Collins v. Union Federal Sav. & Loan Ass'n

• Decision Date: 21 April 1983
• Docket Number: No. 12961,12961
• Citation: 662 P.2d 610,99 Nev. 284
• Parties: Ernest J. COLLINS, Appellant, v. UNION FEDERAL SAVINGS AND LOAN ASSOCIATION, aka First Federal Savings and Loan Association, et al., Respondents.
• Court: Nevada Supreme Court

Page 610

662 P.2d 610

99 Nev. 284

Ernest J. COLLINS, Appellant, v. UNION FEDERAL SAVINGS AND LOAN ASSOCIATION, aka First Federal Savings and Loan Association, et al., Respondents.

No. 12961.

Supreme Court of Nevada.

April 21, 1983.

Roger A. Bergmann, Reno, for appellant.

Vargas & Bartlett, Reno, McKenna, Conner, & Cuneo, Los Angeles, Cal., for respondents.

OPINION

MANOUKIAN, Chief Justice:

This appeal involves diverse legal questions all incidental to a $1,500,000 loan secured by a deed of trust on commercial property, the execution of the power of sale pursuant to said deed and a summary judgment entered against the appellant, Ernest Collins, debtor and trustor.

In 1973, Collins owned a parcel of real property on Fourth Street in Reno. In March of that year, Collins entered into a mortgage loan contract with respondent First Federal Savings and Loan Association, by which First Federal loaned $1,500,000 to Collins to finance the construction of a hotel on his property. ¹ The loan agreement included a promissory note, bearing interest at an annual rate of 8.5%, a deed of trust, a Loan Settlement Statement, a Building Loan Agreement and a Financing Statement.

The promissory note specified that Collins was to repay First Federal in 240 equal monthly installments. The installments, in the amount of $12,078.45, were to commence on February 1, 1974. In the event the installments were more than thirty days late, First Federal retained the right to increase the rate of interest on the unpaid portion of the principal sum at 1% per annum during the period of delinquency. The Loan Settlement Statement reiterated some of the provisions of the promissory note and modified others. It provided that interest would not run for a ninety day period and that interest only payments of $10,624.50 would be due after the ninety day period until the February payments were to begin. That document also provided that Collins was to contribute $85,360.36 in personal funds, $48,850.36 of which was to be applied to loan costs and title search charges, and the remaining $36,510.00 of which was allocated to a Loan-in-Process (LIP) account in Collins' name. Collins was charged an initial loan fee ("points") of 2.5% of the loan amount ($37,500), a title policy premium ($3,000), recording fees ($8.00), tax service fee ($43), application fee ($265), and $8,034.36 in prepaid interest for the period June 7-July 7, 1973.

The Building Loan Agreement set out the method of disbursement for the loan proceeds. Those funds, along with Collins' personal funds, were placed in the LIP account. The monies deposited in that account were to be disbursed at the request of the contractor and with the approval of Collins and First Federal.

The business opened in January 1974 under the name of the Reef Hotel. It was economically unsuccessful and Collins made several attempts to dispose of the property by sale or lease. Collins suspended payment to First Federal in May 1975. First Federal initiated foreclosure proceedings on July 16, 1975.

According to First Federal officers, they encouraged Collins to cure the default and granted several postponements of the foreclosure sale to enable Collins to secure a buyer or lessee. In his deposition, Collins admitted that although he could have arranged financing to meet his delinquencies with First Federal, he made a conscious choice not to pay the Association. A foreclosure sale occurred on January 15, 1976, under the supervision of Lawyers Title Insurance, trustee. First Federal submitted the only bid--a credit bid in the amount of the indebtedness ($1,586,872). First Federal subsequently resold the hotel property with a substantial credit component.

Collins' initial complaint and amended complaint, filed in July 1976 and June 1977, respectively, alleged intentional interference with prospective economic advantage and contractual relationships, civil conspiracy, disparagement and interference with a "fair and open" trustee sale. Collins sought imposition of a constructive trust on any money realized by First Federal from the foreclosure sale together with general and punitive damages.

In August 1979, Collins filed a Supplemental Complaint at the direction of the trial court. In that complaint, Collins additionally alleged that the interest charged by First Federal was usurious and constituted a breach of contract. He further alleged that because of the excess interest, he was not in default when the notice of default was filed, and as a consequence, the foreclosure sale was wrongful. Collins also alleged that the late charges asserted by First Federal were illegal and should be considered as "interest" for the purpose of usury calculations.

