Behymer v. Cavaglieri Mortgage Co.

EDMONDS, J., pro tem. Plaintiff sued for treble interest alleged to have been paid in violation of the usury law, and recovered judgment. The defendant has appealed on the judgment roll alone, asserting that the amended complaint does not state a cause of action, and that the findings of fact, which follow the allegations of the amended complaint, are insufficient to support the judgment. The entire dispute concerns the right of the plaintiff to maintain the action. The following facts alleged in the complaint and found by the trial court to be true are not denied by appellant.

In 1925 the defendant agreed to loan the Edwin R. Rockwell Company $105,000 as a building loan, to be advanced as a certain building was erected. This agreement was made June 17, 1925, and with the intention of violating the Usury Act, the defendant required that the loan be repaid [718]six months thereafter, together with the sum of $5,000 as a bonus. For the purpose of disguising the transaction, a promissory note for $110,000 and a deed of trust securing it were made payable to Malcolm Smith, and indorsed and transferred by him to appellant. Smith paid no consideration therefor, and was at no time a bona fide owner or holder. The Rockwell company became involved in financial difficulties in connection with the construction of the building for which the loan was secured, and owed over $42,000 for material purchased and labor performed, and mechanics’ liens were filed to secure these claims. A second deed of trust securing a number of notes aggregating $50,-000 was also outstanding. Some of these notes were in the hands of the lien claimants. In April, 1926, the Rockwell company entered into a contract with Malcolm Smith and Malcolm Smith - Company, a corporation (the latter as the holder of the second trust deed on the property), and the lien claimants by which it agreed to convey the property to respondent as trustee. This contract provided that the second trust deed and all of the mechanics’ liens were to be released of record, and that the property should be held for the benefit of the Rockwell company and the mechanic’s lien claimants in accordance with the terms of a declaration of trust to be executed by the plaintiff.

This declaration of trust, which was afterward executed, provides that the plaintiff paid no consideration for the conveyance and holds title to the property for the benefit of the lien claimants and the Rockwell company, subject to the liens of the unpaid taxes, street assessments and the deed of trust for $110,000. The trustee by the instrument agrees to distribute the balance of the money due from the defendant (all of the amount agreed to be loaned by it not having been paid at the time the contract and declaration of trust were executed) among the beneficiaries or, if so directed by the advisory committee designated in the instrument, to use it for the benefit of the property. The trustee is also authorized to operate the property and to divide any net income from it among the lien claimants “in proportion to the amount of their respective claims . . . such payments, however, not to be in reduction in the amount of such claims, but to be a profit to be enjoyed by the said beneficiaries (other than the said Edwin R. Rockwell Co.) as