United Companies Lending Corp. v. Autrey

• Decision Date: 14 August 1998
• Citation: 723 So.2d 617
• Parties: UNITED COMPANIES LENDING CORPORATION v. Cecil AUTREY et al.
• Court: Alabama Supreme Court

723 So.2d 617

UNITED COMPANIES LENDING CORPORATION v. Cecil AUTREY et al.

1970246.

Supreme Court of Alabama.

August 14, 1998.

Rehearing Denied October 16, 1998.

M. Christian King and Wynn M. Shuford of Lightfoot, Franklin & White. L.L.C., Birmingham; and John N. Leach, Jr., of Helmsing, Sims & Leach, P.C., Mobile, for appellant.

George W. Finkbohner III and Royce A. Ray III of Finkbohner & Lawler, L.L.C., Mobile, for appellees.

John R. Chiles and Christopher J. Willis of Sirote & Permutt, P.C., Birmingham, for amici curiae Alabama Lenders Ass'n, Alabama Financial Services Ass'n, and Alabama Mortgage Brokers Ass'n.

H. Hampton Boles, Alan T. Rogers, and N. DeWayne Pope of Balch & Bingham, L.L.P., Birmingham, for amici curiae Alabama Bankers Ass'n and Automobile Dealers Ass'n of Alabama, Inc.

KENNEDY, Justice.

The question presented in this appeal is whether amendments to a section of the Code of Alabama may constitutionally be given retroactive effect "given that these amendments were enacted after the class members' contracts had been consummated, after this lawsuit had been pending more than two years, and after the class had been certified." (Trial court's order, C.R. 1544.) The plaintiffs were charged 8% in points on mortgage loans from United Companies Lending Corporation ("UCLC"), although § 5-19-4(g), Ala.Code 1975, prohibited lenders from charging points in excess of 5%. At the time UCLC made the loans, at the time the plaintiffs filed their complaint, and at the time their action was certified as a class action, § 5-19-19, Ala.Code 1975, provided for damages to be awarded in an action filed by debtors who had been charged illegal, excessive finance charges. The amount of recoverable damages increased if the creditor did not respond to a written demand for a refund and if the creditor made the excess finance charge in deliberate violation of, or in reckless disregard for, the law. Later, the Legislature amended § 5-19-19 to reduce the amount of damages recoverable by debtors who are charged excess finance charges.

The trial court held that a retroactive application of that amendment to the plaintiffs' claims in this action would violate Article I, § 13; Article I, § 22; and Article IV, § 95, of the Alabama Constitution of 1901.

Article I, Section 13, declares:

"That all courts shall be open; and that every person, for any injury done him, in his lands, goods, person, or reputation, shall have a remedy by due process of law; and right and justice shall be administered without sale, denial, or delay."

Section 22 declares:

"That no ex post facto law, nor any law, impairing the obligations of contracts, or making any irrevocable or exclusive grants of special privileges or immunities, shall be passed by the legislature; and every grant or franchise, privilege, or immunity shall forever remain subject to revocation, alteration, or amendment."

Article IV governs the Legislative Department. Section 95 therein declares:

"There can be no law of this state impairing the obligation of contracts by destroying or impairing the remedy for their enforcement; and the legislature shall have no power to revive any right or remedy which may have become barred by lapse of time, or by any statute of this state. After suit has been commenced on any cause of action, the legislature shall have no power to take away such cause of action, or destroy any existing defense to such suit."

(Emphasis added.)

UCLC petitioned for, and this Court granted, permission to appeal from the interlocutory order of the circuit court holding that the statutory amendment could not be retroactively applied to the plaintiffs' claims. Rule 5, Ala. R.App. P. The only question presented is the amount of damages recoverable, i.e., whether the amendment reducing allowable damages applies to these plaintiffs' claims.

The action pending in the Mobile Circuit Court is a class action requesting damages as provided for in § 5-19-19, Ala.Code 1975, as that section read at the times pertinent to this action and until its amendment by Act No. 96-576, 1996 Ala. Acts p. 887. Section 5-19-19 is part of the Mini-Code, which the legislature enacted in 1971. Act No. 2052, 1971 Ala. Acts p. 3290. Until the May 20, 1996, amendment of § 5-19-19 by Act No. 96-576, that section had remained unchanged since the enactment of the Mini-Code in 1971. Section 5-19-19 was codified from Act No. 2052, § 15, which read:

