Rashaw v. United Consumers Credit Union

• Citation: 685 F.3d 739
• Decision Date: 17 July 2012
• Docket Number: 11–2329,Nos. 11–2327,11–2331.,s. 11–2327
• Parties: Bridget RASHAW; Matthew Hutchinson, Plaintiffs–Appellants, v. UNITED CONSUMERS CREDIT UNION, Defendant–Appellee. Michael J. Knight, Plaintiff–Appellant, v. Central Communications Credit Union, Defendant–Appellee. Bernard W. Moran, Plaintiff–Appellant, v. Missouri Central Credit Union, Defendant–Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

685 F.3d 739

Bridget RASHAW; Matthew Hutchinson, Plaintiffs–Appellants,

v.UNITED CONSUMERS CREDIT UNION, Defendant–Appellee.

Michael J. Knight, Plaintiff–Appellant,

v.Central Communications Credit Union, Defendant–Appellee.

Bernard W. Moran, Plaintiff–Appellant,

v.Missouri Central Credit Union, Defendant–Appellee.

Nos. 11–2327, 11–2329, 11–2331.

United States Court of Appeals,

Eighth Circuit.

Submitted: Feb. 15, 2012.

Filed: July 17, 2012.

Roy Frederick Walters, argued, Kip Dudley Richards, Garrett Mark Hodes, on the brief, Kansas City, MO, for appellants.

Thomas Marvin Martin, argued, Joseph Edward Bant, on the brief, Kansas City, MO, for appellees.

Before LOKEN, BYE, and MELLOY, Circuit Judges.

LOKEN, Circuit Judge.

Four named plaintiffs filed three separate class action lawsuits in state court alleging, inter alia, that three Missouri credit unions, by participating in a subprime motor vehicle lending and investment program administered by now-bankrupt Centrix Financial, LLC (“Centrix”), violated provisions of the Missouri Uniform Commercial Code (“Mo UCC”) and the Missouri Merchandising Practices Act (“MMPA”). Defendants removed under the Class Action Fairness Act, 28 U.S.C. § 1332(d), and moved to dismiss the complaints. The district court ¹ issued three identical orders dismissing all the state law claims. Plaintiffs appeal the dismissal of the statutory claims; we granted their unopposed motion to consolidate the three appeals. We review the dismissals de novo, taking the allegations in the complaints as true. See O'Neal v. State Farm Fire & Cas. Co., 630 F.3d 1075, 1077 (8th Cir.2011) (standard of review). We agree with the district court that plaintiffs' Mo UCC claims are time-barred, although our analysis of that issue is somewhat different, and that the MMPA expressly exempts Missouri credit unions. Accordingly, we affirm.

I. The Mo UCC Claims.

The limitations issue presented on appeal requires us to define relationships between statutes of limitations that have been part of the codified Missouri statutes since 1865. The law declared by the State's highest court governs these questions of state law. Washington v. Countrywide Home Loans, Inc., 655 F.3d 869, 873 (8th Cir.2011). Here, the crucial issue is whether the Supreme Court of Missouri would follow a recent decision by the Missouri Court of Appeals that completely ignored controlling Supreme Court decisions under prior codifications of the relevant statutes that in our view required a contrary decision.

The complaints allege that each plaintiff obtained a secured motor vehicle loan from a defendant credit union under the “Portfolio Management Program” administered by Centrix as agent for the credit unions. Plaintiffs allege that, after loan defaults, the credit unions through the actions of Centrix violated Revised Article 9 of the Mo UCC by sending deficient collateral disposition notices before selling the repossessed vehicles. SeeMo.Rev.Stat. §§ 400.9–611–614.² The notices were sent between December 20, 2004, and January 20, 2005. The complaints were filed between November 24 and December 15, 2010, nearly six years later.

The Missouri statutes of limitations for civil actions include two provisions governing actions to enforce statutory liabilities: an action “upon a liability created by a statute other than a penalty or forfeiture” must be commenced within five years, Mo.Rev.Stat. § 516.120(2); an action “upon a statute for a penalty or forfeiture, where the action is given to the party aggrieved, or to such party and the state,” must be commenced within three years, Mo.Rev.Stat. § 516.130(2). The parties agree that the violations of Revised Article 9 of the Mo UCC alleged by plaintiffs are statutory liabilities. Thus, it would seem that those claims, filed nearly six years after receipt of the allegedly deficient collateral disposition notices, are clearly time-barred.

The issue arises because a long-standing but rarely applied statute provides a six-year limitations period for some actions to recover penalties or forfeitures from “moneyed corporations”:

None of the provisions of sections 516.380 to 516.420 shall apply to suits against moneyed corporations or against the directors or stockholders thereof, to recover any penalty or forfeiture imposed, or to enforce any liability created by the act of incorporation or any other law; but all such suits 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.

