Appeals court declares foreclosure mediation dispute moot

Listen to this article

When the Missouri Legislature passed a law that bars local governments from enacting mortgage lending-related ordinances, it mooted the controversy between St. Louis County and the banks that challenged its law.

That’s what the two-judge majority of the Missouri Court of Appeals Eastern District said Tuesday as it dismissed the lawsuit filed against the county by the Missouri Bankers Association Inc. and Jonesburg State Bank. The majority, which consisted of Judge Mary K. Hoff and Senior Judge Kathianne Knaup Crane, remanded the case to the St. Louis County Circuit Court and ordered it to vacate its judgment.

Judge Lisa Van Amburg dissented from the majority opinion and argued that the state law is inapplicable to the county because the mediation program is a valid exercise of its constitutional authority to regulate municipal services and functions. This, coupled with the fact that the county has not said it would repeal the ordinance, means that the controversy is not moot, the judge said.

The county ordinance required lenders to offer borrowers the opportunity for mediation before foreclosure. The city of St. Louis adopted an identical mediation ordinance. Both have been challenged in court and are currently enjoined.

“It’s very unsettling,” Keith Thornburg, general counsel for the Missouri Bankers Association, said of the majority opinion.

“Generally when something’s been mooted that’s comparable to this it’s because the actual statute or rule was amended or repealed,” he said. “And here the ordinance has not been amended or repealed.”

County Counselor Patricia Redington said the court rejected the argument that the county would begin to enforce the ordinance again.

“We had argued that our mediation program was consistent with statewide policy, but then once the General Assembly passed a law prohibiting such programs, it was hard to see a good result for the county,” she said. “And having it declared moot looked like the best outcome.”

Redington said she was encouraged by Van Amburg’s dissent, which held that the county’s legislative power can be superior to the General Assembly’s power.

“We haven’t seen that kind of support for county authority in recent years,” Redington said.

In July, just a few weeks after Gov. Jay Nixon allowed the legislation to become law without signing it, the Court of Appeals asked the parties for additional briefing to address the state law’s effect on the case. The parties originally argued the case on May 31.

At the end of a two-page letter, Redington asked the court to dismiss the appeal and remand the case to the circuit court with instructions to vacate the judgment and dismiss the lawsuit.

“The County has abandoned its enforcement efforts and will not resume them in light of the General Assembly’s unfortunate decision to affirmatively withdraw this opportunity from Missouri residents,” Redington wrote.

The bankers, however, argued the dispute was not moot in a five-page letter signed by Nicholas G. Frey, of Stinson Morrison Hecker.

“Here, the legal circumstances have not changed,” Frey wrote. “The Ordinance is still part of the St. Louis County Code. A future county executive or county counselor could have a different legal opinion as to the validity of the Ordinance and choose to enforce it again.”

Thornburg said he doesn’t know what the association will do next, but it may ask the appellate court to reconsider its decision, clarify its order or transfer the case to the Missouri Supreme Court.

“Based on what we asked for in our petition — that the ordinance be found void, that the county be enjoined from enforcing it and that we asked for our costs and attorney fees — we’re going to need more clarity than just that ‘the county isn’t going to enforce it, so we think it’s moot,’” he said.

The Missouri Bankers Association’s lawsuit to enjoin the city of St. Louis from enforcing its foreclosure mediation statute is still pending before St. Louis Circuit Judge Robert H. Dierker Jr. A hearing on that case is scheduled for Monday.

The appellate case is Missouri Bankers Association Inc. and Jonesburg State Bank v. St. Louis County and Charlie A. Dooley, ED99333.