Levey v. Roosevelt Federal Sav. and Loan Ass'n of St. Louis, No. 34857

• Court: Missouri Court of Appeals
• Writing for the Court: McMILLIAN; SMITH, P.J., and CLEMENS
• Citation: 504 S.W.2d 241
• Decision Date: 27 December 1973
• Docket Number: No. 34857
• Parties: Daniel F. LEVEY and The Dan Levey Company, Inc., a corporation, Respondents-Plaintiffs, v. ROOSEVELT FEDERAL SAVINGS AND LOAN ASSOCIATION OF ST. LOUIS et al., Appellant-Defendant. . Louis District, Division Two

Page 241

504 S.W.2d 241 Daniel F. LEVEY and The Dan Levey Company, Inc., a
corporation, Respondents-Plaintiffs,
v.
ROOSEVELT FEDERAL SAVINGS AND LOAN ASSOCIATION OF ST. LOUIS
et al., Appellant-Defendant. No. 34857. Missouri Court of Appeals, St. Louis District, Division Two. Dec. 27, 1973.

Page 243

Millar, Schaefer, Ebling & Wallace, Samuel C. Ebling, John B. Lewis, St. Louis, for appellant-defendant.

Gray, Friedman & Ritter, C. Marshall Friedman, St. Louis, for respondents-plaintiffs.

McMILLIAN, Judge.

This is an appeal by defendant Roosevelt Federal Savings and Loan Association, hereinafter referred to as Roosevelt, from a judgment entered by the Circuit Court of the City of St. Louis, Missouri, for $25,200.00 in favor of plaintiffs, Daniel F. Levey and The Dan Levey Company, Inc., a corporation, hereinafter referred to as Dan Levey and Levey Company respectively. At the close of plaintiffs' case, the Court sustained a motion for a directed verdict by a second defendant, New York Life Insurance Company, a corporation, hereinafter referred to as New York Life.

Roosevelt claims that the trial court erred (1) in finding that Levey Company had the capacity to sue, (2) in permitting a joinder of Roosevelt and New York Life as party defendants, (3) in failing to sustain Roosevelt's motion for a dismissal at the close of plaintiffs' opening statement, (4) in the giving of instruction, and (5) in permitting an excessive jury verdict to stand. We affirm.

Plaintiffs' cause of action arose out of an involved financial arrangement incidental to the proposed construction of a 141 unit town house development. The town house development was to be constructed on five acres of unimproved real estate located generally at the intersection of Union Road and Reavis Barracks Road in South St. Louis County.

Page 244

On March 3, 1966, Levey, individually, entered into a contract with New York Life to borrow One Million Four Hundred Thousand Dollars ($1,400,000.00) as a 'permanent loan,' said loan to be secured by the proposed town house development. New York Life was paid a Fourteen Thousand Dollar ($14,000.00) security deposit to be kept by it as liquidated damages in the event New York Life did not acquire the permanent loan. New York Life's commitment required that the borrower obtain construction financing from an interimlender and that New York Life, the interim lender, and borrower Levey, enter into a 'buy-sell' agreement. The buy and sell agreement required the interim lender to agree to sell its construction loan deed of trust and note to New York Life at the completion of the town house development.

Subsequently on March 22, 1966, Levey Company entered into a contract with Roosevelt to borrow One Million Four Hundred Thousand Dollars ($1,400,000.00) for an interim 'construction loan.' This construction loan was also to be secured by the proposed town house development. Although all parties were required to sign the buy-sell agreement, Roosevelt refused to sign.

Earlier in November, 1965, Appliance Rental, Inc., entered into and paid Two Thousand Dollars ($2,000.00) for an earnest money contract for the purchase of the aforesaid unimproved five acres. Dan Levey was the president of Appliance Rentals, Inc.

