White v. Sweeney

PETERS, P. J.

Plaintiffs appeal from an adverse judgment based on the sustaining without leave to amend of a demurrer to their first amended complaint.

The challenged pleading seeks a declaration that a certain promissory note is usurious, and also requests that the note be reformed to show the true amount borrowed. The pleading alleges that on March 22, 1950, plaintiffs borrowed $3,000 from defendant, executing and delivering to defendant their promissory note in the sum of $3,500, plus interest at 6 per cent on the unpaid balance, payable in 69.13 monthly installments of $60 each, commencing April 15, 1950; that plaintiffs have paid defendant $2,100; that the interest charged on this obligation is usurious, being 11.94 per cent; that the law fixes a maximum rate of 10 per cent.

The trial court apparently believed that, as a matter of law, the transaction was not usurious, and so sustained the demurrer without leave to amend.

The question presented is whether the interest here involved is in excess of the 10 per cent per annum limitation imposed by article XX, section 22, of the state Constitution. The parties agree that the $500 differential between the amount loaned and the amount of the note must be treated as interest, that such interest should be spread over the entire period of the loan, and must be added to the 6 per cent per annum interest provided in the note. The cases so hold.

(Grall

v.

San Diego Bldg. & Loan Assn.,

127 Cal.App. 250 [15 P.2d 797] ;

Haines

v.

Commercial Mtg. Co.,

200 Cal. 609 [254 P. 956, 255 P. 805, 53 A.L.R. 725];

Connor

v.

Minier,

109 Cal.App.Supp. 770 [288 P. 23] ;

Otis

v.

I. Eisner Co.,

7 Cal.App.2d 496 [46 P.2d 235].) The parties differ, however, as to how the $500 differential should be spread over the entire period of the loan.