Williams v. E.F. Hutton Mortg. Corp.Williams v. E.F. Hutton Mortg. Corp.
On our ex mero motu reconsideration of this case, the original opinion is withdrawn and the following substituted therefor:
Brenda Williams and other named plaintiffs filed an action against E.F. Hutton Mortgage Corporation (“E.F. Hutton“) on bеhalf of themselves and others similarly situated, alleging, among other claims, that real estate mortgage loans from First American Mortgage Company (“First American“) to the plaintiffs included excessive, non-refundable, prepaid finance charges that are uncоnscionable and usurious under Alabama law. E.F. Hutton purchased the loans from First American, which has declared bankruptcy. The trial court granted E.F. Hutton‘s motion for summary judgment on all the counts of the complaint, and the plaintiffs appeal.
Although the plaintiffs’ amended сomplaint contained five counts, on appeal the plaintiffs challenge the summary judgment only as to count two of the complaint. Accordingly, the plaintiffs have waived any claim of error as to those portions of the judgment not challenged on appeal. Nichols v. Town of Mount Vernon, 504 So.2d 732 (Ala. 1987); Ex parte Riley, 464 So.2d 92 (Ala. 1985). The pertinent portions of count two of the amended complaint allege that
“the aforementioned practices, including the imposition of non-refundable prepaid finance charges, are unconscionable, both as a mattеr of public policy under the common law of this state and under the provisions of the Alabama Code Section
8-8-5 and under the provisions of the Alabama Mini-code (Alabama Code Sections5-19-1 et seq. ).”
Among First American‘s practices mentioned in the complaint arе that “each borrower would have 40% of the amount he/she received added back to the note as ‘loan discounts.‘”1
The trial court entered summary judgment for the defendant on count two, in the following portion of its order:
“Count Two of the Amended Complaint, which alleges usury claims, §
8-8-1, et seq. , Code, and unconscionability claims under the Mini-Code, §5-19-16 , Code, is dismissed because the usury statute has no applicability to the instant loans, each of which had an original principal balance of more than $2,000, and the unconscionability claims under the Mini-Code are barred by the applicable statute of limitаtions found at §5-19-19 , Code. Furthermore, the unconscionability claims are dismissed because the specific unconscionability provision of the Mini-Code, §5-19-16 , has no application to loans that have previously been prepaid.”
Two problems with the reasoning of this order are apparent. One regards the holding that “the usury statute has no applicability to the present loans,” which holding ignores count two‘s claim of unconscionability under §
Alabama Code 1975, §
The problem regarding the court‘s statute of limitations holding also stems from §
“No action under this section may be brought more than оne 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 open-end credit plans, one year after the excess charge is made.”
Because §
To determine whether the two above-mentioned problems with the trial court‘s reasoning constitute reversible error, we must examine the question of unconscionability and determine whether the plaintiffs have a cause of action under §
In West Point-Pepperell, Inc. v. Bradshaw, 377 F. Supp. 154, 157-58 (M.D.Ala. 1974), the court recited the definition of “unconscionable” as follows:
“The Supreme Court of the United States in Hume v. United States, (1889) 132 U.S. 406, 10 S.Ct. 134, 33 L.Ed. 393, defined ‘unconscionable‘, in referring to an unconsсionable contract, as being the following:
” ‘Such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.’
“In Williams v. Walker-Thomas Furniture Co., (1965) 121 [U.S.] App.D.C. 315, 350 F.2d 445, 18 A.L.R.3rd 1297, the Court in discussing the fact that the element of unconscionability in order to justify unenforceability of the contract must be present at the time the contract is made, said, in substance, that unconscionability included:
” ‘[A]n absence of meaningful choice on the part of one of the parties together with contract terms which are
unreasonably favorable to the other party.’
