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                                     Appellate Court                             Date: 2017.02.24
                                                                                 11:15:51 -06'00'




             City of Chicago v. Elm State Property LLC, 2016 IL App (1st) 152552



Appellate Court         THE CITY OF CHICAGO, a Municipal Corporation, Through Its
Caption                 Department of Finance, Plaintiff-Appellee, v. ELM STATE
                        PROPERTY LLC, and THE CITY OF CHICAGO DEPARTMENT
                        OF ADMINISTRATIVE HEARINGS, Defendants-Appellants.
                        —THE CITY OF CHICAGO, a Municipal Corporation, Through Its
                        Department of Finance, Plaintiff-Appellee, v. HALSTED WEST,
                        LLC, and THE CITY OF CHICAGO DEPARTMENT OF
                        ADMINISTRATIVE HEARINGS, Defendants-Appellants.



District & No.          First District, Fourth Division
                        Docket Nos. 1-15-2552, 1-15-2553 cons.



Filed                   December 22, 2016



Decision Under          Appeal from the Circuit Court of Cook County, Nos. 14-L-50273,
Review                  14-L-50274; the Hon. Carl A. Walker, Judge, presiding.



Judgment                Circuit court reversed; administrative decision reinstated.



Counsel on              Kimberly A. Jansen and Joshua G. Vincent, of Hinshaw & Culbertson
Appeal                  LLP, of Chicago, for appellants.

                        Stephen R. Patton, Corporation Counsel, of Chicago (Benna Ruth
                        Solomon, Myriam Zreczny Kasper, and Stephen G. Collins, Assistant
                        Corporation Counsel, of counsel), for appellee.
                              Christopher W. Carmichael and Darren H. Goodson, of Holland &
                              Knight LLP, and J. Timothy Eaton and Kim R. Walberg, of Taft
                              Stettinius & Hollister LLP, both of Chicago, for amicus curiae.



     Panel                    JUSTICE HOWSE delivered the judgment of the court, with opinion.
                              Presiding Justice Ellis and Justice Burke concurred in the judgment
                              and opinion.


                                                OPINION

¶1         The city of Chicago has imposed a tax “upon the privilege of transferring title to, or
       beneficial interest in, real property located in the city,” known as the City of Chicago Real
       Property Transfer Tax Ordinance (transfer tax). Chicago Municipal Code § 3-33-010 (added
       Dec. 15, 1992). In this case, defendants Elm State Property LLC (Elm State Property) and
       Halsted West, LLC (Halsted West), purchased loans and were assigned mortgages to real
       estate located in Chicago. At the time the defendants acquired the mortgages, the mortgagors
       were in default. Defendants later acquired deeds in lieu of foreclosure to those properties from
       the mortgagors. The city subsequently assessed a tax on the assignments of the mortgages,
       alleging that an assignment of a mortgage was an assignment of a beneficial interest in real
       property under the tax ordinance and subject to the transfer tax. The defendants protested the
       assessments and an administrative law judge (ALJ) vacated the tax assessment, ruling that the
       mortgage assignments did not transfer a beneficial interest in real property. On petition for writ
       of certiorari filed by the city, the circuit court reversed the decision of the ALJ, and the
       defendants filed this appeal. The issue presented in this case is whether the assignment of a
       mortgage on Chicago real estate can be taxed as an assignment of a beneficial interest in real
       property under the transfer tax ordinance. For the following reasons we find that an assignment
       of a mortgage is not subject to the Chicago real estate transfer tax as an assignment of a
       beneficial interest in real property. Therefore, we reinstate the administrative decision and
       reverse the decision of the circuit court.

¶2                                            BACKGROUND
¶3         The city seeks to impose a tax, under provisions of the transfer tax ordinance, on
       assignments of mortgages to both defendants. Chicago Municipal Code § 3-33-010 (added
       Dec. 15, 1992). The city argues that the assignment of a mortgage constitutes an assignment of
       a beneficial interest. Section 3-33-030(A) of the Chicago Municipal Code (Code) states:
       “Except as otherwise provided in this chapter, a tax is imposed upon the privilege of
       transferring title to, or beneficial interest in, real property located in the city ***.” Chicago
       Municipal Code § 3-33-030(A) (amended Nov. 16, 2011). According to the Code:
                   “A. ‘Beneficial interest in real property’ includes, but is not limited to:
                        (1) The beneficial interest in an Illinois land trust;



                                                   -2-
                     (2) The lessee interest in a ground lease (including any interest of the lessee in
                 the related improvements) that provides for a term of 30 years or more when all
                 options to renew or extend are included, whether or not any portion of the term has
                 expired; or
                     (3) The indirect interest in real property as reflected by a controlling interest in
                 a real estate entity.” Chicago Municipal Code § 3-33-020(A) (amended May 8,
                 2013).
     Defendants alleged that a mortgage is not a beneficial interest under the ordinance and filed
     this appeal from the decision of the circuit court. The relevant history of the transactions in this
     appeal are described below.

