Adkison v. First Plus Bank

• Decision Date: 18 May 2004
• Docket Number: No. WD 62308.,WD 62308.
• Parties: Steven Q. and Cody J. ADKISON, et al., Appellants, v. FIRST PLUS BANK, et al., Respondents.
• Court: Missouri Court of Appeals

143 S.W.3d 29

Steven Q. and Cody J. ADKISON, et al., Appellants, v. FIRST PLUS BANK, et al., Respondents.

No. WD 62308.

Missouri Court of Appeals, Western District.

May 18, 2004.

Motion for Rehearing and/or Transfer to Supreme Court Denied June 29, 2004.

Application for Transfer Denied September 28, 2004.

Appeal from the Circuit Court, Clay County, David W. Russell, J J. Michael Vaughan, Kansas City, MO, for appellant.

Leslie Ann Greathouse and Russell Jones, Kansas City, MO, for respondents.

Lori Renee Schultz, Kansas City, MO, for respondent First Plus Bank.

Mark Alan Olthoff, Kansas City, MO, for respondent U.S. Bank, et al., join on the briefs.

Before JAMES M. SMART, JR., P.J., ROBERT G. ULRICH, and LISA WHITE HARDWICK, JJ.

PER CURIAM.

Steven and Cody Adkison, and others, appeal from a grant of summary judgment in favor of Respondents First Plus Bank, Ace Securities Corp. Home Loan Trust, 1999-A, and others. The trial court granted summary judgment, concluding as a matter of law that plaintiffs had no cause of action under Missouri's "Second Mortgage Loan Act," (sections 408.231 to 408.241, RSMo 1994). We affirm.

The appellants are Missouri home owners who obtained second mortgage loans secured by equity in their residences. Appellants (hereinafter sometimes referred to as "Borrowers") all obtained loans from First Plus Bank, a California lending institution. The loans were obtained in 1997 and 1998. The interest rates charged ranged from 11.99% to 14.75%. First Plus Bank charged borrowers a variety of fees and closing costs including "loan discount" or "loan origination" fees, brokers' fees, and other fees and costs. All of the fees and costs were financed at closing and included in the amount amortized. Certain other institutions (including Ace Securities Corp. Home Loan Trust, 1999-A ("Ace")) purchased the loans from First Plus Bank.

Appellant Borrowers thereafter brought an action against First Plus Bank and the assignees of First Plus Bank, including Ace. Appellants brought their action under Missouri's Second Mortgage Loan Act ("SMLA") (sections 408.231 to 408.241, RSMo 1994) contending that the provisions of Missouri law were violated by the terms of the loans and seeking actual and punitive damages. It is clear that at least one purpose of the SMLA was to place limits on the amount of interest, and also on the additional fees and charges, that second mortgage lenders were charging loan consumers in Missouri. In 1998, the interest rate limitation was removed from the Act, but the limitations on permissible additional fees remained in place. In this case, each loan was negotiated and executed in Missouri by a Missouri resident. The Borrowers contended in their action that the loans in question were unlawful in that the various fees and costs were violative of the limitations placed on such terms by the SMLA.

Respondent Ace moved for summary judgment on the ground that the SMLA does not apply to the loans of appellants and that Ace, and others, were therefore entitled to judgment as a matter of law. Ace argued that section 408.232.4 provides an exemption from the SMLA for loans on which "the rate of interest charged is lawful without regard to" the rates permitted in subsection 1 [the subsection which set a maximum interest for second mortgage loans]. They argued that the interest rates on all the loans in question were lawful under California law without regard to section 408.232.4 and, therefore, the loans were exempt from the SMLA.

All parties stipulated and agreed to be governed by the trial court's ruling on Ace's motion. On December 3, 2002, the trial court granted the motion for summary judgment in behalf of all defendants, concluding that the SMLA was not applicable to the loans in question. The Borrowers appeal.

While this appeal has been pending, this court has reviewed identical legal issues in the case of Avila v. Community Bank of Virginia, WD 61568, 143 S.W.3d 1, 2003 WL 22002779 (Mo.App.2003), appealed from the Circuit Court of Jackson County. In an opinion dated August 26, 2003, this court held that the trial court did not err in granting summary judgment to the defendants in that case on the basis that the SMLA did not apply.

