Douglas v. Beneficial Finance Co. of Anchorage, 71-1893.
Citation | 469 F.2d 453 |
Decision Date | 07 November 1972 |
Docket Number | No. 71-1893.,71-1893. |
Parties | Sandra J. DOUGLAS, for herself and as representative of a class, Plaintiff-Appellee, v. BENEFICIAL FINANCE CO. OF ANCHORAGE et al., Defendants-Appellants. |
Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
William M. Burke (argued), George R. Richter, Jr., of Sheppard, Mullin, Richter & Hampton, Los Angeles, Cal., Murphy L. Clark, of Hughes, Thorsness, Lowe, Gantz & Clark, Anchorage, Alaska, for defendants-appellants.
R. Brock Shamberg (argued), John E. Reese, of Alaska Legal Services Corp., Anchorage, Alaska, for plaintiff-appellee.
Before MERRILL, DUNIWAY and TRASK, Circuit Judges.
Douglas, the appellee, brought a class action in the District Court for the District of Alaska against seven Alaska Beneficial Finance Companies (collectively referred to as Beneficial), alleging that they had violated the Federal Truth-in-Lending Act (the Act), 15 U.S.C. §§ 1601-1665, by failing to disclose as security interests certain confession of judgment clauses in their promissory notes. On April 20, 1971, the district court entered a preliminary injunction restraining Beneficial from collecting on the notes pending the outcome of the action. That injunction is the subject of this appeal. We reverse.
Ordinarily, the grant or denial of a preliminary injunction is a matter within the discretion of the district court, and it will not be reversed absent an abuse of that discretion. See King v. Saddleback Junior College District, 9 Cir., 1970, 425 F.2d 426, 429. An exception to this rule applies when such grant or denial is based upon an erroneous legal premise; the order is then reviewable as is any other conclusion of law. Delaware & Hudson Railway Co. v. United Transportation Union, 146 U.S.App.D.C. 142, 1971, 450 F.2d 603, 619-623; Ring v. Spina, 2 Cir., 1945, 148 F.2d 647, 650. As will be seen, this is such a case.
The confession of judgment clause used by Beneficial reads:
"Undersigned jointly and severally authorize and empower any attorney of law of any court of record of the State of Alaska or elsewhere in the United States to appear for undersigned, or any one of undersigned, in an action on this note in any court of the United States, State of Alaska or elsewhere in the United States at any time after default in the payment of the amount of any installment of principal and interest thereon, and confess judgment against any one or all of the undersigned for the amount due with interest and charges permitted by said Section 06.20.260, of the Alaska Statutes, all without benefit of valuation and appraisal laws."
Section 1638 of the Act provides, in part:
The Board of Governors of the Federal Reserve System (15 U.S.C. § 1602 (b)), is given authority by 15 U.S.C. § 1604 as follows:
Pursuant to this authority the Board has defined "security interest" as including "confessed liens whether or not recorded," 12 C.F.R. § 226.2(z), and has issued an interpretation of this regulation stating:
The district court construed Alaska law to be that Beneficial could not obtain judgment under the clause in question unless the obligor first had notice and an opportunity to defend against the action. Nonetheless, it held that the confession of judgment clause was a security interest under the Board's interpretation...
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