¶4                                         Halsted Property
¶5       On June 7, 2007, 1950 North Halsted LLC (North Halsted), along with a trustee, entered
     into a mortgage loan purchase and sale agreement with National City Bank (now PNC Bank).
     North Halsted financed the purchase by taking out a loan in the amount of $5,322,500, which
     was secured by a mortgage on the property. The mortgage provided that in the event of default,
     the mortgagee could initiate foreclosure proceedings and would have the right, “to the extent
     permitted by law, to collect and receive all rents.” North Halsted subsequently went into
     default on its mortgage obligations. On December 28, 2009, PNC Bank sold that loan and
     assigned the mortgage securing the loan to defendant, Halsted West, for $4 million. The
     assignment of the mortgage was recorded on January 5, 2010. Later, on March 29, 2010, the
     mortgagor executed a deed in lieu of foreclosure (DIL) transferring title of the mortgaged
     property to Halsted West. Halsted West and the mortgagor jointly filed a property transfer tax
     declaration when they recorded the documents with the recorder of deeds indicating that the
     transaction was exempt from taxation under section 3-33-060(M) of the Code, which exempts
     deeds filed in lieu of foreclosure from the tax.
¶6       On January 20, 2011, the city of Chicago sent a notice to Halsted West for unpaid taxes.
     This initial tax assessment listed a total amount due of $78,109.07, including interest and
     penalties, for the transaction dated March 29, 2010, the same day the DIL was recorded. On
     April 18, 2011, Halsted West paid and protested the tax assessment. The protest triggered a
     hearing before the city of Chicago’s department of administrative hearings (DOAH). The ALJ
     ruled in favor of Halsted West and found that the assignment of the mortgage and other loan
     documents did not convey a beneficial interest in real property, that the tax was not assessed on
     the assignment but only on the deed in lieu of foreclosure, and that the transfer of the DIL was
     covered by exemption M of the ordinance. Chicago Municipal Code § 3-33-060(M) (amended
     May 8, 2013). The city appealed the decision of the ALJ to the circuit court on petition for writ
     of certiorari.

¶7                                        Elm State Property
¶8       Elm State LLC took out a loan from Suburban Bank & Trust Company (Suburban Bank) in
     2006 for $10.5 million, which was secured by a mortgage on the property at 1149-59 North
     State Street in Chicago. Elm State LLC also executed an assignment of rents providing that in
     the event of default, the lender has the right to collect rents but must “apply the net proceeds,
     over and above the lender’s costs, against the indebtedness.” Further, if the mortgagee chooses
     to take possession, under the terms of the assignment of rents, the mortgagee has “the power to

                                                  -3-
       protect and preserve the property, to operate the property preceding foreclosure or sale, and to
       collect the rents from the property and apply the proceeds, over and above cost of the
       receivership, against the indebtedness.” The parties modified the mortgage a year later to
       include a property at 6-10 East Elm Street. Elm State LLC subsequently defaulted on the loan.
¶9         In 2009, Suburban Bank agreed to sell to defendant, Elm State Property, “all of Suburban’s
       right, title, and interest in the Elm State Loan” for $8.25 million. As part of the sale of the loan,
       Suburban Bank agreed to assign to Elm State Property the related loan documents. On
       December 23, 2009, Suburban Bank assigned the Elm State LLC loan documents (which
       included the mortgage, modification of mortgage, assignment of rents, promissory note,
       commercial guarantees, lender’s title insurance policy, and the rights to the collateral) to Elm
       State Property. On April 27, 2010, Elm State LLC executed a DIL, transferring ownership of
       the mortgaged property to defendant Elm State Property.
¶ 10       On May 26, 2010, the city sent Elm State Property a tax assessment for the April 27, 2010,
       transaction for an amount of $103,125.82, including interest and penalties. Elm State Property
       filed a protest against this tax assessment on June 28, 2010, arguing that the DIL transfer was
       exempt from taxation under exemption C and exemption M of the transfer tax ordinance.
       Chicago Municipal Code § 3-33-060(C), (M) (amended May 8, 2013). Hearings were
       scheduled before the DOAH. The city then filed an amended tax assessment on June 5, 2013,
       indicating a total tax due of $105,906.27 for a transaction dated December 31, 2009.
¶ 11       In the proceedings in the DOAH, the ALJ found that Elm State Property was not liable for
       the tax assessment because the assignment of a mortgage does not convey a beneficial interest
       in the first place and that, even if it did, the assignment properly falls under exemption C.
       Chicago Municipal Code § 3-33-060(C) (amended May 8, 2013). The ALJ noted how the tax
       assessment listed the incorrect date of the DIL transaction and found that this also rendered the
       tax assessment fatally defective.

