Gibbo v. Berger, E035201.

Citation123 Cal.App.4th 396,19 Cal.Rptr.3d 829
Decision Date22 October 2004
Docket NumberNo. E035201.,E035201.
CourtCalifornia Court of Appeals
PartiesAyleen GIBBO, Plaintiff, Cross-defendant and Appellant, v. Janice BERGER, Defendant, Cross-complainant and Respondent.

Gary J. Bryant, Murrieta, for Plaintiff, Cross-defendant and Appellant.

Law Offices of Darren P. Trone and Darren P. Trone for Defendant, Cross-complainant and Respondent.

OPINION

McKINSTER, Acting P.J.

Ayleen Gibbo, plaintiff and appellant (hereafter Gibbo) appeals from the judgment entered against her and in favor of defendant and respondent, Janice Berger (hereafter Berger) on Gibbo's complaint to quiet title to certain real property located in Murrieta. Gibbo alleged in her complaint that in March 1992 she and her husband, Dick, borrowed $15,000 from defendant's father, Harold Berger.1 The loan was evidenced by a note and secured by a deed of trust on Gibbo's residence.2 The note specified that the loan was due and payable in one year and, in the interim, that Gibbo would pay interest only. Gibbo alleged that she had made interest payments on the loan through December 31, 2002, in the total amount of $17,250.

In December 2002 Berger initiated non-judicial foreclosure to recover the $15,000 principal owed on the note. In response, Gibbo filed her quiet title action in which she alleged that the interest rate on the loan was 15 percent and that rate is usurious because it exceeds the 10 percent legal rate of interest allowed under article XV, section 1 of the California Constitution. Because the interest rate was usurious, Gibbo alleged that Berger could recover only the principal of $15,000, which Gibbo had paid to Berger before December 31, 2002. Therefore, Gibbo requested that title to the property be quieted in her and that she also recover the interest that had been paid to Berger as well as statutory treble damages and damages under Civil Code section 2941 for Berger's failure to reconvey title to Gibbo's real property. Gibbo also sought and obtained a preliminary injunction prohibiting Berger from foreclosing on Gibbo's real property.

Berger filed a cross-complaint for declaratory relief alleging that the loan had been arranged by a licensed real estate broker and therefore was exempt from the constitutional usury provision as specified in article XV, section 1 of the California Constitution and in Civil Code section 1916.1. Alternatively, Berger alleged that if the court found the interest rate was usurious, the note contained a "safe harbor provision" as a result of which Berger was entitled to interest at "the maximum rate permitted by law" and therefore Gibbo owed $15,063, which Berger was entitled to recover by nonjudicial foreclosure.

Following a one-day court trial, the trial court found that the loan had been arranged by a licensed real estate broker and therefore was exempt from the constitutional usury provision. The court entered judgment against Gibbo and in favor of Berger on Gibbo's complaint and in favor of Berger and against Gibbo on Berger's cross-complaint for declaratory relief, declaring that the amount due and owing from Gibbo to Berger on the note is $15,000 with interest at the rate of 15 percent in the amount of $5,812.50 as of December 1, 2003. The court also awarded Berger costs and attorney fees under Code of Civil Procedure section 1033.5.

We conclude, for reasons we explain below, that the trial court erred in finding the loan had been arranged by a licensed real estate broker. Therefore, we will reverse the judgment on both the complaint and cross-complaint.

FACTS

The facts are undisputed. Harold Berger loaned the Gibbos $15,000 in 1992. The loan was evidenced by a note and secured by a deed of trust on Gibbo's real property. The note and deed of trust had been prepared by Mecca Escrow, which was owned by Myrna Bravender, a licensed real estate broker. Bravender died about three years before the trial took place, but her former employee, Sandra Winger, testified in pertinent part that she and Bravender were the escrow officers who handled the Berger/Gibbo file. In accordance with the escrow instructions, the escrow officers prepared the loan documents using preprinted forms, obtained a title insurance policy, and disbursed funds. For those services, Mecca Escrow charged a fee of $100, which was paid through escrow.

According to the terms of the note, the Gibbos were to pay interest only for a period of one year, after which the entire balance was due and payable. Despite the terms of the note, the Gibbos made monthly interest payments in the amount of $187.50 over the course of 10 years. Harold Berger died in March 2002. In April 2002, Janice Berger, Harold's daughter, as executor of his estate and joint tenant on the note from the Gibbos, made demand for payment of the outstanding principal. When Gibbo indicated that she was unable to pay the balance due, Berger began non-judicial foreclosure in accordance with the terms of the note.

