Lucas v. Beco Homes, Inc.

• Decision Date: 13 March 1973
• Docket Number: No. 34537,34537
• Citation: 494 S.W.2d 417
• Parties: Madison LUCAS et al., Plaintiffs-Respondents, v. BECO HOMES, INC., et al., Defendants, Delta Loan and Finance Company, Defendant-Appellant. . Louis District
• Court: Missouri Court of Appeals

Page 417

494 S.W.2d 417

Madison LUCAS et al., Plaintiffs-Respondents, v. BECO HOMES, INC., et al., Defendants, Delta Loan and Finance Company, Defendant-Appellant.

No. 34537.

Missouri Court of Appeals, St. Louis District.

March 13, 1973.

Motion for Rehearing or Transfer Denied April 6, 1973.

Application to Transfer Denied June 11, 1973.

Millsap, Weil & Eyerman, Clayton, for defendant-appellant.

Biggs, Curtis, Casserly & Barnes, Francis A. Casserly, Clayton, for plaintiffs-respondents.

SIMEONE, Judge.

This is an appeal by defendant-appellant Delta Loan and Finance Company, (hereinafter Delta), from a judgment of the Circuit Court of the City of St. Louis entered November 30, 1971. The judgment of the trial court decreed the following: (1) that the plaintiffs recover the sum of $88.55 representing the excess paid on a loan to the plaintiffs plus lawful interest at 6%, together with a fee for the plaintiffs' attorney in the amount of $1,400.00; (2) that the plaintiffs were entitled to recover payments made on the loan since the date of the trial, May 11, 1971; (3) that Delta be enjoined from making any further collections on the loan made by plaintiffs, negotiating the note, or from foreclosing on any security held by Delta with respect to the loan. Delta was directed to deliver to plaintiffs the note signed by them, and to execute and deliver to the plaintiffs a deed to certain real estate originally owned by plaintiffs. The judgment dismissed Delta's counterclaim praying for the balance due on the note. After a motion to amend judgment or for a new trial was overruled on February 4, 1972, Delta perfected its appeal here. We affirm the judgment, order and decree of the trial court.

In March of 1966 Madison and Lora Lucas, husband and wife, saw an advertisement relating to the sale of some surplus homes at Scott Air Force Base near Belleville, Illinois, by Beco Homes, Inc. Stephen Coleman was the president of Beco. Mr. and Mrs. Lucas went to Scott Air Force Base and discussed the purchase of a two-bedroom unit with Mr. Coleman. They entered into an agreement to buy one of these homes from him. According to Coleman the purchase price of the home was $1,995.00. Together with sales tax of $79.80 and a dismantling charge of $140.00 the total price came to $2,214.80. Beco also offered to make a construction loan to Madison and Lora Lucas in the amount of $1,000.00 to aid them in the assembly of the dismantled building when it was delivered to the Lucas' property in Jefferson County, Illinois. ¹

According to the invoice the total agreed price amounted to $3,214.80, including the construction loan. $14.80 of this total was paid in cash, leaving a balance of $3,200.00 to be financed. On March 12, 1966, Madison and Lora Lucas, together with the joint owners of the Jefferson County property, Julius and Hazel Watkins, signed the following documents: (1) a note payable to Beco Homes, Inc. in the amount of $5,411.17; (2) a Quit-Claim Deed to property in Jefferson County, Illinois, which when recorded on April 25, 1966, was to be forwarded to Charles G. Bollinger, Delta Loan and Finance Company, Waynesville, Mo.; and (3) a Bond for Deed signed by Coleman, president of Beco, and the plaintiffs, by which the Jefferson County property would be conveyed back to the plaintiffs if they made payments on the loan. The Quit-Claim Deed and the Bond for Deed were both to secure the payment of the note. The note was to be paid in 84 consecutive installments of $64.42 each commencing on June 5, 1966.

Delta had an arrangement with Beco 'to do the financing on the sale of these homes', and it was agreed that when the homes were sold, and if they were sold on credit, the paper would first be offered to Delta. In due time credit reports were requested on Mr. & Mrs. Lucas and Mr. & Mrs. Watkins, presumably by Beco. On April 22, 1966, Coleman wrote to Charles G. Bollinger of Delta enclosing the note and credit report. In due time Delta wrote to the dealer, Beco, acknowledging receipt of the documents signed by the 'purchaser' and showing how the total amount of the note ($5,411.17) was disbursed. The sheet that Delta sent to Beco shows the 'time differential' to be $1,251.44, ² dealer reserve $901.07, credit life insurance $378.77, a check to Delta in the amount of $1,880.00 and two checks in the amount of $500.00 payable to the dealer, Beco, presumably representing the $1,000.00 construction loan.