¶ 12                                  Proceedings in the Circuit Court
¶ 13        The city appealed the decision of the ALJ on petition for writ of certiorari, and both
       defendants’ cases were consolidated before the circuit court. Also consolidated with the case
       was a complaint for declaratory judgment filed by Halsted West, alleging that the transfer of
       the DIL was exempt from taxation under exemption M. Chicago Municipal Code
       § 3-33-060(M) (amended May 8, 2013). The complaint for declaratory judgment was
       consolidated for hearing with the petitions of certiorari. The complaint for declaratory
       judgment alleged that after Halsted West recorded its DIL, the city comptroller adopted a tax
       ruling providing that the exemptions for a DIL would only apply if the transferee was a “bona
       fide mortgagee” or “bona fide secured creditor.” In Halsted West’s complaint for declaratory
       judgment, it argued that the application of the ruling to the transfer tax ordinance, made after
       its transaction, could not be retroactively applied because the council did not state the tax
       should apply retroactively. The trial court held that the ruling could not be retroactively
       applied.
¶ 14        Despite finding that the ruling could not be retroactively applied, the circuit court reversed
       the decision of the ALJ and reinstated the tax. The court found that the Chicago transfer tax
       applies to mortgages because a mortgage conveys a beneficial interest in real property and the
       transactions did not fall under any applicable exemption. The court found that to read the
       ordinance otherwise would render exemptions C and G (Chicago Municipal Code

                                                     -4-
       § 3-33-060(C), (G) (amended May 8, 2013)) superfluous because the exemptions include
       mortgage assignments. Additionally, the trial court held the assignments did not fall under any
       applicable exemption.
¶ 15       Both parties filed a notice of appeal from the trial court’s judgment. No appeal was taken
       from the declaratory judgment, and therefore the only issues in this appeal are whether the
       assignments of mortgages constituted transfers of beneficial interests in real property and
       whether the assignments fall under an exemption even if they do transfer a beneficial interest.

¶ 16                                           ANALYSIS
¶ 17       Though this case comes before us under writ of certiorari and not the Administrative
       Review Law (735 ILCS 5/3-101 et seq. (West 2014)), “[t]he standards of review under a
       common law writ of certiorari are essentially the same as those under the Administrative
       Review Law.” Hanrahan v. Williams, 174 Ill. 2d 268, 272 (1996). In cases following review of
       an administrative decision, this court reviews the decision of the ALJ rather than the decision
       of the circuit court. Chicago Bears Football Club v. Cook County Department of Revenue,
       2014 IL App (1st) 122892, ¶ 22. “[W]hether the question presented is one of fact, one of law,
       or a mixed question of law and fact,” determines the applicable standard of review. AFM
       Messenger Service, Inc. v. Department of Employment Security, 198 Ill. 2d 380, 390 (2001).
       Issues of statutory construction are questions of law, not fact, which this court reviews
       de novo. Chicago Bears Football Club, 2014 IL App (1st) 122892, ¶ 25. Because the
       interpretation of the term “beneficial interest in real property” is at issue, that matter is a
       question of law and therefore merits de novo review.
¶ 18       Though this court is interpreting a municipal ordinance, the rules governing statutory
       interpretation apply equally to ordinances. DTCT, Inc. v. City of Chicago Department of
       Revenue, 407 Ill. App. 3d 945, 949 (2011). This court will interpret a statute based on its plain
       meaning without resorting to canons of construction if the statute is not ambiguous.
       Department of Transportation v. Singh, 393 Ill. App. 3d 458, 465 (2009) (“ ‘Where the text of
       the statute is clear and unambiguous, there is no need to resort to canons of construction ***.’ ”
       (quoting People v. Burke, 362 Ill. App. 3d 99, 105 (2005))). Looking to the language of the
       statute, this court need not utilize canons of construction if the language is clear (In re
       Marriage of Logston, 103 Ill. 2d 266, 277 (1984)) and should interpret the words with their
       popularly understood meaning. Kozak v. Retirement Board of the Firemen’s Annuity & Benefit
       Fund, 95 Ill. 2d 211, 215 (1983). “When the language of a statute is plain and unambiguous,
       courts may not read in exceptions, limitations, or other conditions.” In re D.D., 196 Ill. 2d 405,
       419 (2001) (citing People v. Lavallier, 187 Ill. 2d 464 (1999), and People v. Daniels, 172 Ill.
       2d 154 (1996)). “A statute is ambiguous when it is capable of being understood by reasonably
       well-informed persons in two or more different senses.” People v. Jameson, 162 Ill. 2d 282,
       288 (1994). Hence, “where more than one construction is apparent, the court will choose that
       interpretation which leads to a logical result, and will avoid an interpretation which would
       render any of the provisions superfluous ***.” City of Chicago v. Strauss, 128 Ill. App. 3d 193,
       194 (1984).




