Carpenter v. Suffolk Franklin Sav. Bank

• Decision Date: 13 May 1976
• Citation: 370 Mass. 314,346 N.E.2d 892
• Parties: John Warren CARPENTER et al. v. SUFFOLK FRANKLIN SAVINGS BANK et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 892

346 N.E.2d 892

370 Mass. 314

John Warren CARPENTER et al.

v. SUFFOLK FRANKLIN SAVINGS BANK et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued March 2, 1976.

Decided May 13, 1976.

Edward J. Barshak, Lawrence D. Shubow and Herbert H. Hershfang, Boston (George S. Abrams, Boston, with them), for plaintiffs.

Marshall Simonds, Boston, for Suffolk Franklin Savings Bank and others.

David W. Walker, Boston, for Arlington Five Cents Savings Bank and others.

Stanley V. Ragalevsky, South Boston, for Merchants Co-operative Bank and others.

Franklin N. Cunningham, Boston, for Dorchester Savings Bank and others.

William S. Monahan, Boston, for The Boston Five Cents Savings Bank and others.

Before HENNESSEY, C.J., and REARDON, QUIRICO, BRAUCHER and KAPLAN, JJ.

BRAUCHER, Justice.

The Carpenters and the Kayes (the plaintiffs) are mortgagors of real property in Boston to the defendant Suffolk Franklin Savings Bank (Suffolk Franklin). They made payments to Suffolk Franklin, as mortgagee, on account of municipal real estate taxes, and seek an accounting of investment profits realized by Suffolk Franklin on the tax payments. In Carpenter v. Suffolk Franklin Sav. Bank, 362 Mass. 770, 291 N.E.2d 609 (1973) (Carpenter I), we held that a cause of action was stated. On remand, a judge of the Superior Court denied the plaintiffs' motions to certify the action as a class action and, after trial without a jury on liability issues only, made findings of fact and conclusions of law adverse to the plaintiffs' claims against Suffolk Franklin. On report pursuant to Mass.R.Civ.P. 64, 365 Mass. --- (1974), we hold that there was no reversible error.

On September 17, 1970, the plaintiffs filed a bill in equity and petition for declaratory judgment against Suffolk Franklin. A Superior Court judge sustained the defendant's demurrer and dismissed the bill, and in Carpenter I we reversed. Thereafter the plaintiffs amended the bill to allege that they represented all Massachusetts real estate owners who as mortgagors had made monthly tax escrow payments during the six preceding years to any of the 325 other savings banks and cooperative banks in the Commonwealth, and to add each such bank as a defendant. On March 21, 1974, the judge denied the plaintiffs' motion to certify such a multibank action as a class action, but gave them leave to present a motion to certify a more limited action on behalf of mortgagors to Suffolk Franklin. Such a motion was denied on August 14, 1974. A trial on the merits of the plaintiffs' claims against Suffolk Franklin was held, restricted to the issue of liability, and the judge made findings of fact and conclusions of law pursuant to Mass.R.Civ.P. 52(a), 365 Mass. --- (1974), and reported the case to the Appeals Court. We allowed the plaintiffs' application for direct appellate review.

1. The multibank class action. The judge has reported to us the question whether his interlocutory orders denying the motions to certify the action as a class action were correct or incorrect and, if incorrect, whether they constitute reversible error. We consider the two orders separately. We did not address any class action issues in Carpenter I.

In their motion to certify the multibank class action, the plaintiffs sought to represent mortgagors of both residential and nonresidential real estate in Massachusetts, excluding any mortgagor whose estimated tax payments were certified by the mortgagee bank to be pursuant to a written agreement explicitly authorizing the bank to invest the payments, to retain the proceeds, and to be free of any duty to account for them. Although the motion was denied in March, 1974, the judge took into account Mass.R.Civ.P. 23, 365 Mass. --- (1974), effective July 1, 1974, as well as such prior decisions as Spear v. H. V. Greene Co., 246 Mass. 259, 140 N.E. 795 (1923). He noted that the plaintiffs asserted personal rights against only Suffolk Franklin, and alleged no conspiracy or concerted action among the defendant banks. He ruled that the plaintiffs could not represent potential class members having claims against defendants against whom the plaintiffs asserted no claim. He further stated that the proposed class action possibly involved more than a million mortgagors as plaintiffs and 326 banks as defendants, that there probably were factual and legal variations among the claims, and that alternative procedural devices were available. Hence, he ruled the action was simply unmanageable.

