Marshall Cnty. ex rel. Marshall Cnty. v. Homesales, Inc.

• Decision Date: 28 October 2014
• Docket Number: 111,786,111,870.
• Parties: MARSHALL COUNTY, OKLAHOMA, County Commissioners ex rel. Marshall County, Oklahoma, Plaintiff/Appellee, v. HOMESALES, INC., JPMorgan Chase Bank, N.A., and Jason L. Howell, Defendants/Appellants.
• Court: Oklahoma Supreme Court

339 P.3d 878

2014 OK 88

MARSHALL COUNTY, OKLAHOMA, County Commissioners ex rel. Marshall County, Oklahoma, Plaintiff/Appellee

v.HOMESALES, INC., JPMorgan Chase Bank, N.A., and Jason L. Howell, Defendants/Appellants.

111,786

111,870.

Supreme Court of Oklahoma.

Oct. 28, 2014.

Clyde A. Muchmore, Crowe & Dunlevy, P.C., Oklahoma City, Oklahoma, and Kenneth M. Kliebard, Morgan, Lewis & Bockius, LLP, Chicago, Illinois, for Defendants/Appellants Homesales, Inc., and JPMorgan Chase Bank, N.A.

Brian J. Rayment, Kivell, Rayment & Francis, P.C., Tulsa, Oklahoma, for Defendant/Appellant Jason L. Howell.

Darryl F. Roberts and Jason D. May, Ardmore, Oklahoma, for Plaintiff/Appellee.

Opinion

FISCHER, S.J.

¶ 1 The issue in this litigation is whether class treatment is appropriate for damage claims by Oklahoma counties for unpaid documentary taxes allegedly due on hundreds of real property transactions in real estate foreclosure proceedings. We hold that it is not because a county does not have standing to sue to collect unpaid documentary taxes.

FACTS

¶ 2 Marshall County filed this case to prosecute an alleged violation of the Documentary Stamp Tax Act (DSTA), (68 O.S.2011 §§ 3201 through 3206 ). The DSTA imposes a tax “on each deed, instrument or writing by which any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyed ... when the consideration ... exceeds One Hundred Dollars ($100.00).” 68 O.S.2011 § 3201(A). Absent an exemption, any tax due is collected by the county clerks through the sale of documentary stamps. 68 O.S.2011 §§ 3203 and 3204. The county clerk retains a portion of the tax and forwards the balance to the Oklahoma Tax Commission. 68 O.S.2011 § 3204. In this case, the County contends that Homesales failed to pay the required documentary tax on a deed executed in a mortgage foreclosure action filed by JPMorgan. The substance of that transaction, summarized in the following paragraph, is described in the County's petition.

¶ 3 On October 1, 2007, JPMorgan obtained a judgment in a real estate mortgage foreclosure action filed in Marshall County, Oklahoma, case number CJ–2004–217. A sale of the mortgaged property was conducted by the Sheriff of Marshall County and JPMorgan was the successful bidder at that sale. At the hearing to confirm the sale, JPMorgan assigned its interest to Homesales, the Sheriff's Deed was granted to Homesales and recorded with the Marshall County Clerk. Although we do not have the benefit of a more developed evidentiary record at this stage of these proceedings, the transaction described in the County's petition is similar to those evident from the summary judgment record in Murray Cnty. v. Homesales, Inc., 2014 OK 52, 330 P.3d 519. The district court's order granting summary judgment in Murray County describing these transactions in more detail is included in the record on appeal in this case. An undisputed fact in Murray County is that Homesales is a wholly owned subsidiary of JPMorgan. No documentary tax was paid by Homesales when it recorded the Sheriff's Deed in this case. The deed recited that no documentary stamps were due citing Title 68 O.S.2011 § 3202(13) exempting: “Any deed executed pursuant to a foreclosure proceeding in which the grantee is the holder of a mortgage on the property being foreclosed....” In its petition, the County alleged that Homesales was not entitled to this exemption because it was not the original mortgagee.¹

¶ 4 Chase filed a motion to dismiss, arguing the County did not have standing to enforce the DSTA. The district court denied that motion on April 19, 2013. The County then moved to have the case certified as a class action pursuant to Title 12 O.S. Supp.2013 § 2023,² with all seventy-seven counties constituting a class of plaintiffs. As relevant to this appeal, the County's motion argued that: (1) JPMorgan, as the holder of promissory notes secured by real estate mortgages, obtained a judgment in numerous foreclosure actions; (2) JPMorgan was the successful bidder at the sheriff's sale of the real property securing the mortgages in those foreclosure actions; (3) the district court would confirm the sheriff's sale by entering an order prepared by JPMorgan's attorney, Howell; (4) the order directed the sheriff to issue a deed to the real property to Homesales; (5) Homesales was the grantee of sheriff's deeds, and claimed an exemption from documentary taxes pursuant to the mortgage foreclosure exemption in Title 68 O.S.2011 § 3202(13) ; (6) Homesales was not entitled to an exemption from documentary taxes for any of these transactions.³ Attached to the County's motion were several exhibits including copies of two hundred and thirty-eight deeds filed with the county clerks in twenty-eight counties. Homesales was the grantee in the vast majority of these deeds, many reciting that JPMorgan assigned all of its right, title and interest to Homesales at the confirmation hearing.