                                                   -5-
¶ 19                          Under Established Illinois Law a Mortgage Is Not
                                    a Beneficial Interest in Real Property
¶ 20        The city argues that a mortgage is a beneficial interest in real property and therefore the
       assignment of a mortgage is taxable under the transfer tax. We disagree. The term “beneficial
       interest” in Illinois law typically refers to a beneficiary’s interest in a land trust. See generally
       People v. Chicago Title & Trust Co., 75 Ill. 2d 479 (1979); 11 U.S.C. § 541(d) (2012);
       Antognoni v. Basso (In re Basso), 397 B.R. 556 (B.A.P. 1st Cir. 2008); Congress Talcott Corp.
       v. Sicari (In re Sicari), 187 B.R. 861 (Bankr. S.D.N.Y. 1994); Rainsdon v. Garcia (In re
       Garcia), 465 B.R. 181 (Bankr. D. Idaho 2011). More generally, a beneficial interest relates to
       the party having ownership control over the property. See Refreshment Services Co. v. Lindley,
       423 N.E.2d 1119, 1122 (Ohio 1981). A “beneficial interest” represents a form of equitable
       ownership and “include[s] the interest of one who is in possession of all characteristics of
       ownership other than legal title of the taxable property.” Id. The holder of the beneficial
       interest is the effective owner of the property even though it does not possess legal title. See
       Arachnid, Inc. v. Merit Industries, Inc., 939 F.2d 1574, 1578 n.3 (Fed. Cir. 1991) (“Equitable
       title may be defined as ‘the beneficial interest of one person whom equity regards as the real
       owner, although legal title is vested in another.’ ” (quoting Black’s Law Dictionary 1486 (6th
       ed. 1990))). When words of well-known legal significance are used in a statute, then absent
       contrary evidence, this court will assume the legislature intended that well-known legal
       meaning. Harris v. Manor Healthcare Corp., 111 Ill. 2d 350 (1986). Therefore, we will
       assume the legislature intended the well-known legal meaning of the term “beneficial interest”
       in real property, which is equitable ownership.
¶ 21        The authorities we reviewed demonstrate that mortgages do not convey an equitable
       ownership in real property. A mortgage only creates a lien on the property. Kling v.
       Ghilarducci, 3 Ill. 2d 454, 460 (1954). It conveys a security interest that may be extinguished
       by the mortgagor paying in full any time prior to foreclosure. Restatement (Third) of Prop.:
       Mortgages § 3.1 (1997). Because this court uses the plain meaning of the statute if no
       ambiguity is present (Quality Saw & Seal, Inc. v. Illinois Commerce Comm’n, 374 Ill. App. 3d
       776, 781 (2007)) and because there is no ambiguity in the definition of a beneficial interest in
       real property, this court finds that the assignment of a mortgage is not a transfer of a beneficial
       interest in real property. Consistent with this definition, the ALJ found that a beneficial interest
       in real property refers to the equitable ownership of the property, as opposed to possessing
       legal title. As such, he concluded that the defendants’ purchase of loans and the accompanying
       security instruments did not convey to defendants a beneficial interest in real property because
       the mortgages only conveyed liens rather than granting ownership. Although a mortgage gives
       the mortgagee a lien interest in property which is beneficial, we encountered no authority that
       considered a mortgage a “beneficial interest” in real property under established law.
¶ 22        The city has advanced a novel interpretation of what constitutes a beneficial interest in real
       property by including mortgages in that definition. This does not comport with the popularly
       understood definition of a beneficial interest in real property. Indeed, the city has failed to
       identify any authority for its novel proposition that the assignment of a mortgage is equivalent
       to the assignment of a beneficial interest in property. To support its novel interpretation, the
       city has obfuscated the issue by resorting to various interpretative aids.
¶ 23        As stated earlier, the Code provides a definition of beneficial interest:
                    “A. ‘Beneficial interest in real property’ includes, but is not limited to:

