Baker v. Century Fin. Grp., Inc.

• Decision Date: 24 April 2018
• Docket Number: WD 80813
• Citation: 554 S.W.3d 426
• Parties: James BAKER, et al., Appellants, v. CENTURY FINANCIAL GROUP, INC., et al., Respondents.
• Court: Missouri Court of Appeals

554 S.W.3d 426

James BAKER, et al., Appellants,

v.CENTURY FINANCIAL GROUP, INC., et al., Respondents.

WD 80813

Missouri Court of Appeals, Western District.

OPINION FILED: April 24, 2018

Application to Transfer to Supreme Court Denied July 3, 2018

Application for Transfer Denied September 25, 2018

Kip D. Richards, R. Frederick Walters, J. Michael Vaughan, and David M. Skeens, Kansas City, MO, Attorneys for Appellants.

Mark A. Olthoff and Michael S. Foster, Kansas City, MO, Attorneys for Respondents Republic Bank, Wilmington Trust Company, and Ocwen Loan Servicing LLC.

Michael J. Abrams and R. Kent Sellers, Kansas City, MO, and John H. Cobb (pro hac vice) and Stacie C. Knight (pro hac vice), Charlotte, NC, Attorneys for Respondent The Bank of New York Mellon.

Barry L. Pickens, Kansas City, MO, Attorney for Respondents Impac Funding Corporation, Impac Mortgage Holdings, Inc., Impac Secured Assets Corp., IMH Assets Corporation, and Deutsche Bank National Trust Company, in its capacity as former trustee for Impac Secured Assets CMB Trust Series 1998-1 and Impac CMB Trust Series 2000-2.

Daniel L. McClain, Kansas City, MO, Attorney for Respondent JPMorgan Chase Bank, N.A. as Successor by Merger to Banc One Financial Services, Inc.

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

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.

Background³

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 loans⁴ 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 Wilmington⁶ 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. US 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...