Garrett v. Citizens Sav. Ass'n, No. 32170

CourtCourt of Appeal of Missouri (US)
Writing for the CourtLOWENSTEIN
Citation636 S.W.2d 104
PartiesN. R. GARRETT, Maggie A. Garrett, Florence G. Meininger, Charles Garrett, Steve Garrett and Kay Garrett, Plaintiffs-Appellants, v. CITIZENS SAVINGS ASSOCIATION, Defendant-Respondent.
Docket NumberNo. 32170
Decision Date11 May 1982

Page 104

636 S.W.2d 104
N. R. GARRETT, Maggie A. Garrett, Florence G. Meininger,
Charles Garrett, Steve Garrett and Kay Garrett,
Plaintiffs-Appellants,
v.
CITIZENS SAVINGS ASSOCIATION, Defendant-Respondent.
No. 32170.
Missouri Court of Appeals, Western District.
May 11, 1982.
Motion for Rehearing and/or Transfer to Supreme Court Denied
June 29, 1982.

Page 106

George A. Spencer, Columbia, for plaintiffs-appellants.

Jerome W. Seigfreid, Louis J. Leonatti, Mexico, for defendant-respondent.

Before NUGENT, P. J., and TURNAGE and LOWENSTEIN, JJ.

LOWENSTEIN, Judge.

Plaintiffs-appellants N. R. Garrett, et al. (plaintiffs) 1 appeal the judgment of the trial court awarding them $953.21 in their action to recover usurious interest paid on their loan of $200,000.00 from defendant-respondent Citizens Savings Association (defendant). It is undisputed that usurious interest was exacted by defendant on the loan in question. The questions on this appeal concern the trial court's determination as to (1) what payments made to defendant were usury (2) what amount of that usury is recoverable by plaintiffs and (3) what additional amounts may be recovered as interest on the award. Plaintiffs also contend that the award of $500.00 for attorney's fees was inadequate.

On September 25, 1969, N. R. Garrett, his wife Maggie, N. R. Garrett, Jr. and his wife Florence (plaintiffs-borrowers) borrowed $200,000.00 from defendant with interest at 8% and payable in 144 monthly payments of $2,165.00. Payments were to begin January 1, 1970 and end October 1, 1981. This loan was evidenced by a deed of trust on N. R. Garrett's farm containing approximately 176 acres, three structures and having an appraised value, less encumbrances, in excess of the $200,000.00 loan. On October 2, 1969, defendant issued two drafts to the borrowers, one in the amount of $175,000.00 and the other in the amount of $25,000.00. The $175,000.00 was deposited by N. R. Garrett in his personal checking account. The $25,000.00 was endorsed by the borrowers and then kept by defendant in a non-interest earning escrow account as a "compensating balance." The loan agreement provided that "(t)his $25,000.00 shall be held by this association and cannot be withdrawn until the outstanding principal balance of the loan has been reduced to $25,000.00." At this same time, N. R. Garrett gave defendant a check for $4,969.25 for miscellaneous closing expenses, which included a $1,750.00 "Initial service charge" and a $2,000.00 charge denoted "PREMIUM ON LOAN 1%."

In their petition, plaintiffs alleged and prayed that they were entitled to: (1) $9,532.07 for the excessive interest which they paid on the $25,000.00 compensating balance, which they claimed was not actually borrowed nor received by them; (2) the $1,750.00 initial service charge and $2,000.00 premium paid to defendant, which they contended was merely a device used to obtain additional usury; and (3) prejudgment interest in the amount of "the highest legal interest from November 2, 1976, the date of demand by the served petition." 2

At trial, plaintiffs offered evidence as set out below to support their allegations. Defendant offered no testimony, but cross-examined plaintiffs' witnesses concerning how the proceeds of the loan were distributed and what persons or entities made the payments on the loan. At the time of the loan, N. R. Garrett and N. R. Garrett, Jr. were the sole officers and directors of two Missouri "Subchapter S" corporations, City Quarries, Inc. and Missouri Concrete Company, and each owned 50% of the stock in those corporations. On the loan application, N. R. Garrett, Jr. stated that the proceeds of the loan were to be used for "operating money for businesses," and the testimony

Page 107

indicated that $126,452.30 of those proceeds were advanced to either City Quarries or Missouri Concrete for working capital. The remainder of the proceeds were used to pay off personal debts of N. R. Garrett and his son and for other personal expenses.

