WHEELING - Spurred by a precedent-setting, multimillion-dollar court ruling in Michigan earlier this year, two Northern Panhandle counties are suing mortgage giants Fannie Mae and Freddie Mac to recoup an unspecified amount of unpaid real estate transfer taxes.
The Marshall County Commission and Hancock County Commission are named as plaintiffs in a suit filed in U.S. District Court for the Southern District of West Virginia. Bailey & Glasser, the Charleston law firm that filed the suit, reportedly plans to reach out to all 55 West Virginia counties in hopes of getting additional counties to join the class-action suit.
The six-page complaint claims Fannie Mae - the Federal National Mortgage Association - and Freddie Mac - the Federal Home Loan Mortgage Corp. - are not government entities that are exempt from paying West Virginia transfer taxes.
"They claim the (transactions are) exempt because they are government entities ... exempt from paying West Virginia Transfer Taxes. ..." the lawsuit states. "Neither claimed exemption applies. Fannie Mae and Freddie Mac are federally chartered private corporations and not government entities. Defendants' federal law exemption from certain taxes does not include Transfer Taxes."
The counties are asking a federal judge to declare that the mortgage agencies are subject to the transfer taxes and award the counties "damages in an amount to be determined by the trier of fact," including interest and penalties, as well as attorney's fees. The plaintiffs also are demanding a trial by jury, according to the complaint.
No specific dollar amount is mentioned in the lawsuit, although the document states it falls under federal jurisdiction "because the matter in controversy exceeds $75,000."
The West Virginia lawsuit comes on the heels of similar litigation in Michigan, where a federal judge in March ruled the two agencies are liable for an estimated $13.5 million in damages, on the grounds the government exemption applies only to "direct taxes," not "excise taxes" such as the real estate transfer tax.
Marshall County Clerk Jan Pest said only a handful of counties so far have been approached about the lawsuit, and the Marshall County Commission waited until Hancock County expressed interest before making a decision. Similar lawsuits also have been filed in Illinois and Georgia, she said.
It's unclear whether other counties in the Northern Panhandle will join the litigation. Wetzel County Clerk Carol Haught said although she is aware of the suit, officials there have yet to be approached and she could not speculate on the likelihood of the county becoming involved.
Tyler County Commission President Charles Smith said he had not heard about the lawsuit and could not comment. Attempts to reach officials in Brooke and Ohio counties Tuesday were unsuccessful.
West Virginia's largest county, however, does plan to join the suit. According to published reports, Kanawha County commissioners voted earlier this month to allow Bailey & Glasser to represent them in the matter. Attorney Jonathan Deem reportedly told commissioners the firm would not charge for its services if the suit was unsuccessful, but would collect one-third of any judgment against the agencies.
Staff Writer J.W. Johnson Jr. contributed to this report.