Schwartz v. Bann-Cor Mortg.
| Decision Date | 09 May 2006 |
| Docket Number | No. WD 65187.,WD 65187. |
| Citation | 197 S.W.3d 168 |
| Parties | John SCHWARTZ, et al., Appellant, v. BANN-COR MORTGAGE, et al., Respondent. |
| Court | Missouri Court of Appeals |
Daniel Larson McClain, Kansas City, MO, for Respondents HomeQ Servicing and The Money Store.
Before ROBERT G. ULRICH, P.J., PATRICIA A. BRECKENRIDGE, and JAMES M. SMART, JR., JJ.
The issues in this appeal include the question of whether the six-year limitations period of Section 516.420, RSMo, 2000 applies to claims brought under the Second Mortgage Loan Act against Bann-Cor, a company engaged in the business of making second mortgage loans.
Plaintiffs John and Jeannette Schwartz applied for and obtained a second mortgage loan in 1997. The Schwartzes obtained a loan in the amount of $25,000.00 payable over 20 years at 15.50 percent interest, from Bann-Cor, a California corporation. Additional charges in connection with the loan were a $500.00 loan origination fee, a $595.00 "processing" fee, and a $500.00 "underwriting" fee. The additional charges were financed by rolling them into the loan balance.
Plaintiff James Wong also, in 1997, obtained a second mortgage loan in the amount of $50,000.00, payable over 20 years at 13.99 percent interest. Wong was charged a $5,000.00 loan origination fee and a $495.00 "processing" fee. The additional charges were financed by rolling them into the loan balance.
Bann-Cor sold Wong's loan to Master Financial, Inc. Bann-Cor sold the Schwartz's loan to Defendants Homeq Servicing Corporation and The Money Store.
At the time of these transactions, the making of second mortgage loans in the State of Missouri was regulated by section 408.231, et seq., RSMo 1994, the Second Mortgage Loan Act ("SMLA"). The SMLA purported to regulate the charging by lenders of closing costs and fees. Three years thereafter, on October 31, 2000, plaintiffs brought an action against Bann-Cor and a defendant believed to be an assignee of the loans in question. Plaintiffs brought the action in behalf of themselves and also sought to be designated representatives in order to bring claims in behalf of the class of other Missouri home owners who borrowed money from Bann-Cor under similar terms and conditions.
In their third amended petition, plaintiffs alleged that each of the loans at issue was a second mortgage loan within the meaning of the SMLA. They alleged that the rates charged exceeded Missouri's "maximum lawful rate" at the time. They also alleged that Bann-Cor violated the SMLA by charging plaintiffs additional fees not authorized by the SMLA. Plaintiffs sought to recover the allegedly unlawful fees and closing costs that they were charged, as well as interest paid on their loans. They also sought actual and punitive damages, interest, attorney's fees and injunctive relief. Plaintiffs alleged that the assignee defendants (Master Financial, Inc., Homeq Servicing Corporation and The Money Store) are liable to plaintiffs under federal laws specifying that assignees may be liable for violations of state consumer protection laws just as the originators of such loans may be liable. Plaintiffs sought to be allowed to proceed not only in behalf of a class of plaintiffs, but also against a class of defendants comprised of entities that had purchased loans from Bann-Cor.
One of the affirmative defenses raised herein by defendants is the defense that the claims are barred by the statute of limitations set forth in section 516.130(2) RSMo 2000,1 which provides for a three-year period of limitations for actions on a statute for a penalty or forfeiture where the action is given to the party aggrieved. In response to defendants' motions, plaintiffs asked for and were granted leave to file a third amended petition in which plaintiffs asserted that plaintiffs had six years in which to bring an action under section 516.420, which is applicable to claims for a penalty or forfeiture brought against "moneyed corporations" within the meaning of section 516.420.
On January 28, 2005, the court granted motions to dismiss and motions for summary judgment filed by the defendants, ruling that the claims of plaintiffs were barred by the three-year statute of limitations set forth in section 516.130(2). Plaintiffs appeal.