                                                     -6-
                        (1) The beneficial interest in an Illinois land trust;
                        (2) The lessee interest in a ground lease (including any interest of the lessee in
                    the related improvements) that provides for a term of 30 years or more when all
                    options to renew or extend are included, whether or not any portion of the term has
                    expired; or
                        (3) The indirect interest in real property as reflected by a controlling interest in
                    a real estate entity.” Chicago Municipal Code § 3-33-020(A) (amended May 8,
                    2013).
       The city has not claimed that the transactions convey any of the three listed examples of a
       beneficial interest in real property. Instead, the city argues that we should read a mortgage into
       the beneficial interest under the “including, but not limited to” language of the tax ordinance.
       “The legislature has on many occasions used the phrases ‘including but not limited to’ or
       ‘includes but is not limited to’ to indicate that the list that follows is intended to be illustrative
       rather than exhaustive.” People v. Perry, 224 Ill. 2d 312, 330 (2007). This stems from “[t]he
       doctrine of ejusdem generis,” which “provides that when a statutory clause specifically
       describes several classes of persons or things and then includes ‘other persons or things,’ the
       word ‘other’ is interpreted as meaning ‘other such like.’ [Citation.]” People v. Davis, 199 Ill.
       2d 130, 138 (2002). Therefore, for the city to prevail on its argument to include a mortgage
       under the “not limited to” language, it first had to demonstrate a mortgage is similar to the
       listed classes of interests. See Baksh v. Human Rights Comm’n, 304 Ill. App. 3d 995, 1003-04
       (1999) (“ ‘[W]hen a statute lists several classes of persons or things but provides that the list is
       not exhaustive, the class of unarticulated persons or things will be interpreted as those ‘others
       such like’ the named persons or things.’ ” (quoting Board of Trustees of Southern Illinois
       University v. Department of Human Rights, 159 Ill. 2d 206, 211 (1994))).
¶ 24        The listed types of beneficial interests in the ordinance are all forms of ownership of the
       property. “The key elements of ownership are control and the right to enjoy the benefits of the
       property.” IMM Acceptance Corp. v. First National Bank & Trust Co. of Evanston, 148 Ill.
       App. 3d 949, 954 (1986). Under Illinois law, a “land trust places both the legal and equitable
       title in the trustee.” Id. However, the holder of the beneficial interest in the land trust is the
       owner of the property because the beneficiary maintains control over the property and is the
       party who garners benefits from the property. Id. The second example of a ground lease of 30
       years or more with an option to renew also grants sufficient control to a lessee to constitute
       ownership. See Cole Hospital, Inc. v. Champaign County Board of Review, 113 Ill. App. 3d
       96, 100 (1983) (finding that a 20-year lease with options to renew “indicate[s] sufficient
       incidents of ownership”). The third example explicitly lists “controlling interest in a real estate
       entity,” indicating control over the entity owning the property. A mortgage, rather than
       granting ownership or control over the property, grants only a lien on the property. Kling, 3 Ill.
       2d at 460. The city failed to cite authority for the proposition that a mortgage is a beneficial
       interest in real property and also failed to cite any authority indicating a mortgage conveys
       ownership control over the property. The authorities we reviewed indicate that a mortgage
       does not convey control over the property to the mortgagee. See, e.g., M. Ecker & Co. v.
       La Salle National Bank, 268 Ill. App. 3d 874 (1994). The conspicuous lack of reference by
       authorities to a mortgage as a beneficial interest in real property, the fact that the listed
       beneficial interests all indicate a degree of ownership control, and the fact that a mortgage does
       not grant control over property leads this court to the conclusion that a mortgage is not a

                                                     -7-
       beneficial interest in real property.