Only five of the payments on the loan were made personally by N. R. Garrett, forty-nine were made by either of the two corporations wholly owned by N. R. Garrett and his son, and the source of two payments were said to be "unknown". The total interest paid on the loan was $65,920.42, of which $57,045.54 was paid by the corporations, $6,502.54 by N. R. Garrett and $2,372.34 by the source "unknown". The payments made by the corporations were charged to N. R. Garrett on the corporations' books in order to reduce the corporations' indebtedness to him (money he advanced to the corporations from the proceeds of the loan). All of the interest deductions were taken and reported by the corporations on their income tax returns.

By letter of July 10, 1974, defendant informed N. R. Garrett that the $25,000.00 being held in escrow could be credited against the outstanding balance of his loan. At that time the balance of the loan was $142,559.93. The following day, N. R. Garrett informed defendant to go ahead with the credit, which the association did on July 12, 1974. The loan was paid in full on February 23, 1976. Plaintiffs filed their petition on November 2, 1976.

After bench trial and after request for findings of fact and conclusions of law, the court found:

1. Plaintiffs had made a loan application for $200,000.00, the proceeds to be used for business purposes.

2. A $200,000.00 note with interest at 8% was executed along with a deed of trust by plaintiffs. Pursuant to a settlement statement, plaintiffs paid directly to defendant $4,969.25, which included $3,750.00 comprised of an initial service charge and a premium of 1%.

3. $25,000.00 of the loan was not available to plaintiffs but was kept in a non-interest bearing account (compensating balance) with the defendant Citizens Savings Association with the result that the effective rate of interest charged on the loan went from 8 to 9.15% and that $9,532.07 interest resulted from the compensating balance between the first payment on January 19, 1970 and July 12, 1974 the date the defendant credited the loan balance with the $25,000.00.

4. That the lawful rate of interest on this loan pursuant to 408.050, RSMo was 8%.

5. Of the 56 payments made during the period of the compensating balance 40 were made by corporations under plaintiffs' control. Plaintiffs made 5 payments and the source of 2 payments was unknown.

6. Plaintiffs advanced $126,452.30 of the $175,000.00 loan to the two corporations in question and the funds were used by those corporations for business purposes.

7. On July 10, 1974 defendant notified plaintiffs that plaintiffs could receive $25,000.00 or have this amount (compensating balance) applied to the loan.

The trial court concluded that until the crediting of the compensating balance, excess interest of $9,532.07 was paid, but that only 10% of that amount or $953.21 was paid by plaintiffs. The court stated that the portion of the usury paid by the corporations (90%) would not be recoverable by the individual plaintiffs. Plaintiffs were awarded the $953.21 and $500.00 attorney's fees.

There is no question that the $25,000.00 compensating balance kept by defendant until July 12, 1974 made the loan usurious. The giving back by defendant only stopped the continuation of usury from July 12th and did nothing to correct the usurious interest collection from the date of the first payment until July 12, 1974. This amount retained by defendant increased the interest rate on the amount actually loaned to the borrowers from the agreed upon 8% to 9.15%. At the time of the loan, § 408.030, RSMo 1969 was in effect, which stated:

The parties may agree, in writing, for the payment of interest, not exceeding eight

Page 108

percent per annum, on money due or to become due upon any contract.

Section 408.050, RSMo 1969 further provided:

No person shall directly or indirectly take, for the use or loan of money ... above the rates of interest specified in sections 408.020 to 408.040 for the forbearance or use of one hundred dollars, or the value thereof, for one year.... Any person who shall violate the first going prohibition of this section shall be subject to be sued, for any and all sums of money paid in excess of the principal and legal rate of interest of any loan, by the borrower ... and shall be adjudged to pay the costs of suit, including a reasonable attorney's fees to be determined by the court.

Thus, the trial court was correct in finding that the $9,532.07 exacted as interest on the escrowed money was usurious. See Grundel v. Bank of Craig, 515 S.W.2d 177 (Mo.App.1974); see generally 92 A.L.R.3d 769, 775. The trial court's conclusions of law made no mention, however, of the $1,750.00 service charge or $2,000.00 premium paid by plaintiffs, although plaintiffs pleaded, prayed and presented evidence on these charges as well. Nor, did the trial court make any finding or conclusion as to the prejudgment interest requested in the petition. Our review in a court tried case is governed by Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976).

I.

