Sunday, February 15, 2015

Missouri Bankers Ass'n, Inc. v. St. Louis County

Opinion issued
November 12, 2014

Link to the Supreme Court of Missouri Opinion

This case arose out of an ordinance adopted by the St. Louis County Council [hereinafter, the County] in 2012.[1]  The ordinance, known as the “Mortgage Foreclosure Intervention Code,” stated its intention was to address “the national residential property foreclosure crisis” and the crisis’s negative impact on the County’s “property values, tax base, budget, assessments, and collection of real property taxes.[2]  The ordinance recognized “unmaintained properties” as public nuisances.[3]  In an attempt to rectify the public nuisance problem, the ordinance “implemented a mediation program requiring lenders to provide residential borrowers an opportunity to mediate prior to foreclosure.”[4]                                                                                                             
Two banks sued the County seeking injunctive relief and a declaratory judgment that the ordinance was invalid after the County enforced the ordinance.  The lower court granted the County’s summary judgment motion, and the Court of Appeals dismissed the banks’ appeal.  The Supreme Court of Missouri granted transfer.  

 I.                   Facts and Holding
The ordinance placed certain requirements on the lender.  The lender must provide written notice to the homeowner of the mediation process, the homeowner’s right to mediation, and notice of the foreclosure.[5]  The mediation must be scheduled within sixty days should the homeowner decide to request mediation.[6]  The ordinance mandated that even if there was no settlement reached during mediation, the lender satisfied the requirements if the lender made a “good faith effort” to settle the matter.[7]  The ordinance also mandated that the lender satisfied the requirements if the homeowner failed to respond or declined to respond to the mediation program.[8] 

Following the mediation process, the coordinator was required to issue the lender a “certificate of compliance.”[9]  The certificate of compliance was a document “attesting the lender ha[d] complied with the ordinance and [was] eligible to record the foreclosure deed without penalty.”[10]  The lender would also receive a certificate of compliance if the homeowner failed to respond or declined to participate in the mediation process.[11]  The importance of the certificate was that the ordinance required it be filed simultaneously with the filing of a conveyance of the foreclosure.[12]  However, under the ordinance, the failure to file the certificate did not prevent the recording of the conveyance.[13]

The Bankers filed suit against St. Louis County and the county executive, Charlie A. Dooley. The suit included six counts, “alleging the ordinance: (1) conflicted with state statutes; (2) violated the Hancock Amendment; (3) violated Missouri constitutional taxation provisions; (4) violated Missouri constitutional restrictions of charter county authority; (5) violated Bankers’ rights; and (6) violated the County charter.”[14]  The Bankers sought a declaratory judgment and injunctive relief.[15]  The circuit court issued a temporary restraining order, but after both parties filed motions for summary judgment, the order was overturned and the circuit court granted the County’s motion.[16]  The Bankers appealed. The court of appeals agreed with the County that the passage of Missouri Revised Statute section 442.454 rendered the controversy moot.[17] Section 442.454 “expressly prohibits local municipalities from enforcing the type of ordinance the County enacted.”[18]  The court of appeals dismissed the Bankers’ appeal and remanded the case to the circuit court so the judgment could be vacated and the lawsuit dismissed.[19]  The Supreme Court of Missouri granted transfer.[20]

The Supreme Court of Missouri reversed the circuit court’s decision and remanded the case. The Court found that the circuit court erred in granting the County’s summary judgment motion, and held that the “Mortgage Foreclosure Intervention Code” ordinance was void and unenforceable ab initio.[21]
II.                Legal Background

The Bankers argued that the County exceeded its charter authority under article VI, section 18(b) of the Missouri Constitution because the mediation ordinance conflicted with both the general laws and public policy of the state regarding foreclosures, particularly with section 443.454.[22] The County conceded there was a direct conflict between the ordinance and section 443.454, but it argued that article VI, section 18(c) of the Missouri Constitution grants the County superior legislative authority.[23]  The County argued that such superior legislative authority meant the ordinance displaced the statute and should remain valid.[24]

Article VI, Section 18(b) of the Missouri Constitution provides “that a charter county shall possess an implied grant of power ‘for the exercise of all powers and duties of counties and county officers prescribed by the constitution and laws of the state . . . .”[25]  However, this charter authority may not “invade the province of general legislation involving the public policy of the state as a whole.”[26]  Section 18(c) “authorizes a charter county to ‘provide for the vesting and exercise of legislative power pertaining to any and all services and functions of any municipality or political subdivision, except school districts throughout the entire county within as well as outside incorporated municipalities . . . .”[27]  The police power is one of the powers given to charter counties through article VI, section 18(c), and the exercise of the police power is a governmental function.[28] 

The County clearly stated the purpose of the ordinance was to rectify “the national residential property foreclosure crisis” and its impact on the County.[29]  The Supreme Court of Missouri, in its majority opinion, notes that “[m]unicipal regulations meant to address a national crisis, which affect every state in the country, are not a matter of such distinctly local concern that the County is authorized to legislate pursuant to its delegated police power.”[30]  The Court held that because the acts performed by the County were beyond its express or implied powers, the ordinance was void from the beginning.[31]

III.             Comment

Judge Teitelman did offer a dissenting opinion in this case.  The dissenting opinion argues that the mediation ordinance put in place by the County was a valid exercise of the County’s authority found in the Missouri Constitution and therefore, was valid even if it was in conflict with section 443.454.[32]  The dissent contends that even though the ordinance was enacted to address the national foreclosure crisis, “[t]he fact that the underlying reasons for the foreclosure crisis involve national and international trends does not compel the conclusion that the localized symptoms of this crisis are beyond the County’s constitutionally legislative power.”[33] 

The dissent’s argument is compelling.  It challenges the majority by questioning why it matters if the root of a problem a County seeks to rectify through legislation be on the national scale.  The dissent challenges the majority in arguing that the power does not revolve around whether the ultimate issue is a national trend; rather, the ordinance must just use its legislative power to rectify the localized symptoms.    
 -Tara A. Bailes

[1] Missouri Bankers Ass'n, Inc. v. St. Louis Cnty., 448 S.W.3d 267 (Mo.banc 2014).
[2] Id.
[3] Id.
[4] Id.
[5] Id. at 268-69.  Other requirements include that the lender must pay a nonrefundable refundable fee of 100 dollars to a mediation coordinator to oversee the mediation process.  The coordinator must make at least three attempts to contact the homeowner.  Id.
[6] Id. at 269.  At this point, the lender must pay the coordinator an additional 350 dollars.  The lender is reimbursed the total 350 dollar fee if the parties are able to reach a settlement regarding the foreclosure prior to the mediation. Id.  
[7] Id. at 269.
[8] Id.
[9] Id. 
[10] Id.
[11] Id.
[12][12] Id.  The certificate of compliance was to be filed with the court assessor while the conveyance was to be filed with the county recorder of deeds.  Id.
[13] Id.  The lender would be subject to criminal prosecution and a fine up to 1,000 dollars for failure to comply with the certificate requirement.  Id.
[14] Id.
[15] Id.
[16] Id.
[17] Id.
[18] Id.
[19] Id. at 270
[20] Id.
[21] Id. at 274. 
[22] Id. at 272.
[23] Id.
[24] Id.
[25] 271.
[26] Id.
[27] Id. at 272.
[28] Id.
[29] Id. at 273.
[30] Id.
[31] Id. 273-74.
[32] Id. at 275.
[33] Id.