United States District Court, Southern District of Illinois, N. D
May 25, 1973
ELMO E. KOOS, SR., ET AL., PLAINTIFFS,
FIRST NATIONAL BANK OF PEORIA, ILLINOIS, A NATIONAL BANKING ASSOCIATION, DEFENDANT.
The opinion of the court was delivered by: Robert D. Morgan, Chief Judge.
DECISION AND ORDER
Plaintiff borrowers filed a complaint and purported class
action on behalf of themselves and all persons similarly
situated against defendant lender for recovery of double the
interest paid on loans upon which interest allegedly was
charged in excess of the rate permitted by law. Upon motion to
dismiss, based upon a statutory exception to the Illinois
usury statute, this court dismissed the complaint, granting
leave to amend. Plaintiffs having filed an amended complaint,
defendant again moves to dismiss, raising the same statutory
exception to Illinois usury provisions. (Ill.Rev.Stat. ch. 74,
Jurisdiction is predicated upon 28 U.S.C. § 1331(a), 1355.
The case arises under 12 U.S.C. § 85, 86, wherein a knowing
violation of a state usury law by a national bank is a
violation of federal law.
Pursuant to Rule 23(c)(1), F.R. Civ.P., the court at this
time concludes that this action is not maintainable as a class
action. The prerequisites set forth in Rule 23(a) have not
been satisfied. Plaintiffs' claims here, involving
transactions possibly excepted from the usury provisions,
involve atypical claims on the general proposition of possible
usury arising from computation of interest on a 360-day year.
Further, under the circumstance here that plaintiff has
pledged security in the form of savings and loan shares and
life insurance cash values, there is nothing to indicate that
those similarly situated would be so numerous that joinder of
all would be impracticable.
Turning to the merits of plaintiffs' claim, the pertinent
language of the Illinois statute is as follows:
"§ 4. * * *
* * * It is lawful to charge, contract for, and
receive any rate or amount of interest or
compensation with respect to the following
(b) Advances of money, repayable on demand, to
an amount not less than $5,000, which are made
upon warehouse receipts, bills of lading,
certificates of stock, certificates of deposit,
bills of exchange, bonds or other negotiable
instruments pledged as collateral security for
such repayment, if evidenced by a writing; * * *"
Ill.Rev.Stat. ch. 74, § 4.
It is alleged and undisputed with reference to the Note here
(Exhibit A attached to the amended complaint) that the advance
of money to plaintiffs by the defendant was payable on demand,
was for an amount over eleven times $5,000, and was made on
the security of savings and loan shares and life insurance
values, all evidenced by writing. The only issue on the
statute is whether these pledged securities are "certificates
of stock" or "certificates of deposit," or something else
which is within the meaning of the above statutory language.
This court finds no difficulty whatsoever in holding that
the savings and loan shares and life insurance cash values
come within the above exception. The statute is quite
apparently designed to protect only relatively small,
personal, non-business borrowers from high interest rates, and
this exception speaks in very general terms as to various
types of relatively liquid collateral security pledged for
repayment of a loan over $5,000. While the collateral in the
present case may not exactly be the ordinary certificates of
stock or certificates of deposit in all respects and in a
purely technical sense, any variance is not significant in
view of the apparent purpose of the statute. There is simply
no justification for a blindly technical reading of this
exception in view of the general language used.
Even if the exception were not applicable, however, this
court decides that computation of interest on the present
loan, on the basis of a year of 360 days, is subject to the
doctrine de minimis non curat lex, and is thus not usurious. It
is vastly different than American Timber & Trading Co. v. First
National Bank of Oregon, 334 F. Supp. 888 (D.C.Or. 1971), where
borrowers were charged maximum interest rates at 10% and 12%,
and computation of interest by the challenged method yielded an
annual return of 10.139% and 12.167%, respectively. In the
present case, plaintiffs allege that they contracted for and
were charged a variable interest rate related to the prime
commercial rate on a monthly basis, with some monthly interest
payments thereby being below the permitted maximum rate of 8%
per annum, thereby reducing the total effective annual rate.
Without undertaking to construe the words per annum found in
the Illinois Statute (Ill.Rev. Stat. ch. 74, § 4) in the
360-day context because it is unnecessary, on the present
complaint any interest payments which might have been slightly
above the statutory maximum for any given month because of the
360-day year would raise the effective annual rate of interest
inconsequentially, and a claim of usury thereon would be
clearly a trifle of which the law will not be concerned.
Accordingly, it is ordered that plaintiffs' action is
dismissed with prejudice and judgment is entered for
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