Firstplus Home Loan Owner 1997-1 v. Bryant

• Decision Date: 28 February 2008
• Docket Number: No. 07-740.,07-740.
• Citation: 372 Ark. 466,277 S.W.3d 576
• Parties: FIRSTPLUS HOME LOAN OWNER 1997-1, et al., Appellants, v. Stacy BRYANT, et al., and Michael Bryant, Appellees.
• Court: Arkansas Supreme Court

277 S.W.3d 576

372 Ark. 466

FIRSTPLUS HOME LOAN OWNER 1997-1, et al., Appellants, v. Stacy BRYANT, et al., and Michael Bryant, Appellees.

No. 07-740.

Supreme Court of Arkansas.

February 28, 2008.

Rehearing Denied April 10, 2008.

Rose Law Firm, by: Garland J. Garrett and Kathy B. Perkins, Little Rock, AR; and Branch Thompson Philhours & Warmath, P.A., by: Robert F. Thompson, Paragould,

AR, for appellants trust defendants.

Womack, Landis, Phelps, et al., by: Paul D. McNeill and Mark Mayfield, Jonesboro, AR; and Kutak Rock LLP, by: Leslie A. Greathouse and Jean-Paul Assouad, Kansas City, MO, for appellant trust.

Mark Vehik, Little Rock, AR, for appellees.

JIM HANNAH, Chief Justice.

This is an appeal from an order certifying a class action. The cause of action by the representative plaintiffs, individually, and on behalf of the members of each subclass, seeks damages arising from the payment by them of interest that they allege is usurious to the trust or trusts and their trustees that own or owned their loans. The cause of action also seeks damages for fraud arising from the payment by the plaintiffs and the members of each subclass of fees to record loan documents in excess of the amounts actually paid by the originators to record the documents. The circuit court certified five subclasses with each subclass consisting of a class representative or representatives and class members who pay or have paid interest to the trust or trusts identified in the subclass that own or owned their mortgage notes. The subclasses were defined as follows:

1. (a) Arkansas residents who entered into promissory note contracts secured by second mortgages on their homes in Arkansas that were assigned to U.S. Bank, as trustee for, and owned by FirstPlus Home Loan Owner Trusts 1997-1, 1997-2, 1997-3, 1997-4, 1998-3, 1998-4, and Remodeler's Home Improvement Asset-Backed Certificate Series 1996-1;

(b) Arkansas residents who entered into promissory note contracts secured by second mortgages on their homes in Arkansas that were assigned to U.S. Bank, as trustee for, and owned by Keystone Owner Trust 1998-P1;

(c) Arkansas residents who entered into promissory note contracts secured by second mortgages on their homes in Arkansas that were assigned to U.S. Bank, as trustee for, and owned by Keystone Owner Trust 1998-P2;

(d) Arkansas residents who entered into promissory note contracts secured by second mortgages on their homes in Arkansas that were assigned to U.S. Bank, as trustee for, and owned by Keystone Owner Trust 1997-P3;

(e) Arkansas residents who entered into promissory note contracts secured by second mortgages on their homes in Arkansas that were assigned to U.S. Bank, as trustee for, and owned by United National Home Loan Owner Trust 1999-1.

2. Arkansas residents who paid fees to record mortgages and the assignment of mortgages, identified in subclasses (a) through (e), above.

Appellants are FirstPlus Home Loan Owner Trusts 1997-1, 1997-2, 1997-3, 1997-4, 1998-3, 1998-4, and the Remodeler's Series 1996-1 Trust Fund; the Keystone Owner Trusts 1997-P3, 1998-P1, and 1998-P2; Wilmington Trust Company and U.S. Bank National Association in their various capacities as Owner Trustee, Co-Owner Trustee, and Indenture Trustee ("Trust Defendants"); and United National Home Loan Owner Trust 1999-1 ("United Trust"). Appellees are Stacy Bryant, individually and on behalf of those similarly situated, and Michael Bryant; Roy Dale Moomey, individually and on behalf of those similarly situated, and Linda Moomey; Mark Petty, individually and on behalf of those similarly situated, and Elizabeth Petty; Mark Cheney, individually and on behalf of those similarly situated, and Sara Cheney; Dale Ferguson, individually and on behalf of those similarly situated, and Danielle Ferguson; Billy Lawhon, individually and on behalf of those similarly situated; Pearlie Truly, individually and on behalf of those similarly situated, and Delmore Truly; Terry Ferguson, individually and on behalf of those similarly situated, and Julie Ferguson; Stephen Davis, individually and on behalf of those similarly situated; and Joyce and Willie Turner, individually and on behalf of those similarly situated.

