Cowles v. Bank West

• Decision Date: 13 October 2004
• Docket Number: Docket No. 229516.
• Citation: Cowles v. Bank West, 263 Mich.App. 213, 687 N.W.2d 603 (Mich. App. 2004)
• Parties: Kristine COWLES, Plaintiff-Appellant, and Karen B. Paxson, Intervening Plaintiff-Appellant, v. BANK WEST, f/k/a Bank West FSB, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

687 N.W.2d 603

263 Mich. App. 213

Kristine COWLES, Plaintiff-Appellant, andKaren B. Paxson, Intervening Plaintiff-Appellant, v.BANK WEST, f/k/a Bank West FSB, Defendant-Appellee.

Docket No. 229516.

Court of Appeals of Michigan.

Submitted May 5, 2004, at Grand Rapids.

Decided August 5, 2004, at 9:05 a.m.

Released for Publication October 13, 2004.

Drew, Cooper & Anding(by John E. Anding and Christopher G. Hastings), Grand Rapids, for the plaintiffs.

Warner Norcross & Judd, L.L.P.(by William K. Holmes and Molly E. McFarlane), Grand Rapids, for the defendant.

Before: GAGE, P.J., and O'CONNELL and ZAHRA, JJ.

GAGE, P.J.

Plaintiffs appeal by leave granted from the trial court's March 24, 2000, order summarily dismissing intervening plaintiffKaren B. Paxson's claim under the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq., as barred by the applicable statute of limitations.Summary disposition was previously granted to defendant on plaintiffs' other pleaded claims.We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

PlaintiffKristine Cowles received a residential real estate mortgage loan from defendant, which loan closed on February 7, 1997.Cowles was charged a $250 document preparation fee, and the fee was disclosed on Line 1105 of her United States Department of Housing and Urban Development settlement statement (HUD-1), a standardized form used in residential real estate loan closings.

On July 1, 1998, Cowles filed a complaint alleging several claims related to the document preparation fee.The complaint was filed on her own behalf and that of a class of consumers similarly wronged by the payment of the document preparation fee.The class was defined to include all consumers who obtained real estate loans in Michigan from defendant and who were charged with, and paid or financed, the document preparation fee in the six-year period before the date of the filing of the complaint.Cowles specifically alleged that defendant's conduct in preparing documents and charging a fee for the service constituted the unauthorized practice of law.She also alleged violations of the Michigan Consumer Protection Act (MCPA), M.C.L. § 445.901 et seq., and claims for replevin, unjust enrichment, innocent misrepresentation, and negligent misrepresentation.

On August 20, 1998, Cowles amended her complaint to add an allegation that the charged document preparation fee violated TILA, 15 U.S.C. § 1638, because the document preparation fee was improperly identified on the TILA disclosure form as a fee "paid to others on your behalf."The fee was actually retained by the bank and not paid to others.Cowles also alleged that the document preparation fee exceeded the cost of actual preparation of the "final legal papers."Defendant's motion for summary disposition on the TILA claim was granted.Plaintiffs have not appealed that ruling.

On February 16, 1999, Cowles filed a second amended complaint, alleging another TILA violation, specifically that defendant's failure to disclose the document preparation fee violated 15 U.S.C. § 1605(a), and Regulation Z, 12 C.F.R. § 226.4(c)(7).

The trial court subsequently certified the class as described in Cowles's, second amended complaint with Cowles acting as the class representative for all the claims.Defendant moved for reconsideration, arguing that Cowles's individual TILA claim was time-barred by the statute of limitations and thus she could not represent the class with respect to that claim.Defendant also moved for summary disposition on the merits of the TILA claim.

Paxson thereafter moved to intervene in the action and serve as the class representative for the TILA claim.Paxson obtained a residential refinancing loan from defendant on February 9, 1998, and was charged the $250 document preparation fee.Paxson's motion to intervene was granted, and she filed a complaint in intervention.The trial court later granted summary disposition to defendant on Cowles's TILA claim, finding that the statute of limitations barred her claim.The statute of limitations for a TILA claim is one year from the date of the alleged violation.15 U.S.C. § 1640(e).Cowles filed her initial complaint on July 1, 1998, more than one year after the closing on her loan.Her TILA claim was time-barred before she filed her initial complaint.

