Coughenour v. Bates, 16338

• Court: Court of Appeal of Missouri (US)
• Writing for the Court: CROW
• Citation: 785 S.W.2d 291
• Parties: Ralph S. COUGHENOUR, Appellant, v. Harold Paul BATES and Thelma Bates, Respondents.
• Docket Number: No. 16338,16338
• Decision Date: 05 March 1990

Page 291

785 S.W.2d 291 Ralph S. COUGHENOUR, Appellant,
v.
Harold Paul BATES and Thelma Bates, Respondents. No. 16338. Missouri Court of Appeals,
Southern District,
Division One. March 5, 1990.

Page 292

Francis H. McClernon, Jr., Springfield, for appellant.

Jerry L. Reynolds, Ronald A. Conway, Jerry L. Reynolds and Associates, P.C., Springfield for respondent Harold Paul Bates.

No appearance for Thelma Bates.

CROW, Presiding Judge.

This appeal presents the issue of what rate of interest plaintiff Ralph S. Coughenour must pay defendants Harold Paul Bates and Thelma Bates under a contract for the purchase of real estate.

On March 20, 1982, the parties signed a "contract for deed" whereby plaintiff agreed to purchase a tract of real estate from defendants for $100,000. At time of closing plaintiff was to pay $12,500 in cash; the remaining $87,500 was to be "amortized in monthly payments over a term of 30 years." Payments were to commence May 1, 1982. The interest rate was fixed by the contract at ten percent per annum, which was to remain in effect "to and including the payment due April 1, 1984." The contract continued:

"Commencing with the monthly payment due May 1, 1984, and thereafter,

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the interest rate shall be adjusted to equal that rate of interest charged from time to time by the Federal Land Bank for real estate loans in the State of Missouri, and shall be adjusted contemporaneously with such changes in the Federal Land Bank rate, but in no event shall said rate of interest exceed Twelve and One-half Percent (12 1/2%) per annum. At such times as the rate of interest hereunder is adjusted to conform with the rate charged by the Federal Land Bank, the unpaid principal balance shall be re-amortized over the remaining unexpired period of the initial 30-year term and the amount of the monthly payment shall be adjusted accordingly."

The contract further provided that the tract was subject to a first deed of trust in favor of the Federal Land Bank, and that defendants would faithfully perform the terms of the deed of trust and satisfy any payment required thereunder as the same became due. When the full purchase price was ultimately paid by plaintiff to defendants, defendants were to convey the tract to plaintiff by warranty deed.

The evidence revealed that at the time the contract was signed the Federal Land Bank was charging all its borrowers the same rate of interest for real estate loans in Missouri. The Bank did, however, change the rate from time to time.

Plaintiff made the monthly payments to defendants as required by the contract through April 1, 1984.

On May 1, 1984, the interest rate being charged by the Federal Land Bank was 11 1/2 percent per annum. Commencing May 1, 1984, plaintiff, at the instance of defendants, increased the amount of his monthly payment to meet that rate.

On July 1, 1984, the Federal Land Bank raised the rate to 12 percent per annum. Commencing that date plaintiff, at the instance of defendants, increased the amount of his monthly payment to meet that rate.

On June 1, 1985, the Federal Land Bank raised the rate to 12 1/2 percent per annum. Commencing that date plaintiff, at the instance of defendants, increased the amount of his monthly payment to meet that rate.

On December 1, 1985, the Federal Land Bank began offering a "preferred pricing program" under which a borrower who had "60 percent ownership equity" in his assets as a whole and whose loan balance did not exceed 55 percent of the appraised value of the property securing the loan could qualify for an interest rate of 11 percent per annum. Borrowers who did not qualify for that rate continued to pay 12 1/2 percent per annum.

On August 1, 1986, the Federal Land Bank revised its interest rate structure to provide for three "tiers." A borrower whose equity in his assets as a whole was 20 percent or more and whose loan balance did not exceed 70 percent of the appraised value of the property securing the loan could qualify for the Tier I rate of 9 1/2 percent per annum. A borrower whose equity in his assets as a whole was 20 percent or more and whose loan balance did not exceed 80 percent of the appraised value of the property securing the loan could qualify for the Tier II rate of 11 percent per annum. Borrowers who did not apply for the Tier I rate or the Tier II rate, or who did not qualify for either rate, paid the Tier III rate of 12 1/2 percent per annum.

