Conseco Finance Ser. v. Mo Dept. of Revenue

• Decision Date: 13 June 2006
• Docket Number: No. SC 87061.,SC 87061.
• Citation: 195 S.W.3d 410
• Parties: CONSECO FINANCE SERVICING CORP., n/k/a Green Tree Servicing, L.L.C., et al., Respondents, v. MISSOURI DEPARTMENT OF REVENUE, Appellant.
• Court: Missouri Supreme Court

Page 410

195 S.W.3d 410

CONSECO FINANCE SERVICING CORP., n/k/a Green Tree Servicing, L.L.C., et al., Respondents, v. MISSOURI DEPARTMENT OF REVENUE, Appellant.

No. SC 87061.

Supreme Court of Missouri, En Banc.

June 13, 2006.

Jeremiah W. (Jay) Nixon, Attorney General, Mark E. Long, Assistant Attorney General, Jefferson City, for appellant,

David G. Wasinger, James S. Cole, Julie Eanes, St. Louis, for respondents.

LAURA DENVIR STITH, Judge.

The issue before this Court is whether sections 700.525 to 700.541, RSMo 2000,¹ which are entitled "Abandoned Manufactured Home — Title Disposition" (the Act) and which govern issuance of titles to abandoned manufactured homes, are unconstitutional in whole or in part. Respondents allege the Act is unconstitutional because its provisions are unduly vague as to what constitutes abandonment, because they provide inadequate notice or hearing prior to deprivation of the property interest of owners of manufactured homes and lienholders, and because they arbitrarily impair a lienholder's perfected security interest in a manufactured home. The trial court found these provisions invalid for the reasons asserted and enjoined Appellant, the Missouri Department of Revenue (DOR), from issuing abandoned manufactured home titles pursuant to the Act.

This Court affirms. The notice sent to Respondents was deficient because it was not reasonably calculated to reach them and was insufficient to inform them of their due process rights. Further, on its face the Act unconstitutionally fails to provide a pre-deprivation hearing to owners of manufactured homes. Having failed of its essential purpose, the Act is invalid in its entirety, and DOR is permanently enjoined from issuing certificates of title to abandoned manufactured homes pursuant to it.

I. FACTUAL AND PROCEDURAL HISTORY

Respondents John Wren Jr. and Shannon Wren (the Wrens or homeowners) purchased a manufactured home financed by Respondent Conseco Finance Servicing Corporation (lienholder). They placed the home on land rented from Lakehurst Investments (landlord).² Lakehurst applied to DOR for an abandoned home title in its name, alleging the Wrens' home was abandoned pursuant to the Act.

In May 2000, DOR sent notice of Lakehurst's application for title to the Wrens at the address of the manufactured home listed on the home's title — an address that DOR had just been informed had been abandoned. Although DOR gives examples of cases in which it also has sent a copy of the notice to the lienholder, here it did not separately notify Conseco at any address or try to do so. Instead, DOR argues the following letter addressed to the Wrens at their abandoned home served as adequate notice to both:

The Motor Vehicle Bureau was notified that on October 30, 1999, the manufactured home listed above was abandoned on property owned by Lakehurst Investments Inc. at 4450 Burnau Dr Lot 90 House Springs MO. Accordingly, the Department of Revenue is required to notify the last titled owner and the lienholder(s) of record listed below of the landowner's right to obtain a title on the manufactured home, if the manufactured home is not redeemed as outlined herein.

. . . .

THE OWNER OR LIENHOLDER MUST REDEEM THE MANUFACTURED HOME WITHIN 30 DAYS OF THIS NOTICE TO PROTECT THEIR [sic] INTEREST.

The owner may redeem the manufactured home by presenting proof of ownership and paying all rent owed to the landowner.

The lienholder may redeem the manufactured home, if titled in Missouri, by presenting a valid security agreement to the landowner and paying all rent owed to the landowner.

The owner or lienholder must notify this department within 30 days of this notice that the manufactured home was redeemed and submit a receipt issued by the landowner showing that all rent was paid.

Failure to redeem the manufactured home and notify this department will cause the Director to issue title in the name of the landowner.

Neither the Wrens nor Conseco redeemed the title within the 30-day period, and Conseco did not learn of the claimed abandonment until after DOR issued an abandoned home title to Lakehurst. The abandoned home title did not list any security interest of Conseco or any other party in the manufactured home, although DOR concedes that Conseco's security interest was perfected prior to DOR's issuance of the abandoned home title and had been listed on the Wrens' title.

