Ricord v. Aragon

SHINN, P. J. Action for declaratory relief and to enjoin sale of real property under a trust deed. Judgment was for defendants and plaintiffs appeal.

In September, 1950, plaintiffs inserted an advertisement in the Los Angeles Examiner reading as follows: “$3,000 Bonus—Want $27,000.00 1st T.D. on De Lux 10 units. 6% Interest.” Defendants Aragon, husband and wife, answered the advertisement and on September 28, 1950, an agreement was reached whereby the Aragons would lend plaintiffs $27,000 and would receive a note for $31,000 to be paid in 58 monthly instalments of interest and principal, the entire balance then to be due. The transaction was consummated, plaintiffs giving the Aragons a trust deed on the land and apartment building thereon. Only the first payment of $300, due December 1, 1950, was made. In July, 1951, notice of trustee’s sale was given and plaintiffs filed this action. By their complaint plaintiffs asked for (1) an injunction against foreclosure because the loan was usurious, (2) recovery of interest wrongfully collected and (3) declaratory relief. It was alleged that defendants had credited the amount of the bonus on the note, that this operated as a prepayment of monthly instalments equal to $4,000 and therefore plaintiffs were not in default.

Computations of interest were made at the trial which included as interest the agreed bonus. The court found, and plaintiffs concede, that it was slightly less than 10 per cent per annum and that it was not usurious.

Plaintiffs contend that the note provided for interest at a rate exceeding 7 per cent without a writing clearly expressing an agreement of the parties for such charge. From this premise they argue there was usury and that the debt could not be declared due until the last payment fell due. Article XX, § 22 of the Constitution, which relates to the rate of interest, provides as set out below.1

[178]The Usury Law, 2 Leering’s General Laws, Act 3757, § 1, reads in part as set out below.2

As previously stated, the rate here in question was not over 10 per cent and we conclude that the agreement to pay interest was clearly expressed in writing. It has been plaintiffs’ contention throughout, and correctly, that the bonus was charged as additional interest. Notwithstanding the stipulation that the rate would be 6 per cent plaintiffs offered to pay the bonus and there was a clearly expressed agreement to pay it. The parties understood it to be, and it was in fact, an additional charge for the use of money. (Otis v. I. Eisner Co., 7 Cal.App.2d 496 [46 P.2d 235].) The writing met the requirement that it must clearly state that interest was being charged at a rate in excess of 7 per cent. (Brown v Cardoza, 67 Cal.App.2d 187, 194 [153 P.2d 767].)