O'Boskey v. First Federal Sav. & Loan Ass'n of Boise

• Decision Date: 08 April 1987
• Docket Number: Nos. 15919,16293,s. 15919
• Citation: 112 Idaho 1002,739 P.2d 301
• Parties: Joseph M. O'BOSKEY and Ann B. O'Boskey, husband and wife, and S. Kay Kemp, on behalf of themselves and all others similarly situated, Plaintiffs-Respondents, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF BOISE, now known as United First Federal Savings & Loan Association, a federally chartered savings and loan association, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 301

739 P.2d 301

112 Idaho 1002

Joseph M. O'BOSKEY and Ann B. O'Boskey, husband and wife, and S. Kay Kemp, on behalf of themselves and all others similarly situated, Plaintiffs-Respondents, v. FIRST FEDERAL SAVINGS & LOAN ASSOCIATION OF BOISE, now known as United First Federal Savings & Loan Association, a federally chartered savings and loan association, Defendant-Appellant.

Nos. 15919, 16293.

Supreme Court of Idaho.

April 8, 1987.

Rehearing Denied June 11, 1987.

P. Craig Storti and John F. Kurtz, Jr. (argued), of Hawley, Troxell, Ennis & Hawley, Boise, for defendant-appellant.

Jon M. Steele, of Ellis, Brown, Sheils & Steele, Boise, for plaintiffs-respondents.

BISTLINE, Justice.

Defendant-appellant United First Federal Savings & Loan Association (United First) appeals from the district court's order (1) granting judgment for permanent injunction against United First and in favor of the plaintiff class members, and (2) awarding costs and attorney's fees to the plaintiffs. Plaintiffs ask for an award of attorney's fees on appeal. We affirm, and grant plaintiffs attorney's fees on appeal.

I. BACKGROUND

The O'Boskeys executed a deed of trust dated November 1, 1977 encumbering certain real property in order to secure a loan from the named beneficiary, United First. In July of 1980, the O'Boskeys entered an agreement to sell the property to Kay Kemp. Kemp asked United First to allow her to assume the O'Boskeys' loan. United First insisted upon Kemp paying a loan origination fee and an increase of two percent in the interest rate.

Kemp refused to accept the increased interest rate. Kemp then purchased the property from the O'Boskeys, agreeing to assume all the obligations of the note and deed of trust, excepting the increased interest rate.

United First refused Kemp's tender of the loan origination fee and of monthly payments, and served notice of acceleration of the loan payments, default, and foreclosure. The acceleration provision on which United First premised its action read as follows:

To protect the security of this Deed of Trust, Grantor agrees:

....

2. In the event the herein described property or any part thereof, or any interest therein is sold, agreed to be sold, conveyed or alienated by the trustor or by operation of law or otherwise, all obligations secured by this instrument, irrespective of the maturity dates expressed therein, at the option of the holder hereof and without demand or notice shall immediately become due and payable.

In response, the O'Boskeys and Kemp joined as plaintiffs and sued for declaratory and injunctive relief. They also moved for an order determining that the action be maintained as a class action. The alleged class consisted of those within the state of Idaho who had sold or purchased Idaho real property encumbered by a deed of trust containing the above due-on-sale provision, and who had paid or obligated themselves to pay an assumption fee and/or increased interest rate as a condition of assumption. Prior to sufficient discovery on and determination of the class issues, United First moved for summary judgment on the issue of the enforceability of the due-on-sale clause. The plaintiffs cross-moved for summary judgment.

On September 1, 1981, the district court filed a memorandum opinion and orders. Based on an insufficiently developed record, the district court initially denied without prejudice the request for class certification, though in this order and in its memorandum opinion and order of November 25, 1981, the court permitted further discovery on and left open the question of class certification. (In the latter order, the court ordered United First to produce all deeds in trust containing the due-on-sale clause.) The district court held that "[a] simple reading of the contract indicates that the provision is applicable to those cases in which a transfer of the property would impair the security." R., Vol. 2, p. 133-34. The district court granted partial summary judgment on the issue of the due-on-sale clause to the plaintiffs. The district court decided in the November opinion that the class ultimately determined "would be entitled to injunctive relief." R., Vol. 2, p. 125.

