Hall v. Beneficial Finance Co.

Opinion

HEALY, J.

*

Plaintiff-appellant borrowed $10,299.41 from respondent on December 15, 1969. The obligation was formalized in a note calling for interest at the rate of

VA

percent per month (18 percent per annum) on the unpaid principal balance. Security consisted of liens on real property and furnishings, and an assignment of rents. The realty equity at that time was estimated at $18,900; the personalty at a value of $500.

On January 9, 1974, appellant brought suit to recover treble interest and brokerage fees paid to respondent, a California licensed personal property broker. The action was premised upon alleged violation of the usury laws. Appellant’s thesis was that in taking as security a real prop

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erty lien valued arguendo at 38 times that of the personal property mortgaged, respondent lost or forfeited its constitutional and statutory exemption from compliance with laws limiting maximum interest otherwise chargeable.

Respondent moved for summary judgment in the trial court. The motion was granted. This appeal is from the judgment dismissing the action, entered on August 1, 1978.

“Usury” has been defined as “taking more than the law allows upon a loan or for forbearance of a debt.” (Ballantine’s Law Diet. (1931) p. 1324.) The word chiefly is used in an odious sense, to express an exorbitant or illegal compensation for money lent, in contradistinction to the return authorized by law, which we call “interest.”

California has a constitutional provision (art. XV, § 1; formerly art. XX, § 22) and a quantity of legislation limiting the interest a lender may receive on a loan to a stated maximum of 10 percent per annum. The illegality of usury is wholly the creature of legislation. Both Constitution and statutes exempt certain organizations and individuals from usury law restrictions, for varying purposes and policies. Among those exempt are building and loan associations, industrial loan companies, credit unions, pawn and personal property brokers, banks, and designated agriculturally related nonprofit associations.