Respondents filed three motions for summary judgment encompassing all of appellant's claims. Appellant filed a motion for partial summary judgment on the usury and late charge/penalty claims. The trial court granted respondents' motions as to the "chilling the sale" claim, the intentional tort claims, the wrongful foreclosure claim and the usury claim. It also determined, as a matter of law, that the officers were not personally liable to Collins and that punitive damages were not recoverable. A breach of contract claim (charging interest in excess of 8.5%) remains undetermined.

A. Usury Claim. ²

1. Applicable Rate.

The trial court's ruling implicitly adopted a rate of 12% per annum as the applicable rate of interest for appellant's usury claim. Respondents, however, urge that for the purposes of this appeal the correct rate of interest is 18% per annum. In 1973, when the loan agreement was executed, NRS 99.050 provided for a maximum interest rate of 12% per annum. NRS 99.050 was amended in 1979. See 1979 Nev.Stats. Ch. 498. Although that amendment increased the maximum rate to 18% per annum, it also included a provision making the increased rate inapplicable to any loan contract made before the amendment's effective date. Id. at § 4. Thus, the lower court did not err in utilizing 12% per annum as the maximum rate of interest.

2. One vs. Two Loans.

Appellant next contends that the transaction with First Federal involved two separate loans: a "construction loan" from March 1973 to December 1973; and a "take-out" loan commencing January 1974 and running for a period of twenty years. According to appellant, the Building Loan Agreement established a separate construction agreement, while the Promissory Note and Deed of Trust created a permanent financing agreement for a period of 240 months. If the "construction" loan is viewed separately from the "take-out" loan, appellant asserts that the "construction" loan would be usurious. The lower court, however, determined that only one loan was contemplated by the loan agreements. We agree.

The general presumption is that where two or more written instruments are executed contemporaneously the documents evidence but a single contract if they relate to the same subject matter and one of the two refers to the other. McClean v. Hillman, 352 S.W.2d 310, 313 (Tex.Civ.App.1962). Cf. Haspray v. Pasarelli, 79 Nev. 203, 380 P.2d 919 (1963) (separate memorandum part of contract for purposes of statute of frauds); Bowker v. Goodwin, 7 Nev. 135 (1871) (separate agreement part of promissory note for purposes of revenue stamp requirement). In the present case, the loan documents constitute the only evidence offered in support of or in opposition to the motion for summary judgment which is relevant to the issue of the number of loans. No evidence was presented by affidavit, or otherwise, that the parties intended those documents to create two separate loans. The documents are unambiguous with respect to this issue. Cf. Mullis v. Nevada National Bank, 98 Nev. 510, 654 P.2d 533 (1982) (ambiguous contracts can create triable issue of fact). All the relevant documents were executed by the same parties on March 7, 1973. All of those documents address the same subject matter--a $1,500,000 loan between appellant and respondent First Federal. The Building Loan Agreement states that deposit of the loan proceeds in the LIP account "shall conclusively be deemed a full and complete consideration for [the promissory] note and Deed of Trust ...." Because no genuine issue of material fact existed, the trial court did not err in finding, as a matter of law, that only one loan was contemplated by the loan agreements. See generally McPherron v. McAuliffe, 97 Nev. 78, 624 P.2d 21 (1982).

3. Duration of the Loan.

The lower court held that the amounts of interest paid by Collins must be amortized over the life of the loan as originally provided in the promissory note and other loan documents. Collins, however, challenges that ruling, arguing that for the purposes of usury calculations, interest should be prorated over the "actual" life of the loan, i.e., from the inception of the loan to the date of default or that interest should be calculated for each year of the loan. Collins ignores a fundamental principle of usury law--that "[t]he usurious character of a transaction is determined as of the time of its inception." Curtis v. Securities Acceptance Corp., 166 Neb. 815, 91 N.W.2d 19, 26 (Neb.1958) (emphasis added). The "actual" life of the loan is not to be considered when determining whether a loan is usurious. Watson Const. Co. v. Amfac Mortgage Corp., 124 Ariz. 570, 606 P.2d 421 (Ariz.App.1979).

Nevertheless, Collins contends that NRS 99.050 (1973) should be interpreted to mean that if interest charged on a loan exceeds 12% of the outstanding principal for any one year, then the loan is usurious. Although NRS 99.050 (1973) provides that a contracted rate of interest may not exceed the rate of 12% per annum, that statute does not mean that the interest rate cannot exceed 12% annually or 12% for any one year. The words "twelve percent per annum" refer to the rate of interest and not the time of payment. Montgomery Federal Savings & Loan Ass'n...