The relevant statutes and DOR regulations provide no procedure for contesting issuance of an abandoned home title or for objecting to failure to list a lienholder's security interest on that title. Conseco, therefore, sought injunctive relief to prevent DOR from issuing abandoned home titles under the Act, arguing its provisions violate Respondents' due process rights and are unconstitutionally vague.

The Wrens, although the owners of the manufactured home before it was deemed abandoned, initially were not parties to the suit. The trial court granted Conseco leave to add the Wrens as plaintiffs and that same day entered summary judgment in favor of Conseco, finding the Act to be unconstitutional because it is confiscatory and in violation of the Due Process Clause of the United States Constitution. It further found that the Act did not provide proper notice and did not give homeowners an opportunity to be heard, which deprived both homeowners and secured parties of their property interests in the manufactured homes without due process of law, and that the statutory scheme was unconstitutionally vague.

In its opinion on DOR's appeal of this decision, this Court held that DOR should have been permitted to show cause why a permanent injunction should not issue, to file an answer to the amended petition once the Wrens were added, and to conduct discovery or present evidence on the issues raised in the second amended petition, before the trial court ruled. Conseco I, 98 S.W.3d at 544.³

Upon remand, Respondents jointly argued that section 700.525's definition of "abandoned" is unconstitutionally vague and arbitrary in that it permits a finding of abandonment when the homeowner owes even a small amount of rent if the landlord asserts the home shows "indications of abandonment." They also argued that section 700.525 allows new title to issue without a pre-deprivation hearing to contest what rents are owing or whether indications of abandonment exist and that no provision is made even for a post-deprivation hearing, again violating the procedural due process rights of the homeowner in the manufactured home.

In addition, Conseco argued the Act is unconstitutional because to the extent the Act can be read to permit issuance of an abandoned home title to the landlord that is not subject to the lienholder's interest, it deprives the lienholder of a security interest in the manufactured home without adequate notice. Even if the landlord takes the home subject to the lienholder's interest, DOR does not reflect that interest nor does the statute require it to be reflected on the abandoned home title issued by DOR. Moreover, even were its interest reflected on the title, Conseco argued, the statutory procedure may impair the lienholder's security interest by leaving the debt in the name of the debtor while transferring ownership to the landlord, arguably denying it the ability to proceed against the landlord under section 400.9-203, RSMo Supp.2005.

The trial court granted the motion for summary judgment and request for injunctive relief, finding the Act unconstitutional as to both the Wrens and Conseco because it is confiscatory and violates the Due Process Clause on its face and as applied, and is unconstitutionally vague. The court issued a permanent injunction prohibiting DOR from issuing titles on abandoned manufactured homes pursuant to sections 700.525 to 700.541.⁴ DOR appeals. This Court affirms.

II. STANDARD OF REVIEW

Summary judgment is proper only where there is no issue of material fact and a party is entitled to judgment as a matter of law. Here, the issue is one of statutory interpretation, which is an issue of law. This Court, therefore, reviews the grant of summary judgment de novo. Ochoa v. Ochoa, 71 S.W.3d 593, 595 (Mo. banc 2002); Dial v. Lathrop R-II Sch. Dist., 871 S.W.2d 444, 446 (Mo. banc 1994). In reaching a decision, this Court presumes that a statute is constitutional. In re Marriage of Kohring, 999 S.W.2d 228, 231 (Mo. banc 1999). It will not be invalidated "unless it clearly and undoubtedly contravenes the constitution and plainly and palpably affronts fundamental law embodied in the constitution." Id.

III. CONSTITUTIONALITY OF THE MANUFACTURED HOMES ACT

A. Vagueness of Definition of "Abandoned."

The Act allows a landowner to obtain title to an abandoned manufactured home under section 700.525, which defines "abandoned" as the homeowner's "physical absence from the property," and either:

(a) Failure by a renter of real property to pay any required rent for fifteen consecutive days, along with the discontinuation of utility service to the rented property for such period; or

(b) Indication of or notice of abandonment of real property rented from a landlord;

(emphasis added). Plaintiffs argue that section 700.525's definition of "abandoned" is so vague and ambiguous as to be unconstitutional because it is not susceptible to any reasonable or practical construction. The definition of "abandoned" in paragraph (a), it notes, would permit a home to be found to be abandoned if the homeowner failed to pay rent before taking a two-week vacation during which the utilities were turned off. The definition in paragraph (b) would allow a landlord to use its own imagination to come up with indications of abandonment. They argue that one can foresee that if homeowners failed to live in a home for a period because of storm or flood damage or due to illness or otherwise, the homeowners could return to find their home belonged to another.

DOR argues that the Wrens and...