In their points I and II, plaintiffs contend that the trial court erred in granting motions to dismiss filed by Bann-Cor and The Money Store because the motions to dismiss alleged facts sufficient to show that the matter is governed by the six-year statute of limitations set forth in section 516.420 rather than the three-year statute of limitations set forth in section 516.130(2). In point III, plaintiffs contend the court similarly erred in granting the motion for summary judgment filed by Master Financial. In point IV, plaintiffs contend that the court erred in denying plaintiffs' motion to add persons as plaintiffs in that the class of persons sought to be added were not barred by the statute of limitations.
All the motions granted in this case, whether denominated a motion to dismiss or a motion for summary judgment, were determined by the trial court's ruling on the issue of the applicability of the three-year statute of limitations. Thus, the questions presented in this appeal are questions of law. There is no dispute as to the essential facts. We review the legal issues in the appeal de novo. M & P Enter., Inc. v. Transamerica Fin. Serv., 944 S.W.2d 154, 159 (Mo. banc 1997); Yahne v. Pettis County Sheriff Dep't, 73 S.W.3d 717, 719 (Mo.App.2002).
In their first point, appellants ("Borrowers") contend that the circuit court erred in ruling that the claims are barred by the three-year statute in section 516.130(2) in that the applicable statute of limitations is a six-year statute, section 516.420. Plaintiff Borrowers pleaded that Defendant Bann-Cor Mortgage, a California corporation, is a "moneyed corporation" within the meaning of section 516.420, and pleaded facts supporting that assertion. Borrowers contend the proper statute of limitations is as follows:
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.
The petition alleges that Bann-Cor is a mortgage lender, lending money to individuals throughout the nation. Bann-Cor allegedly makes the loan and then sells the loans to third parties. The loans in Missouri were secured by deeds of trust. Plaintiffs contend that the making of such loans and the selling of such loans are characteristics of a "moneyed corporation." Bann-Cor allegedly has no business other than dealing in money and assignable financial instruments. Borrowers point out that Bann-Cor, as a mortgage lender, is subject to certain banking laws, e.g., sections 443.800 to .893, RSMo and title XII of the United States Code. Bann-Cor is, Borrowers say, licensed by the Missouri Division of Finance to lend money and to then assign the loan paper to secondary entities. See §§ 443.803.1(13), 443.805.1, RSMo, 2000, governing entities "engag[ed] in the business of brokering, funding, originating, servicing or purchasing of residential mortgage loans."
Section 516.420 was originally enacted in Missouri in 1865 as chapter 190, section 10 of the General Statutes of the State of Missouri. It was borrowed from the statutes of New York. Div. of Labor Standards v. Walton Constr. Mgmt. Co., Inc., 984 S.W.2d 152, 155 (Mo.App.1998). The language of section 516.420 is very similar to the language of section 44, part 3, chapter 4, title 2 of the Revised Statutes of the State of New York, which the New York legislature enacted in 1830:
None of the provisions of this chapter shall apply to suits against directors or stockholders of any moneyed corporations to recover any penalty or forfeiture imposed or to enforce any liability created by the second title of the eighteenth chapter of the first part of the Revised Statutes; 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.
Platt v. Wilmot, 193 U.S. 602, 608, 24 S.Ct. 542, 48 L.Ed. 809 (1904). Upon adoption of the New York Code of Procedure in 1848, this section became section 89 of that Code. Id. As re-enacted by the New York legislature in 1848, section 89 read as follows:
This title shall not affect actions against directors or stockholders of a moneyed corporation to recover a penalty or forfeiture imposed, or to enforce a liability created by the second title of the chapter of the Revised Statutes, entitled "Of moneyed corporations," but such action must be brought within six years after the discovery by the aggrieved party of the facts upon which the penalty or forfeiture attached or the liability was created.
Brinckerhoff v. Bostwick, 99 N.Y. 185, 1 N.E. 663, 666 (1885). In 1849, the New York Code of Procedure was amended and section 89 became section 109. Platt, 193 U.S. at 608, 24 S.Ct. 542. In the amendment, the phrase "moneyed corporation" became "moneyed corporation or banking association." After this amendment, section 109 read as follows:
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