Kronisch v. Howard Sav. Inst.

• Decision Date: 04 March 1975
• Citation: 133 N.J.Super. 124,335 A.2d 587
• Parties: , 1975-1 Trade Cases P 60,245 Myron W. KRONISCH and Sheila Kronisch, individually and on behalf of a class, Plaintiffs, v. The HOWARD SAVINGS INSTITUTION, a New Jersey corporation, individually and as representative of a class, Defendant. Harold CHAMBERS and Veraian Chambers, his wife, individually and on behalf of a class, Plaintiffs, v. BERKELEY SAVINGS & LOAN ASSOCIATION OF NEW JERSEY, a New Jersey corporation, individually and as representative of a class, Defendant.
• Court: New Jersey Superior Court

Page 124

133 N.J.Super. 124

335 A.2d 587, 1975-1 Trade Cases P 60,245

Myron W. KRONISCH and Sheila Kronisch, individually and on behalf of a class, Plaintiffs, v. The HOWARD SAVINGS INSTITUTION, a New Jersey corporation, individually and as representative of a class, Defendant.

Harold CHAMBERS and Veraian Chambers, his wife, individually and on behalf of a class, Plaintiffs, v. BERKELEY SAVINGS & LOAN ASSOCIATION OF NEW JERSEY, a New

Jersey corporation, individually and as

representative of a class, Defendant.

Superior Court of New Jersey,

Chancery Division.

March 4, 1975.

Cyrus J. Bloom, Newark, for plaintiffs.

William H. Hyatt, Jr., Newark, for defendant Howard Sav. Inst. (Pitney, Hardin & Kipp, Newark, attorneys).

Arthur D. Grossman, Newark, for defendant Berkeley Sav. and Loan Assn. (Fox & Fox, Newark, attorneys).

ANTELL, J.S.C.

This is a motion for an order of maintainability as a class action under R. 4:32. In these consolidated actions plaintiffs and defendants are respectively mortgagors and mortgagees under federally insured residential mortgages. Alleging a relationship sounding in express or constructive trust, plaintiffs seek an accounting for moneys earned by defendants from the investment of tax escrow funds paid by plaintiffs to defendants under their mortgages. They also ask treble damages arising from an alleged conspiracy in restraint of trade under the New Jersey Antitrust Act, N.J.S.A. 56:9--12(a). On this application they apply for designation as representatives of a class consisting of all mortgagors similarly situated in the State of New Jersey and to have defendants named representatives of a class or classes of mortgagees occupying a position similar to defendants'.

The standards governing this application are enumerated in R. 4:32--1(a). This rule provides:

(a) General Prerequisites to a 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 will fairly and adequately protect the interests of the class.

Subparagraph (b)(3) further provides that

An action may be maintained as a class action if the prerequisites of paragraph (a) are satisfied, and in addition: * * * (3) 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. The factors pertinent to the findings include: first, the interest of members of the class in individually controlling the prosecution or defense of separate actions; second, the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; third, the difficulties likely to be encountered in the management of a class action.

Plaintiffs Kronisch are homeowner-mortgagors under a mortgage guaranteed by the United States of America pursuant to the Servicemen's Readjustment Act as amended (hereinafter GI mortgage) executed and delivered to defendant, The Howard Savings Institution (Howard), on October 23, 1957. This mortgage was given to secure the repayment of a home-purchase loan in the amount of $18,000 which is expected to be liquidated sometime in the year 1982. Kronisch is an attorney-at-law and until August 31, 1973 was counsel of record for plaintiffs in both actions.

Plaintiffs Chambers are homeowner-mortgagors under a mortgage insured or guaranteed by the United States of America under the National Housing Act, as amended, and related federal legislation (hereinafter FHA mortgage) executed and delivered to defendant Berkeley Savings & Loan Association (Berkeley) on May 31, 1972. This mortgage was given to secure the repayment of a home-purchase loan in the amount of $26,700 which is expected to be fully paid sometime in the year 1997.

Under the terms of their respective mortgages plaintiffs make monthly advance payments to defendants of their municipal real estate taxes in a sum equal to 1/12 of the annual tax on their respective properties, together with their monthly mortgage payments of principal and interest. The mortgage instruments recite that defendants hold such advance tax payments 'in trust' to pay the taxes as they come due, and defendants-mortgagees make the payments every three months to the appropriate tax collectors. It is admitted by Howard and Berkeley that every GI and FHA mortgage ever executed by an individual and at any time held by these defendants as mortgagees contain the 'in trust' language.

