Prior Alerts have outlined the history of the Missouri No-Oral-Credit-Agreement Statute, originally §432.045, R.S.Mo. After being amended in 2004 by §432.047 to overrule a limiting appellate opinion, the Missouri Court of Appeals, Eastern District, held that it was effective to negate all claims and defenses based upon any allegations or oral promises including those based on fraud or any other equitable doctrine.
The assault on §432.047, however, continued and, in mid-2012, §432.047 was the subject of a limiting interpretation in Bailey v. Hawthorn Bank, 382 S.W. 3d 84 (Mo. Ct. App. W.D. 2012), in which the Court of Appeals held that a combination of a vague commitment letter, which did not contain basic terms such as interest rate and installment payment amounts, plus an additional internal written loan summary, which did contain the relevant terms, together constituted a written “credit agreement,” as that term is used in the statute, even though the internal loan summary was never delivered to the borrower until after the borrower filed suit.
In response to that opinion, House Bill No. 375 was introduced into the latest session of the Missouri General Assembly with the clear intent of revising §432.047 to correct that highly technical interpretation in Hawthorn. House Bill 375 would have changed the statute to prohibit a debtor from maintaining an action on a credit agreement unless the credit agreement not only was in writing but also was “executed by the debtor and the lender.”
Although that bill did not emerge from committee in 2013, the substance of House Bill 375 was added to a more comprehensive banking-related bill, Senate Bill 100, which was adopted by the General Assembly and was just signed by Governor Nixon. The revisions to §432.047 in Senate Bill 100 make it clear that a credit agreement must not only be in writing, must provide for the payment of interest or other consideration, must set forth the relevant terms and conditions but also must be “¼ executed by the debtor and the lender.” §432.047-2.
Senate Bill 100 also added the words “or unexecuted” to the first sentence of the language required to be inserted in all credit agreements giving notice of the statute. As so revised, the language required in commercial credit agreements will read as follows, which must be in 10 point bold face type:
ORAL OR UNEXECUTED AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANY WAY RELATED TO THE CREDIT AGREEMENT. TO PROTECT YOU (BORROWER(S)) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
The above language should be inserted in all commercial credit agreements from and after the effective date of the bill, August 28, 2013.
This amendment may not be the end of the further adventures of the Missouri No-Oral-Credit-Agreement statute. It appears that for every amendment to the statute, there is a court challenge attempting to limit the clear original intent of the statute, which was and remains to free banks from claims, regardless of the legal theory relied on, that oral promises have been made that excuse performance or alter the terms of written and executed credit agreements. We will continue to monitor developments.