Abbot v. Stevens

• Decision Date: 25 May 1955
• Citation: 133 Cal.App.2d 242,284 P.2d 159
• Parties: Marshall ABBOT and Frances Abbott, Plaintiffs and Appellants, v. Dr. Phillip H. STEVENS, Defendant and Respondent. Civ. 20570.
• Court: California Court of Appeals Court of Appeals

Page 159

284 P.2d 159

133 Cal.App.2d 242

Marshall ABBOT and Frances Abbott, Plaintiffs and Appellants, v. Dr. Phillip H. STEVENS, Defendant and Respondent.

Civ. 20570.

District Court of Appeal, Second District, Division 3, California.

May 25, 1955.

Wm. J. Clark and Marshall Abbott, Los Angeles, for appellants.

Low & Stone, Beverly Hills, By Leonard Low, Beverly Hills, for respondent.

ASHBURN, Justice pro tem.

Demurrer to plaintiffs' fourth amended complaint having been sustained, they, according to appellants' opening brief, 'refused to plead further.' The judgment recites that counsel for plaintiffs stated 'that plaintiffs had either pleaded a good cause of action or could not plead one.' Plaintiffs having appealed, their counsel say that the 'sole question to be decided therefore is whether said pleading as amended states a cause of action.' They treat the action as one for damages for fraud and for recovery of interest, bonus and penalty for usury.

The complaint alleges that plaintiffs borrowed from defendant on September 12, 1952, the sum of $30,000 upon their promissory note secured by trust deed. The note carries interest at 10 per cent per annum payable monthly. The term of the note is three years. It confers this option upon the borrowers: 'Privilege is hereby reserved of paying this Note in full prior to maturity by payment of principal, accrued interest, and 180 days unearned interest as a pre-payment privilege.' Plaintiffs allege that they sought and defendant knew they wanted a loan for one year and no longer; that he promised them that if they would promptly make the prescribed payments for a period of one year or such lesser period as he should prescribe he would accept the principal amount and waive the payment of any bonus; he also represented that the bonus provision was inserted only with the intention that it should be effective if plaintiffs were dilatory in their payments and that as a matter of business practice he never did insist, and in this instance would not insist, upon payment of the bonus. It is also alleged that defendant then intended not to perform said promise and that the other representations were false; that plaintiffs believed said promises and statements and were thereby induced to accept the three year loan instead of the one desired, for a year or less. (There were other alleged false representations to the effect that defendant was loaning his mother's money and acting as her agent; that she insisted on loans for three years or more; that he had authority to terminate the loan before maturity and without exacting a bonus and that he had been doing so. But, as the note and trust deed were taken in defendant's own name and the acts complained of were performed by him personally, these alleged false representations are not material.) By way of branding the transaction as usurious plaintiffs further allege that the insistence upon a three year note and trust deed was merely a device 'to procure a note and Trust Deed for a longer period than plaintiffs rquired, and for a longer period than it was intended by either party that the loan should remain unpaid, and said device being resorted to for the purpose of pretending to require a bonus for the release of said loan.' Also that plaintiffs 'did not require a loan for a longer term than one year, and did not intend to use the money for any longer term, as the defendants at all times well knew * * * to the end that defendants [plaintiffs] would submit to paying said bonus rather than two years additional interest.' Again: 'That all of the acts and things done by said defendant were done pursuant to an intent on his part to charge and collect more than 12% ¹ per annum for the use of money and all of the promises and representations were made in pursuance of such intent.' But it is also alleged that defendant intended and expected that plaintiffs would believe and rely on his promise with respect to the bonus and that they did do so; that otherwise they would not have executed the note and trust deed. It is not alleged that plaintiffs ever agreed or expected or intended to pay the bonus; it is alleged that they still relied upon the promise to waive it when they negotiated a new loan, probably in May 1953.

Plaintiffs paid the prescribed interest in monthly sums to and including May 19, 1953. About two months before that date they offered to pay the note and about May 20, 1953, defendant advised that he wished this done; plaintiffs, relying upon the promise not to exact the bonus, negotiated a new loan with which to discharge this one; thereupon 'after the said payments had been concluded' ² they tendered to defendant the principal of $30,000 and demanded cancellation of the note and atisfaction of the trust deed, but he refused to do so unless plaintiffs paid him $1,500 as a bonus (the stipulated amount); thereupon they paid the principal, interest and bonus on June 1, 1953; they then received their note and a reconveyance under the trust deed. The complaint prays for recovery of $3,675 as the amount of interest and bonus paid, plus $4,500 as treble the amount of bonus; no mention of damages for fraud. And the averments approach no closer to a claim of damage than the allegation that plaintiffs negotiated a new loan and 'that in so doing they incurred expense and in so doing they placed themselves in a position where unless the loan from defendant was cancelled they would be compelled to pay interest on two loans and thereby to pay far more than the ten percent on the amount of the loan from defendant.'

This complaint does not disclose a right to recover for fraud, as it alleges no actionable deceit and contains no averment of damage.

The loan was for a specified term of three years and plaintiffs were given an option to pay it before maturity upon payment of a bonus of 180 days' unearned interest; without the bonus payment there could arise no right to pay the note before maturity. Defendant, with no intention of performing, promised to accept payment of principal without requiring a bonus of plaintiffs would promptly make their payments (interest) 'for a period within one year, or such lesser period as he should require.' In other words it was a promise that he would not enforce one of the terms of the contract. Such a promise, directly at variance with the terms of the writing, cannot afford a basis for an action in deceit. This rule is established by Bank of America, etc., Ass'n, v. Pendergrass, 4 Cal.2d 258, 264, 48 P.2d 659. And it is succinctly stated in Newmark v. H and H Products Mfg. Co., 128 Cal.App.2d 35, 37, 274 P.2d 702, 703, 'Parol evidence of fraud to establish[ed] the invalidity of a written instrument induced by a promise made without any intention of performing it is only permissible in the case of a promise to do some additional act which was not covered by the terms of the contract and such evidence is not admissible in the case of a promise directly at variance with the terms of the written instrument. (Simmons v. Cal. Institute of Technology, 34 Cal.2d 264, 274, 209 P.2d 581; Bank of America, etc., v. Pendergrass, 4 Cal.2d 258, 263, 48 P.2d 659; Partanian v. Flodine, 95 Cal.App.2d Supp. 931, 934, 213 P.2d 790; Cobbs v. Cobbs, 53 Cal.App.2d 780, 784 et seq., 128 P.2d 373; W. Ross Campbell Co. v. Sears, Roebuck & Co., 136 Cal.App. 765, 769, 29 P.2d 910.)'

Fraudulent representations which work no damage cannot give rise to an action at law, 12 Cal.Jur. § 39, p. 765, and an allegation of a definite amount of damage is essential to stating a cause of action. Munson v. Fishburn, 183 Cal. 206, 220, 190 P. 808; Maynes v. Angeles Mesa Land Co., 10 Cal.2d 587, 590, 76 P.2d 109; Tsang v. Kan, 78 Cal.App.2d 275, 281, 177 P.2d 630; 12 Cal.Jur. § 69, p. 813. The only specific damage alleged at bar is the payment of the bonus, and that could not serve the desired purpose unless it was usurious; payment of a lawful exaction cannot constitute a legal injury.

The note was not usurious on its face. Although it provided for interest at the maximum rate, the payment of a bonus in addition thereto and as a consideration for the lender's relinquishing the loan before maturity rested entirely with the debtor; and in that situation a provision for or collection of a bonus is not usurious. 'Where the excessive interest is caused by a contingency under the lender's control, or not under the borrower's control,...