Title: Rogelstad v. Farmers Un. Grain Ter. Ass'n

State: north-dakota

Issuer: North Dakota Supreme Court

Document:

226 N.W.2d 370 (1975) Harlen ROGELSTAD, on behalf of himself and all others similarly situated, Plaintiff and Appellant, v. FARMERS UNION GRAIN TERMINAL ASSOCIATION, INC., a Minnesota Corporation, Defendant and Appellee. Civ. No. 9038. Supreme Court of North Dakota. February 13, 1975. *372 Ohnstad, Twichell, Breitling, Arntson & Hagen, West Fargo, for plaintiff and appellant. Pringle & Herigstad, Minot, for defendant and appellee. VOGEL, Judge. This is an appeal from an order of the Ramsey County district court denying the plaintiff's motion for an order allowing him to maintain a class action pursuant to Rule 23 of the North Dakota Rules of Civil Procedure. In a prior appeal in this case, reported at 224 N.W.2d 544 (N.D.1974), we held that the denial of class action status was appealable, and we now consider the appeal on the merits. Harlen G. Rogelstad, the plaintiff and appellant, brings this suit on behalf of himself and all others similarly situated for damages arising from alleged violations of Section 47-14-09 of the North Dakota Century Code relating to usury and for damages arising from alleged violations of the United States Federal Reserve Regulation Z, 15 U.S.C. § 1640, relating to truth in lending. The parties agree that the latter issue has been disposed of, contrary to Rogelstad's contentions, in Farmers Union Grain Terminal Assn. v. Nelson, 223 N.W.2d 494 (N.D.1974). The remainder of this opinion will therefore be concerned with the merits of the claim for class action status as to the cause of action alleging usury. Rogelstad entered into contracts with the appellee, Farmers Union Grain Terminal Association, hereinafter GTA, through its line elevator at Hamberg, North Dakota, whereby Rogelstad agreed to deliver 30,000 bushels of wheat and 10,000 bushels of durum on or before June 30, 1973, at an agreed price. On February 21, 1973, Rogelstad received from GTA an advance of $2,000 on the purchase price of this grain. This advance was delivered to Rogelstad without the benefit of any written agreement, although it was apparently understood by both parties that the amount of the advance would be deducted from the agreed price at the time Rogelstad was paid for the delivered grain. It appears that GTA handles its accounts receivable through its home office in St. Paul, Minnesota. Rogelstad asserts that the account arising from the $2,000 advance made to him was treated by GTA as any other account receivable. It further appears that in the usual course of business such accounts are initially received in St. Paul in the month in which the obligation is incurred. No interest or finance charge is assessed for this first month, and statements are not sent out until the end of the first full month following the month in which the obligation is incurred. The finance charge is computed at the rate of five-sixths of one percent per month on the *373 unpaid balance remaining on the principal and on the total amount of unpaid finance charges. The advance made to Rogelstad was partially repaid in May and fully repaid on June 27, 1973, and finance charges were assessed for the months of March, April, and May 1973 in the total sum of $39.14. It appears that the rate of interest or "finance charge" applied by GTA was five-sixths of one percent per month, while the applicable statutes as to usury limited interest rates to nine percent per annum during the pertinent period. See Sections 47-14-09, 47-14-10, and 6-03-63, N.D.C.C. From the affidavit of the plaintiff's attorneys, filed in support of the motion for class action status, it appears that GTA owned 39 elevators in North Dakota, that the Hamberg elevator with which the plaintiff dealt is one of these, and that "numerous" customers of the Hamberg elevator received advances and were charged five-sixths of one percent on the advances, just as the plaintiff was. While the affidavit is indefinite as to the number of potential class plaintiffs, statements were made during oral argument that there were 10 or 12 potential class plaintiffs who were customers of the Hamberg elevator, which was not a very big elevator, and that there were perhaps several hundred total potential class plaintiffs within this State. The trial court denied the motion to declare this action a class action. Pertinent portions of the court's memorandum of opinion follow: Rule 23, North Dakota Rules of Civil Procedure, identical with Rule 23, Federal Rules of Civil Procedure, in pertinent part, reads: It will be noted that the trial court apparently erroneously interpreted the requirements of Rule 23(b)(3) so as to require that its conditions be complied with in every case, whereas the rule itself provides that Rule 23(b)(3) offers only one of the alternative ways of finding a class action appropriate. While the parties apparently agree that neither 23(b)(1)(B) nor 23(b)(2) is applicable, it appears that the court failed to consider, as an alternative ground for finding a class action appropriate, the provisions of 23(b)(1)(A). In Yaffe v. Powers, 454 F.2d 1362 (7th Cir. 1972), the Circuit Court held that it was error for a district court to assume that "`all of the requirements of Rule 23 of the Federal Rules of Civil Procedure must be met before an action can be classified as a class action'" (p. 1365), and called this the trial court's "most basic error" (p. 1366). We hold that the alternative basis should have been considered by the trial court, and that it could be found to apply here. We believe that the trial court erred in holding, in the language quoted above, that it was relevant to the feasibility of permitting the