Madsen v. Prudential Federal Sav. and Loan Ass'n

• Citation: 767 P.2d 538
• Decision Date: 30 December 1988
• Docket Number: No. 860148,860148
• Parties: Richard MADSEN and Nancy Madsen, his wife, for themselves and all others similarly situated, Plaintiffs and Appellants, v. PRUDENTIAL FEDERAL SAVINGS AND LOAN ASSOCIATION, Defendant and Appellee.
• Court: Supreme Court of Utah

Page 538

767 P.2d 538

Richard MADSEN and Nancy Madsen, his wife, for themselves and all others similarly situated, Plaintiffs and Appellants, v. PRUDENTIAL FEDERAL SAVINGS AND LOAN ASSOCIATION, Defendant

and Appellee.

No. 860148.

Supreme Court of Utah.

Dec. 30, 1988.

Robert J. DeBry, Salt Lake City, for plaintiffs and appellants.

Joseph J. Palmer, Reid E. Lewis, Salt Lake City, for defendant and appellee.

STEWART, Justice:

Plaintiffs Richard and Nancy Madsen appeal a district court order entered by Judge Philip Fishler which disqualified Judge Kenneth Rigtrup after he had presided over a trial in this case and had orally announced his ruling but before he had entered formal findings of fact, conclusions of law, and final judgment. Judge Fishler ruled that Judge Rigtrup had no actual bias, but did have an appearance of bias and voided the trial and all prior orders entered by Judge Rigtrup in the case.

This appeal is yet another installment in the protracted history of this case, which started in 1975 and has already been before this Court once, Madsen v. Prudential Fed. Sav. & Loan Ass'n, 558 P.2d 1337 (Utah 1977), and before a federal appellate court once, Madsen v. Prudential Fed. Sav. & Loan Ass'n, 635 F.2d 797 (10th Cir.1980), cert. denied, 451 U.S. 1018, 101 S.Ct. 3007, 69 L.Ed.2d 389 (1981). The facts which gave rise to this litigation are reported in detail in those opinions. 558 P.2d at 1338-39; 635 F.2d at 799-800.

Plaintiffs are representatives of a certified class of borrowers whose trust deeds with Prudential Federal Savings and Loan Association (hereafter "Prudential") contained language identical to that contained in the Madsens' trust deed. In 1984, this action was assigned to Third District Court Judge Kenneth Rigtrup who had been assigned to four other similar cases. ¹ Prudential appeared as amicus curiae in each of the other actions.

The issue here was whether a financial institution which loaned money to the plaintiffs on a first trust deed is obligated to pay interest to the plaintiffs on monthly budget payments for property taxes and insurance that are paid with the monthly mortgage payments. In a bench trial in September 1985, the Madsens and Prudential tried the limited issue of whether Prudential made any profit on the budget payments it collected from the Madsens. At the close of the trial, Judge Rigtrup ruled from the bench. Just prior to his ruling, the following exchange occurred between Judge Rigtrup and counsel for the parties:

THE COURT: ... I'll share the benefits of my decision with you at this point.

... I'll expose my biases and my prejudices and be very frank with you.

I think there are some substantial kinds of policy things that have really caused me great trouble and trauma. As I've indicated earlier, and no objection was interposed, I was a customer of Prudential Federal Savings & Loan Association and paid without default for 25 years at four and three-quarters per cent, ... and I computed that out and I thought, why, those robbers, they are charging me twice what I'm borrowing from them, and that's unfair.

As I get older and more sophisticated I--

MR. PALMER [Attorney for Prudential]: Your Honor, I hate to interrupt, but I need to make the point that this is news to me, that you had been a customer of Prudential.

THE COURT: I indicated that on several occasions.

MR. PALMER: I beg the Court's pardon, but that is news to me. I don't recall that at all--if anybody else does--recall you telling me that, and I--

THE COURT: I indicated that in these earlier meetings that I had paid my loan off at some point, and I'd had a loan with Prudential Federal Savings.

MR. PALMER: Perhaps the Court is thinking of conferences with other counsel. The reason I make the point is--

THE COURT: My earlier conferences were not with the two of you in this case, they were with Mr. Billings, with Mr. Ashton, with you, with Mr. Giauque, Mr. McDonough, with respect to whoever he represents. It was Mr. Giauque or someone from that office. They were a corrective kind of a deal.

MR. PALMER: In any event, I stand to raise the point now that it is news to us. I believe it--I take it that the Court did not feel that it had any prejudice because of that.

THE COURT: No.

MR. PALMER: All right.

THE COURT: I have a recollection that somewhere along the line I did make that disclosure. I don't know how you could be part of the community and be a homeowner and not have borrowed from someone. And so I think I make it very clear in one of those collective kinds of meetings that my loan had been with Prudential Federal.