As previously noted, Gibbo sued to enjoin the foreclosure and to quiet title, asserting that the 15 percent interest rate on the note was usurious and thus violated article XV, section 1 of the California Constitution, which states in pertinent part, "The rate of interest upon the loan or forbearance of any money, goods, or things in action, or on accounts after demand, shall be 7 percent per annum but it shall be competent for the parties to any loan or forbearance of any money, goods or things in action to contract in writing for a rate of interest: [¶] (1) For any loan or forbearance of any money, goods, or things in action, if the money, goods, or things in action are for use primarily for personal, family, or household purposes, at a rate not exceeding 10 percent per annum."

Berger alleged in her answer and cross-complaint that certain loans are exempt from the usury statute including those made or arranged by a licensed real estate broker. (Cal. Const., art. XV, § 1.) "For purposes of this section, a loan or forbearance is arranged by a person licensed as a real estate broker when the broker (1) acts for compensation or in expectation of compensation for soliciting, negotiating, or arranging the loan for another...." (Civ.Code, § 1916.1.) The trial court found that Myrna Bravender had "arranged" the loan for the parties and therefore the transaction was exempt from the usury law.

DISCUSSION

The only issue in this appeal is whether Myrna Bravender, a licensed real estate broker, arranged the loan between Berger and Gibbo such that the loan was exempt from the usury provision in the California Constitution. Because the facts are undisputed, we are not bound by the trial court's resolution of this issue and instead review the question as one of law. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 798, 35 Cal.Rptr.2d 418, 883 P.2d 960.)

As noted above, Civil Code section 1916.1 states, "a loan or forbearance is arranged by a person licensed as a real estate broker when the broker (1) acts for compensation or in expectation of compensation for soliciting, negotiating, or arranging the loan for another...." (Civ.Code, § 1916.1.) Bravender did not solicit or negotiate the loan and the parties concede on appeal as they did in the trial court that her only involvement could have been to arrange the loan. Because the definition of "arranged" includes "arranging the loan for another," the dispositive question in this appeal is what conduct constitutes arranging a loan for another within the meaning of Civil Code section 1916.1.

One of the most recent cases to address this issue is Del Mar v. Caspe (1990) 222 Cal.App.3d 1316, 272 Cal.Rptr. 446, in which the borrower sued to recover treble damages based on an alleged usurious interest rate of 15 percent. Caspe, the defendant, was sued in his capacity as executor of the lender's estate. He defended the lawsuit by asserting that the loans were exempt from the usury law because he is a lawyer and licensed real estate broker and he had arranged the loans. The evidence showed, among other things, that Caspe had conducted title searches, calculated the outstanding principal owed by the borrower, set the interest rate on additional loans to the borrower, prepared loan documents, and discussed those documents with the lender and borrower.

On appeal from the judgment in favor of Caspe, the Sixth District reviewed the trial court's finding that Caspe had arranged the loans such that the transactions were exempt from the usury law under the exception for loans arranged by a licensed real estate broker. The court of appeal found that the term "arranged" was "amorphous" and therefore the court looked to the legislative history and purpose of the real estate broker exemption to determine the Legislature's intent and thus the meaning of the term. (Del Mar v. Caspe, supra, 222 Cal.App.3d at p. 1324, 272 Cal.Rptr. 446.) The appellate court concluded, based on the legislative history that the purpose of the exemption was to expand the sources of money available for nonconsumer loans, and to further that purpose the court concluded the exemption should be broadly construed. (Ibid.) To that end, the court relied on the "settled rule of statutory construction that unless otherwise clearly intended or indicated, statutes should be construed in accordance with the common or ordinary meaning of the language used, particularly when the law as so construed is consistent with the general policy of the state. [Citations.] ... [¶] The common and ordinary meaning of the word `arrange' includes: `to put in correct, convenient, or desired order'; to put in order beforehand: make preparations for'; to effect [usually] by consulting: come to an agreement or understanding about: settle.' (Webster's New Internat. Dict. (3d ed.1981) p. 120.)" (Del Mar v. Caspe, supra, 222 Cal.App.3d at p. 1328, 272 Cal.Rptr. 446.) The appellate court concluded that substantial evidence supported the...

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