maintenance of a class action that there is but one party plaintiff involved here and no other persons have sought to intervene and no other independent actions have been commenced. The trial court's citation to 7A Wright & Miller, Federal Practice and Procedure: Civil § 1780, page 68, is not apropos, since the matter under discussion there related to the extraneous factors which might be relevant in deciding whether expressions for or against individual actions were motivated by reasons unrelated to the merits of class action treatment. Here, we have no expressions of potential plaintiffs either for or against the use of the class action. The better rule as to the importance of the presence or absence of other litigation in 23(b)(3) cases is stated in Wright & Miller, Section 1780, at page 71: In Eisen v. Carlisle & Jacquelin, 391 F.2d 555, 563 (2d Cir. 1968), the court said: This statement was quoted in Hohmann v. Packard Instrument Co., 399 F.2d 711, 714 (7th Cir. 1968), and the court added: We believe that the facts before us present a meritorious case for determination of class action status. The trial court appears to have held, at least inferentially, that the prerequisites of Rule 23(a) have been shown. It appears that this is true. The potential plaintiffs are so numerous that individual joinder is impracticable, there are questions of law and fact common to the class, the claims of the representative plaintiff are typical of the claims or defenses of the class, with one minor exception which could readily be separated into a *376 subclass if desired as permitted by Rule 23(c)(4)(B), and the representative party will fairly and adequately protect the interests of the class. The principal controversy is as to the applicability of one or more of the alternative requirements of Rule 23(b). From the showing made by the plaintiff, it appears that the only possible differences between the contentions of the named plaintiff and the potential plaintiffs would arise from the fact that some potential plaintiffs may have signed notes for their advances while the named plaintiff and other potential plaintiffs did not, the individual differences as to dates of advances and repayments, and amounts of damages. The similarities, which will very likely be determinative of the right of the class plaintiffs to recover, are largely legal questions: whether the usury law applied to the factual situation we have outlined, whether an agreement is necessary in order to constitute usury, or whether the mere charging and receipt of usurious interest is sufficient. We believe that these issues "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." We therefore hold, for reasons set forth below, that the trial court abused its discretion in denying class action status. We do so with great deference to the trial court's discretion in such matters. But we are impelled to hold as we do by several considerations. We note that the Federal appellate courts have seldom hesitated to overrule and reverse determinations of Federal district courts denying class action status. For example, see Eisen v. Carlisle & Jacquelin, supra; Knuth v. Erie Crawford Dairy Coop. Assn., 395 F.2d 420 (3d Cir. 1968); Yaffe v. Powers, supra; Esplin v. Hirschi, 402 F.2d 94 (10th Cir. 1968); Hohmann v. Packard Instrument Co., supra. Decisions as to whether class action status should be allowed seem to rest, more than many other judicial determinations, on judicial philosophy, rather than on precedent or statutory language. One court may look upon an allegation of the existence of a class with a "jaundiced eye" [Yaffe v. Powers, supra], while another may consider class actions as the "wave of the future" [Wright & Miller, § 1751], or hold that "any error, if there is one, should be in favor of allowing the class action" [Esplin v. Hirschi, supra]. We will interpret Rule 23 so as to provide an open and receptive attitude toward class actions. We believe that Rule 23 is a remedial rule which "continues to have as its objectives the efficient resolution of the claims or liabilities of many individuals in a single action, the elimination of repetitious litigation and possibly inconsistent adjudications involving common questions, related events, or requests for similar relief, and the establishment of an effective procedure for those whose economic position is such that it is unrealistic to expect them to seek to vindicate their rights in separate lawsuits." Wright & Miller, Federal Practice and Procedure: Civil § 1754. We are confirmed in these views by a review of the history of what we now call class actions, but which have always been recognized and encouraged under our laws since prior to Statehood. The Code of Civil Procedure of the Territory of Dakota, adopted by the first Legislative *377 Assembly of the Territory in 1862, contains the following, as Section 34 of Chapter VIII: This section was copied from the Code of Civil Procedure of California, which retains the section in full force and effect to this day. The quoted section is still the basis for class action litigation in California at this time. 68 Nw.U.L.Rev. No. 6, p. 1024. It is contained in Section 382 of the Code of Civil Procedure of California. In 1863, the Dakota Territorial Legislature rewrote its Code of Civil Procedure, taking much of it from the so-called "Field Code" of the State of New York, from which California had also borrowed. The 1863 Dakota statute, Section 83 of the Code of Civil Procedure, reads: Substantially the same provision continued in effect through all the compilations and codifications of our statutes until the adoption of the North Dakota Rules of Civil Procedure, effective July 1, 1957, when the above statute, then