and remain meaningful even if mortgages are excluded | Exemptions remain meaningful; excluding mortgages does not render them superfluous |
Key Cases Cited
- People v. Chicago Title & Trust Co., 75 Ill. 2d 479 (discusses beneficial interest concept in land trusts)
- Kling v. Ghilarducci, 3 Ill. 2d 454 (mortgage creates only a lien on property)
- AFM Messenger Service, Inc. v. Department of Employment Security, 198 Ill. 2d 380 (standards for reviewing mixed questions of law and fact)
- Hanrahan v. Williams, 174 Ill. 2d 268 (common-law certiorari review parallels Administrative Review Law)