Layport v. Rieder

California Court of Appeal Sep 21, 1939 No. Civ. A. 4362Published

Before: Shaw

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Holding. The court held that the Usury Law of 1918, which provides for treble damages, does not apply to interest rates between 10% and 12% despite the constitutional reduction of the maximum interest rate to 10%. However, a borrower may still recover the actual amount of usurious interest paid under common law principles.

Issues

Does the Usury Law of 1918 authorize treble damages for interest paid at a rate exceeding 10% but not exceeding 12%?
Does the constitutional amendment limiting interest to 10% implicitly amend the Usury Law to impose penalties for rates between 10% and 12%?
Is a borrower entitled to recover actual usurious interest paid despite the unavailability of statutory treble damages?

Disposition. reversed

Quotations verified verbatim against the opinion

“Crimes and penalties are not to be so built up.”

“if the borrower actually pays interest at an usurious rate he may, independent of the statute, recover the amount so paid in an action brought for that purpose.”

SHAW, P. J.

Plaintiff seeks to recover, and by proceedings under section 437c, Code of Civil Procedure, he obtained summary judgment for, treble the amount of interest paid by him to defendant on a note. The note provided for interest at the rate of 12 per cent per annum, and plaintiff paid interest at this rate, in the sum of $144.22. The note was given by plaintiff to defendant after the addition to the Constitution, in 1934, of section 22 of article XX, limiting the rate of interest to 10 per cent, and defendant was not in any of the classes of money lenders exempted by that section from its operation. The note was therefore in contravention of that section and the interest paid by plaintiff was usurious.

But the constitutional section above mentioned makes no provision for the remedy to be allowed one who has paid usurious interest. The only possible authority for the recovery of treble the interest paid is section 3 of the Usury Law of 1918. It was held in

Penziner

West American Fin. Co.,

(1937) 10 Cal. (2d) 160, 173 [74 Pac. (2d) 252], that this law was not repealed by the adoption of the constitutional provision above mentioned, in so far as it applies to lenders not exempt from the constitutional restrictions. But it does not follow from this holding that section 3 of the Usury Law may be applied here. Sections 1 and 2 of the Usury Law (Deering’s Gen. Laws, 1937 ed., Act 3757) authorize contracts for interest at a rate not exceeding 12 per cent per annum and make invalid any agreement to pay interest at a greater rate than that, and section 3 provides that “Every person . . . who for any loan ... of money . . . shall have

*Supp. 745

paid . . . any greater sum . . . than is allowed to be received under the preceding sections, one and two, may . . . recover . . . treble the amount of the money so paid”. This plainly means that a recovery may be had if the interest paid was at a rate in excess of

per cent, and authorizes nothing more. Here there was no interest paid in excess of that rate.

It is true, the Supreme Court, in reaching its conclusion in

Penziner

West American Fin. Co., supra,

Layport v. Rieder

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SHAW, P. J.

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