At any rate, it's a fact, and it was something that I never tried to hide or have hid from anyone. So there's no sense of covering up. I guess if that creates error, it creates error. But so be it. I have a recollection that I did expose it, and whether you were there or Mr. Lewis or anyone else, I don't know. I did make the disclosure early on.

MR. DeBRY [Attorney for the Madsens]: I do recall some conversations, I think, off the record, of that effect, and I honestly don't recall who was present. But it was a comment that was made from time to time.

MR. PALMER: Could I inquire of the Court when the loan was paid off?

THE COURT: Probably two years ago. I'm not sure at what point in the discussions I indicated that, but I'm sure that in the presence of the collective group that I indicated that I had been a borrower of Prudential Federal Savings.

MR. PALMER: No prejudice arose in the Court's mind because of the fact that we collected a mortgage escrow from you?

THE COURT: No.

MR. PALMER: Okay. I can't do anything else but ask.

THE COURT: That's what I've been trying to tell you. That was the intention.

MR. PALMER: I make the point because I didn't want to go on and let the Court note--

THE COURT: I think I've made general comments throughout that I have cussed financial institutions, and customers do simply because they see inherent injustice about that. And my perspective today, after 23 years has passed, has become much, much different at the end of the 23 years. Far before that I could see the cost of money was markedly greater, and that I would be a damn fool to prepay. So I paid faithfully every month for 25 years, and not a day sooner or a day later. And I'm just commenting generally in terms of unjust or whatever. The tension is between that to be gained and that to be lost, I suppose, in my eyes. And I have a feeling that class actions are a form of champerty and maintenance in that the one that substantially gains is the lawyer or the expert. Mr. Madsen stands to gain little, except he has struck a blow for freedom, I suppose, in the form that the consumer has achieved balance.

Be seated, Mr. DeBry.

MR. DeBRY: I want to make an objection on the record. I really must.

THE COURT: Well, sit down.

MR. DeBRY: Before you give your decision, I must make a comment, because I know the Court is being candid and this has been a long struggle, and Prudential says they are almost broke before this. And you say maybe DeBry will make some money, but I haven't yet. But I really must interpose an objection at this point. If the Court harbors this type of personal bias with respect to--

THE COURT: I'm just--

MR. DeBRY: --class actions.

THE COURT: I'm just telling you about the tension.

MR. DeBRY: I must object to the Court's sitting on this case if you have that kind of bias.

THE COURT: I'm just telling you why I'm getting to my ruling and how I'm getting to my ruling and being open and candid with both of you. But that's a built-in problem with class actions. They have achieved a beneficial result. The difficult[y] I am locked into is that I have got to follow the law of the case. I have got the Supreme Court that's telling me what to do....

....

MR. DeBRY: Your Honor--

THE COURT: You can take exceptions after I get done. I'm trying to--

MR. DeBRY: I might note that I do have an exception to take at this time before you give your verdict in this matter.

THE COURT: I haven't given a verdict.

Prudential did not object during the course of the exchange. Judge Rigtrup rendered his decision in favor of the Madsens and awarded them damages of $134.70.

After the ruling, Judge Rigtrup asked if either side wished to take any exceptions. Prudential's attorney stated only that an appeal was anticipated before any class issues were addressed. However, no specific objection to Judge Rigtrup's qualifications was voiced.

Thirty-nine days after Judge Rigtrup announced his decision, Prudential raised its first formal objection to the judge's qualifications to hear the case by filing a motion for disqualification under Rule 63(b) of the Utah Rules of Civil Procedure. ² The motion was assigned to the then-presiding judge of the Third District, the Honorable Philip Fishler. Judge Fishler held several hearings on the motion and considered testimony, portions of the trial transcript, affidavits, and memoranda in reaching his decision. Judge Fishler ruled that Prudential's motion was timely, that the possibility existed that Judge Rigtrup may have a financial interest in the outcome of the case, and that Judge Rigtrup's impartiality might reasonably be questioned. Judge Fishler expressly found no actual bias on the part of Judge Rigtrup, but ordered him disqualified solely on the appearance of bias. After the case was assigned to another judge for retrial, we granted plaintiffs' request for an interlocutory appeal of Judge Fishler's order.

I.

The Madsens contend that Prudential waived its objections to Judge Rigtrup's qualifications by failing to make a timely objection at the time of the judge's exchange with counsel, thereby giving Prudential the advantage of waiting to see if the ruling was favorable and, if not, of moving to disqualify. In addition, Prudential waited an extended period to file its motion to disqualify.

While a motion to disqualify a judge should not be undertaken lightly, it must...