Mo.Rev.Stat. § 516.420. Plaintiffs argue this six-year limitations period applies because the defendant credit unions are “moneyed corporations.” They further argue that the remedy provided in § 400.9–625(c)(2) for violations of the Mo UCC collateral disposition notice requirements is a penalty. ³

In arguing that § 516.420 applies to their claims, plaintiffs rely primarily on Schwartz v. Bann–Cor Mortgage, 197 S.W.3d 168, 178 (Mo.App.2006). In that case, defendant argued that a claim under the Missouri Second Mortgage Loan Act was a claim for a penalty barred by the three-year statute of limitations in Mo.Rev.Stat. § 516.130(2). The Court of Appeals instead held that the six-year statute of limitations in § 516.420 applied. After thoroughly reviewing the New York origins of this 1865 statute, the Court concluded that the term “moneyed corporations” includes real estate mortgage lenders. Id. at 171–77. The court then dealt summarily with the question whether § 516.130(2) or § 516.420 applied:

Section 516.130(2) would apparently apply here if this were not an action against a “moneyed corporation.” Section 516.420 is the more specific statute of the two because it deals with claims against “moneyed corporations.” The fact that section 516.130(2) does not fall into the range of the specific excepted statutes mentioned in 516.420 makes no difference in that section 516.420 remains the more specific statute between the two.

Id. at 178 (emphasis added; footnote omitted).⁴ In the district court, although defendants vigorously argued that § 516.420 does not apply at all to plaintiffs' claims, the court accepted the contrary conclusion in Schwartz but then ultimately concluded that § 516.420 does not apply to these claims because the remedies in § 400.9–625 are not “penalties or forfeitures.” Though that is the issue plaintiffs primarily argue on appeal, the threshold conclusion in Schwartz requires a closer look.

The problem with that conclusion is most sharply focused by the Supreme Court of Missouri's decision in State ex rel. Fichtner v. Haid, 324 Mo. 130, 22 S.W.2d 1045 (1929), upholding Fichtner v. Mohr, 223 Mo.App. 752, 16 S.W.2d 739 (1929). In that case, plaintiff sued the directors of an insolvent bank—clearly a “moneyed corporation”—to recover lost deposits. The action was filed more than five but less than six years after the bank failed. The Supreme Court held that it would not disturb the Court of Appeals decision that the action was for a statutory penalty, it accrued when the bank failed, and therefore it was barred by the three-year statute of limitations in the predecessor to § 516.130(2). 22 S.W.2d at 1047–48. Neither Court cited the predecessor to § 516.420, yet if Schwartz was correctly decided, that statute would have compelled a conclusion that the claim was not time-barred because it was filed within six years. Likewise, in Vroom v. Thompson, 227 Mo.App. 531, 55 S.W.2d 1024, 1025–27 (1932), the court held that a claim against the directors of a moneyed corporation was time-barred by the three-year limitation in the predecessor to § 516.130(2) even though the predecessor to § 516.420 as construed in Schwartz would have compelled a contrary conclusion.

The lack of any reference to the predecessor to § 516.420 in these early cases is no doubt attributable to the Supreme Court of Missouri's prior decision in State ex inf. Attorney General v. Arkansas Lumber Co., 260 Mo. 212, 169 S.W. 145 (1914). In that case, the Attorney General sought large fines and the forfeiture of corporate charters for a long-running price fixing conspiracy that violated the Missouri antitrust statutes. The Attorney General argued that no statute of limitations applied; the Court rejected that argument as contrary to a specific statute. Id. at 168. Defendants argued for a three-year limitations period under both the predecessor to § 516.130(2)and the predecessor to § 516.400, a statute included in the preamble to § 516.420 that applies to “actions upon any statute for any penalty or forfeiture, given in whole or in part to the party aggrieved.” ⁵ The Supreme Court agreed that three years was the applicable limitations period but firmly rejected the latter contention:

The sections quoted from the criminal law, and providing for limitations for the bringing of actions for penalties and forfeitures, as urged by [defendants], do not apply, for the very clear reason that this, as we have seen above, is a civil action, and not a criminal action; therefore the statute of limitations providing for the time within which civil actions must be brought [the predecessor to § 516.130(2) ] must govern and guide us.

Id. at 171. With this clear precedent, the Court and the parties in Haid had no reason to revisit the issue a few years later.

The next intriguing question is why the Court of Appeals in Schwartz, which looked carefully at the history of § 516.420, overlooked these earlier, seemingly controlling Supreme Court decisions. We suspect the answer lies in the statutory recodification process. The precursors to § 516.120(2) and § 516.130(2) were enacted as § 4 Second and § 5 Second of the Laws of 1849, pp. 74–75. In the General Statutes of 1865, the Legislature for the first time included two distinct three-year statutes of limitations for actions for statutory penalties and forfeitures. One—the precursor to § 516.130(2)—appeared in...