Council Plaza Redevelopment Corp. v. Duffey, No. 54153

• Court: United States State Supreme Court of Missouri
• Writing for the Court: MORGAN
• Citation: 439 S.W.2d 526
• Docket Number: No. 54153
• Decision Date: 14 April 1969
• Parties: COUNCIL PLAZA REDEVELOPMENT CORPORATION, a Corporation, Appellant, v. Thomas J. DUFFEY et al., Respondents.

Page 526

439 S.W.2d 526 COUNCIL PLAZA REDEVELOPMENT CORPORATION, a Corporation, Appellant,
v.
Thomas J. DUFFEY et al., Respondents. No. 54153. Supreme Court of Missouri, En Banc. April 14, 1969.

Page 527

Merle L. Silverstein, Rosenblum & Goldenhersh, Clayton, for appellant.

Husch, Eppenberger, Donohue, Elson & Cornfeld, St. Louis, Harris, Burman & Silets, Chicago, Ill., for respondents.

Elliot William Bergfeld, Jr., St. Louis, for amicus curiae.

MORGAN, Judge.

This is an action for declaratory judgment. Defendants prevailed in the trial court and plaintiff has appealed.

Plaintiff is an urban redevelopment corporation organized under the provisions of Chapter 353, RSMo 1959, V.A.M.S. Defendants are trustees of funds available for lending if secured by real estate mortgages or deeds of trust.

Plaintiff, in its corporate capacity, acquired certain land in the City of St. Louis for development of an appropriate urban redevelopment project. It obtained from defendants a written commitment for the permanent financing of the project. The loan was to be in the amount of $5,000,000.00, at an annual interest of 6 1/2%, payable in two hundred forty consecutive monthly installments of principal and interest, if secured by a first deed of trust on the project property. Plaintiff, in reliance upon the commitment, obtained temporary financing and completed the improvements on its land. While perfecting the permanent loan, a dispute developed between the parties as to the legality of plaintiff paying interest in excess of 6% per annum in view of the provisions of Chapter 353. A further complication arose when it was found that no title insurance company would issue a mortgage guarantee policy, as required by the commitment letter, so long as an interest rate in excess of 6% per annum was required. By stipulation the parties have mutually agreed: (1) that current rates of interest on real estate loans are in excess of six percent, and (2) that the rate of interest to be charged on this permanent loan will be the lesser of (a) 6 1/2% as set forth in the commitment letter or (b) the highest lawful rate plaintiff

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can pay under the provisions of Chapter 353. We are asked to determine the latter, and we find that in so doing a justiciable controversy will be resolved. City of Joplin v. Jasper County, 349 Mo. 441, 161 S.W.2d 411. In addition, one other preliminary observation has been made. The disputed one-half percent per annum interest on the contemplated loan over a twenty-year period makes a differential of approximately $250,000.00. No prepayment provision authorized could reduce the amount in controversy to a sum less than $15,000.00. Jurisdiction is in this Court.

The General Assembly, acting under the authority of Article VI, Section 21, and Article X, Section 7, of the 1945 Constitution of Missouri, V.A.M.S., enacted Chapter 353. The obvious objective was to involve private enterprise in the monumental task of eliminating urban blighted areas and the inevitable social ills flowing therefrom. This introduction of the private sector of the economy into activities generally recognized as governmental functions was recently subjected to a multiple pronged attack in Annbar Associates v. West Side Redevelopment Corporation, Mo., 397 S.W.2d 635, and this Court, en Banc, upheld the constitutionality of the challenged provisions of Chapter 353 in a most comprehensive and definitive opinion by Judge Henley. See also State on Inf. of Dalton, Attorney General v. Land Clearance for Redevelopment Authority of Kansas City, Mo., 364 Mo. 974, 270 S.W.2d 44, and Land Clearance for Redevelopment Authority of City of St. Louis v. City of St. Louis, et al., Mo., 270 S.W.2d 58.

As somewhat of a sequel to the cases just cited, the issue here drawn creates one limited question, i.e., does Section 353.030(10) establish six percent per annum as the maximum rate of interest payable by an urban redevelopment corporation on any indebtedness created by it? We necessarily set out all provisions of Chapter 353, omitting titles, pertinent to that question and mention that the terminology used was designed to outline the mandatory provisions of such a corporation's 'articles of agreement.'

Section 353.020(6): "Mortgage' shall mean a mortgage, trust indenture, deed of trust, building and loan contract, or other instrument creating a lien on real property, to secure the payment of an indebtedness, and the indebtedness secured by any of them.'

Section 353.030(10): 'A provision that in the event that income debenture certificates are issued by the corporation, the owners thereof shall have the same right to vote as they would have if possessed of certificates of stock of the amount and par value of the income debenture certificates held by them. The articles may provide for the retirement of income debenture certificates or preferred stock of the corporation as and when there shall be funds available in the treasury of the corporation from the receipt of amortization or sinking fund in installments for that purpose. Interest shall not be paid by the corporation upon such income debenture certificates or upon any bonded or other debt of the corporation in excess of six per cent per annum.' (Emphasis added.)

Section 353.030(11): '* * * that the stockholders of the corporation shall when they subscribe to and receive the stock thereof, agree that the net earnings of the corporation shall be limited to an amount not to exceed eight per cent per annum of the cost to such corporation of the redevelopment project including the cost of the land, or the balances of such cost as reduced by amortization payments; provided, that the net earnings derived from any redevelopment project shall in no event exceed a sum equal to eight per cent per annum upon the entire cost thereof. Such net earnings shall be computed after deducting from gross earnings the following:

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(a) All costs and expenses of maintenance and operation;

(b) Amounts paid for taxes, assessments, insurance premiums and other similar charges;

(c) An annual amount sufficient to amortize the cost of the entire project at the end of the period, which shall be not more than sixty years from the date of completion of the project * * *'

Section 353.100. 'No urban redevelopment corporation shall pay any interest on its income debentures or dividends on its stock during any dividend year unless there shall exist at the time of such payment no default under any amortization requirement with respect to its indebtedness, nor unless all accrued interest, taxes and other public charges shall have been duly paid or reserves set up for the payment thereof, and adequate reserves provided for depreciation,...