Section 28-0208, N.D.R.C.1943, was declared superseded by Rules 19(a) and 23(a). The law of New York still contains essentially the same language. N.Y. Civil Practice Law and Rules, § 1005. There is no indication that the adoption of Rule 23 was intended in any way to reduce or minimize the use of class actions in North Dakota. The judicial acceptance of the statutes quoted above, throughout the history of Dakota Territory and the State of North Dakota, has been generally receptive. In Bonde v. Stern, 73 N.D. 273, 14 N.W.2d 249 (1944), we traced the statute here in question back to the New York Code and cited and discussed many of the New York cases construing the New York Code provision. In Kvello v. Lisbon, 38 N.D. 71, 164 N.W. 305 (1917), we referred to the history of the equitable doctrine against multiplicity of actions and allowed a class action for the owners of all property within a city affected by special assessments. In Jones v. Grady, 62 N.D. 312, 243 N.W. 743 (1932), we allowed an action on behalf of all stockholders, resident and nonresident, of a bank. In Horst v. Guy, 211 N.W.2d 723 (N.D. 1973), and in the prior appeal in this case, reported at 224 N.W.2d 544 (1974), we also expressed a receptive attitude toward class actions. In view of this long tradition of hospitality toward class actions, by whatever name, we are not disposed now to take a constrictive view of class action eligibility. Even before there was a Dakota Territory, or a California or a New York, actions such as the present one could be sustained. The class action is descended from or related to the "Bill of Peace" of English equity, early examples of which include actions by tenants or copyholders against the lord of the manor, to establish their rights under the customs of the manor. Pomeroy, Equity Jurisprudence, 5th Ed., § 247; Wright & Miller, Federal Practice and Procedure: Civil § 1751. Equity traditionally has granted relief against usurious contracts, *378 executory or executed. Pomeroy, supra, § 937. Class action status is not to be refused merely because individual issues will remain even after common issues are disposed of. The presence of individual issues is "no obstacle." Siegel v. Chicken Delight, Inc., 271 F. Supp. 722 (N.D.Cal.1967). In the present case it appears that all plaintiffs would offer the same evidence as to the interest rate charged, the computer bookkeeping methods of GTA, the relationship between GTA headquarters and local elevators, and billing methods, among other things. The principal legal question, common to all, would appear to be: "Did GTA, for `numerous' patrons with grain purchase contracts, utilize an accounting procedure for billing interest on advances that entailed a usurious rate of interest, resulting in a charge or collection of usury?" Once the evidence is presented as to the common questions of fact, and a disposition is made as to the common question of law, it appears that either GTA would be entitled to a decision in its favor or the class action plaintiffs would need only to prove their individual damages. In either case, the rights of small claimants would be preserved and litigated, and a vast saving of money, time, and judicial and attorney manpower would have been effected, as compared with litigation of individual claims. We feel it is particularly important that class action access to the State courts be unimpeded, especially since the Federal courts are now closed in diversity cases to 23(b)(3) plaintiffs unless each of them has a $10,000 claim. Zahn v. International Paper Co., 414 U.S. 291, 94 S. Ct. 505, 38 L. Ed. 2d 511 (1973); Snyder v. Harris, 394 U.S. 332, 89 S. Ct. 1053, 22 L. Ed. 2d 319 (1969); Lonnquist v. J. C. Penney Co., 421 F.2d 597 (10th Cir. 1970). For many potential class actions, State courts are the only forum available. See Closing the Courthouse Door: The Aftermath of Snyder v. Harris, 68 Nw. U.L.Rev. No. 6, p. 1011 (1974). It is true that orders allowing or refusing class action status need not be final and may be modified. Rule 23(c)(1). But, and especially in 23(b)(3) cases where notice must be given to members of the class [see Rule 23(c)(2)], there must come a time when a final decision must be made. Otherwise, the action will be subject to interruption even during trial in order to take the time to notify the members of the newly declared class. Such postponements might be highly disruptive. If the determination is made too late, a separate and duplicitous trial might be required for the members of the newly declared class. In Esplin v. Hirschi, supra, the class action status was denied by the district court and reversed on appeal by the Court of Appeals, necessitating a second trial. Such results should be avoided if possible. We reverse the district court's order determining that this action should not be maintained as a class action. The Federal courts, under similar circumstances, have made somewhat similar reversals in Hohmann, supra, Knuth, supra, and Esplin, supra. Other Federal courts, as in Yaffe, *379 supra, and Eisen, supra, have sent the matters back to the trial courts for redetermination as to whether class action status is appropriate. We believe the facts are sufficiently clear, however, so that we can determine, at this time, that class action status is appropriate. However, this determination is not intended to limit in any way the future discretion of the trial court to alter or amend the determination of class action status under Rule 23(c)(1), or to make appropriate orders under Rule 23(c)(4), or to make appropriate orders under Rule 23(d). Reversed and remanded for further proceedings consistent with this opinion. ERICKSTAD, C.J., and PEDERSON, PAULSON and SAND, JJ., concur.