Conseco Fin. Corp. v. Missouri Dep. of Rev.

Decision Date04 March 2003
Docket NumberNo. SC 84347.,SC 84347.
Citation98 S.W.3d 540
PartiesCONSECO FINANCE SERVICING CORPORATION, f/k/a Green Tree Finance Servicing Corp., et al., Respondents, v. MISSOURI DEPARTMENT OF REVENUE, Appellant.
CourtMissouri Supreme Court

Jeremiah W. (Jay) Nixon, Atty. Gen., Charles W. Hatfield, Asst. Atty. Gen., Jeffrey Harris, Asst. Atty. Gen., Douglas E. Nelson, Asst. Atty. Gen., Jefferson City, for Appellee.

David G. Wasinger, Randall T. Oettle, Rebecca A. Nickelson, St. Louis, for Respondents.

James P. Gamble, St. Louis, Amicus Curiae.

LAURA DENVIR STITH, Judge.

The Missouri Department of Revenue appeals the trial court's judgment permanently enjoining it from issuing certificates of title to owners of manufactured home parks for manufactured homes that were abandoned at their parks. It had previously issued such titles to mobile home park owners pursuant to sections 700.525 through 700.541, governing abandoned manufactured home title disposition (AMHTD).1 The court held that AMHTD unconstitutionally deprives secured parties of their security interests and owners of their property rights in financed homes without adequate notice or other process and that the provisions of the statute are unconstitutionally vague.

This Court finds that the trial court erred in reaching the serious constitutional issues raised as to the notice and forfeiture procedures of AMHTD as they relate to owners of manufactured homes. It erroneously entered judgment on these issues without permitting the department to file an answer or show cause why an injunction should not issue as to the implementation of AMHTD as to homeowners and without permitting the department to put on evidence or conduct discovery on those issues.

This Court also finds that it is premature at this juncture to determine the validity of the provisions of AMHTD relating to secured parties. These provisions presume a valid transfer of title and ownership from the former owner to the mobile home park owner. They are incomplete and cannot be executed in accordance with legislative intent in the absence of the provisions regarding homeowners, and they are so inseparably connected with the homeowner provisions that it cannot be presumed that the legislature would have adopted them in the absence of the provisions regarding homeowners. Moreover, Conseco has made numerous factual allegations concerning its security interests in certain manufactured homes, concerning the department's handling of the notice of and transfer of title in those cases, and concerning the department's practices in this regard generally, that have been denied by the department, thereby raising issues of Conseco's standing to seek the relief it requests here. The trial court should have addressed these issues before resolving the constitutional issues raised as to the effect of the statute on secured parties. Reversed and remanded for further proceedings.

I. FACTUAL AND PROCEDURAL HISTORY

According to the allegations of the petition, John Wren Jr. and Shannon Wren bought a manufactured home. They financed their purchase through Conseco Finance Servicing Corp. (formerly known as Green Tree Financial Servicing Corp.), which retained a security interest in the home. The petition further alleges that the Wrens placed their manufactured home in a mobile home park owned by Lakehurst Investments, a real estate investment company, and lived in the home. In October 1999, Lakehurst alleged that the Wrens had abandoned their home and applied to the department of revenue for issuance of a new title to the manufactured home in its name under AMHTD. In May 2000, the petition alleges, the department sent the Wrens and Conseco notice of Lakehurst's application for title due to abandonment. The notice stated that the home was abandoned and that the department would issue title to Lakehurst unless the Wrens or Conseco redeemed the home by paying all rents due to Lakehurst within 30 days "to protect their interest." The home was not redeemed, and the department issued Lakehurst a certificate of title. That certificate did not reflect Conseco's security interest.

Conseco filed suit against the department in August of 2001. Count I asked for a declaration that AMHTD was unconstitutional as to secured parties and homeowners. Count II raised various issues about the department's application and implementation of AMHTD and asked for a declaration that AMHTD, if constitutional, does not affect the rights of secured parties. The trial court granted Conseco a temporary restraining order enjoining the department from issuing titles under AMHTD.