We agree, for the most part on the grounds given by the judge. Although our Rule 23, unlike the corresponding Federal rule, does not provide for a motion to certify that an action may proceed as a class action, such motions are often necessary and desirable for the efficient handling of class actions, and it was properly within the judge's discretion to make preliminary rulings on the class action issues. Baldassari v. Public Fin. Trust,--- Mass. ---, ---, ---, ^a 337 N.E.2d 701 (1975). So far as the Spear case required that the members of the class suffer a 'joint wrong,' it imposed a more restrictive standard than our Rule 23. The purpose of the 1966 amendment to the Federal rule was to enlarge the scope of the class action device, and our Rule 23, though written in light of the Federal rule, omitted some of the restrictions in the Federal rule. Id. at ---, ^b 337 N.E.2d 701. The plaintiffs do not object to the judge's use of Rule 23 before it took effect.

A number of Federal cases have denied certification where the plaintiff has a claim against one defendant only and seeks to represent those having similar claims against other unrelated defendants. La Mar v. H & B Novelty & Loan Co., 489 F.2d 461, 462 (9th Cir. 1973). Kauffman v. Dreyfus Fund, Inc., 434 F.2d 727, 734 (3d Cir. 1970), cert. denied, 401 U.S. 974, 91 S.Ct. 1190, 28 L.Ed.2d 323 (1971). Weiner v. Bank of King of Prussia, 358 F.Supp. 684, 690 (E.D.Pa.1973). Contra: Haas v. Pittsburgh Nat'l Bank, 60 F.R.D. 604, 611--614 (W.D.Pa.1973); Samuel v. University of Pittsburgh, 56 F.R.D. 435, 438--440 (W.D.Pa.1972). Such decisions have been 'plagued by the problem of 'standing' arising from the federal constitutional provision restricting the judicial power to actual cases and controversies.' State courts need not become enmeshed in the Federal complexities and technicalities and are free to reject procedural frustrations in favor of just and expeditious determinations on the ultimate merits. See Kronisch v. Howard Sav. Institution, 133 N.J.Super. 124, 137--138, 335 A.2d 587, 594 (1975). In the Kronisch case and in Buchanan v. Brentwood Fed. Sav. & Loan Ass'n, 457 Pa. 135, 160, 320 A.2d 117 (1974), multibank class actions like the present one were allowed to continue. Contrary rulings in Graybeal v. American Sav. & Loan Ass'n, 59 F.R.D. 7, 18 (D.D.C.1973), and Cale v. American Nat'l Bank, 37 Ohio Misc. 56, 58--59 (1973), rest on the Federal 'standing' cases.

Under our Rule 23 the class must be 'numerous,' there must be common questions of law or fact, the claims of the representative parties must be 'typical,' and those parties must 'fairly and adequately protect the interests of the class.' In addition, the common questions must 'predominate' over individual questions, and the class action must be 'superior' to other available methods for fair and efficient adjudication. Apart from any technical requirement of 'standing,' the proposed multibank class action raised questions of typicality, of fair and adequate protection, and of predominance and superiority. The predominance and superiority requirements introduce a highly discretionary element. See Baldassari v. Public Fin. Trust, --- Mass. ---, ---, ^c 337 N.E.2d 701 (1975).

The judge thought it probable that, if the multibank class were certified, he would nevertheless have to try many mortgagors' cases separately in order to determine whether their individual agreements had established a trust relationship with the mortgagee bank. The effect of each agreement, he said, depended on the language of the loan documents--mortgage deed, note, often a mortgage application, a commitment letter, and related papers. Such documents might vary widely in their effect. Not all of the writings contained identical or even similar language. In addition to varying written formulations, the conduct of the parties might furnish evidence of intention. The judge also took account of alternative procedural devices and methods, 'ranging from use of a model (or test) action to consolidation or co-ordination of the numerous individual actions for all or selected purposes,' quoting Kaplan, Continuing Work of the Civil Committee: 1966 Amendments of the Federal Rules of Civil Procedure (I), 81 Harv.L.Rev. 356, 391 (1967).

In these circumstances there was no abuse of discretion in the refusal to certify the multibank class action. In Buchanan v. Brentwood Fed. Sav. & Loan Ass'n, 457 Pa. 135, 160, 320 A.2d 117 (1974), the court insisted that a class be limited to mortgagors whose documents contained tax payment clauses that did not differ materially, and in Kronisch v. Howard Sav. Institution, 133 N.J.Super. 124, 131, 335 A.2d 587 (1975), the class approved included only mortgagors whose mortgages, guaranteed under Federal programs, contained identical language. Cf. Umdenstock v. American Mortgage & Inv. Co., 363 F.Supp. 1375, 1379 (W.D.Okla.1973), aff'd in part and rev'd in part, 495 F.2d 589 (10th Cir. 1974).

We are not insensitive to countervailing considerations. The judge found the plaintiffs' claims fairly typical of the claims of other mortgagors of residential property to Suffolk Franklin, and estimated the probable gross yield on investment at $10 to $15 a year; 'by allowing aggregation at $10, to $15 a year; 'by allowing aggregation of numerous small claims in one action, class actions provide a judicial vehicle for redress which, were separate actions required, would not be financially...