Anderson v. Lee

MOORE, P. J.

In a complaint charging appellant with usury respondents demanded that their note payable to appellant in the principal sum of $7,500 and their trust deed securing its payment be reformed to show $5,000 as the principal of their debt, that the aggregate installment payments already made on the note be credited as payments on the principal, and for general relief. The facts were found as alleged by respondents and the decree adjudged that (1) the transaction involved was usurious, in violation of the initiative Usury Act of 1919 (2 Deering’s Gen. Laws, Act 3757) and section 22, article XX of the Constitution; (2) the principal sum of the debt due appellant is reduced to $5,000, less $1,650, the aggregate payments made on the principal; (3) the loan shall henceforth bear no interest and is credited with treble the sum of $437.25 already paid as interest.

The findings disclose that in August, 1948, respondents borrowed $5,000 from appellant and gave their note and a trust deed to secure its payment in monthly installments. For the use of the $5,000 appellant demanded the sum of $2,500 over and above the interest, the rate of which was not clearly expressed, making the principal of the note $7,500 with interest at 7 per cent per annum on the loan. As a part of appellant’s scheme to evade the operation of the usury laws appellant and his broker, defendant Jack Freehill, opened

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an escrow at a bank on August 4, 1948. In it the note for $7,500 and the trust deed were deposited together with escrow instructions to be signed by appellant. Such instruments were in favor of Lillian M. Stout, mother of Mrs. Anderson, and they were to be executed by respondents. But before they had been signed by respondents, appellant examined and initialed them on August 12, 1948, as well as his escrow instructions. While such instructions refer to Mrs. Stout as lender, she had no interest in the transaction or in the moneys to be acquired by respondents, but was an innocent dupe of appellant and his broker and was their dummy for the purposes, of effectuating the unlawful purpose and of creating an aura of legality for the usurious loan. Mrs. Stout had not visited the escrow department, approved the form of the note and trust deed or signed the escrow instructions prior to the day of appellant’s approval of the writings. Besides the trust deed, appellant required respondents to execute as additional security a chattel mortgage on the furniture and furnishings located on the real property described in the trust deed and to have it recorded along with the latter instrument in the official records of Los Angeles County. No actual loan was ever made by Mrs. Stout to respondents and all the documents deposited in the escrow purportedly opened for them and the asserted payment of $2,500 to respondents outside of escrow were pretense only. Mrs. Stout had no money to loan. She had met defendant Freehill while attempting to find a lender for respondents. After deducting $300 commission paid to Freehill and $98.45 escrow charges, respondents received the net sum of $4,601.55 from the transaction.