¶ 5 The County's class certification motion and supporting brief asserts, based on these facts, that it had satisfied all four of the subdivision 2023(A) factors and that class treatment was appropriate pursuant to subdivisions 2023(B)(2) and (B)(3). The district court conducted a hearing on the County's motion and on May 20, 2013, entered its Journal Entry granting the County's motion and certifying a class of plaintiffs consisting of all seventy-seven Oklahoma counties. The order finds that “questions of law and fact are common to all the members of the class as well as the Defendants” and that the County had “satisfied the prerequisites of 12 Okl.St.Ann. § 2023(A).” The order then provides:

The Court, having considered the matters set forth in Title 12 Okl.St.Ann. § 2023(B)(3) finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

The order concludes that the case “shall be maintained as a class action pursuant to 12 Okla. Stat. Ann. § 2023(A) and (B)(3).”⁴ Chase appeals that order.⁵

STANDARD OF REVIEW

¶ 6 When Oklahoma's class action statute was originally enacted, class certification orders were reviewed pursuant to an abuse-of-discretion standard. Shores v. First City Bank Corp., 1984 OK 67, ¶ 4, 689 P.2d 299, 301. In 2009, the Legislature replaced the abuse-of-discretion standard with de novo appellate review for any class certification order entered after November 1, 2009. 12 O.S. Supp.2009 § 2023(C)(2) (declared unconstitutional on other grounds in Douglas v. Cox Ret. Props., Inc., 2013 OK 37, 302 P.3d 789 ). In its 2013 First Extraordinary Session, the Legislature re-adopted the de novo standard of appellate review for orders certifying a class action. Laws 2013, 1st Extr. Sess., HB 1013, ch. 10, § 4, emerg. eff. September 10, 2013. This Court has previously recognized the Legislature's authority to specify the standard of appellate review in circumstances like this. Kentucky Fried Chicken of McAlester v. Snell, 2014 OK 35, – ––P.3d –––– (providing the standard for appellate review of Workers' Compensation Court orders is within the authority of the Legislature). The de novo standard of review is familiar to appellate courts, and we conclude the Legislature intended to invoke that settled law when it changed the standard of review for class certification orders. Cf., Peoplelink, LLC. v. Bear, 2014 OK 65, ¶ 6, ––– P.3d ––– –(applying the traditional against-the-weight-of-the-evidence equity standard of review in appeals of Workers' Compensation Court orders finding Legislature was familiar with the Court's decisions using that standard and must have intended that standard by including identical language in Workers' Compensation Court statute).

¶ 7 However, de novo review has historically been confined to review of legal rulings. In re Estate of Bell–Levine, 2012 OK 112, ¶ 5, 293 P.3d 964, 966 (de novo review requires a plenary, independent, and non-deferential examination of the trial court's rulings of law). In contrast, a trial court's factual determinations in an equitable proceeding have traditionally been accorded deferential treatment. Krumme v. Moody, 1995 OK 140, 910 P.2d 993 (appellate court examines the record, weighs the evidence and accepts the trial court's findings of fact unless they are against the clear weight of the evidence). The tradition in equitable proceedings is an appropriate reference because class action procedure was initially developed from equity practice. Mattoon v. City of Norman, 1981 OK 92, ¶ 9, 633 P.2d 735, 737.

¶ 8 To decide a class certification motion the district court is required to determine whether the prerequisites for a class action have been satisfied. That determination often requires analysis of the elements of the claim or cause of action to determine the “core liability issues” the class will have to prove in order to prevail and the nature of the evidence purportedly available to do so. Scoufos v. State Farm Fire & Cas. Co., 2001 OK 113, ¶ 1, 41 P.3d 366, 367. Accord General Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 160–61, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982) (court must conduct a “rigorous analysis” to determine if requirements for class certification have been met).⁶ And, when necessary to decide a class certification motion, courts must resolve factual disputes raised by the parties to determine whether the movant has satisfied the statutory prerequisites for a class action, even if those disputes involve the merits of the plaintiff's claim. Masquat v. DaimlerChrysler Corp., 2008 OK 67, ¶ 10, 195 P.3d 48, 52–53 (citing Steven S. Gensler, Civil Procedure: Class Certification and the Predominance Requirement Under Oklahoma Section 2023(B)(3), 56 Okla. L.Rev. 289, 316 (2003) ) (Oklahoma follows the “modern view” that consideration of the merits of the classes' claim is...