"Any creditor charging a finance charge in excess of the amount authorized herein except as the result of an accidental and bona fide error in computation, shall forfeit his right to any finance charge and shall refund to the debtor the total amount of the finance charge, which may be done by reducing the amount of the debtor's principal obligation. If the debtor is entitled to a refund and the creditor refuses to refund within a reasonable time after written demand, the debtor may recover a penalty of either twice the finance charge or ten times the amount of the excess charge, whichever is greater, but in any event not less then $100, together with a reasonable attorney's fee. If the creditor has made an excess finance charge in deliberate violation of or in reckless disregard for this Act, the creditor shall have no right to receive or retain the principal or any finance charge whatsoever and the transaction shall be void. No action under this section may be brought more than one year after due date [sic] of the last scheduled payment of the agreement pursuant to which the charge was made or in the case of open end credit plans, one year after the excess charge is made."

This present action pertains to consumer home mortgage loans made by UCLC to members of the plaintiff class in 1991. Cecil Autrey and Willie Mae Autrey, husband and wife, filed a complaint against UCLC on April 20, 1994, alleging that UCLC had violated § 5-19-4(g), which prohibits creditors from charging "points" in excess of 5% of the original principal balance of the loan. The Autreys amended their complaint on May 11, 1994, to allege claims on behalf of a class of similarly situated plaintiffs. UCLC charged 8% in points on the mortgage loans that are the subject of the class allegations. On June 6, 1994, UCLC removed the action to a federal court; on January 3, 1995, after extensive proceedings, the federal court remanded the cause.

On April 10, 1995, four additional persons filed a motion to intervene as plaintiffs, and the circuit court granted that motion on June 5, 1995. Through discovery, 910 members of the plaintiff class were identified. On September 8, 1995, the plaintiffs, acting pursuant to the provisions of § 5-19-19, demanded a refund of the finance charges to all of the named plaintiffs and all of the class members. UCLC did not respond to this request, and the plaintiffs' attorney filed an affidavit on January 12, 1996, stating that "therefore, more than four (4) months have passed since the written demand, and Defendant UCLC has declined within a reasonable time after written demand to refund the finance charges." On January 9, 1996, the circuit court certified the action as a class action, pursuant to Rule 23(b)(3), Ala. R. Civ. P.

On January 12, 1996, the plaintiffs filed a motion for a partial summary judgment, based on the circuit court's holding in a similar case that UCLC was not exempt from the provisions of the Mini-Code. On January 17, UCLC opposed that motion and sought a stay of a ruling on it until an interlocutory appeal from that holding in that other case was decided by this Court. On February 26, the circuit court granted the requested stay. The appeal in question was decided on October 11, 1996. United Companies Lending Corp. v. McGehee, 686 So.2d 1171 (Ala.1996). This Court affirmed the holding that UCLC is not exempt from the Mini-Code. The Supreme Court of the United States denied certiorari review. 520 U.S. 1197, 117 S.Ct. 1555, 137 L.Ed.2d 703 (1997).

Meanwhile, on May 20, 1996, the Governor approved Act No. 96-576. That Act revised several sections of the Mini-Code, including § 5-19-19, which it completely rewrote. That section now reads, in pertinent part:

"(a)(1)(i) Any creditor charging a finance charge in excess of the amount authorized herein, except as specified in subdivision (2), shall forfeit debtor's actual economic damages not to exceed the finance charge, and shall refund to the debtor such amount of the actual economic damages, which may be done by reducing the amount of the debtor's obligation. If the debtor is entitled to a refund and the creditor refuses to refund within a reasonable time, not to exceed 60 days, after written demand, including the filing of a legal action, the debtor shall recover a penalty of five times the amount of the actual economic damages not to exceed the finance charge, but in any event not less that one hundred dollars ($100). Provided, however, as to any legal action pending on May 20, 1996 [the effective date of Act No. 96-576], the debtor shall make a new written demand under this subsection.

"....

"(2) If the creditor has made an excess finance charge in deliberate violation of or in reckless disregard for this chapter, the creditor shall forfeit the greater of the entire finance charge imposed or five times the amount of the actual economic damages, but not less than one hundred dollars ($100). No action under this subsection may be brought more than one year after the due date of the last scheduled payment of the agreement pursuant to which the charge was made or, in the case of an open-end credit plan, one year after the excess charge is made."

Section 4 of Act No. 96-576 reads:

"The amendments to Sections 5-19-19, except subsections (a)(1)(ii) and (e), 5-19-22, except subsection (h), and 5-19-31 are retroactive and are to be applied to consumer credit transactions entered into on, before, and after the effective date of this act. The amendments to all other sections in this act not

...