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Baker v. Century Financial Group, Inc.

Court of Appeals of Missouri, Western District, First Division

April 24, 2018

JAMES BAKER, et al., Appellants,
v.
CENTURY FINANCIAL GROUP, INC., et al., Respondents.

          Appeal from the Circuit Court of Clay County, Missouri The Honorable K. Elizabeth Davis, Judge.

          Before Thomas H. Newton, Presiding Judge, and Victor C. Howard and Karen King Mitchell, Judges.

          OPINION

          Karen King Mitchell, Judge.

         Appellants James and Jill Baker, Jeffrey and Michelle Cox, and William and Linda Springer, as named representatives of a class certified in 2003, (collectively, Borrowers) appeal decisions by the Circuit Court of Clay County to grant three motions to dismiss and three motions for summary judgment, all of which were based on the same statute of limitations defense to Borrowers' claims against Respondents under the Missouri Second Mortgage Loan Act, §§ 408.231-408.241 (MSMLA).[1] Respondents are current or former trustees, agents, and/or holders of second mortgage loans made by Century Financial Group, Inc. (CFG) and the trustees and/or agents of such holders (collectively, Lenders).[2] Because Borrowers' claims against Lenders are not barred by the applicable statute of limitations, we reverse and remand for further proceedings.

         Background[3]

         This case has a long and complicated history. For purposes of this appeal, which involves a fairly narrow legal issue, we endeavor to include only those facts necessary for a full understanding and evaluation of that issue.

         Borrowers are homeowners who obtained second mortgage loans[4] on their Missouri homes from CFG. The Coxes received their second mortgage loan from CFG on September 30, 1997, the Springers received their loan on October 8, 1997, and the Bakers received their loan on December 2, 1997.[5] After making the loans, CFG sold or assigned them to other entities, many of whom are participants in this litigation. The assignees pooled these (and other) loans and placed them in trusts. The pools were used to collateralize bonds or other investment instruments that were sold to investors. The borrowers' monthly mortgage payments created a revenue stream from which payments were made to those who bought the mortgage-backed investments. In some cases, the assignees designated a separate entity to process the payments made by mortgagors.

         The MSMLA, which governs CFG's loans to the Coxes, the Springers, and the Bakers, provides, with specific exceptions, "[n]o charge other than that permitted by section 408.232 shall be directly or indirectly charged, contracted for or received in connection with any second mortgage loan." § 408.233.1. The MSMLA further provides that "[a]ny person violating [that prohibition] shall be barred from recovery of any interest on the contract, " except as otherwise provided in that section. § 408.236.

         The Bakers commenced this action on June 28, 2000, by filing a petition alleging, among other things, that CFG, Master Financial, Inc. (a servicer of CFG's Missouri second mortgage loans), and Defendants "Does 1-25, " who would later include Lenders, among others, violated the fee limitations of MSMLA, § 408.233.1, in the course of making the Bakers' loan by directly or indirectly charging, contracting for, and/or receiving excessive loan origination fees and other fees not permitted by § 408.233.1. Approximately a year after commencing this suit, the Bakers filed a First Amended Petition, dated July 12, 2001, joining Ocwen, Impac, and Wilmington[6] as defendants.

         On February 26, 2002, the Bakers, joined by the Coxes and the Springers, moved for certification of a plaintiffs' class.[7] In their motion, the homeowners argued that their claims "are subject to the 6-year statute of limitations (claims against 'moneyed corporations') [in § 516.420]" and "the class period should therefore include claims arising 6 years before the action was filed."[8] In opposing the motion to certify and in an earlier motion for summary judgment filed by one of the Master Financial Asset Securitization Trusts (MF Trusts), [9] the defendants urged the court to apply the three-year statute of limitations in § 516.130(2) to the homeowners' claims. On December 19, 2002, the court ruled that the MF Trust was a "moneyed corporation" within the meaning of § 516.420 and that the applicable statute of limitations was six years.

