Miller v. York

Decision Date16 April 1976
Docket NumberNo. 7930,7930
Citation92 Nev. 226,548 P.2d 941
PartiesGordon B. MILLER et al., Appellants, v. Don YORK and Kathryn York, Respondents.
CourtNevada Supreme Court

Robinson & Cassas, Reno, for appellants.

Stewart & Horton and Raymond B. Little, Reno, for respondents.

OPINION

MOWBRAY, Justice:

This is an appeal from a judgment of the district court declaring usurious a promissory note signed by the respondents, Don and Kathryn York, made payable to Appellant Gordon B. Miller, in the principal sum of $35,000; ordering appellants to return to the Yorks (1) the sum of $7,958.85, representing moneys paid to appellants in excess of the actual amount loaned to them, (2) accrued interest thereon in the amount of $2,655.11, and (3) $1,000 attorney's fees; and permanently enjoining Miller from proceeding with foreclosure proceedings under three deeds of trust securing the aforementioned promissory note.

On March 1, 1973, the Yorks were served with notice of default and election to sell certain trust deeds that they had executed in favor of Appellant Gordon B. Miller to secure a loan. The Yorks responded to the notice of default and election to sell by filing a complaint in the district court and moving for an injunction to prevent the sale of the properties.

The deeds of trust had been given by the Yorks to secure a promissory note dated February 25, 1966, in favor of Appellant Gordon B. Miller. The promissory note was in the sum of $35,000, payable in two years, with 10 percent interest.

Although the promissory note provided a face amount of $35,000 the Yorks received only $24,500, because a $10,500 loan commission was paid to Appellant Gordon B. Miller, the payee on the original note. Miller received the $10,500 commission plus an additional $10,500 commission in consideration for a renewal of the note. Again at a subsequent date the note became delinquent, and Miller was paid an additional commission of $1,602.16 on or about February 13, 1970.

The Yorks' complaint in the court below, filed in response to Miller's attempt to foreclose on the deeds of trust, was filed March 1, 1973. The complaint prayed for judgment decreeing that the promissory note secured by the deeds of trust had been paid, requiring the repayment of $7,958.85 as usurious interest and the issuance of an injunction preventing the sale under the deeds of trust, and requiring reconveyance of title therein to the Yorks.

The appellants filed their answer on May 3, 1973, denying that the transaction was usurious and asserting the affirmative defense of the statute of limitations, among others. Trial was held before the court, sitting without a jury. At the conclusion of the trial, the district judge entered judgment in favor of the Yorks, declaring that the promissory note was paid in full, permanently enjoining the sale under the deeds of trust, decreeing that reconveyance should be made to the Yorks, and awarding them $7,958.85, representing past payments of usurious interest, together with accrued interest thereon in the amount of $2,655.11; attorney's fees in the sum of $1,000; and their costs of suit. From that judgment the appellants have appealed to this court.

The basis of the Yorks' claim of usury in the instant case is that they received $24,500 from the subject loan and were required to give their note in the sum of $35,000. The remainder, or $10,500, was retained by Appellant Gordon B. Miller as a fee for obtaining the loan for the Yorks. Additional sums were paid to Appellant Gordon B. Miller for various renewals of the note that occurred over the life of the transaction. Appellants attempted to purge the transaction of its usurious nature, at trial, by claiming that Appellant Gordon B. Miller was the agent for Mrs. Ray Korn, his mother-in-law, now deceased, and that Mrs. Korn was the true lender (even though Gordon B. Miller is named as the sole payee in the promissory note and as the sole beneficiary under the deed of trust). Miller contends that he was merely acting as a broker for the loan and that his fees cannot be added to the 10 percent interest provided in the note, to make the loan usurious. Our decision in Pease v. Taylor, 88 Nev. 287, 496 P.2d 757 (1972), is controlling on this issue. There, this court said:

'. . . The exaction of a broker's fee by the lender or his agent is to be considered in computing the amount of interest due from the borrower.' Id., 88 Nev. at 290, 496 P.2d at 759.

'. . . A note is to be tested for usury with reference to the actual sum given by the lender to the borrower, and not by the face of the note. (Cite omitted.) In testing for an usurious exaction, a fee or bonus beyond the legal rate of interest constitutes an additional charge for interest. (Cites omitted.)' Id., 88 Nev. at 291, 496 P.2d at 760.

'. . . Brokers who negotiate loans may be lawfully reimbursed for their services, as for example, where one negotiates a loan through a third party with a money lender and the latter bona fide lends the money at a legal rate of interest, the transaction is not made usurious merely by the fact that the intermediary charges the borrower with a broker's commission, the intermediary having no legal or established connection with the lender. . . .' (Emphasis added; footnote omitted.) Id., 88 Nev. at 290, 496 P.2d at 760.

The record shows that this transaction was not the act of an independent lender or independent broker. The close relationship between the purported lender, Korn, and the alleged broker, Miller, is evidenced by their close family relationship, in that the loan was assigned to and carried on the records of a family trust wherein George B. Miller's wife (Eddie Miller, one of the appellants) was named as a beneficiary of the income of the trust, and their children, beneficiaries of the corpus of the trust.

Transactions by which one member of a family receives commissions for alleged services in negotiating loans from another member of the family have been held usurious where they appeared to be merely devices by which an excessive compensation was received for the loan. See Grady v. Price, 94 Ariz. 252, 383 P.2d 173 (1963). We agree with the ruling of the court below that the Miller loan commission was an additional interest payment that made the entire transaction usurious, and that the Yorks were entitled to be reimbursed for all sums paid to Miller over and above the $24,500 they actually received from him.

The next issue presented is whether the recovery of those excess sums may be barred in whole or in part by the statute of limitations.

The Yorks executed the $35,000 promissory note on February 25, 1966. On January 2, 1969, the payee, George B. Miller, assigned the note to Eddie Miller, his wife, and Helen Spencer, his sister-in-law, as trustees of an inter vivos trust established by Miller's mother-in-law, Mrs. Korn. The Yorks paid additional renewal commissions--$10,500 on March 14, 1968, and $1,624.81 on October 29, 1970--totaling completed payments on the note of $32,458.85 by October 29, 1970. On June 21, 1968, the Yorks had paid Miller $24,747.88 ($247.88 more than the $24,500 they had received on the original note). The court below ordered all payments above $24,500 to be remitted to the Yorks, with interest thereon at 7 percent per annum until paid. As a result, the trial court found the Yorks were entitled to $7,958.85, representing past payment of usurious interest, together with accrued interest thereon in the sum of $2,655.11, plus $1,000 for attorney's fees. In reaching this conclusion, the trial court rejected appellants' contention that the Yorks' claim was barred by the statute of limitations, stating: 'The Court is of the opinion that the correct rule is that the statute of limitations has no application since it has been established that the transaction is usurious.' Both parties concede, however, that an action to affirmatively recover usurious interest is governed by a statute of limitations. The prime issue presented to us is to determine which statute is controlling.

It is the Yorks' contention that there is no statute of limitations regarding the right of setoff as long as the usurious transaction remains unpaid and the lender attempts to enforce the same. We agree. The California courts have specifically held that as long as any part of the debt remains unpaid the usurious payments made or agreed to be made may be set off against the whole amount and are not affected by the statute of limitations. The debtor can, at any time, set off the usurious payments where the lender seeks to collect the obligations by...

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