Financial Federal Sav. and Loan Ass'n v. Burleigh House, Inc.

• Decision Date: 12 November 1974
• Docket Number: No. 73--1195,73--1195
• Citation: 305 So.2d 59
• Parties: FINANCIAL FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellant, v. BURLEIGH HOUSE, INC., Appellee.
• Court: Florida District Court of Appeals

Page 59

305 So.2d 59

FINANCIAL FEDERAL SAVINGS AND LOAN ASSOCIATION, Appellant, v. BURLEIGH HOUSE, INC., Appellee.

No. 73--1195.

District Court of Appeal of Florida, Third District.

Nov. 12, 1974.

Rehearing Denied Jan. 9, 1975.

Sams, Anderson, Alper & Post, Sam Daniels, Miami, for appellant.

Lapidus & Hollander, Miami, for appellee.

Before PEARSON and HAVERFIELD, JJ., and CARROLL (Ret.), Associate Judge.

HAVERFIELD, Judge.

Defendant-appellant seeks review of an adverse final judgment awarding plaintiff-appellee $652,169.24 plus costs in this usury action.

In 1968, plaintiff-appellee, Burleigh House, Inc., the developer of a 360 unit highrise condominium building on Miami Beach, Florida was approached by the defendant-appellant, Financial Federal Savings and Loan Association (hereinafter referred to as Financial Federal), which offered both construction and permanent financing for the project. Initially the parties attempted to negotiate a single loan for both the construction and permanent financing of the building. However, this scheme presented recording and other difficulties and at the request of defendant Financial Federal, plaintiff applied for a construction loan in the total principal sum of $7,800,000 and deposited a stand-by fee of $39,000. On January 6, 1969 Financial Federal issued its commitment letter to consummate a loan in the principal amount of $7,800,000 at an interest rate of 8 1/2% Per annum, 8% Per annum during the construction period which originally covered a maximum period of 13 months from the date of execution of the mortgage. The letter further provided that the loan was to be made up of 360 individual mortgage loans totaling the aggregate sum of $7,800,000. Of this sum, $7,000,000 would be placed in a construction escrow fund and the remaining $800,000 would be held in reserve by Financial Federal for use in closing and disbursing on the individual condominium mortgage loans which would be assumed by qualified purchasers. Plaintiff signed the commitment letter and paid an additional $39,000 stand-by fee therefor. Prior to closing, plaintiff on February 18, 1969 sent to defendant Financial Federal a letter wherein it requested an extension of the construction period from 13 to 18 months. At the closing on February 26, 1969 plaintiff signed a mortgage and note which was prepared by defendant Financial Federal and which provided that plaintiff promised to pay Financial Federal $7,800,000 for an 18 month construction loan with the entire unpaid principal due and payable on September 1, 1970. The interest thereon was 8% Per annum for the first 13 months beginning March 1, 1969, 8.5% Per annum thereafter until September 1, 1970. Defendant Financial Federal also prepared on February 26, 1969 a construction loan agreement between itself, plaintiff, as owner, and the general contractor. This agreement reflected the construction of the building would take 18 months at an estimated sum of $7,000,000 which would be disbursed as the construction proceeded. Financial Federal charged plaintiff.$390,000 as closing costs on the loan.

Construction commenced in April 1969 and was still in progress on April 1, 1970. Nevertheless, over plaintiff's protests and despite the fact that as of April 1, 1970 less than half the funds were drawn out of the construction account, Financial Federal began charging the full interest on the $7,000,000. Effective September 1, 1970 when the 18 month note matured, plaintiff then executed 344 ¹ individual notes and mortgages for a term of 25 years for the permanent financing on the individual units. These mortgages were then assumed by the condominium purchasers. Plaintiff made the last payment of interest on the construction loan on September 30, 1970 and the construction mortgage was satisfied in December 1970. On September 25, 1972 plaintiff filed against the defendant Financial Federal a complaint seeking damages for usury wherein it alleged that Financial Federal had retained control over most of the $7,000,000 construction fund from which it had drawn only approximately $2,000,000 by April 1, 1970; nevertheless, Financial Federal charged plaintiff interest on the entire $7,000,000 resulting in an effective rate of interest in excess of 15% Per annum. In response thereto, Financial Federal raised as a defense the Statute of Limitations and at trial contended that the 18 month construction loan and subsequent permanent mortgages in effect were one loan and, therefore, the.$390,000 closing costs paid by the plaintiff should be spread over a 26 1/2 year period. ² The cause proceeded to a nonjury trial at the conclusion of which the trial judge found inter alia: (1) that time as well as amount of principal is a factor in the calculation of interest and the retention of a substantial portion of a loan without a corresponding abatement of interest on the amount retained has the effect of substantially increasing the per centum of interest (Williamson v. Clark, Fla.App.1960, 120 So.2d 637); (2) that Financial Federal over plaintiff's objections continued to allow interest to run on the undisbursed portion of the loan; (3) that the effective rate of interest on the 18 month construction loan was in excess of 15% And accountants for both parties so testified; (4) that defendant's actual expenses in closing were $66,812 and the balance of the.$390,000 charged as closing costs actually was interest; (5) that the construction loan and the permanent mortgages were separate and distinct loans and the closing costs clearly, by agreement of the parties, were charges for the construction loan alone; (6) that plaintiff's suit was filed within the applicable two year Statute of Limitations period; and (7) that defendant was not exempt from Florida's usury laws. Thereupon, the trial judge entered judgment in favor of plaintiff in the sum of $652,169.24 plus costs. Defendant Financial Federal Appeals therefrom.

We first turned our attention to appellant's argument that the trial court erred in holding that the instant action was brought within the two year period of the applicable Statute of Limitations.

A borrower at a usurious interest is given a cause of action for the imposition of a penalty or forfeiture upon the occurrence of a payment, and it is from the date of such a payment the Statute of Limitations begins to run. Wenck v. Insurance Agents Finance Corp., Fla.App.1958, 99 So.2d 883; Vance v. Florida Reduction Corporation, Fla.App.1972, 263 So.2d 585. The trial judge found that plaintiff-appellee by check dated September 28, 1970 and received on September 30, 1970 made the last interest payment on the...