Plaintiffs first contend that the trial court erred in finding that plaintiffs were entitled to recover only 10% of the $9,532.07 denominated as usurious interest resulting from the $25,000.00 compensating balance.

The trial court cited to § 408.050 for its conclusion that plaintiffs were only entitled to the 10% of the usurious interest they had paid. That section says that "any person who shall violate (§ 408.030) ... shall be subject to be sued, for any and all sums of money paid in excess of the principal and legal rate of interest, by the borrower." (Emphasis added.) The trial court read that section to limit recovery of usurious interest to those amounts actually paid by the borrower. This conclusion was reached even though the interest not paid by the individual borrowers was paid by their wholly-owned corporations, which in turn charged these payments to...

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5 practice notes
  • City of Aurora v. Spectra Commc'ns Grp., LLC, No. SC 96276
    • United States
    • United States State Supreme Court of Missouri
    • December 24, 2019
    ...accrued but applied the amended rate only prospectively from the effective date of the amendment. See Garrett v. Citizens Sav. Ass'n , 636 S.W.2d 104, 112 (Mo. App. 1982) ; Cotton v. 71 Highway Mini-Warehouse , 614 S.W.2d 304, 308 (Mo. App. 1981).In this case, prejudgment interest accrued a......
  • Crawford v. Crawford, No. WD
    • United States
    • Court of Appeal of Missouri (US)
    • March 9, 1999
    ...In view of the relevant factors in § 452.355 that the attorney fee award should be $2,500. Garrett v. Citizens Savings Association, 636 S.W.2d 104, 112 (Mo.App.1982). Leon had superior economic resources, while Mary's economic means were slender. This court has the power to enter the judgme......
  • Exch. Bank of Mo. v. Gerlt, No. WD 74206.
    • United States
    • Court of Appeal of Missouri (US)
    • May 22, 2012
    ...Cumulative Supplements, the version of the statutes in effect at the time of the events in question. See Garrett v. Citizens Sav. Ass'n, 636 S.W.2d 104, 109 (Mo.App. W.D.1982). 3. The Bank does not dispute that it failed to provide the notice of sale required by section 400.9–611 and, conse......
  • U.S. Life Title Ins. Co. v. Brents, No. WD
    • United States
    • Court of Appeal of Missouri (US)
    • February 7, 1984
    ...its position. However, this court has quite recently ruled upon the question in the opposite way. In Garrett v. Citizens Savings Ass'n, 636 S.W.2d 104, 108-109 (Mo.App.1982), it was held that a statute (§ 408.035, RSMo 1978), which removed a certain kind of loan ("a business loan of $5......
  • Request a trial to view additional results
5 cases
  • City of Aurora v. Spectra Commc'ns Grp., LLC, No. SC 96276
    • United States
    • United States State Supreme Court of Missouri
    • December 24, 2019
    ...accrued but applied the amended rate only prospectively from the effective date of the amendment. See Garrett v. Citizens Sav. Ass'n , 636 S.W.2d 104, 112 (Mo. App. 1982) ; Cotton v. 71 Highway Mini-Warehouse , 614 S.W.2d 304, 308 (Mo. App. 1981).In this case, prejudgment interest accrued a......
  • Crawford v. Crawford, No. WD
    • United States
    • Court of Appeal of Missouri (US)
    • March 9, 1999
    ...In view of the relevant factors in § 452.355 that the attorney fee award should be $2,500. Garrett v. Citizens Savings Association, 636 S.W.2d 104, 112 (Mo.App.1982). Leon had superior economic resources, while Mary's economic means were slender. This court has the power to enter the judgme......
  • Exch. Bank of Mo. v. Gerlt, No. WD 74206.
    • United States
    • Court of Appeal of Missouri (US)
    • May 22, 2012
    ...Cumulative Supplements, the version of the statutes in effect at the time of the events in question. See Garrett v. Citizens Sav. Ass'n, 636 S.W.2d 104, 109 (Mo.App. W.D.1982). 3. The Bank does not dispute that it failed to provide the notice of sale required by section 400.9–611 and, conse......
  • Wellner v. Director of Revenue
    • United States
    • Court of Appeal of Missouri (US)
    • April 25, 2000
    ...law since the statute increases the penalty after the conduct to be penalized has already occurred. Garrett v. Citizens Sav. Ass'n, 636 S.W.2d 104, 110-11 (Mo. App. 1982). Third, section 302.536 is silent on the issue of retrospective application, so it is presumed that the legislature did ......
  • Request a trial to view additional results

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