         On January 2, 2003, the court issued its Order Certifying Plaintiff Class pursuant to Rule 52.08.[10] The court defined the class as "[a]ll individuals who, on or after June 28, 1994: obtained a 'Second Mortgage Loan' from Century Financial; and who paid [fees or interest in violation of the MSMLA], or who financed the payment of [fees or interest in violation of the MSMLA] as part of the principal loan balance, at or before closing . . . ." In addition to certifying the class, the court determined, consistent with its denial of the MF Trust's summary judgment motion, that the six-year statute of limitations in § 516.420 applied to plaintiffs' claims, stating,

[t]he 6-year statute of limitations contained in § 516.420 RSMo. applies to "all" lawsuits where the claimant seeks relief (i.e., "to recover any penalty or forfeiture imposed or to enforce any liability created by . . . law") from and/or against a "moneyed corporation." . . . Because Plaintiffs are seeking to "enforce a liability" and/or to recover a "penalty or forfeiture" imposed by the MSMLA and § 408.562[11] against and from Century Financial, a "moneyed corporation, " and its derivatively liable assignees, Plaintiffs' statutory claims are governed by § 516.420 RSMo. The language of the statute is crystal clear: "all" suits to "recover any penalty or forfeiture imposed, or to enforce any liability created by any . . . law . . . shall be brought within six years after the discovery by the aggrieved party of the facts upon which such penalty or forfeiture attached, or by which such liability was created." § 516.420 RSMo. 2000. Hence, the 6-year statute applies in this case.

(Emphasis in original.)

         Shortly after class certification, Borrowers filed their Third Amended Petition, dated February 5, 2003, joining Bank of New York Mellon (BNYM) and Republic as defendants. Borrowers filed their Fourth Amended Petition (the Petition), the operative pleading for purposes of this appeal, on February 3, 2004, joining Banc One Financial Services, Inc., predecessor to Chase, as a defendant. The Petition asserts that Lenders, among others, became liable on CFG's Missouri loans just as CFG is and would be liable because the loans are "high-cost" mortgages under the Home Ownership and Equity Protection Act, 15 U.S.C. § 1602(bb) (HOEPA). The Petition further alleges that Lenders, among others, directly violated the MSMLA, and continued repeatedly to violate it, by charging and/or receiving interest and principal on the loans, which included portions of the illegal settlement charges that had been financed as part of the principal loan amounts. Under the authority of § 408.236 of the MSMLA, Borrowers seek to recover all excessive loan origination and other fees they were charged in connection with the CFG loans and all interest paid or to be paid on the loans; they also seek prejudgment interest, punitive damages, reasonable attorneys' fees, and equitable relief under § 408.562.

         In 2006, while this case was pending, this court issued an opinion in Schwartz v. Bann-Cor Mortgage, 197 S.W.3d 168, 178 (Mo. App. W.D. 2006), where we ruled that the six-year statute of limitations in § 516.420 applies to MSMLA claims. Thereafter, Borrowers and Lenders proceeded with the understanding that the applicable limitations period was six years until the U.S. Court of Appeals for the Eighth Circuit issued its opinion in Rashaw v. United Consumers Credit Union, 685 F.3d 739 (8th Cir. 2012). In Rashaw, which involved claims under the Missouri Uniform Commercial Code and the Missouri Merchandizing Practices Act, the Eighth Circuit held that § 516.420 "is limited to penal statutes and does not apply to civil actions to recover penalties and forfeitures governed by § 516.130(2)." Id. at 744. Relying on Rashaw, the Eighth Circuit subsequently held that MSMLA claims are subject to the three-year limitations period in § 516.130(2), rather than the six-year limitations period in § 516.420. See Washington v. Countrywide Home Loans, Inc., 747 F.3d 955, 958 (8th Cir. 2014); Thomas v. U.S. Bank NA ND, 789 F.3d 900, 902 (8th Cir. 2014); Wong v. Wells Fargo Bank, N.A., 789 F.3d 889, 898 (8th Cir. 2015).

         Based on the Eighth Circuit's pronouncement of the applicable limitations period, BNYM filed a Motion to Dismiss the Petition, arguing that Borrowers' claims were barred by the three-year statute of limitations in § 516.130(2).[12] Borrowers filed Suggestions in Opposition to BNYM's Motion to Dismiss, and, after additional submissions by both sides, the court granted BNYM's motion on December 1, 2015, based on the statute of limitations defense.[13] On the heels of BNYM's successful motion, Ocwen and Republic moved to dismiss the Petition as time barred by § 516.130(2). Then, Wilmington filed a motion for partial summary judgment, [14] which was followed by Impac's motion for summary judgment, both relying on the statute of limitations defense. On November 15, 2016, the court dismissed Ocwen and Republic and granted summary judgment to Wilmington and Impac.