On appeal, the Trust Defendants and United Trust argue that the circuit court erred in certifying the underlying case as a class action. They raise several points and subpoints on appeal, each of which challenges the circuit court's conclusion that the plaintiffs met the requirements of Rule 23 of the Arkansas Rules of Civil Procedure. The gist of the appellants' arguments is that individual, threshold issues preclude class certification. Because this is an interlocutory appeal pursuant to Ark. R.App. P.-Civ. 2(a)(9), our jurisdiction is proper pursuant to Ark. Sup.Ct. R. 1-2(a)(8). We find no error and affirm.

Circuit courts are given broad discretion in matters regarding class certification, and we will not reverse a circuit court's decision to grant or deny class certification absent an abuse of discretion. See Asbury Auto. Group, Inc. v. Palasack, 366 Ark. 601, 237 S.W.3d 462 (2006). When reviewing a circuit court's class-certification order, this court reviews the evidence contained in the record to determine whether it supports the circuit court's decision. See id. This court does not delve into the merits of the underlying claims at this stage, as the issue of whether to certify a class is not determined by whether the plaintiff has stated a cause of action for the proposed class that will prevail. See American Abstract & Title Co. v. Rice, 358 Ark. 1, 186 S.W.3d 705 (2004).

Rule 23 provides in relevant part:

(a) Prerequisites to Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties and their counsel will fairly and adequately protect the interests of the class.

(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. At an early practicable time after the commencement of an action brought as a class action, the court shall determine by order whether it is to be maintained. For purposes of this subdivision, "practicable" means reasonably capable of being accomplished. An order under this section may be altered or amended at any time before the court enters final judgment. An order certifying a class action must define the class and the class claims, issues, or defenses.

Rule 23 provides the requirements for class certification. Specifically, the following six requirements must be met before a lawsuit can be certified as a class action under Rule 23:(1) numerosity; (2) commonality; (3) typicality; (4) adequacy; (5) predominance; and (6) superiority. See Asbury Auto. Group, supra.

Commonality

Rule 23(a)(2) requires the circuit court to make a determination that "there are questions of law or fact common to the class." Quoting from Professor Newberg's treatise on class actions, this court has explained:

[T]he common question prerequisite is interdependent with the notion of joinder impracticality under Rule 23(a)(1). Consideration of the common question issue requires an answer to the question: Common to whom?

...

Rule 23(a)(2) does not require that all questions of law or fact raised in the litigation be common. The test or standard for meeting the Rule 23(a)(2) prerequisite is ... that is there need be only a single issue common to all members of the class.... When the party opposing the class has engaged in some course of conduct that affects a group of persons and gives rise to a cause of action, one or more of the elements of that cause of action will be common to all of the persons affected.

Williamson v. Sanofi Winthrop Pharms., Inc., 347 Ark. 89, 96, 60 S.W.3d 428, 432 (2001) (quoting Herbert B. Newberg, Newberg on Class Actions § 3.10 (3d ed.1993)).

In its order, the circuit court found multiple common issues in this case, including but not limited to the following: (1) whether Arkansas law applies to the mortgage notes of the class, and if so, whether the mortgage notes are usurious under Arkansas law; (2) whether the rates of interest on the mortgage notes of the plaintiffs and the class violate Arkansas's public policy; (3) what damages are recoverable for usury violations; (4) what defenses are available to usury claims; (5) what statutes of limitations are applicable to claims for usury damages; (6) whether prejudgment interest is recoverable on usury damages awards; (7) whether the defendants are liable under principles of assignee liability, including the Home Ownership Equity Act, 15 U.S.C. § 1641, for the claims asserted in this case; (8) whether the defendants or their representatives acquired loans with unlawful interest rates from the originating lenders; (9) what was the applicable Federal Discount Rate in effect at the time of the making of the class loan; (10) whether subjective intent is admissible in the interpretation of unambiguous uniform instruments, or relevant in the choice-of-law analyses that have been applied by Arkansas courts; (11) whether usury recoveries by the class are subject to set-offs; (12) whether there are exceptions to the application of usury laws based on considerations such as the "benefit" to the borrowers; (13) whether absent class members are subject to counterclaims; (14) whether class members were overcharged...