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.
[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.
[20] Id.
[23] Id.
[24] Id.
[26] Id.
[28] Id.
[30] Id.
[33] Id.
