McTigue v. American Sav. and Loan Ass'n of Florida

• Decision Date: 18 March 1977
• Docket Number: 76--843 and 76--844,76--564,Nos. 75--1623,s. 75--1623
• Citation: 344 So.2d 254
• Court: Florida District Court of Appeals
• Parties: R. Emmett McTIGUE, Trustee, and Edgar G. Hamilton, Bond Indenture Trustee, Appellants, v. AMERICAN SAVINGS & LOAN ASSOCIATION OF FLORIDA, a Florida Savings and Loan Association and C.D.I. Corp., et al., Appellees.

Page 254

344 So.2d 254

R. Emmett McTIGUE, Trustee, and Edgar G. Hamilton, Bond Indenture Trustee, Appellants, v. AMERICAN SAVINGS & LOAN ASSOCIATION OF FLORIDA, a Florida Savings and Loan Association and C.D.I. Corp., et al., Appellees.

Nos. 75--1623, 76--564, 76--843 and 76--844.

District Court of Appeal of Florida, Fourth District.

March 18, 1977.

Rehearing Denied March 31, 1977.

Joe Easthope of Ferrero, Middlebrooks & Houston, Fort Lauderdale, for appellant McTigue.

Edgar G. Hamilton of Hamilton, James, Merkle & Young, West Palm Beach, for appellant Edgar G. Hamilton, Bond Indenture Trustee.

Broad & Cassel, Bay Harbor Islands, and Larry A. Klein, West Palm Beach, for appellee American Sav. and Loan Ass'n.

SCHWARTZ, ALAN R., Associate Judge.

The central issue on the main appeal in this case--which is determinative also of the satellite cross-appeal and interlocutory appeals--concerns the question of whether the multi-million dollar mortgage loan given by American Savings & Loan upon a Broward County apartment complex called the Essex House was usurious. We agree with the trial court's determination that it was not.

When the loan, which had an interest rate of 10%, was initially negotiated in August, 1972, ¹ American, a domestic savings and loan institution, exacted various discount, commitment and modification 'fees', at least some of which would surely be considered interest and subject to being 'spread over the stated term of the loan for the purpose of determining the rate of interest', under F.S. § 687.03(2); Financial Federal Savings and Loan Assn. v. Burleigh House, Inc., 305 So.2d 59 (Fla.3rd DCA 1974), cert. discharged, 336 So.2d 1145 (Fla.1976). Since even with all the fees added to the 10% Rate, the effective rate did not exceed 15%, no question of usury arose in the first instance.

By the middle of 1973, however, the loan went into default and the following provision of the mortgage and note became effective:

'While in default, this obligation shall bear interest at the highest lawful rate for corporations in the State of Florida.'

In September, 1973, American filed a foreclosure action in the Broward County Circuit Court; a few days later, the owner filed a Chapter X reorganization proceeding in the United States District Court and obtained a stay of the state foreclosure action. In the Chapter X proceeding in the Federal Court, American filed two separate statements as to the amount of its claim against the debtor. Both stated the amount of claimed interest at $1,572.46 per day. It is undisputed both that this sum amounts to a rate of 15% Actual interest on the unpaid balance due, Without any point spreading whatsoever, and that the effective rate of interest represented by this claim was thus in excess of the 15% Statutory corporate maximum. The issue before us is whether the mere fact that usurious interest was at one time Claimed, though not paid, received, or awarded is sufficient to render the transaction itself usurious in law and effect.

The reasons that the issue may be accurately posed in this manner arise from the fact that after American had secured permission from the federal court to pursue the Circuit Court foreclosure action--and was met with a usury defense by the bankruptcy trustee--it no longer claimed a usurious interest rate. It contended, instead, that a proper view of the default interest clause we have quoted was that it was entitled to 15% Including the amounts of any fees required to be spread as interest over the life of the loan. In accordance with this interpretation, the final foreclosure judgment which it secured, and which is now here on appeal, does not, in fact and without dispute, involve an interest allowance of more than 15%.

Upon close questioning from the bench at the oral argument of this appeal, counsel for the appellant-trustee stated clearly that his client's position here does Not involve a claim that, on its face, or even upon its proper interpretation, the interest upon default clause requires or permits the payment of 15% Interest Without spreading; ² that, standing alone, the clause does not render the transaction usurious, even though a default has in fact occurred; and that American's second, and the trial court's initial interpretation of the clause to involve 15% With spreading, is correct. Counsel stated unequivocally that the sole basis of his contention that usury was involved lies in American's fruitless and bare claims to usurious interest in the Chapter X proceeding. We cannot agree with this position, which, we think, is in conflict both with the decided cases and with common sense.

A holding that a mere Demand for usurious interest unjustified by any contractual requirement to pay it, renders the loan usurious, would mean, for example, that an utterly baseless claim for 17% Interest upon a simple note which plainly provides for only 9% Would invalidate the transaction itself. This cannot be and is not the law. In Connecticut Mut. Life Ins. Co. v. Fisher, 165 So.2d 182 (Fla.3rd DCA 1964), for example, the court overturned a finding that usury was involved even though the lender had actually Charged and accepted excessive interest, when the overpayments were caused only by a mistaken computation as to the interest required by the agreement. The court said at 165 So.2d 184, 186:

'The promissory note made...