After the department filed an answer to Conseco's first amended petition, the trial court granted Conseco leave to file a second amended petition adding the Wrens as additional party plaintiffs. On that same day, without giving the department an opportunity to answer the Wrens' allegations as to the invalidity of AMHTD as to homeowners, the court granted a permanent injunction finding that various provisions of AMHTD were unconstitutional as to both the Wrens and Conseco and prohibiting the department from issuing titles under AMHTD. The department appeals.

II. STANDARD OF REVIEW

The court's judgment in a suit in equity will be affirmed unless there is no substantial evidence to support it, unless it was against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976); Nothaus v. City of Salem, 585 S.W.2d 244, 245 (Mo.App. S.D.1979). Because this case involves statutory interpretation, which is a question of law, this Court's review is de novo. Ochoa v. Ochoa, 71 S.W.3d 593, 595 (Mo. banc 2002). Statutes are presumed constitutional. In re Marriage of Kohring, 999 S.W.2d 228, 231 (Mo. banc 1999). A statute will not be invalidated "unless it clearly and undoubtedly contravenes the constitution and plainly and palpably affronts fundamental law embodied in the constitution." Id.

II. CONSTITUTIONALITY OF AMHTD

When enacted, AMHTD was designed to address the problems that arise when a person abandons a manufactured home in a mobile home park without the landlord's consent.2 Under AMHTD, when a manufactured home is abandoned in a mobile home park, the owner of the park, referred to as a "landlord" by AMHTD, can apply to the department of revenue for a certificate of title by submitting a report to the department, the required contents of which are outlined in section 700.527. The department then sends notice to the owner of the manufactured home and to any holder of a security interest in the home informing them of the home's alleged status as abandoned and of the right of the landlord to seek title to the home under AMHTD if the home remains abandoned. Sec. 700.531. The notice informs them that if the owner or the holder of any security interest wishes to claim title to the home under AMHTD, the owner or secured party must prove either ownership or that a valid security interest exists and pay "all reasonable rents due and owing to the landlord." Sec. 700.533.

A. Constitutionality as to Homeowners.

Conseco and the Wrens argued in the trial court that section 700.525 permits a homeowner to be found to have abandoned the home if the homeowner is even a small amount behind in rent, so long as the utilities have been turned off or the landlord claims that there are other "indications of abandonment;"3 that the statute allows deprivation without a pre-deprivation hearing to contest what rents are owing or whether indications of abandonment exist; that the statute forfeits all of the owner's equity in the home merely because the owner owes a few hundred dollars or less in rent, unless the owner pays all rents within 30 days; and that these provisions result in deprivation of the owner's property rights in the manufactured home and in the proceeds of the home without due process. After considering the above arguments, the trial court declared AMHTD unconstitutional because it deprives homeowners of their property without adequate notice or opportunity to be heard and because it is unconstitutionally vague.

This Court agrees that serious constitutional issues would be raised were this Court to construe AMHTD to permit a landlord to retain the proceeds of sale of a manufactured home, over and above the amounts due in rents and related expenses, and should it permit a finding of abandonment without constitutionally adequate notice and opportunity to be heard.4

It is premature for this Court to finally resolve these issues, however, for, while the Wrens were added as parties in the second amended petition, the ruling permitting that filing occurred on the same day the court issued its permanent injunction. No order was first issued allowing the department to show cause why a permanent injunction should not issue, nor was it otherwise given the opportunity to answer, conduct discovery or present evidence on the issues raised by the petition.

The department alleges that numerous issues need to be explored, such as whether the Wrens indeed owned the home in question, whether they abandoned it, whether their home was forfeited under AMHTD, what rents were owing, what notice the Wrens received, if any, and so forth. A defendant is entitled to file an answer before the court rules in favor of the plaintiff on the allegations of the petition, and a permanent injunction should not issue until the pleadings have been joined and the evidence necessary to the court's determination has been developed. See, e.g., Rule 55.01; State ex rel. Woytus v. Ryan, 776 S.W.2d 389, 391 (Mo. banc 1989) (purpose of discovery is to provide access to information needed to develop issues framed by pleadings); Simms v. Ford Motor Credit Co., 605 S.W.2d 212, 214 (Mo.App. E.D.1980) (pleadings must be made up and issues developed); Frimel v. Humphrey, 555 S.W.2d 350, 352 (Mo. App.1977) (same).

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