Brocke v. Naseath

PEEK, J.

This is an appeal by defendant from a judgment in the sum of $9,793.23 in ravor of plaintiffs in an action brought to recover treble the amount of interest collected on an alleged usurious transaction.

By this action plaintiffs sought to recover treble the amount of interest paid by them to defendant for a loan of $4,000 dated June 30, 1947. Their complaint alleged that they borrowed $4,000 from defendant for which he demanded and received a promissory note in the sum of $6,000 to bear interest at 6 per cent per annum due six months from the date thereof and secured by a mortgage upon certain real property situated in Plumas County; that defendant had actually collected from plaintiffs the sum of $7,264.41, or interest in the sum of $3,264.41 on the alleged $4,000 principal. Defendant’s answer admitted the execution of the mortgage and affirmatively alleged that plaintiffs borrowed $4,500 on June 30, 1947; that plaintiffs were indebted to him in the further sum of $1,000 on a prior note and the accrued interest thereon. During the hearing defendant testified to having advanced additional sums to plaintiffs.

It is defendant’s first argument that in any event the amount of the judgment is excessive as a matter of law, and in this regard reliance is placed solely upon the case of

Penziner

v.

West American Finance Co.,

10 Cal.2d 160 [74 P.2d 252]. His argument in this regard is that the cited case requires a defendant in a usury action to be given credit for interest upon the true amount of the debt at the stipulated rate from the maturity date of the usurious obligation to the date of its payment, plus the principal amount of the loan; and that therefore plaintiffs in this case can recover only treble the difference between that amount and the amount actually paid by them, which, assuming plaintiffs’ allegations are true, would amount to $8,029.77, or $1,763.46 less than the judgment as entered.

[25]

The court in the Penziner case apparently rested its opinion upon the conclusion that as originally conceived, the transaction was not necessarily usurious; that the agreement of the parties contemplated advances from time to time up to an amount equal to the principal of the loan as it appeared on the face of the note plus interest thereon at a rate clearly within the statute; that the note did not provide for further charges; that it was only when the proceeds of the foreclosure sale were applied toward the payment of certain brokerage fees and interest that the element of usury was injected into the transaction. Here the evidence introduced by plaintiffs established an entirely different transaction. The contract between the parties at its inception was tainted with usury, providing as it did that the plaintiffs should pay for the use of $4,000 the sum of $2,000 plus interest on the stated principal of the note which was $6,000 at the rate of 6 per cent per annum.