Plaintiff testified he first became aware that the Federal Land Bank no longer had a single interest rate in the summer of 1986 when he began getting "very unclear answers" upon phoning the Bank to inquire about the rate. Plaintiff recalled he contacted defendant Harold Paul Bates in August, 1986, and was informed by Bates that there "was a different rate structure" and that Bates was "signing some paperwork" to be forwarded to defendant Thelma Bates which "would reduce all of our rates." ¹

An employee of the Federal Land Bank testified that in September, 1986, the Bank sent defendants information about converting

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their loan from the "base rate" (Tier III) to a lower rate. From data submitted by defendant Harold Paul Bates the Bank employee determined defendants would have qualified for the Tier I rate. Defendant Thelma Bates, however, refused to sign the "conversion agreement."

Plaintiff testified that a month after he first contacted defendant Harold Paul Bates about the interest rates he (plaintiff) called Bates again and was told that he (Bates) had signed the papers but "Thelma had refused to sign." Plaintiff quoted defendant Harold Paul Bates as saying he could not argue with Thelma and that "we were all stuck at this 12 1/2 percent rate."

Plaintiff continued making monthly payments to defendants at an interest rate of 12 1/2 percent per annum, but commencing in September, 1987, he placed a notation on his checks that he was paying "under protest."

On December 14, 1987, plaintiff commenced this action by filing a petition praying the trial court to determine the interest rate the contract required plaintiff to pay defendants. ²

The cause was tried without a jury. The evidence showed among other things, that on July 1, 1988, by reason of a merger that need not be further detailed, the Federal Land Bank became Farm Credit Services of Southwest Missouri.

The trial court entered judgment providing, among other things:

"2. The interest rate called for in ... the parties' Contract for Deed is construed to be the base rate or the highest rate of interest charged on real estate loans by ... Farm Credit Services Of Southwest Missouri, but in no event shall said rate of interest exceed 12 1/2% per annum.

3. Based upon the Court's construction of the parties' Contract for Deed, the ... paragraph [establishing the interest rate commencing May 1, 1984] ... shall be construed as follows:

Commencing with the monthly payment due May 1, 1984, and thereafter, the interest rate shall be adjusted to equal the base rate or highest rate of interest charged from time to time by the Federal Land Bank, now Farm Credit Services of Southwest Missouri for real estate loans in the state of Missouri, and shall be adjusted contemporaneously with such changes in said rate, but in no event shall said rate of interest exceed 12 1/2% per annum. At such times as said rate is adjusted to conform with the base rate or highest rate of interest charged by the Federal Land Bank, now Farm Credit Services Of Southwest Missouri, the unpaid principle [sic] balance shall be re-amortized over the remaining unexpired period of the initial thirty-year term and the amount of the monthly payment shall be adjusted accordingly....

4. The 'base rate' as used herein shall mean the highest rate of interest charged by the Federal Land Bank now Farm Credit Services of Southwest Missouri, for real estate loans in the state of Missouri."

Plaintiff appeals, presenting one point. It reads:

"The Trial Court erred in holding that the 'interest rate charged by the Federal Land Bank for real estate loans in Missouri' is 'the base rate or the highest rate of interest charged on real estate loans by ... Farm Credit Services of Southwest Missouri' for the following reasons[.]"

Plaintiff sets forth five reasons; he designates them "A" through "E." We first consider reason "E" which reads:

"The court should have applied the law of V.A.M.S. Sec. 408.020 and applied a fixed rate of interest of 9% in that after the Federal Land Bank went to a Two tier system of interest rates, there was never any agreement on the interest rate

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that should be paid on the Contract for Deed."

Section 408.020, RSMo 1986, provides:

"Creditors shall be allowed to receive interest at the rate of nine percent per annum, when no other rate is agreed upon, for all moneys after they become due and payable, on written...