Moore v. Comfed Sav. Bank

Decision Date09 August 1990
Docket NumberNo. 89-8414,89-8414
Citation908 F.2d 834
PartiesMary M. MOORE, Arthur Moore, James Bailey, Robin A. Bailey, Eddie Howard, on behalf of themselves and all other persons similarly situated, Plaintiffs-Appellees, v. COMFED SAVINGS BANK, Federal National Mortgage Association, First Federal of Seminole County, First Federal of Walterboro, Government Employees Corporation, Great Life Savings Association, Horizon Financial, F.A., Mid America Federal S & L Association, Permanent Savings Bank Republic Savings & Loan Association, Southeast Mortgage Corporation, FDIC as Receiver for Yankee Bank for Finance & Savings, FSB, Defendants-Appellants.
CourtU.S. Court of Appeals — Eleventh Circuit

Douglas N. Campbell and Laura E. Stevenson, Booth, Wade & Campbell, Atlanta, Ga., for defendants-appellants.

Thomas S. Richey and G. Patrick Watson, Powell, Goldstein, Frazer and Murphy, Atlanta, Ga., for F.D.I.C., as receiver for Yankee Bank for Finance & Sav., FSB.

William A. Trotter, III, Augusta, Ga., for Comfed Sav. Bank, Permanent Sav. Bank

Republic S & L, Mid Am. Federal S & L Ass'n & SE Mtg. Corp.

David E. Hudson, Hull, Towill, Norman & Barrett, Augusta, Ga., for plaintiffs-appellees.

Appeals from the United States District Court for the Southern District of Georgia.

Before FAY and COX, Circuit Judges, and TUTTLE, Senior Circuit Judge.

TUTTLE, Senior Circuit Judge:

This is an appeal from a denial by the trial court of appellants' motion for summary judgment and their motion to vacate joinder of them as parties defendant.

I. STATEMENT OF THE CASE

On April 21, 1986, Davis Hogan filed a three count complaint in federal district court. Count I was an individual claim of Davis Hogan under the Truth in Lending Act (TILA), 15 U.S.C. Sec. 1601 et seq., against Colonial Savings and Loan Association. Count II asserted a claim under the Federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. Sec. 1961 et seq. (Federal RICO). Count III asserted a claim under the Georgia Racketeer Influenced and Corrupt Organizations Act, O.C.G.A. Sec. 16-14-1 et seq. (Georgia RICO). Count IV, added by amendment, asserted a claim under the TILA for rescission under 15 U.S.C. Sec. 1635 and for penalties under 15 U.S.C. Sec. 1640.

Initially, the complaint was cast as a bilateral class action involving a class of plaintiffs who were Georgia residents and who had borrowed money from Land Bank Equity Corporation (Land Bank) giving mortgages on Georgia real estate as security for such loans, and a class of defendants who had purchased the Land Bank loan paper in the secondary market. The basis for plaintiffs' RICO (and now usury) claims was the allegation that the discount points, fees and charges in connection with the loans were excessive and had rendered the loans usurious. Additional named plaintiffs, including the appellees, were added from time to time, along with the institutions which held their Land Bank loans.

On February 17, 1987, in response to a motion by the plaintiffs seeking a certification of a class of defendant financial institutions, the court entered an order sua sponte joining as additional named defendants, all other institutions which held Land Bank loans secured by real property in Georgia, which included the appellants.

On January 19, 1988, seven of the appellants moved to vacate the order joining them as named defendants. On September 15, 1988, these appellants filed certain motions for judgment on the pleadings and for summary judgment. In October 1988, the court held a hearing at which class certification issues as well as the joinder issues were heard. By order of October 17, 1988, the trial court dropped some of the named class representatives, because they had settled their individual claims, then certified a class of plaintiffs with respect to Georgia usury claims arising under O.C.G.A. Secs. 7-4-18 and 7-4-2, and denied certification as to all other requested classes.

On March 21, 1989, the trial court entered an order denying appellants' motion for summary judgment, motion to dismiss and motion to vacate joinder and certified that order for interlocutory appeal. This Court granted appellants' motion for interlocutory appeal, and this appeal followed.

