Handi Inv. Co. v. Mobil Oil Corp.

• Decision Date: 10 August 1981
• Docket Number: No. 78-2953,78-2953
• Citation: 653 F.2d 391
• Parties: HANDI INVESTMENT COMPANY, Robert M. Fridlund, Richard E. Fridlund, Everette H. Neal, Barbara Fridlund, Loretta Fridlund, Patricia Neal, Plaintiffs-Appellants, v. MOBIL OIL CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 391

653 F.2d 391

HANDI INVESTMENT COMPANY, Robert M. Fridlund, Richard E Fridlund, Everette H. Neal, Barbara Fridlund Loretta Fridlund, Patricia Neal Plaintiffs-Appellants, v. MOBIL OIL CORPORATION, Defendant-Appellee.

No. 78-2953.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 6, 1980.

Decided Aug. 10, 1981.

Garry Koenigsberg, San Francisco, Cal., argued, for plaintiffs-appellants; Timothy H. Fine, San Francisco, Cal., on brief.

Jack D. Fudge, McCutchen, Black, Verleger & Shea, Los Angeles, Cal., argued, for defendant-appellee; Michael L. Hickok, Los Angeles, Cal., on brief.

Appeal from the United States District Court for the Eastern District of California.

Before CHAMBERS, WALLACE and POOLE, Circuit Judges.

CHAMBERS, Circuit Judge:

This is the second time these parties have come before this court. The first go-around was an appeal from summary judgment, Handi Inv. Co. v. Mobil Oil Corp., 550 F.2d 543 (9th Cir. 1977), (Handi I ), and the facts are set out there. Upon remand, a jury trial resulted in a verdict in favor of defendant Mobil Oil. Handi argues the district court erred in instructing the jury that both parties to a loan agreement must intend to violate the usury laws, and had to enter into a loan agreement in "bad faith," in order to find Mobil in violation of California's usury law. Additionally, Handi finds error in the Court's instructions concerning the calculation of treble damages. Handi also seeks an order that the case be remanded to a different district judge. Reversal is required based on Handi's first two arguments.

In Handi I, we stated that the requisite intent to show a violation of the usury laws would be found in the intent of the defendant, Mobil. Thus, Handi I, is "law of the case" as to the issue of intent in the instant controversy. Although "law of the case" is not an "inexorable command," prior decision of legal issues should be followed unless there is substantially different evidence at a subsequent trial, new controlling authority, or the prior decision was clearly erroneous and would result in injustice. Kimball v. Callahan, 590 F.2d 768, 772 (9th Cir.), cert. den. 444 U.S. 826, 100 S.Ct. 49, 62 L.Ed.2d 33 (1979); White v. Murtha, 377 F.2d 428 (5th Cir. 1967). The district judge explicitly rejected our Handi I, choosing to rely on McConnell v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 21 Cal.3d 365, 146 Cal.Rptr. 371, 578 P.2d 1375 (1978), which he felt superseded Handi I. The district court's reliance on McConnell, we believe, was misplaced.

McConnell concerned variable-rate interest on credit extended for use in margin accounts for securities purchases. The parties there agreed that interest charged would be a percentage amount over the rate defendant was required to pay commercial lenders for brokerage loans. The rate of interest on the brokerage loans would fluctuate and the rate of interest paid by McConnell would also fluctuate. At times the interest paid by McConnell surpassed the maximum rate allowed under law. After analyzing the applicable California cases, the McConnell court held that upon a showing that neither party to the interest agreement had intended to violate the usury laws, and that the transaction was not just a sham to disguise illegal interest, no violation of the usury laws could be found.

Contrary to the district court's views, we think McConnell does not address itself to the minimum requirements to show violation of the law. It only concerns what must be shown to prove innocence of violation of the usury laws. Nothing in Mc...