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    Court Rules for Retailer

    Army reservist's interest rate too high after called to active duty.

    A bank should have given an Army reservist a lower interest rate while he served in Bosnia in 1996, even though his loans went to his convenience store corporation and not him personally, a federal court ruled.

    The September ruling, which is generating renewed discussions in light of the reserve call-ups after the Sept. 11 terrorist attacks, said the bank should have lowered the rate because it required reserve Lt. Col. Stewart Cathey and his wife to cosign the loans personally, the Associated Press reported.

    Cathey's Corp. borrowed $850,000 from First Republic Bank in Shreveport for two Cathey's-branded convenience stores in northeastern Louisiana just before he was called to active duty.

    The Soldiers and Sailors Relief Act requires banks to cut interest rates to 6 percent on existing loans to servicemen on active duty. It also protects deployed troops from foreclosures and other civil court actions.

    But First Republic refused to lower Cathey's rate because the loans were made to his business, attorney Charles Tracher said. "A corporation is not a soldier," he told the Associated Press.

    When Cathey returned from Bosnia nine months later, one store was closed and the second was failing. The bank foreclosed, then bought the stores back at a sheriff's sale.

    Cathey sued for $4.7 million, saying the businesses were left without operating capital because he paid $50,000 too much in interest. A jury will consider damages in May.

    The bank, later bought by Bancorp South, will continue to press its case, Tracher said. The district court ruling, issued Aug. 13, applies only to north and west Louisiana, but the case was the first in the country to let reservists and Guardsmen sue in federal court under the relief act. The law was first passed in 1918, but most cases have involved only a few hundred dollars, he said.

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