Stephans v. Herman

DRAPER, P. J.

Plaintiffs loaned defendants Herman $9,000, and took back a promissory note, payable 90 days thereafter, for $11,500. The note was secured by four lots conveyed by deed of trust to defendant title company, as trustee. Two lots were sold under a prior deed of trust, and are not here in issue. The real estate broker who handled the transaction was in prison at time of trial. She and Mrs. Herman prepared a request for partial reconveyance. Bearing the forged signatures of plaintiffs, this request and a forged note were presented to the title company, which reconveyed lots 8 and 9 to the Hermans some 60 days after date of the note. The Hermans sold lot 8. Lot 9 was later sold under deed of trust securing a prior lien. Plaintiffs learned of these events in

[673]

July 1960, and filed this action on the note and for loss of security September 21,1960.

At trial, plaintiffs waived their claim for the “bonus” of $2,500. They had judgment against the Hermans and the title company, jointly and severally, for $9,000, with interest at 10 percent from the date of the note, plus $2,500 attorney’s fees. Title company, on its cross-complaint, was awarded a like amount against the Hermans. All defendants appeal.

The award of interest is erroneous. The “bonus” of $2,500 is conceded to be usurious. Thus plaintiffs could not claim or collect interest in any amount

(Williams

v.

Reed,

48 Cal.2d 57, 68 [307 P.2d 353]). Moreover, the note makes no provision for interest. Plaintiffs argue that the fraud of the Hermans warrants the award. But plaintiffs have shown no damage save loss of the security for their usurious note. Although the chicanery of the Hermans may well deserve punishment, to award interest as a punitive measure is but to compound the usurious act of plaintiffs.

The claim against the Hermans rests ultimately upon the note, and the fraudulent dissipation of the security is but incidental thereto. The claim against the title company was based wholly upon its negligence in permitting the fraudulent dissipation of the security. These separate theories of recovery are clearly conceded by plaintiffs’ pleadings. Thus the joint and several judgment is erroneous.