On January 10, 2000, the trial court granted summary disposition to defendant on all of plaintiffs' remaining claims with the exception of Paxson's TILA claim.Thereafter, both defendant and Paxson separately moved for summary disposition on the TILA claim.The trial court eventually ruled that Paxson's TILA claim was meritorious but was barred by the applicable statute of limitations.It determined that the claim accrued more than one year before the TILA claim was pleaded in Cowles's second amended complaint.Thus, the claim was untimely.The trial court did not relate the second amendment of the complaint back to the filing of the initial complaint.

This Court granted plaintiffs' application for leave to appeal and then held the appeal in abeyance pending the Supreme Court's resolution of Dressel v. Ameribank,468 Mich. 557, 664 N.W.2d 151(2003).In Dressel,the Court held that a bank does not engage in the unauthorized practice of law when it completes standard mortgage forms and charges a fee for that service.Id. at 569, 664 N.W.2d 151.This ruling resolved plaintiffs' unauthorized practice of law issue, which was then dismissed by order of this Court.We now address plaintiffs' remaining allegations of error.

I

Plaintiffs first argue that the trial court erred in granting summary disposition on the MCPA claims.We disagree.In Newton v. Bank West,262 Mich.App. 434, 686 N.W.2d 491(2004), we recently held that the defendant's residential mortgage loan transactions were exempt from the MCPA by virtue of M.C.L. § 445.904(1)(a).Because the transactions are exempt from the provisions of the MCPA, summary disposition on those claims was appropriate.

II

Plaintiff Paxson next challenges the trial court's grant of summary disposition to defendant on her TILA claim.Neither the Michigan Court of Appeals nor the Michigan Supreme Court has decided whether the amendment of a class action complaint to add new theories of liability relates back to the filing of the initial complaint for purposes of computing the expiration of the period of limitations.Thus, whether Paxson's TILA cause of action was barred by the period of limitations involves an issue of first impression and an issue of law, which is reviewed de novo.Collins v. Comerica Bank,468 Mich. 628, 631, 664 N.W.2d 713(2003).

The TILA claim was formally pleaded in Cowles's second amended complaint, which was filed on February 16, 1999.Defendant argues that the statute of limitations for Paxson and all other class members was not tolled with respect to that claim on that date.When the second amended complaint was filed, more than one year had passed since Paxson's TILA claim accrued on February 9, 1998.Therefore, defendant argues that Paxson's claim is barred by the statute of limitations.We disagree.

MCR 3.501(F)(1) provides that the statute of limitations is tolled with respect to all persons within the class described in the complaint on the commencement of an action asserting a class action.MCR 3.501(F)(2) delineates several circumstances in which the statute of limitations resumes running against class members, specifically, on the filing of a notice of the plaintiff's failure to move for class certification; twenty-eight days after notice of the entry, amendment, or revocation of an order of certification eliminating the person as a member of the class; entry of an order denying certification of the action as a class action; submission of an election to be excluded from the class; or final disposition of the action.

Paxson was a member of the original class described in the complaint on the commencement of Cowles's original class action.The class was ultimately certified and none of the circumstances of MCR 3.501(F)(2) occurred that could have caused the period of limitations to resume running against Paxson or any other class members.Thus, we find that the statute of limitations was tolled with respect to Paxson.The question then arises whether amendments to the complaint, adding claims arising out of the conduct, transaction, or occurrence alleged in the original complaint, relate back to the date of the initial filing when the statute of limitations was tolled.

We initially observe that the court rules governing representative actions, as set forth in subchapter 3.500 of the Michigan Court Rules, are not comprehensive.Thus, the general, civil procedure court rules must necessarily be applied to supplement the specific rules pertaining to representative actions.

There is no particular court rule or authority governing the relation back of amendments in class action lawsuits.MCR 2.118(D), however, provides the general rule that an amendment adding a claim relates back to the date of the original pleading if the claim asserted in the amended pleadings arose out of the conduct, transaction, or occurrence set forth, or attempted to be set forth in the original pleading.An amended pleading may introduce new facts, new theories, or even a different cause of action as long as the amendment arises from the same transaction set forth in the original pleading.Doyle v. Hutzel Hosp.,241 Mich.App. 206, 212-213, 615 N.W.2d 759(2000), citingLaBar v. Cooper,376 Mich. 401, 406, 137 N.W.2d 136(1965).More than thirty years ago, the Supreme Court departed from the strictures of its old rulings and determined that amendments arising "out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading" were permitted.LaBar, supra at 407-408, 137 N.W.2d 136."The test [] is no longer whether an...