763 F. Supp. 2d 1091
W.D. Mo.2011Background
- Mayo spouses purchased a home in Grandview, MO, financing with two separate loans on Oct 28, 2005: Wells Fargo (80%) and Option One (20%).
- Mrs. Mayo signed the Deed of Trust but did not sign the promissory note, so she is not a party to the loan.
- Capital Title coordinated closing; Option One paid two challenged fees to third parties and rolled the rest into the loan principal.
- UBS purchased the loan via a Master Asset Purchase and Securitization, forming part of the MASTR Trust; RFC became master servicer, GMACM serviced the loan as servicer, and UBS/dbntc held trust roles.
- MSMLA governs second mortgage loans and prohibits improper closing charges; plaintiffs allege several fees violated MSMLA and seek damages, including interest and punitive relief.
- Court granted summary judgment in part: Mayo lacks standing; funding/underwriting fees violated MSMLA; some closing costs were bona fide; assignee defendants indirectly violated MSMLA by rolled-in fees; Mayo may seek interest; punitive damages unresolved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing of Mrs. Mayo | Mayo (Mrs.) has standing as a loan participant spouse. | Mrs. Mayo is not a party to the loan and lacks standing. | Mrs. Mayo lacks standing; not a party to the loan. |
| MSMLA applicability to piggyback loan | MSMLA applies to the second mortgage (piggyback) loan. | Piggyback status negates MSMLA applicability. | MSMLA applies; two extensions of credit found, not a single piggyback transaction. |
| Funding and underwriting fees under MSMLA | Funding and underwriting fees violate MSMLA. | Fees may be permissible or not clearly violative. | Funding fee and underwriting fee violate MSMLA; other fees at issue may be permissible as bona fide closing costs. |
| Assignee liability for MSMLA violations | Assignees indirectly violated MSMLA by receiving rolled-in illicit fees; and may be derivative liable. | Assignees are not derivatively liable; servicers are not liable. | Assignee defendants are liable for indirect violations; derivative liability denied; servicers not liable for direct violations. |
| Relief for interest and punitive damages | Plaintiffs may recover interest previously paid; punitive damages may be awarded. | MSMLA bars interest recovery; punitive damages require clear evidence. | Plaintiffs may recover interest; punitive damages not barred at this stage. |
Key Cases Cited
- Mitchell v. Residential Funding Corp., 334 S.W.3d 477 (Mo. Ct. App. 2010) (discussed inclusive vs exclusive meaning of 'which shall include' in MSMLA)
- U.S. Life Title Ins. Co. v. Brents, 676 S.W.2d 839 (Mo. App. 1984) (MSMLA context; consumer protection framework)
- Estes (State ex rel. Nixon v. Estes), 108 S.W.3d 795 (Mo. Ct. App. 2003) (statutory interpretation guidance on 'include')
- Transcon. Holding Ltd. v. First Banks, Inc., 299 S.W.3d 629 (Mo. Ct. App. 2009) (holder in due course defenses and negotiable instruments)
- Travelers Prop. Cas. Ins. Co. of Am. v. National Union Ins. Co. of Pittsburgh, 621 F.3d 697 (8th Cir. 2010) (predictive use of state law by federal courts; not binding but persuasive)
- Merz v. First Nat'l Bank of Franklin Cnty., 682 S.W.2d 500 (Mo. Ct. App. 1984) (holder in due course concepts under UCC)