Hertel v. Bank of America N.A.
897 F. Supp. 2d 579
W.D. Mich.2012Background
- Fannie Mae, Freddie Mac, and FHFA defendants; Michigan AG and Treasury as state plaintiffs; Hertel state case seeking unpaid transfer tax (SRETT) removed to federal court; dispute over whether federal exemptions apply to SRETT; State Plaintiffs seek SRETT from Enterprise Defendants and related lenders; court analyzes statutory exemptions under 12 U.S.C. §§ 1723a(c)(2), 1452(e), 4617(j)(2) and real-property exception; Wells Fargo/West/Bismarck line of cases invoked; court grants enterprise motion and denies state’s summary judgment; Bank of America’s joinder motion denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Enterprise Defendants are exempt from SRETT as a matter of law. | State Plaintiffs argue exemptions do not apply to excise tax like SRETT. | Enterprise Defendants assert all taxation exemptions apply with real-property exception; SRETT falls within exempted category. | Yes; exempt under plain text of statutes. |
| Does the Wells Fargo line undermine the statutory exemptions for excise taxes? | State Plaintiffs contend Wells Fargo redefines all-tax exemption to exclude excise taxes. | Defendants rely on Bismarck and Wells Fargo to support exemption for excise taxes. | No; Wells Fargo does not defeat the exemption; Bismarck supports excise-tax exemption for entities. |
| Are the exemptions coherent with the statutory scheme when applied to transfer taxes? | State Plaintiffs argue potential redundancy undermines coherence. | Exemption readings are coherent and do not imply surplusage. | Exemption readings are coherent and consistent with the statute. |
| Should the Michigan state tax claims proceed given the exemptions? | State Plaintiffs seek liability under Michigan law. | Exemptions foreclose liability for SRETT. | No; summary judgment for Enterprise Defendants. Bank of America joinder denied. |
Key Cases Cited
- United States v. City of Detroit, 355 U.S. 466 (U.S. Supreme Court 1958) (considering circumstances beyond bare statute text in tax cases)
- Wells Fargo Bank v. United States, 485 U.S. 351 (U.S. Supreme Court 1988) (exemption of property from all taxation may not bar excise taxes in certain contexts)
- West v. Oklahoma Tax Comm'n, 334 U.S. 717 (U.S. Supreme Court 1948) (addressed tax-exemption implications in transfer-related taxes)
- Fed. Land Bank of St. Paul v. Bismarck Lumber Co., 314 U.S. 95 (U.S. Supreme Court 1941) (exemption from taxation remains valid against excise taxes for federal entities)
- Plummer v. Coler, 178 U.S. 115 (U.S. Supreme Court 1900) (tax exemption for property did not control case where transfer tax was involved)