As of December 31 of each year, beginning with 1967 and ending with 1972, Howard carried between 12,130 and 11,565 active GI mortgages on its books. During the same period it carried between 8,644 and 10,876 active FHA mortgages. For the year 1972 the average monthly tax escrow which Howard received from its GI mortgagors was $69.45; from its FHA mortgagors the average monthly deposit was $63.16.

As of December 31 of each year, beginning with 1964 and ending with 1972, Berkeley carried between 1,224 and 985 active FHA mortgages on its books and between 1,851 and 1,302 active GI mortgages. The average monthly tax escrow which it received from is FHA mortgagors was $79.89; from its GI mortgagors it received $85.36.

Calculated at an annual rate of return of 8%, the average FHA or GI mortgagors' claim for the investment of the tax escrow deposits is roughly $12 a year. The stakes for the individual mortgagors are therefor minimal.

The bond and mortgage forms utilized by the parties in connection with the home loan transactions are obtained from the Veterans Administration and the Federal Housing Administration and for practical purposes no departures from the printed provisions ever occur. The mortgagors are not given the option of deciding whether or not they will advance tax monies. This is required as a condition of the loan.

It is obvious that the number of such FHA and GI mortgagors in the State of New Jersey may number in the hundreds of thousands since the institutional mortgagees holding such mortgages are comprised of some 20 saving banks, 300 savings and loan associations, 93 commercial banks and 120 national commercial banks, doing business in the state of New Jersey.

The issues projected in opposition to certification of the controversy as class actions will be resolved by the following conclusions in conformity with principles to be recited which are deemed to be controlling within the foregoing factual context.

The courts have been generally receptive to the class action concept. 'The class action rule should be liberally construed, and such an action should be permitted unless there is a clear showing that it is inappropriate or improper.' Lusky v. Capasso Bros., 118 N.J.Super. 369, 373, 287 A.2d 736 (App.Div.1972), certif. den. 60 N.J. 466, 291 A.2d 16 (1972); Eisen v. Carlisle & Jacquelin, 391 F.2d 555, 563 (2 Cir. 1968). It has been recognized as a particularly useful device in the area of consumer litigation, Kugler v. Romain, 58 N.J. 522, 535--541, 279 A.2d 640 (1971), and has been utilized in controversies between mortgagors and their mortgagee banks. Silverstein v. Shadow Lawn S. & L. Ass'n, 51 N.J. 30, 44, 237 A.2d 474 (1968). An element common to such actions is the existence of a claim too small to warrant action by the individual members of the aggrieved class.

If each victim were remitted to an individual suit, the remedy could be illusory, for the individual loss may be too small to warrant a suit or the victim too disadvantaged to seek relief. Thus the wrongs would go without redress, and there would be no deterence (sic) to further aggressions. If there is to be relief, a class action should lie unless it is clearly infeasible. (Riley v. New Rapids Carpet Center, 61 N.J. 218, 225, 294 A.2d 7 (1972)).

Although disputed by defendants, the proposed defendant and plaintiff classes are sufficiently defined and are so numerous that joinder of all members is impracticable. It is not necessary that the exact numbers comprising the class be specified or that the members be identified. In Lusky v. Capasso Bros., Supra, the action was certified for class treatment where 'approximately 7,000 potential members of the class may be involved * * *.' And in Daar v. Yellow Cab Co., 67 Cal.2d 695, 63 Cal.Rptr. 724, 433 P.2d 732 (Sup.Ct.1967), where suit was brought by a taxicab customer on behalf of a class to recover excessive charges over a four-year period, the court took pains to distinguish between establishing the existence of an ascertainable class and identifying the individual members of the class. It concluded that the fact that the members were not then identifiable 'will not preclude a complete determination of the issues affecting the class.' 63 Cal.Rptr. at 732, 433 P.2d at 740.

Defendants also deny that there are questions of law or fact common to the proposed classes. But the governing ideology leads us to conclude that such questions are presented. In Lusky v. Capasso Bros., Supra, a number of township residents had entered into garbage collection contracts with defendants under licensing agreements existing between defendants and the Village of Ridgewood. The contracts were not 'negotiated,' and defendants were engaged pursuant merely to the terms of the licensing agreements. The basic legal issue, as distilled by the court (at 372 of 118 N.J.Super., at 737 of 287 A.2d), for each member of the class was 'whether defendants are entitled to demand, collect or retain payments for services they allegedly did not perform.' Noting that the claims were grounded essentially in the contractual...