“The Court said further that:
” ‘The рresence of a meaningful choice can only be determined by consideration of all the circumstances surrounding the transaction, and might be negated by “gross inequality of bargaining power,” it being relevant to ascertain whether “each party * * * considering thе obvious education or lack of it [had] a reasonable opportunity to understand the terms of the contract or [whether] the important terms [were] hidden in a maze of fine print and minimized by deceptive sales practices“.’ ”
Those definitions have been quoted by this Court in Wilson v. World Omni Leasing, Inc., 540 So.2d 713 (Ala. 1989). See, also, Lloyd v. Service Corp. of Alabama, 453 So.2d 735 (Ala. 1984); Advertiser Co. v. Electronic Engineers, Inc., 527 So.2d 1317 (Ala.Civ.App. 1988).
Section
“With respect to a consumer credit sale, consumer lease or consumer loan, if the court as a matter of law finds the agreement or any provision of the agreement to have been uncоnscionable before, after or at the time it was made, the court may refuse to enforce the agreement, or it may enforce the remainder of the agreement without the unconscionable provision, or it may so limit the application of any unconscionable provision as to avoid any unconscionable result.”
All of the plaintiffs in this action except one had prepaid their loans before this action was filed. Indeed, such prepayment was a requirement for the plaintiffs not to be barred by thе res judicata effect of Murphree v. E.F. Hutton Mortgage Corp., Civil Action No. 86-102 (Jefferson County Circuit Court, Bessemer Division, 1986). In Murphree, as in this case, a class of plaintiffs filed an action alleging that First American had imposed excessive, prepaid finance charges. That class was defined as “all persons who borrowed money from [First American] and executed notes . . . secured by mortgages on real property located in the State of Alabama, which notes are presently held by [E.F. Hutton].” There were over 1100 plaintiffs joined in the Murphree class action, and they reached a settlement with E.F. Hutton, which the Circuit Court of Jefferson County approved. The Murphree complaint was filed on February 17, 1986, and the court in the present case dismissed the action as to all plaintiffs whose notes were held by First American or E.F. Hutton on that date. The present action was filed on May 21, 1987, so all of the plaintiffs had either paid their notes more than a year before the complaint was filed or were barred by the judgment in Murphree.2
In light of these facts, the court‘s third holding in its summary judgment on count two is significant: “Furthermore, the unconscionability claims are dismissed because the spеcific unconscionability provision of the Mini-Code, §
Sanders and most of the authorities cited therein, including Cowin, concerned the application of the Uniform Commercial Code unconscionability provision, adopted in Alabama as Ala. Code 1975, §
Therefore, we hold that the trial court did not err in holding that §
The plaintiffs do not cite any authority contradicting those authorities cited above that tend to show that unconscionability does not provide an affirmative ground for relief. E.F. Hutton introduced affidavits stating that, when the plaintiffs prepaid their loans, they were given credit according to the formula for repayment of prepaid finance charges found at §
The plaintiffs furthеr contend that summary judgment was improper because there was a pending discovery order. The mere pendency of discovery does not bar summary judgment; however, if the matter subject to production is crucial to the plaintiffs’ case, then it is error for the trial court to enter summary judgment before the matter has been produced. Reeves v. Porter, 521 So.2d 963, 965 (Ala. 1988). The pending discovery that the plaintiffs’ argument addresses dealt with a list of persons other than the named plaintiffs — the names, addresses, and prepayment dates of other First American borrowers in Alabama whose notes had been assigned to E.F. Hutton. This discovery is not crucial — indeed, under the facts of this case, it is irrelevant — to the named plaintiffs’ claims and to the issues raised by E.F. Hutton‘s motion for summary judgment. Only a person who had opted out of Murphree and who still owed money on a First American note held by E.F. Hutton could conceivably have a claim under count two, and none of the named plaintiffs fits that category. The named plaintiffs cannot stand as class representatives if they do not have viable claims themselves. See Rowan v. First Bank of Boaz, 476 So.2d 44 (Ala. 1985);
The judgment is affirmed:
ORIGINAL OPINION WITHDRAWN; OPINION SUBSTITUTED; AFFIRMED.
MADDOX, JONES, SHORES, ADAMS and STEAGALL, JJ., concur.
HORNSBY, C.J., concurs in the result.