¶ 25                Remedies Available to a Mortgagee in Case of Default Do Not Convert
                           a Mortgage into a Beneficial Interest in Real Property
¶ 26        The availability of remedies to a mortgagee does not make the mortgagee the owner or
       controller of the property. The city has advanced the argument that because the loans were
       already in default at the time the mortgages were acquired, the assignment of the mortgage
       actually conveyed a beneficial interest in real property, namely, due to the mortgagee’s ability
       to collect rents and take possession of property upon foreclosure. We disagree. Although a
       mortgagee has certain rights in case of default under the terms of the mortgage, the argument
       that a mortgagee therefore has a beneficial interest in the property is fundamentally at odds
       with how mortgages are understood to function: “A mortgage creates only a security interest in
       real estate and confers no right to possession of that real estate on the mortgagee.” Restatement
       (Third) of Prop.: Mortgages § 4.1 (1997). The problem with the city’s novel line of reasoning
       is that the collection of rents provisions are simply a form of security for the repayment of the
       loan. “In Illinois, a clause in a real estate mortgage pledging rents and profits creates an
       equitable lien upon such rents and profits of the land, which may be enforced by the mortgagee
       upon default by taking possession of the mortgaged property.” M. Ecker & Co., 268 Ill. App.
       3d at 879. This is consistent with how “[i]n most lien theory jurisdictions, courts *** regard the
       mortgagor as the owner of the rents and profits until the mortgagee takes steps to ‘perfect’ the
       assignment, such as taking possession of the property or foreclosing the mortgage.” Id. When
       the “right to the rents and profits [is] contingent upon taking possession of the mortgaged
       premises following a default,” the “assignment of rents clause [does] not convey any
       ‘ownership’ interest *** but simply grant[s] an equitable lien as additional security for the
       mortgage.” Id. at 880. The assignment of rents provision in this case provided that if the loan
       was in default, the mortgagee would be entitled to collect rents (although for Elm State
       Property, the assignment of rents only allowed Elm State Property to apply those rents to the
       costs of maintaining the property and the remainder toward the debt it was owed). This only
       amounts to a lien interest in the property and failed to grant defendants control or possession of
       the properties. The fact that defendants were still required to acquire title to the property
       through the DIL or to initiate foreclosure proceedings is significant in demonstrating the lack
       of control defendants had with simply a mortgage’s security interest in the property, even when
       those mortgages were in default. Therefore, the assignment of rents provisions did not grant
       defendants the ownership interest in the properties necessary to constitute a beneficial interest.
¶ 27        Moreover, the remedies that a mortgagee has in case of default on the mortgage can be
       extinguished by the mortgagor curing the default or paying off the mortgage. In that event the
       mortgagee has absolutely no control or rights in the property. Even when the loan is in default,
       “[f]rom the time the full obligation secured by a mortgage becomes due and payable until the
       mortgage is foreclosed, a mortgagor has the right to redeem the real estate from the mortgage.”
       Restatement (Third) of Prop.: Mortgages § 3.1 (1997). Additionally, under Illinois mortgage
       foreclosure statutes the mortgagor retains control until the judicial sale and confirmation of the
       sale of the property. 735 ILCS 5/15-1404 (West 2014). The lien on the real estate secures the
       rights of the mortgagee upon judgment of foreclosure. 735 ILCS 5/15-1506 (West 2014). “A
       mortgage is a conveyance or retention of an interest in real property as security for
       performance of an obligation.” Restatement (Third) of Prop.: Mortgages § 1.1 (1997). Even

                                                   -8-
       under federal law, a mortgage is seen as a security interest and not an equitable interest. See,
       e.g., 11 U.S.C. § 541(d) (2012) (when referring to the property in the bankruptcy estate:
       “property in which the debtor holds *** only legal title and not an equitable interest, such as a
       mortgage secured by real property, or an interest in such a mortgage, sold by the debtor”).
       Mortgages, then, are not reasonably understood to convey the equitable interest to the
       mortgagee necessary to constitute ownership control over a property. We find that the
       remedies available to a mortgagee when a mortgage is in default do not grant the mortgagee the
       degree of control necessary for ownership. Therefore, the assignment of a mortgage in default
       does not convey a beneficial interest in real property, and the city cannot assess a tax on the
       mortgage assignments to defendants.

