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Case Developments in Consumer Law

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                Issue 34, Summer 2007

Case Developments
By Joseph Ferrentino, MPLP Law Clerk

The Driver Responsibility Law Is Constitutional

Several motorists challenged the Michigan’s Driver Responsibility Law (DRL) in Dawson v Secretary of State, No. 264103, 2007 WL 852638 (Mich App Mar. 20, 2007). The DRL (MCL 257.732a) provides for a fee assessment against drivers who are convicted of specific offenses, or accumulate seven or more qualifying points on their driving records. Plaintiffs, drivers convicted of qualifying offenses who were subject to the DRL, argued that the DRL violated the double jeopardy and equal protection clauses of the United States and Michigan constitutions, as well as the uniformity of taxation clause and the “Distinct Statement” clause of the Michigan constitution.

The Court of Appeals held that the DRL does not violate the double jeopardy clause because “there is no multiple punishment double jeopardy violation.” The Court stated that the double jeopardy clause prohibits prosecutors and courts, not the Legislature, from imposing multiple punishments. Where there is clear legislative intent to impose multiple punishments for the same offense, there is no double jeopardy violation. In this case, the Court found clear legislative intent.

Using a rational basis test, the Court also held that the DRL does not violate either the equal protection or the uniformity of taxation clause. Finally, the Court of Appeals held that the DRL does not violate the “Distinct Statement” clause. The “Distinct Statement” clause of the Michigan Constitution provides that “[e]very law which imposes, continues or revives a tax shall distinctly state the tax.” Although the Court concluded that the fees “are in reality taxes designed to raise revenue,” the Court held that the DRL does not violate the “Distinct Statement” clause because the fees are “distinctly stated.” The language of the statute “is not obscure or deceitful.”

Motor Vehicle Title Is Transferred At Signing

In Perry v. Golling Chrysler Plymouth Jeep, Inc., 477 Mich 62 (2007), the Michigan Supreme Court held that an application for title to a motor vehicle is executed and title is transferred to the new owner at the time the application is signed. In this case, an individual purchased a car. She completed the paperwork, including the application for title that she signed. Hours after taking possession of the car, she collided with a parked car, causing injury to plaintiff. Plaintiff sued the car dealership, asserting that the car dealership was still the owner of the car. Plaintiff argued that although the application for title had been signed, the title was not effectively transferred until the application was delivered to the Secretary of State. The Supreme Court concluded that application for title was executed when the parties signed the application. Therefore, the parties were not required to send the application to the Secretary of State to complete the execution.

National Banks and Their Operating Subsidiaries Are Subject to National Regulation

Watters v Wachovia Bank, 127 S Ct 1559 (2007), a recent United States Supreme Court case, addresses the supervision of national banks and their operating subsidiaries. Wachovia Mortgage Corporation was in the business of real estate lending in Michigan, as well as in other states, before becoming a wholly owned operating subsidiary of Wachovia Bank. Wachovia Bank is a national bank. Michigan law exempts national and state banks from state mortgage lending regulation, but requires their subsidiaries to register with the State’s Office of Insurance and Financial Services (OIFS) and submit to state supervision. Once Wachovia Mortgage became a subsidiary of Wachovia Bank, Watters, the OIFS Commissioner, informed Wachovia Mortgage that it would no longer be allowed to conduct business in Michigan without registering. This suit followed.

The United States Supreme Court held that Wachovia’s mortgage business is subject to national supervision by the Office of the Comptroller of the Currency and the National Bank Act (NBA), but not to state supervision where this regulation would conflict with the NBA. The Court believed that duplicative state examination, supervision, and regulation would interfere with banks’ business practices.

Foreclosing Party May Not Foreclose on Property It Does Not Yet Own

In Davenport v. HSBC Bank USA, No. 273897, 2007 WL 1203619 (Mich App Apr. 24, 2007), the Court of Appeals voided foreclosure proceedings because the foreclosing party did not own the mortgage or an interest in the mortgage at the time it initiated foreclosure proceedings.

The mortgage was assigned to HSBC Bank on October 31, 2005. HSBC initiated foreclosure proceedings, publishing its first notice on October 27, 2005. A sheriff’s sale followed. Plaintiff sued HSBC asserting that the foreclosure proceedings should be voided because HSBC published its first notice of foreclosure several days before it actually acquired an interest in the mortgage. The Court held that “one who is not the record holder of a mortgage may not foreclose the mortgage.” Consequently, the Court voided the foreclosure proceedings because HSBC lacked the authority to foreclose.

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