Middlekauf v. Vinson

VALLÉE, J.

Appeal by defendant Alice Vinson and cross-complainants Alice Vinson and Walter Vinson, husband and wife, from a judgment decreeing that a loan of $30,000

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made by Alice Vinson to plaintiff and cross-defendant was a usurious transaction.

Plaintiff at all times was the owner of a parcel of realty at Oceanside, California. On March 14, 1946, she executed a $40,000 promissory note in favor of A. L. Gindling, due March 15, 1952, bearing interest at the rate of 5 per cent per annum from March 15, 1946, interest payable monthly beginning April 15, 1946, continuing to and including September 15, 1946, and providing for payment of principal and interest in installments of $400 or more on the 15th day of each month beginning October 15, 1946, continuing to and including February 15, 1952. The note was secured by a trust deed (a first lien) upon the Oceanside property. Subsequently, Gindling assigned the note and trust deed to Peggy Shirk, plaintiff’s sister.

Prior to March 25, 1949, plaintiff commenced the erection of a building on the property for the staging of athletic matches and other amusements. She became hard pressed for money, was about to lose her license from the California Athletic Commission, and was only able to partially complete the building. Alice Vinson, an acquaintance of some 20 years, who was familiar with all phases of plaintiff’s activities in connection with the property, agreed to loan her $30,000 for the completion of the building. On March 25, 1949, they opened an escrow. The escrow officer testified Mrs. Vinson told him “she was to make a loan to Mrs. Middlekauf for the purpose of completing a building at Oceanside . . . and she was to assign or cause to be assigned a note and trust deed for the sum of $40,000 that was then in existence, for security for this loan; that the loan money was to be put in escrow and paid out under a building contract for the construction of this boxing arena.” The escrow officer told the parties that in his opinion “this sort of loan” was usurious. Notwithstanding this admonition, Mrs. Vinson stated that “if the title company would insure it she would take it along that line.” Escrow instructions were signed by the parties, providing that the $40,000 note, secured by the trust deed, be assigned by Peggy Shirk (assignee of Gindling) to Mrs. Vinson, and the $30,000 be deposited by Mrs. Vinson “to be used for building purposes and to be released upon demand and affidavit of the Owner, to release to the contractor for said building purposes. ’ ’ The withdrawals were approved by both parties. At the time Mrs. Vinson received the $40,000 note and trust deed she knew plaintiff had never made any payment thereon and