         On February 9, 2017, Borrowers moved the trial court to enter final judgment on Borrowers' claims and to stay the remainder of the class action pending Borrowers' appeal of the court's prior dismissal and summary judgment rulings. Before the court ruled on Borrowers' motion for a final judgment and stay, Chase moved for summary judgment raising the statute of limitations defense. The court granted Chase's motion on May 23, 2017. The next day, the court granted Borrowers' motion for a final judgment, determining that there was "no just reason for delay" and staying the action as to the remaining defendants pending Borrowers' appeal of the court's statute of limitations rulings. The court's May 24, 2017 judgment ended Borrowers' claims against Lenders based on a common legal issue and is a final judgment subject to appeal pursuant to Rule 74.01(b).[15] This appeal follows.

         Standard of Review

         All motions at issue in this appeal, whether denominated motions to dismiss or motions for summary judgment, were granted by the trial court based on its finding that the three-year statute of limitations in § 516.130(2), rather than the six-year statute of limitations in § 516.420, governs Borrowers' claims. Which statute of limitations applies to a claim is a question of law, which we review de novo. Mitchell v. Residential Funding Corp., 334 S.W.3d 477, 502 (Mo. App. W.D. 2010). Likewise, our review of the grant of both motions to dismiss and for summary judgment is de novo. Lynch v. Lynch, 260 S.W.3d 834, 836 (Mo. banc 2008) (grant of motion to dismiss); Hill v. Ford Motor Co., 277 S.W.3d 659, 664 (Mo. banc 2009) (grant of motion for summary judgment).

         Under the de novo standard of review, appellate courts use the same decision criteria as the lower courts. In the context of a dismissal based on a statute of limitations defense, "[i]f it clearly appears on the face of the petition that the cause of action is barred by the applicable statute of limitations, the motion to dismiss is properly sustained." Armistead v. A.L.W. Grp., 60 S.W.3d 25, 26 (Mo. App. E.D. 2001). In the context of summary judgment, we will affirm if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Rule 74.04(c)(6); ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 378 (Mo. banc 1993). For defendants seeking summary judgment on a properly pleaded affirmative defense, there must be no genuine dispute as to the facts required to support the defense. Id. at 381. Here, there is no dispute as to the material facts pertaining to the statute of limitations defense at issue.

         Analysis

         Borrowers raise six points on appeal. In their first point, they argue that the court erred in granting Lenders' dismissal and summary judgment motions based on the statute of limitations because Borrowers' claims are subject to the six-year limitations period in § 516.420, rather than the three-year limitations period in § 516.130(2). In their remaining five points, Borrowers argue that the court erred in finding their claims time barred under the three-year statute of limitations in § 516.130(2) because, even under the shorter limitations period, their claims are timely based on the following legal theories: (1) HOEPA's derivative liability (Point II), (2) accrual of claims against Lenders occurs when they acquire or begin servicing the loans (Point III), (3) the "continuing or repeated wrong" exception to accrual of claims (Point IV), (4) the relation back doctrine (Point V), and (5) class action tolling (Point VI).[16]

         The initial issue on appeal is whether Borrowers' MSMLA claims are subject to the three-year limitations period in § 516.130(2), as the trial court found, or the six-year limitations period in § 516.420, as we concluded in Schwartz and Borrowers advocate here (Point I).[17]Because we conclude that § 516.420 applies and Borrowers' claims must be brought within six years, we need not reach Borrowers' alternative arguments regarding the timeliness of their claims under the shorter limitations period (Points II-VI). We begin our analysis by examining the language of §§ 516.130(2) and 516.420.

         1. Statutory Language

         "Our primary rule in construing statutes is to determine the legislature's intent through the language used." Mitchell, 334 S.W.3d at 502. We must "presume every word, sentence or clause in a statute has effect." Bateman v. Rinehart, 391 S.W.3d 441, 446 (Mo. banc 2013). But we will not add words that the legislature did not include when drafting the statute. Ryder ...


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