Sailboat Apartment Corp. v. Chase Manhattan Mortg. and Realty Trust

• Decision Date: 15 August 1978
• Docket Number: No. 78-416,78-416
• Citation: 363 So.2d 564
• Parties: SAILBOAT APARTMENT CORP., a Florida Corporation, et al., Plaintiffs Counterdefendants, v. CHASE MANHATTAN MORTGAGE AND REALTY TRUST, Defendant Counterplaintiff.
• Court: Florida District Court of Appeals

Page 564

363 So.2d 564

SAILBOAT APARTMENT CORP., a Florida Corporation, et al., Plaintiffs Counterdefendants, v. CHASE MANHATTAN MORTGAGE AND REALTY TRUST, Defendant Counterplaintiff.

No. 78-416.

District Court of Appeal of Florida, Third District.

Aug. 15, 1978.

Rehearing Denied Nov. 17, 1978.

Arky, Freed, Stearns, Watson & Greer and Bruce W. Greer, Miami, for plaintiffs/counterdefendants.

Smathers & Thompson and Linwood Anderson, Miami, for defendant/counterplaintiff.

Before HAVERFIELD, C. J., and PEARSON, J., and CHARLES CARROLL (Ret.) Associate Judge.

HAVERFIELD, Chief Judge.

This appeal is presented for determination by way of certified question pursuant to Fla.App.R. 4.6 (1962 Revision).

The undisputed facts are as follows:

On March 12, 1974 plaintiff, Sailboat Apartment Corporation (SAC), as borrower executed a loan agreement together with a promissory note in favor of defendant, Chase Manhattan Mortgage and Realty Trust (Chase Manhattan). The note provided for a floating interest rate of 41/2% Over the prime rate for the duration of the note which was to mature in March, 1979. The interest was collected or charged monthly.

At the time of the commencement of the transaction the prime rate was 83/4% And, therefore, the effective interest rate on the loan was 131/4% (83/4% Plus 41/2%). However, the prime rate commenced to move upward such that between August 1, 1974 and September 26, this rate reached a high of 12%. As a consequence, the interest on the loan for the first year (from March 12, 1974 March 12, 1975) exceeded 15%. ¹ SAC paid approximately $140,000 of the interest through the summer of 1974; however, as the interest charges continued to soar (due to the rise in the prime rate), SAC refused to pay further interest and Chase Manhattan declared the loan in default. SAC filed suit in November, 1974 for usury. Chase Manhattan counterclaimed for foreclosure. Chase Manhattan argues that the variable interest charges are to be spread over the entire term of the loan under Section 687.03, Florida Statutes. To the contrary SAC contends that this statute provides only for the spreading of advances and forbearances. The trial judge has certified the following questions:

I.

WHETHER VARIABLE INTEREST CHARGES ARE TO BE "SPREAD" OVER THE LIFE OF A LOAN UNDER § 687.03(3), FLORIDA STATUTES.

II.

IF 687.03(3) PROVIDES ONLY FOR THE "SPREADING" OF ADVANCES AND FORBEARANCES, ARE VARIABLE INTEREST CHARGES TO BE SPREAD UNDER THE GENERAL RULE THAT THE ENTIRE TERM OF THE LOAN MUST BE CONSIDERED IN DETERMINING WHETHER A CONTRACT IS USURIOUS.

We first note that at the time of the execution of the loan transaction, the subject statute (Section 687.03, Florida Statutes (1973)) read as follows:

" * 687.03 Unlawful rates of interest defined; proviso. It shall be usury and unlawful for any person, or for any agent, officer or other representative of any person, to reserve, charge or take for any loan, or for any advance of money, or for forbearance to enforce the collection of any sum of money, except upon an obligation of a corporation, a rate of interest greater than ten per cent per annum, either directly or indirectly, by way of commission for advances, discounts, exchange, or by any contract, contrivance or device whatever, whereby the debtor is required or obligated to pay a sum of money greater than the actual principal sum received, together with interest at the rate of ten per cent; and such transactions with a corporation shall, whereby the corporation pays interest, be usury and unlawful if for a rate of interest greater than fifteen percent per annum; however, if any loan, advance of money, forbearance to enforce the collection of any debt, or contract exceeds $500,000 in amount or value, it shall not be usury or unlawful to reserve, charge, or take interest thereon unless the rate of interest exceeds 15 percent per annum. The provisions of this section shall not apply to sales of bonds in excess of one hundred dollars and mortgages securing the same or money loaned on bonds. For the purpose of this section and § 687.02, the rate of interest on any loan of money shall be determined and computed upon the assumption that the debt will be paid according to the agreed terms, and in the event said loan is paid or collected by court action prior to the term of said loan, Any payments charged, reserved, or taken as an advance or forbearance which are in the nature of, and taken into account in the calculation of, interest shall be spread over the stated term of the loan for the purpose of determining the rate of interest." (Emphasis Supplied)

On June 18, 1974 this statute was amended and reads: ²

"687.03 'Unlawful rates of interest' defined; proviso.

"(1) It shall be usury and unlawful for any person, or for any agent, officer or other representative of any person, to reserve, charge or take for any loan, or for any advance of money, or for forbearance to enforce the collection of any sum of money, except upon an obligation of a corporation, a rate of interest greater than ten percent per annum, either directly or indirectly, by way of commission for advances, discounts, exchange, or by any contract, contrivance or device whatever, whereby the debtor is required or obligated to pay a sum of money greater than the actual principal sum received, together with interest at the rate of ten percent; and such transactions with a corporation shall, whereby the corporation pays interest, be usury and unlawful if for a rate of interest greater than fifteen percent per annum; however, if any loan, advance of money, forbearance to enforce the collection of any debt, or contract exceeds $500,000 in amount or value, it shall not be usury or unlawful to reserve, charge, or take interest thereon unless the rate of interest exceeds 15 per cent per annum. The provisions of this section shall not apply to sales of bonds in excess of $100 and...