The state of Missouri allows prejudgment interest in breach of contract cases, as well as other types of claims. In cases of breach of contract, prejudgment interest generally begins to accrue on the date of breach or the date payment was due. The interest rate is fixed at nine percent unless the parties have contractually agreed to a different rate. Under Missouri law, most contracts are subject to a maximum annual interest rate of ten percent, or the market rate. However, the legislator has provided an exception to the cap on interest rates for short-term consumer loans. These loans are designed to provide borrowers with relatively small loan amounts and longer repayment options, but often have high interest rates.
In a recent court opinion for the Western District of Missouri Court of Appeals, the court ruled on the enforceability of prejudgment interest in cases that arose before August 28, 2021, when the amendments took effect. of 2021 to Missouri Revised Statute Chapter 408, including Section 408.553 regarding Lender Recovery in Default. In its amendments, the legislator appears to have intended to clear up confusion around the applicability of prejudgment interest statutes and to ensure that prejudgment interest is provided for in 408.553.
However, the Western District was still left with the problem of determining the applicability of the law before it was amended. In the recent Mmm end. against Pink case, Judge Karen King Mitchell wrote the majority opinion on behalf of herself and Judge Gary D. Witt. No. WD84379, 2022 MB. App. LEXIS 193 (Mo. App. WD 12 Apr 2022). Presiding Judge Mark D. Pfeiffer wrote a separate, partly concurring and partly dissenting opinion. In this case, MM Finance LLC appealed a trial court award for damages, claiming that the trial court erred in not awarding the company prejudgment and postjudgment interest in contractual annual rate of 360%. The Court of Appeal quashed and returned for recalculation.
In this case, the three judges agreed that the applicable post-judgment interest rate was that contracted by the parties, here 360%. The tribunal followed its own precedent of Ponca Finance Company v. Esser, 132 SW3d 930 (Mo. App. WD 2004). In sandedthe court ruled that even an extremely high contract rate was permitted as a post-judgment interest rate under the statutory exception for consumer installment lenders in effect at the time, and noted that “if the legislator believes that this rate is excessive, then the legislator can change the law. ID. at 932.
However, with respect to prejudgment interest, the court found no applicable precedent to follow. The majority opinion held that MM Finance, LLC, a licensed consumer installment lender, is authorized under Section 408 to create contracts and receive interest at higher rates, and therefore the contract under underlying is authorized by the legislator and the interest rate contracted is enforceable, including with respect to prejudgment interest, in the absence of exception or limitation.
Judge Pfeiffer, in his dissent, argued that Law 408.553 is the exception. The pre-2021 version of the law stated:
In the event of default, the lender will not be entitled to recover more than the amount which the borrower would have been required to pay in the event of early repayment of the obligation on the date of the final judgment, increased thereafter by interest at the simple interest rate equivalent to the rate provided for in the contract.
§ 408.553, RSMo 2016. Justice Pfeiffer argued that the sentence, with interest thereafter, as well as the 2021 legislative amendments to that section (making it explicit that prejudgment interest was permitted), indicate that the pre-2021 version did not allow prejudgment interest.
The majority opinion held that while the pre-2021 version of section 408.553 did not explicitly allow prejudgment interest, section 408.100 did by stating that “[o]n any loan subject to this article, any person, firm or company may modify, contract for[,] and receive interest on the outstanding principal balance at rates agreed to by the parties. § 408.100, RSMo 2016. The majority further noted that it found the pre-2021 language of section 408.553 to be simple and unambiguous, and therefore not subject to statutory interpretation. Judge Mitchell also cited a recent 2020 ruling from the Western District, acknowledging that “subsequent enactment of the law may not always be a reliable guide to the interpretation of pre-amendment law” and the purpose of an amendment to existing law may be to clarify rather than change the law. Spire Mo. Inc. v. Pub. Mo. To serve. Common607 SW3d 759, 774 (MB App. WD 2020).
Ultimately, the court opinion confirms that both prejudgment and postjudgment interest are available to licensed consumer installment lenders under pre-2021 laws, even at high interest rates.