¶ 28               The Interpretation of the Statute Does Not Render the Exemptions Superfluous
¶ 29       The trial court determined that interpreting a mortgage as not conveying a beneficial
       interest in real property would render exemptions C and G (Chicago Municipal Code
       § 3-33-060(C), (G) (amended May 8, 2013)) superfluous and on that basis found that
       mortgages were beneficial interests in real property. The city made the same argument in this
       appeal. An interpretation that mortgages are not beneficial interests in property does not render
       exemptions C and G superfluous. The argument advanced by the city is predicated on
       fallacious logic. For transactions conveying a beneficial interest in real property, exemption C
       exempts “[t]ransfers in which the deed, assignment or other instrument of transfer secures debt
       or other obligations.” Chicago Municipal Code § 3-33-060(C) (amended May 8, 2013).
       Exemption G exempts those “[t]ransfers in which the deed, assignment or other instrument of
       transfer releases property which secures debt or other obligations.” Chicago Municipal Code
       § 3-33-060(G) (amended May 8, 2013). There are more members of the set containing
       transfers of beneficial interest that “secure[ ] debt or other obligation” or “releas[ing] property
       which secures [a] debt” than simply mortgages, meaning that if the tax does not apply to
       mortgages, the exemptions still have meaning because they cover a number of other
       transactions conveying a beneficial interest in real property and securing debt. The city’s own
       brief admits that there are many other instruments that secure debt: “a deed can be an
       instrument that secures debt, just like a mortgage secures debt. [Citation.] And an assignment
       can likewise secure a debt, such as when there is an assignment of rents. [Citation.]” Logically
       following from the city’s own admission, if exemptions C and G only cover instruments that
       secure debt that are not mortgages, they are not superfluous: they still cover a number of
       transactions that do transfer a beneficial interest in real property. Exemptions C and G maintain
       their plain meaning when a “beneficial interest in real property” (see Chicago Municipal Code
       § 3-33-030(A) (amended Nov. 16, 2011)) is interpreted to include equitable interests (and not
       to apply to mortgages). Therefore they are not superfluous.
¶ 30       This conclusion is supported by the history of the real estate transfer tax ordinance. That
       history demonstrates that mortgages were never taxed under the ordinance. In 1973, the tax
       ordinance was first passed providing that deeds were taxable. Chicago Municipal Code
       § 200.1-2B (adopted at Chi. City Clerk J. Proc. 6867 (Dec. 14, 1973)). It also had an exemption
       C to exclude deeds that secured debt. Id. The ordinance did not provide for the taxation of
       mortgages. At the time the 1973 ordinance was passed, the ordinance did not provide for a tax
       on beneficial interests in real property. There was a subsequent amendment to the ordinance
       exempting deeds securing debt and transfers of beneficial interests that secured debt. Chicago

                                                    -9-
       Municipal Code § 200.1-2B (adopted at Chi. City Clerk J. Proc. 18484 (June 26, 1985)),
       http://chicityclerk.com/file/5988/download?token=Odn2HgN6. This was an obvious
       recognition that many individuals assigned deeds and assigned beneficial interests in land
       trusts as security for loans. Exemption C merely provided an exemption for those situations
       where, on the face of the transaction, there appeared to be a transfer of ownership but in reality
       the beneficial interests and deeds were given as security for loans. Chicago Municipal Code
       § 3-33-060(C) (added by Chi. City Clerk J. Proc. 27401 (Dec. 15, 1992)),
       http://chicityclerk.com/file/6610/download?token=arF8eGDV. The exemption is not
       superfluous when mortgages are not construed as beneficial interests in real property because
       the exemptions were written to cover other transactions.
¶ 31       Finally, we acknowledge that home rule municipalities, like Chicago, are allowed to assess
       a real estate transfer tax on real estate transfers including deeds, assignments of beneficial
       interests, and other controlling interests as those terms are defined in article 31 of the Property
       Tax Code, which is the Illinois Real Estate Transfer Tax Law:
               “After the effective date of this amendatory Act of the 93rd General Assembly and
               subject to this Section, a home rule municipality may impose or increase a tax or other
               fee on the privilege of transferring title to real estate, on the privilege of transferring a
               beneficial interest in real property, and on the privilege of transferring a controlling
               interest in a real estate entity, as the terms ‘beneficial interest’, ‘controlling interest’,
               and ‘real estate entity’ are defined in Article 31 of the Property Tax Code. Such a tax or
               other fee shall hereafter be referred to as a real estate transfer tax.” 65 ILCS 5/8-3-19
               (West 2014).
       Therefore, if the article 31 definition of a beneficial interest includes mortgages, a plausible
       argument may be made that Chicago may impose a tax on the assignment of mortgages
       because under that definition an assignment of mortgage is an assignment of a beneficial
       interest. Accordingly, we look to article 31 to determine whether article 31 defines mortgages
       as beneficial interests.
¶ 32       The Illinois Real Estate Transfer Tax Law (Illinois Transfer Tax Law) is almost identical to
       the city transfer tax, and provides a definition of beneficial interest as follows:
                    “ ‘Beneficial interest’ includes, but is not limited to:
                        (1) The beneficial interest in an Illinois land trust;
                        (2) The lessee interest in a ground lease (including any interest of the lessee in
                    the related improvements) that provides for a term of 30 or more years when all
                    options to renew or extend are included, whether or not any portion of the term has
                    expired; or
                        (3) The indirect interest in real property as reflected by a controlling interest in
                    a real estate entity.” 35 ILCS 200/31-5 (West 2014).
       The legislature, in the Illinois Transfer Tax Law, has not defined a mortgage as being a
       beneficial interest in real estate. The Illinois Department of Revenue interpreted the statute in
       2004, concluding that apart from the three listed categories, a beneficial interest includes “any
       other type of interest with the right to use or occupy real property, or the right to receive
       income from [the] property.” 86 Ill. Adm. Code 120.20(a)(2)(D) (2004). The defining
       characteristic of a beneficial interest in real property, if read consistently with the Illinois
       Transfer Tax Law as interpreted by the Illinois Department of Revenue, is having ownership


