Lewis v. Pacific States Savings & Loan Co.

PRESTON, J. This appeal involves the construction of certain provisions of sections 1, 2 and 3 of the so-called Usury Act (Stats. 1919, p. lxxxiii; Act No. 3757, pp. 1908 et seq., Deering’s Gen. Laws).

On September 7, 1928, plaintiffs executed to defendant Pacific States Savings and Loan Company of Stockton, California, their promissory note in the principal sum of [693]$172,000, with interest thereon at seven per cent per annum, principal and interest payable as follows: $1604.76 on October 20, 1928, and the same amount monthly thereafter for a period of five years, to wit: until September 20, 1933', at which time the balance of the principal, to wit: $129,000, was to be due and payable. Unpaid principal and interest, when not paid according to the agreement, were to draw interest at the rate of ten per cent per annum. It was further provided that failure for a period of ten days to pay any installment of principal and interest in full authorized the payee, at its option, to declare the whole obligation due and payable. The note was secured by deed of trust of even date naming Pacific States Auxiliary Corporation as trustee. To further secure said obligation plaintiffs executed, on said date, to said loan company, a chattel mortgage on the contents of the apartment house located on said property mentioned in the deed of trust. As still further security, plaintiffs, on said date, assigned to said loan company the rents due and thereafter to become due them as owners of said property.

Plaintiffs made the payments provided for for some twenty-six months, to wit: until November 20, 1930. They thereafter defaulted, failing also to discharge the second installment of taxes for the fiscal year 1929-1930 as well as the first installment for the year 1930-1931, both of which items were liquidated by the loan company. On December 18, 1930, said loan company caused the trustee to duly record a notice of breach and election to sell under the deed of trust, whereupon plaintiffs instituted this action to enjoin a sale under said deed of trust on the ground that they were not in default, praying that said transaction be declared usurious; that a penalty in treble the amount of all interest paid be imposed; also that the maturity date of the entire principal be postponed until the end of the period of forbearance without interest.

The issues thus tendered were met by a sufficient answer and at the same time a cross-complaint was interposed by defendants, seeking a foreclosure of the aforesaid chattel mortgage as well as the impounding of the rents yielded by said property. The cause came on for trial and the court made findings and gave judgment granting a measure of relief to plaintiffs, consisting of the following: A provision