Wayne Anderson, the subsequent manager of Delta's Waynesville office, testified that a desk pad dated April 22, 1966, showed that Bollinger had figured Delta's discount price to be $1,251.44. ³ While the amount borrowed by the plaintiffs was $3,200.00, the amount of the note was $5,411.17. The note was negotiated to Delta on April 22, 1966, and Delta discounted the note at 5% add-on interest for a charge of $1,251.44. The balance of the proceeds ($4,159.73) was disbursed by Delta as follows:

1. check dated April 28, 1966, in the amount of $1,880.00 payable to Delta for existing indebtedness of Beco;

2. check dated April 28, 1966, in the amount of $500.00 payable to Beco as part of the $1,000.00 construction loan advance to plaintiffs;

3. Check dated April 28, 1966, in the amount of $500.00 payable to Beco for construction loan;

4. check dated April 29, 1966, in the amount of $378.77 for credit life insurance on the life of Jolius Watkins payable to Magnolia Insurance Agency; and

5. $901.07 retained by Delta as part of 'dealer reserve' to be held for Beco until the total indebtedness was satisfied.

The life insurance policy was purchased because it was Delta's policy not to purchase an installment note unless the life of the maker was insured.

An authorization to purchase life insurance (unsigned) in the name of Julius Watkins at a total premium of $378.77 was introduced and life insurance was purchased. This was 'customary' because life insurance was mandatory on every contract. There is no evidence that Watkins knew anything about this policy.

Sometime in May the home was delivered to the plaintiffs' property in Jefferson County, Illinois, but Beco never gave the plaintiffs the $1,000.00 construction loan for the assembly of the home. The building was never assembled but remained on the property exposed to the weather and deteriorated.

The ledger sheets of Delta on the plaintiffs' account show that the borrower was Julius Watkins and the date of the note was April 25, 1966. The ledger sheets also show the principal amount of the loan to be $3,258.77 ($1,880.00 plus $1,000.00 construction loan and $378.77 life insurance) and the amount of the interest to be $2,152.51 ($1,251.44 discount plus $901.07 dealer reserve). The ledger sheets show the date of the first payment was June 5, 1966, and the maturity date was May 5, 1973. The installments were to be paid in 84 monthly installments of $64.42 each. Plaintiffs made 59 payments totaling $3,800.78.

Plaintiffs filed an amended petition on December 31, 1970, in three Counts. Count I alleged a conspiracy between Delta and Beco; Count III sought the excess usurious interest and attorney's fee; and Count IV prayed that the defendants be enjoined from collecting any further payments and cancel the balance due. Count II which was based on a claim under Illinois law was dismissed.

After a hearing on May 11, 1971, the trial court rendered the judgment on November 30, 1971, that the plaintiffs were entitled to recover all payments made by them in excess of $3,712.20, representing the principal and legal interest at 6% amortized over a five-year period. Thus, judgment was rendered in the amount of $88.55 together with the attorney's fee of $1,400.00 and to the extent that if any payments were made after May 11, 1971, the plaintiffs were entitled to recover such payments. ⁴ In holding that Delta was a holder in due course, the court also decreed that Delta and Beco be enjoined from making any further collections on the note of March 12, 1966, and from negotiating the note or foreclosing any security held by them. Delta was also ordered to execute and deliver to Mr. & Mrs. Lucas a deed to the Jefferson County property as per the Bond for Deed. The court found that although plaintiffs pleaded a conspiracy in Count I, there was no evidence of any conspiracy or fraudulent scheme.

On this appeal the appellant Delta contends: (1) the trial court erred in finding Delta charged usurious interest because the transaction in which Delta was involved was in fact a 'purchase money contract' or a time differential sale to which the usury statutes are inapplicable; (2) usury may not be 'charged' against, or be a defense to, a holder in due course; and (3) since the plaintiffs had made payments for a long period of time and did not bring suit until they had been paying on the note for more than two years, they are estopped from raising the issue of usury.

On the other hand the respondents contend that the transaction was not a 'purchase money contract' or a time differential sale but was an original loan by Delta from the inception of the transaction, and the add-on interest charge made by Delta was in itself a violation of the usury laws.

Therefore, the question to be resolved is whether there was a loan of money made by Delta, and if so whether the loan was usurious.

Our duty on this appeal is to review this court-tried case upon the law and evidence and to reach our own findings of fact from a consideration of all the evidence in the case, giving due regard to the opportunity of the trial court to judge the credibility of the witnesses. We are not to set the judgment aside unless 'clearly erroneous.' Rule 73.01(d). ⁵ Personal Finance Co. of St. Louis v. Endicott, Mo.App., 238 S.W.2d 51.

Sec. 408.020 provides: ⁶

'Creditors shall be allowed to receive interest at the rate of six percent per annum, when no other rate is agreed upon, for all moneys after they become due and payable, on written...