Thereafter, pursuant to I.A.R. 12, United First sought and obtained this Court's certification to appeal on the issue of whether the due-on-sale clause could be enforced only upon impairment of the security. While that appeal was pending, United First continued to enforce the due-on-sale clause against borrowers, and to obtain agreements increasing interest rates and including assumption fees. Ultimately, this Court unanimously affirmed the decision of the district court. O'Boskey v. First Federal Savings & Loan Assoc., 106 Idaho 339, 678 P.2d 1112 (1984) (O'Boskey I ).

Subsequently, the plaintiffs once again sought production from United First of deeds in trust containing the due-on-sale clause, and the district court once again ordered their production. On June 24, 1984, counsel for United First represented to the court that the 2,194 deeds United First had produced represented all such deeds. However, subsequent discovery and court orders produced another 2,079 class members.

On August 3, 1984, the district court issued a memorandum opinion and orders denying Albert and Sharon Bruno's motion to intervene and United First's motion for entry of judgment and dismissal of the action. In a unique motion, United First itself moved the court for an order enjoining it, United First, from enforcing the due-on-sale provision, but only as against Kemp and the O'Boskeys, and also for dismissal of the case. The accompanying affidavit of United First's vice-president, Robert G. Dickinson, admitted that the sale by the O'Boskeys to Kemp caused no "impairment of the security of the deed in trust." R., Vol. 2, p. 43. The district court denied the motion in view of the pending question of class certification.

On October 18, 1984, the district court certified the class, ordered notice to class members, and indicated that present grantors were entitled to injunctive relief against the enforcement of the due-on-sale clause. On October 29, notice was given to class members informing them that the court had determined that the class was entitled to injunctive relief.

On November 26, 1984, in its continuing efforts against certification of and notice to the class, United First filed the affidavit of its President, Robert D. Glaisyer. In that affidavit, Glaisyer testified that immediately after this Court's decision in O'Boskey I of March 1984, United First adopted the policy of "allowing loans secured by an O'Boskey form deed of trust to be assumed by the purchaser of the security property upon submission of adequate evidence that the new purchaser's credit was adequate to meet the applicable underwriting standards and an assumption fee based upon actual costs of processing the assumption was paid." R., Vol. 3, p. 241. In other words, United First would not invoke the due-on-sale clause absent impairment of security. Id. at 244.

On January 21, 1985, the district court entered judgment granting permanent injunction against invoking the due-on-sale clause absent impairment of security. The judgment further provided for costs, including "reasonable attorney fees if allowed by law." R., Vol. 3, p. 269.

In its May 17, 1985 memorandum opinion and order, the district court found that United First unreasonably asserted against the named plaintiffs the defense of impairment of security up to May 25, 1984, even though from the beginning of the law suit there was never any basis for this defense. The district court also found that United First's defense "as it relates to the plaintiffs' efforts to identify a class of persons entitled to injunctive relief and to obtain certification of that class has been unreasonable." R., Vol. 3, p. 327. The court concluded that "[t]he plaintiffs are entitled to attorney's fees for that effort." Id. Ultimately, the district court awarded attorney's fees amounting to $45,000.

I. PROPRIETY OF THE PERMANENT INJUNCTION

United First asserts that the district court acted prematurely in imposing the permanent injunction against United First and in favor of the class prior to certification and notice to the class, as well as in advance of a motion or hearing, without benefit of a hearing, ¹ and without issuing findings of fact and conclusions of law. Alternatively, argues United First, the district court erred by imposing the injunction where there was no evidence that United First would continue to enforce the due-on-sale provision after this Court issued its decision of O'Boskey I. Both of United First's arguments are premised on its erroneous conception that the merits and remedy were not decided in the district court's decisions of September 1 and November 25, 1981. At that time, United First pointed to no procedural error, and suggested no reason opposing the remedy imposed either to the district court or this Court on appeal. At the time it certified the class in 1984, the only question for the district court concerning the injunction already decided upon was whether there was reason not to impose it. The district court was well within its discretion in determining that the injunction should inure to the benefit of the class.

As United First notes, in class actions the rules of procedure contemplate that ordinarily the class will be determined and given notice early in the proceedings and prior to deciding the merits. See I.R.C.P. 23(c) (1980); see also Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 2152-53, 40 L.Ed.2d 732 (1974); In re Consolidated Pretrial Proceedings in Air West Securities Litigation, 73 F.R.D. 12, 14-15 (N.D.Cal.1976). ² Otherwise, potential class members could await the determination of the merits prior to deciding whether to participate in the class and be bound by the judgment. Id.

While such is ordinarily the case,...