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       control over the property. When examining the Illinois Transfer Tax Law, a consistent reading
       of its provisions supports the Illinois Department of Revenue interpretation of a beneficial
       interest, which has not included mortgages and demonstrates how the imposition of the
       transfer tax is limited to transactions conveying title to or a controlling interest in real estate.
¶ 33       Further sections of the Illinois Transfer Tax Law demonstrate the legislature did not intend
       to include mortgages in its definition of a beneficial interest in real property. Section 31-20 of
       the statute reads:
               “Payment of the tax shall be evidenced by revenue stamps in the amount required to
               show full payment of the tax imposed by Section 31-10. Except as provided in Section
               31-45, a deed, document transferring a controlling interest in real property, or trust
               document shall not be accepted for filing by any recorder or registrar of titles unless
               revenue stamps in the required amount have been purchased from the recorder or
               registrar of titles of the county where the deed, document transferring a controlling
               interest in real property, or trust document is being filed for recordation. The revenue
               stamps shall be affixed to the deed, document transferring a controlling interest in real
               property, or trust document by the recorder or the registrar of titles either before or after
               recording as requested by the grantee.” 35 ILCS 200/31-20 (West 2014).
       Under this section, the statute specifies taxable documents: deeds, documents transferring
       controlling interest in real property, or trust documents. If the statute is read consistently as a
       whole and all parts are read in pari materia, then it is clear that the transfers of the types of
       interests that are taxed are the transfers of controlling, or equitable, interests in property.
       Documents transferring a mortgage are not listed in section 31-20 even though the section
       deals with instruments that must be filed in order to recognize a property interest. However,
       mortgages must be filed to be effective.1 If the city were correct that a mortgage is a beneficial
       interest in real property, then the Illinois Transfer Tax Law would specify tax stamps proving
       payment should be affixed to assignments of mortgages as well, because those would be
       assignments of controlling interest in property. The lack of reference to mortgages, the fact that
       the Illinois Transfer Tax Law references types of controlling interests, and the fact that
       mortgages do not grant ownership control lead this court to the conclusion that mortgages are
       not defined as beneficial interests in real property in article 31. Therefore, article 31 does not
       provide the city of Chicago with authority to tax an assignment of mortgage as an assignment
       of beneficial interest in real property under the municipal transfer tax. 65 ILCS 5/8-3-19 (West
       2014).
¶ 34       Section 31-25 provides further proof that the critical factor for imposing the transfer tax is
       whether there is a transfer of a controlling interest in real property. The statute reads:
               “Transfer declaration. At the time a deed, a document transferring a controlling interest
               in real property, or trust document is presented for recordation, or within 3 business
               days after the transfer is effected, whichever is earlier, there shall also be presented to
               the recorder or registrar of titles a declaration, signed by at least one of the sellers and
               also signed by at least one of the buyers in the transaction or by the attorneys or agents

           1
            See 765 ILCS 5/30 (West 2014) (“All deeds, mortgages and other instruments of writing which are
       authorized to be recorded, shall take effect and be in force from and after the time of filing the same for
       record, *** and all such deeds and title papers shall be adjudged void *** without notice, until the same
       shall be filed for record.”).

                                                       - 11 -
               for the sellers or buyers. The declaration shall state information including, but not
               limited to: (a) the value of the real property or beneficial interest in real property
               located in Illinois so transferred ***.” 35 ILCS 200/31-25 (West 2014).
       The transfer tax is imposed on deeds and documents conveying controlling interest in property,
       not on security interests in the property.
¶ 35       Our analysis of Illinois law leads us to the conclusion that a beneficial interest in the
       context of real estate means a controlling or equitable interest, such as the beneficiary in a land
       trust. We found no authority construing a mortgage as granting a controlling interest in real
       property or construing a mortgage to be a beneficial interest in real estate. Therefore, the
       assignment of a mortgage is not taxable as an assignment of a beneficial interest under the
       transfer tax. Finally, it is unnecessary for us to resolve the issue of whether mortgage
       assignments also fall under applicable exemptions within the transfer tax because we find that
       mortgages are not taxable interests under the transfer tax to begin with.
¶ 36       Therefore, this court reinstates the decision of the department of administrative hearings,
       and the trial court ruling is reversed.

¶ 37                                     CONCLUSION
¶ 38      The judgment of the circuit court of Cook County is reversed, and the administrative
       decision is reinstated.

¶ 39      Circuit court reversed; administrative decision reinstated.




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