In this case, which was ruled by the trial court before the decision of this court on appeal in Avila, the trial court also concluded the SMLA was not applicable to the loans in question. The trial court noted that First Plus, as a federally insured state-chartered institution, is subject to the provisions of 12 U.S.C. § 1831d, known as the Depository Institutions Deregulation and Monetary Control Act of 1980 ("DIDA"), which states in pertinent part as follows:

In order to prevent discrimination against State-chartered insured depository institutions, including insured savings banks, or insured branches of foreign banks with respect to interest rates, if the applicable rate prescribed in this subsection exceeds the rate such State bank or insured branch of a foreign bank would be permitted to charge in the absence of this subsection, such State bank or such insured branch of a foreign bank may, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any loan or discount made, or upon any note, bill of exchange, or other evidence of debt, interest at a rate ... allowed by the laws of the State, territory, or district where the bank is located, whichever may be greater.

The trial court in this case noted that the interest rates charged were in each case lawful under California state law. The court also noted that 12 U.S.C. § 1831d was enacted in order "to level the playing field between federally-chartered and state-chartered banks," citing Greenwood Trust Co. v. Commonwealth of Massachusetts, 971 F.2d 818, 826 (1st Cir.1992). Under the federal statute, state-chartered banks, like national banks before them, were allowed to export interest rates authorized under the laws of their home states. Thus, the trial court observed, federal banking law permitted First Plus Bank, as a federally insured state-chartered institutional lender, to export its home state's interest rates to other states, even though those rates may be usurious or unlawful under the laws of such other states.

The Borrowers contended below and contend on appeal that 12 U.S.C. § 1831d is irrelevant to this matter because the SMLA never intended to exempt out-of-state lenders from the regulation of "additional charges and fees" provided in the SMLA.¹ Borrowers contend that the General Assembly did not have in mind any accommodation to 12 U.S.C. § 1831d in enacting subsection 4 of 408.232. The SMLA, they say, places restrictions upon the extra fees and charges that may be assessed against borrowers by the lenders and contains no exemption for foreign state-chartered banks making loans in Missouri at interest rates that would be permitted under the laws of the foreign state.

The controversy is about the precise meaning of section 408.232.4. The issue is one of statutory interpretation.

Section 408.232 was enacted in 1979. As originally enacted it stated as follows:

1. With respect to a second mortgage loan, any person, firm or corporation may charge, contract for, and receive interest in any manner at a rate which shall not exceed one and three-eighths percent per month, computed on unpaid balances of the principal for the time actually outstanding.

2. The term of the loan, for purposes of this section, commences with the date the loan is made. Differences in the lengths of months are disregarded, and a day may be counted as one-thirtieth of a month and one-three hundred sixtieth of a year. When a second mortgage loan contract provides for monthly installments, the first installment may be payable at any time within one month and fifteen days of the date of the loan.

3. For revolving loans, charges may be computed at a daily rate of one-thirtieth of the monthly rate on actual daily balances or at a monthly rate on the average daily balance in each monthly billing cycle.

A year later, in 1980, it was amended in part. Subsection 1 was amended in that the phrase "one and three-eighths percent per month" was changed to "one and sixty-seven hundredths percent per month." Also, subsection 4, the focus of our inquiry in this case, was added:

4. Section 408.231 to 408.237 [which address, inter alia, the additional fees and charges] shall not apply to any loans on which the rate of interest charged is lawful without regard to the rates permitted in subsection 1 of this section.

In 1998, the statute was again amended. This time the phrase limiting the rate of interest to "one and sixty-seven hundredths percent per month" in subsection 1 was changed to allow interest "at rates agreed to by the parties." Subsections 2, 3, and 4 were unaffected by the 1998 amendment.

The loans in question here were made in 1997 and 1998. All except one, the Adkison loan, were made prior to the effective date of the change to subsection 1. Plaintiffs do not argue that the removal of a maximum specified rate of interest in subsection 1 has an effect on the interpretation of subsection 4 or on the application of the non-interest protections of the statutes.

Here, in the trial court, Ace argued that because the interest rates charged by First Plus Bank were lawful under California law, and hence could be exported to Missouri under federal law, the SMLA had no application to the First Plus loans at all because section 408.232.4 provided that the SMLA would not apply to any loans on which the rate of interest charged is "lawful without regard to the rates permitted in subsection 1" of 408.232. The trial court noted that the language in question must be interpreted in its context. The court, in its oral comments, noted that the statute was passed in the same year as the federal government adopted 12 U.S.C. § 1831d...