Council Plaza Redevelopment Corp. v. Duffey

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

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.

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 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:

(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, obsolescence and other proper reserves.'

Section 353.150. '1. Any urban redevelopment corporation may borrow funds and secure the repayment thereof by mortgage which shall contain reasonable amortization provisions and shall be a lien upon no other real property except that forming the whole or a part of single development area. (Emphasis added.)

'2. Certificates, bonds and notes, or part interest therein, or any part of an issue thereof, which are secured by a first mortgage on the real property in a development area, or any part thereof, shall be securities in which all the following persons, partnerships, or corporations and public bodies or public officers may legally invest the funds within their control: * * *'

Directing our attention to the ultimate problem, we find only one direct reference to 'rate of interest' in Chapter 353. It is the last sentence of Section 353.030(10) which we, again, set out--'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.' The parties commendably have focused their arguments on the proper interpretation of this one sentence, but, even though each has considered it as grammatically written and in the context of not only this specific section but also the entire chapter, they have reached directly opposite conclusions. Since a matter of interpretation is involved, fairness demands that we recognize the approach to the solution used by all parties. With every effort being made to preserve the theory of their arguments, we outline those presented.

Plaintiff (borrower) seeks to sustain its position primarily upon what it calls the 'clear language of the statute itself.' It is argued that the phraseology used is not cryptic nor are the words susceptible of duplicitious interpretation; and being clear and unambiguous, the language must be given its full effect. Stated otherwise, it contends this Court 'must give effect to the statute as it is written * * *' It is submitted that the key word used is 'debt,' because it is the specific thing upon which the restrictive six percent interest limitation is imposed. From this premise, plaintiff suggests the loan contemplated will certainly create a debt of the corporation whether the word 'debt' itself is accepted within the connotation of its dictionary definition or its plain and everyday meaning. Further argument is made that this interpretation of Section 353.030(10) is consistent with the other sections quoted. Significance is placed on the wording of Section 353.150(1) in that it is the '* * * mortgage which shall contain reasonable amortization provisions,' as distinguished from the debt itself. Since a mortgage debt is not accorded any different treatment than any other debt, obviously Section 353.030(10) is applicable. For accuracy we quote plaintiff's contention on another point. It is--'* * * paragraph 2 of Section 353.150 treats as one general group all 'certificates, bonds and notes' which are secured by a first mortgage on the redevelopment property. At the same time, Section 353.030(10) specifically mentions any 'bonded or other debt' as being subject to the six per cent interest limitation. Hence...