Felger v. First Federal S. & L. Ass'n

3 Pa. D. & C.3d 70, 1975 Pa. Dist. & Cnty. Dec. LEXIS 7
CourtPennsylvania Court of Common Pleas, Lawrence County
DecidedSeptember 15, 1975
StatusPublished
Cited by1 cases

This text of 3 Pa. D. & C.3d 70 (Felger v. First Federal S. & L. Ass'n) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Lawrence County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Felger v. First Federal S. & L. Ass'n, 3 Pa. D. & C.3d 70, 1975 Pa. Dist. & Cnty. Dec. LEXIS 7 (Pa. Super. Ct. 1975).

Opinion

HENDERSON, P.J.,

On September 19, 1974, plaintiffs commenced this action by filing a complaint in equity against defendant, a federally-chartered savings and loan institution. Plaintiffs seek to represent themselves and all persons similarly situated who have borrowed money from defendant and who, in order to secure such loans, have executed mortgages upon real estate, as well as personal bonds to accompany said mortgages, containing a specified real estate tax and insurance escrow provisions.

The real estate tax and insurance escrow provision, which is the subject of this complaint, is contained in the copy of plaintiff’s mortgage agreement. This provision requires the mortgagor to pay all taxes and assessments levied against the real estate and all insurance premiums against fire and other hazards which shall seem necessary to the [72]*72mortgagee (defendant). These payments are to be made monthly to the mortgagee in an amount equal to one-twelfth of the annual taxes, assessments and insurance premiums.

The complaint alleges that, pursuant to the above-mentioned escrow provision, defendant receives and holds these moneys as a trustee or other fiduciary for plaintiffs and the members of the class they seek to represent. The complaint alleges that, in violation of its trust or fiduciary duty, defendant has commingled and continues to commingle these escrow payments with defendant’s general funds. Defendant, according to the complaint, has earned, and continues to earn, large sums of money from the use and investment of these trust funds. The complaint avers that defendant, as trustee or fiduciary of these funds, has the obligation to either apply said funds directly to the reduction of the mortgage each month or to segregate said trust funds and to account to the mortgagors for all earnings and profits which defendant has earned by the use and employment of said funds in the operation of its business.

Plaintiffs pray for various forms of equitable relief on behalf of themselves and all other persons, firms and corporations who have borrowed money from defendant pursuant to mortgage agreements containing this escrow provision. Defendant filed preliminary objections objecting to the maintenance of the class action, a petition for the joinder of necessary parties, a -demurrer to the complaint, and a petition raising a question of jurisdiction.

I. CLASS ACTION

Historically, class actions were not permitted at common law. The class action device had its origin [73]*73in equity1 and class actions in Pennsylvania are presently governed by Pa. R.C.P. 2230. Rule 2230 adopts the practice under former Pennsylvania Equity Rule 16(1924) and under F. R.C.P. No. 23,2 and reads as follows:

“(a) If persons constituting a class are so numerous as to make it impracticable to join all as parties, any one or more of them who will adequately represent the interest of all may sue or be sued on behalf of all, but the judgment entered in such action shall not impose personal liability upon anyone not a party thereto.

“(b) An action brought on behalf of a class shall not be dismissed, discontinued or compromised nor shall a voluntary nonsuit be entered therein without approval of the court in which the action is pending.”

Although Rule 2230 has been in effect since 1941, until recently there have been relatively few Pennsylvania appellate decisions concerning class actions. This resulted, in large measure, from the preference of plaintiffs in class actions for a Fed[74]*74eral forum. However, since the United States Supreme Court’s recent decisions in Zahn v. International Paper Company, 414 U.S. 291, 94 S. Ct. 505, 38 L. Ed. 2d 511 (1973), and Eisen v. Carlisle and Jacquelin, 417 U.S. 156, 94 S. Ct. 2140, 40 L. Ed. 2d 732 (1974), which severely limited class actions in the Federal courts, the volume of class actions in Pennsylvania courts has risen sharply. Despite this increase, appellate guidelines governing the propriety of maintaining a class action remain murky in several respects, and resort to Federal case law appears essential. See McMonagle v. Allstate Insurance Company, 458 Pa. 317, 331 A. 2d 467, 468, fn. 2 (1975).

Recently, our Supreme Court considered a case similar to the instant case in Buchanan v. Brentwood Federal Savings & Loan Assoc., 457 Pa. 135, 320 A. 2d 117 (1974) (hereinafter cited as Buchanan). In Buchanan, 29 plaintiffs filed a class action against 32 lending institutions “and other unknown banking institutions and savings and loan associations doing business in Allegheny County, Pennsylvania.” Plaintiffs claimed that they had borrowed money from defendants and, as security for these loans, had given mortgages upon real property and executed personal bonds to accompany said mortgages. Each mortgage and bond contained a provision requiring the mortgagor to pay all taxes and assessments on the real estate and all fire and casualty insurance premiums. The mortgagors were required to pay to defendants each month one-twelfth of the annual taxes, assessments and premiums. Although different language was used in the lending agreements employed by the several defendants, plaintiffs alleged, inter alia, that in each case this created a trustee or fidiciary relationship and de[75]*75manded an accounting for the interest earned on the monthly payments.

Plaintiffs sought to represent themselves and all other mortgagors who had entered into mortgage agreements with mortgage lending institutions in Allegheny County. Plaintiffs also sought relief against defendants individually and against all other similarly — situated banking institutions and savings and loan associations in Allegheny County.

After considering the propriety of the class action, the Supreme Court remanded the case to the Allegheny County Court of Common Pleas. On remand, the trial court was instructed that if the action was to continue as a class action, each class of plaintiffs had to be limited to those holding mortgages and personal bond agreements containing tax and insurance escrow provisions which did not differ materially. As to this limited group, two further requirements were to be met. First, the trial court must determine whether the group of mortgagors holding such instruments “are so numerous as to make it impracticable to join all as parties.” Further, the trial court must be satisfied that the named plaintiffs seeking to represent the class “will adequately represent the interest of all.”3 Buchanan, 457 Pa. at 160, 320 A. 2d at 131.

Thus, the Supreme Court established three essential prerequisites for the proper maintenance of the class action: (1) Typicality; (2) numerosity; [76]*76and (3) adequacy of representation.4 We will consider each prerequisite separately as applied to the facts of the case at hand.

A. TYPICALITY

The Buchanan decision, 457 Pa. at 160, 320 A. 2d at 131, requires this court to limit the class of plaintiffs to those holding mortgage agreements containing tax and insurance escrow provisions which do not differ materially.

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Related

Buchanan v. Century Federal Savings & Loan Ass'n
393 A.2d 704 (Superior Court of Pennsylvania, 1978)

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3 Pa. D. & C.3d 70, 1975 Pa. Dist. & Cnty. Dec. LEXIS 7, Counsel Stack Legal Research, https://law.counselstack.com/opinion/felger-v-first-federal-s-l-assn-pactcompllawren-1975.