Opinion ID: 1174727
Heading Depth: 1
Heading Rank: 5

Heading: 3b 4. The trial court's ruling upon plaintiffs' motion for certification of the suit as a class action should be remanded for further consideration.

Text: The trial court's complex order on plaintiffs' motion for certification of their action inextricably relates to the court's misapprehension of the controlling legal principles. The crucial determination that plaintiffs were not members of a class who could state a cause of action for excessive interest rests directly upon the trial court's view that interest must be averaged from the opening of the margin account to September 26, 1973. With the exception of the court's ruling on the issue of treble damages, the court's order including the portion of the order challenged by the cross-appeal rests also on this mistaken premise and, in view of the above discussion, should be remanded to the trial court for reconsideration. The trial court's ruling that plaintiffs could not assert a class action to recover treble damages, however, rests on an independent ground. (6a) Apparently the trial court concluded that because the granting of treble damages upon a finding of usury is a matter within the trial court's discretion ( Burr v. Capital Reserve Corp. (1969) 71 Cal.2d 983, 994 [80 Cal. Rptr. 345, 458 P.2d 185]), all cases involving such damages should be presented by individuals rather than by a class. [8] In awarding treble damages, however, the court does not exercise an abstract discretion, but must base its ruling on the facts of the transaction at issue. (Cf. Riskin v. Towers (1944) 24 Cal.2d 274, 279 [148 P.2d 611, 153 A.L.R. 442]; Troendle v. Clinch (1946) 74 Cal. App.2d 480, 484 [169 P.2d 55]; 6 Witkin, Cal. Procedure (2d ed. 1971) pp. 4235-4236.) (7), (See fn. 9.) (6b) If the common facts of a class of transactions so predominate over the individual differences distinguishing those transactions that a class action excels other available methods of adjudicating the issues raised by the treble damage claim, we find no rule which prevents the court from certifying a class action. (Cf. Partain v. First National Bank of Montgomery (M.D.Ala. 1973) 59 F.R.D. 56.) [9] We therefore conclude that the trial court should vacate its order refusing to certify this case as a class action and reconsider that matter anew. Upon such reconsideration, the plaintiffs' class with respect to their claim for recovery of damages for excessive interest should be defined to limit its membership to those California customers who maintained margin accounts with defendant during the period July 5, 1973, to September 26, 1973, and who, within one year preceding the filing of plaintiffs' complaint, paid interest charged by defendant during that period pursuant to any agreement with defendant other than a variable-rate agreement entered into in good faith and without intent to avoid the usury laws. [10] In the light of that redefinition of plaintiffs' class, of the principles of law set out in this opinion, and of such additional evidence as the parties may offer, [11] the trial court may then decide whether to certify this suit as a class action on behalf of the palintiffs' class or as appropriate subclass. [12] We briefly summarize our conclusions. First, defendant's customer's agreement does not on its face clearly express the agreement of the parties to authorize defendant to charge compound interest; plaintiffs' complaint therefore states a cause of action alleging that defendant unlawfully charged compound interest. Second, the trial court's order refusing to certify plaintiffs' class action alleging excessive interest was based on that court's conclusion that interest charged must be averaged from the opening of the account until September 26, 1973. We reject that conclusion and hold that, assuming as alleged that the interest charged from July 5 to September 26, 1973 exceeded 10 percent, the validity of the agreement turns on whether the parties contracted in good faith and without intent to avoid the usury laws. The trial court should therefore reconsider the certification of plaintiffs' class action in light of this holding. In sum, the People by initiative and constitutional amendment have prohibited the compounding of interest unless the party to be charged signs an agreement which clearly so expresses in writing, and have limited the rate of interest to 10 percent; interpreting the latter prohibition, the courts hold that an agreement may provide for a variable interest rate that may at times exceed the legal rate if the parties so contract in good faith and without an intent to avoid the usury laws. Compliance with these clear requisites does not impose an onerous burden. The instant complaint draws the outlines of causes of action on both of the above postulates, but plaintiffs' recovery must entirely depend upon the coloration and full picturization of the sketch by a factual showing at trial. The judgment is reversed and the cause remanded for further proceedings consistent with the views expressed herein.