Brann v. Flagship Bank of Pinellas, N.A.
| Decision Date | 11 April 1984 |
| Docket Number | No. 83-829,83-829 |
| Citation | 450 So.2d 237 |
| Court | Florida District Court of Appeals |
| Parties | Edward R. BRANN, d/b/a Brann's Auto Parts & Sales, Edward R. Brann, Individually and Betty Jo Brann, Individually, Appellants/Cross-Appellees, v. FLAGSHIP BANK OF PINELLAS, N.A., Appellee/Cross-Appellant. |
G. Robert Schultz, St. Petersburg, for appellants/cross-appellees.
Richard J. Neefe, St. Petersburg, for appellee/cross-appellant.
This appeal and cross-appeal present two issues. The first issue is whether, in a suit on a promissory note, a national banking association is limited to recovering the maximum rate of interest allowed under Florida law. The second is whether the court erred in refusing to impose liability on a guarantor on the ground that the guaranty agreement was stale.
Flagship Bank of Pinellas, N.A., as holder of a note executed March 3, 1981, brought suit against Edward R. Brann, d/b/a Brann's Auto Parts & Sales, the maker of the note. The bank sought recovery of the unpaid principal balance of $14,999.99, plus accrued interest, costs, and attorneys' fees. Mr. Brann's note to Flagship provided for interest at 21% per annum with the rate subject to a daily change, which allowed it to float two points above the bank's prime rate. Flagship also sought judgment against the maker's wife, Betty Jo Brann, as guarantor to the extent of $12,000. Mrs. Brann had signed the guaranty agreement in 1978, some two and one-half years before Mr. Brann signed this note.
After a nonjury trial the court entered final judgment in favor of Flagship and against Mr. Brann for the principal sum due on the note. However, the court limited the bank's recovery of interest to 18% per annum, the maximum allowed by Florida law on this type of transaction. In its findings, the trial judge observed that Flagship Bank, as a national bank, was entitled to set the interest rates under applicable federal regulations. Nevertheless, the court concluded, since the note stated that it was to be governed by the laws of Florida, the bank had waived that privilege. Further, the court declined to find Mrs. Brann liable as a guarantor, because it concluded that her 1978 guarantee was stale and, therefore, of no force and effect.
On appeal the Branns contend that the trial court erred in allowing the bank to recover any sums other than the principal due on Mr. Brann's note. Since the interest exceeded the 18% per annum permitted by section 687.02, Florida Statutes (1981), they contend the note was usurious, and that under section 687.04, the entire interest should be purged. The bank, on the other hand, argues that as a national association it is not limited in its recovery of interest by the laws of Florida. Next, the bank points out that Mrs. Brann's guarantee was absolute and not limited by time; therefore, the court erred in declining to hold her liable as a guarantor. We think the bank is correct on both points.
Because the note was executed on March 3, 1981, in favor of a national banking association, the bank's interest rates are regulated by the Depository Institutions Deregulation and Monetary Control Act of 1980. 12 U.S.C. § 86a(a) (1980). See also Licata v. Beninate, 436 So.2d 1331 (La.Ct.App.1983). Under this act and pertinent regulations, the bank is permitted, during the term of the loan, to charge a rate of interest equal to 5% in excess of the discount rate, including any surcharge on ninety-day commercial paper, in effect at the Federal Reserve Bank in Atlanta, Georgia. 12 U.S.C. § 86a(a). There is no suggestion that the interest charged by Flagship exceeded the interest ceilings authorized by the federal act and regulations.
Mr. and Mrs. Brann, while conceding the foregoing, argue that Flagship waived its right to charge the federally-sanctioned interest by including in the note a provision that stated, "this note shall be governed by the laws of the State of Florida." We see no merit in this contention.
Florida courts have held that 12 U.S.C. sections 85 and 86, pre-empt state law as to the remedy where a national bank is involved in charging a rate of interest usurious under...
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