The 'construction loan' is money borrowed to pay for the construction of proposed improvements to be built upon the parcel of land and is disbursed either in a lump sum or in accordance with the billing of the construction contractor to the developer. A construction loan normally is for a term consistent with the contemplated length of time required for construction and may range from twelve to twenty-four months. On the other hand, a 'permanent loan' is a long term loan which is usually amortized in equal monthly payments over a period of twenty to thirty years. The permanent loan becomes operative after the project is complete and the construction loan is at an end.

To effect an orderly transition from the 'construction loan' to the 'permanent loan' where the construction lender is not the permanent lender, a 'buy-sell' agreement must be employed. A 'buy-sell' agreement is a contract whereby the construction lender agrees to sell its note and deed of trust to the permanent lender for a stated amount of money which is presumably the principal amount of the note, together with interest and cost as specified in the contract.

Neither the contract to purchase the real estate nor either of the two contracts to borrow money was ever closed. According to the plaintiffs, the reason none of the contracts was closed was that because Roosevelt failed to enter into a buy-sell agreement with New York Life. On the other hand, Roosevelt blames Levey Company for its failure to enter into a 'construction disbursing agreement' pursuant to the terms of the contract to borrow money. By consensus of all the parties the action was presented to the trial court jury as one in contract.

On January 1, 1968, Levey Company's charter was forfeited by the Secretary of State. But on May 10, 1971, the Secretary of State rescinded the forfeiture and issued a Certificate of Rescission for Forfeiture pursuant to § 351.535, V.A.M.S. (1969) which provides:

'No corporation shall maintain an action in any court of this state . . . for the enforcement of a contract, made . . . after the forfeiture of its certificate . . . unless it shall have first been reinstated, or the forfeiture entered against it rescinded. . . .' (Emphasis added.)

Following the rescission, Levey Company joined with Dan Levey as party plaintiff.

Page 245

Roosevelt contends that the affidavit filed by Levey Company to obtain the Certificate of Rescission was fraudulent; therefore, Levey Company had no capacity to maintain an action. In support of its position Roosevelt refers us to § 351.535, RSMo V.A.M.S. (1969); Clark Estate Co. v. Gentry, 362 Mo. 80, 240 S.W.2d 124 (1951); and Schneider v. Best Truck Lines, Inc., 472 S.W.2d 655 (Mo.App. 1971).

No one quarrels with the proposition that a corporation may not maintain an action in any court of this state while it is either under suspension or after the forfeiture of its certificate of authority.

Both Clark, supra, and Schneider, supra, are distinguishable. The Clark case involved an action for fraud and misrepresentation. The charter of the corporation plaintiff had been in a state of forfeiture for sixteen years at the time it was joined as a party plaintiff. The court held that the subsequent rescission of forfeiture by the Secretary of State was not retroactive; consequently, the rescission did not toll the statute of limitations and the action was barred by the five year statute. The Schneider case involved an action against a corporation upon a promissory note and account. The charter of the defendant corporation was in forfeiture at the time of the transaction giving rise to the lawsuit and at the time of suit. In its answer the defendant corporation admitted its corporate existence and its capacity to be sued. The court held that because of its admission the defendant corporation was estopped from denying its corporate status on the occasions of its dealing with plaintiff.

In the instant case it is undisputed that the Levey Company's charter was in good standing at the time of all occurrences and transactions out of which this lawsuit arose. Moreover, it is undisputed that Levey Company was not made a party plaintiff until after the forfeiture had been rescinded and a Certificate of Rescission for Forfeiture issued.

Even if we were to assume that the Certificate of Rescission for Forfeiture was fraudulent, the question remains as to whether or not its validity may be attacked by Roosevelt in a collateral proceeding. In Boatmen's Bank v. Gillespie et al., 209 Mo. 217, 108 S.W. 74, 86 (1907), our Supreme Court stated:

'. . . Moreover, whatever may be the rule in other jurisdictions, we understand the law in this state to be that a certificate of incorporation issued by the Secretary of State is a final determination of the corporation's right to do business as such, and that thereafter the state only, by a direct proceeding, can challenge its corporate existence or its right to do business as a corporation, even though fraud should be practiced upon the Secretary of...