II. STATEMENT OF THE FACTS
A. On the Joinder Question

The loans and promissory notes signed by all the members of the plaintiffs' class originated when they borrowed money from Land Bank Equity Corporation, a Virginia corporation. All of the notes and the settlement papers signed by the borrowers were, in all essential respects, similar to each other. All of them included a large number of discount points, usually in the range of 20 to 38 points, service charges or origination fees, and other charges which, if they were not paid for actual services rendered by or on behalf of the Land Bank Equity Corporation, might result in the collection by Land Bank of interest in an amount which appellees claimed to be usurious under the applicable Georgia statutes.

Land Bank packaged the loans and sold them to savings and loan institutions around the country. Appellants purchased these loans at the full value of the remaining balance of the principal at the time of the purchase. They received none of the benefits from the discount points and charges made by Land Bank. The trial court ordered Land Bank joined as a defendant, but this order was stayed because Land Bank was then in bankruptcy.

The notes and contracts of each of the named plaintiffs were purchased by one of the several named defendants. None of the named plaintiffs has ever dealt with, or had contact with, any other named defendant with respect to Land Bank loans.

B. The Usury Portion of the Class Action

The loans were evidenced by form notes that had blank spaces for the entry of information concerning the date, secured property address, loan amount, lender's name, annual interest rates, amount of monthly payment, due date for each such payment, place of making payments, amount of late charge, and date of accompanying security deed. Borrowers were also given TILA disclosure statements, of which the named plaintiffs received two different forms which, however, were substantially the same. Each borrower was also given a settlement statement that contained a breakdown of the way in which the principal amount of their loan was to be distributed and for what purpose. If a borrower requested an itemization of the amount financed, they would be provided with a form headed "Amount Financed Itemization" that had spaces for the amount financed, the amount to be given directly to the borrower, the amount to be retained by the lender as discount points, the amount to be paid ostensibly on the borrower's account, and the amounts to be paid to others ostensibly on the borrower's behalf. The pre-paid finance charge was broken down into its component parts consisting of loan discount, service charge, mortgage guarantee insurance, and appraisal fee. The only significant item of these statements was the amount of the discount points which, as indicated above, usually ran between 20 to 40 points.

III. CONTENTIONS OF THE PARTIES
A. Appellants

(1) Appellants contend that the trial court erred in joining them as defendants in this case because they do not hold the loans of the six named class representatives and had never dealt with these named representatives.

(2) Appellants also contend that the real estate mortgage loans did not violate Georgia usury statutes by virtue of the charging of non-refundable discount points which were agreed to in writing by the borrowers and were authorized by O.C.G.A. Sec. 7-4-2.

B. Appellees

(1) Appellees contend that the trial court properly joined these defendants.

(2) They contend that the discount points which did not actually represent services performed by the lenders violated the Georgia criminal statute Sec. 7-4-18 which could be the basis for a civil action under Georgia authorities.

IV. DISCUSSION
A. Joinder of Parties Defendant

Over their objection the trial court joined the appellant banks as parties defendant, rather than certifying a defendant class. It is undisputed that but for the four named defendants, Comfed Savings Bank, First Federal Savings and Loan Association of Seminole County, Southeast Mortgage Corporation, and Republic Savings and Loan Association, none of the defendants holds any paper signed by any of the named class plaintiffs. Therefore, all of the remaining appellants complain that they should not have been joined as defendants, and without their joinder, there was no case or controversy between the named plaintiffs and the seven defendants.

There is a strange paucity of appellate court decisions dealing with the precise question with which we are faced here. Appellant relies heavily on the decision by the Court of Appeals for the Ninth Circuit in La Mar v. H & B Novelty & Loan Co., 489 F.2d 461 (9th Cir.1973). In that case, the Court stated:

[W]e assert that a plaintiff who has no cause of action against the defendant can not "fairly and adequately protect the interests" of those who do have such causes of action. This is true even though the plaintiff may have suffered an identical injury at the hands of a party other than the defendant and even though his attorney is excellent in every material respect. Obviously this position does not embrace situations in which all injuries are the result of a conspiracy or concerted schemes between the defendants at whose hands the class suffered injury. Nor is it intended to apply in instances in which all defendants are juridically related in a manner that suggests a single resolution of the dispute would be expeditious.

489 F.2d at 466 (emphasis added) (footnotes omitted). The appellees, of course, rely heavily upon the underscored part of the La Mar opinion, particularly the last sentence, "Nor is it intended to...

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