Shirley v. Britt

• Decision Date: 19 July 1957
• Citation: 313 P.2d 875,152 Cal.App.2d 666
• Court: California Court of Appeals Court of Appeals
• Parties: Lyle M. SHIRLEY and Emily Shirley, Plaintiffs and Respondents, v. Clarence BRITT and Harry U. Parker, Defendants and Appellants. Civ. 5460.

Page 875

313 P.2d 875

152 Cal.App.2d 666

Lyle M. SHIRLEY and Emily Shirley, Plaintiffs and Respondents, v. Clarence BRITT and Harry U. Parker, Defendants and Appellants.

Civ. 5460.

District Court of Appeal, Fourth District, California.

July 19, 1957.

Harry V. Ashfield, San Diego, for appellant Harry U. Parker.

Edward L. Bracklow, San Diego, for appellant Clarence Britt.

Edwin C. Jeffries, San Diego, for respondents.

MUSSELL, Justice.

This is an action to foreclose a chattel mortgage given to secure the payment of a promissory note executed by the defendants on January 2, 1951, and providing for the payment to plaintiffs of the sum of $29,000, on demand, together with interest at the rate of 8% per annum, and attorney's fees. Defendants in their answer admitted the execution of the note and mortgage and claimed a credit on the principal of said note in the sum of $17,100 by reason of payments made on it between January 1, 1951 and November 1, 1955. They further alleged that there was no consideration for the note and that they were entitled to treble damages for the interest paid at the rate of 12% per annum on promissory notes executed by them prior to the note sued upon. Defendants appeal from the judgment which was entered for plaintiffs in the sum of $29,000, principal, plus $97 interest, together with attorney's fees.

In December, 1947, and during 1947 and 1948, plaintiffs loaned various sums of money to the defendants, which sums were evidenced by promissory notes payable on demand and providing for the payment of interest at the rate of 12% per annum. Various payments were made on said notes and on January 2, 1951, the defendants, at the request of plaintiffs, executed the note involved herein for $29,000 in lieu of the said promissory notes theretofore executed by them. The note involved is secured by a chattel mortgage, providing for the payment of interest at the rate of 8% per annum. However, at the demand of plaintiff Lyle M. Shirley, the defendants on January 2, 1951, signed a letter addressed to Mr. and Mrs. Shirley, stating in part as follows:

'This letter is intended to clarify the rate of earned interest paid you on all monies invested with us to this date and any future date.

'The rate of interest paid you is Eight (8) percent per annum. Any additional payments is and has been in the form of a bonus payment on earnings received from your investment.'

Plaintiff Lyle Shirley testified at the trial that when he discovered it was illegal to collect 12% interest per annum 'I made Mr. Britt come through with that letter for, you know, 8% and 4% bonus.'

During the years 1951, 1952, 1953 and 1954 the defendants paid to plaintiffs the sum of $290 per month interest, or $3,480 per year, which amounted to 12% per annum as interest on the loan of $29,000, as is contended by appellants, or interest and bonus, as contended by plaintiffs. During each of the months of 1955 up to and including October, defendants paid $290 per month interest, or interest and bonus, on said note. Appellants contend they paid $8,952.11 interest for the years 1947-1950, inclusive, and $16,820 on the $29,000 note for the years 1951-1955, inclusive; that these payments constituted usurious interest and should have been applied to the principal obligation and that when so applied there would remain due to the respondent the sum of $3,227.89, for which sum they would be entitled to judgment against the appellants.

There may be some question as to whether, under the evidence, the sum of $8,952.11 claimed to have been paid by appellants prior to 1951 amounted to usurious interest and therefore should have been applied to the principal of the $29,000 note, as it does not clearly appear how the parties calculated the amount due from defendants to plaintiffs at the time of the execution of the $29,000 note. However, it clearly appears that the defendants paid interest at the rate of 12% per annum on the note sued upon during the years 1951-1955, inclusive, in the sum of $16,820. In this connection plaintiff Shirley testified that these sums were paid as interest and bonus for the use of the $29,000 loan.

Article XX, Section 22, of the California Constitution provides in part:

'The rate of interest upon the loan or forbearance of any money, goods or things in action, or on accounts after demand or judgment rendered in any court of the State, 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 not exceeding 10 per cent per annum.

'No person, association, copartnership or corporation shall by charging any fee, bonus, commission, discount or other compensation receive from a borrower more than 10 percent per annum upon any loan or forbearance of any money, goods or things in action.'

The provisions of the Usury Law (Deering's Gen.Laws, Act 3757, West's Ann.Civ.Code, § 1916-1 et seq.), inconsistent with the constitutional provisions, are no longer in effect and the legal rate of interest is 10% per annum. Brown v. Cardoza, 67 Cal.App.2d 187, 191, 153 P.2d 767.

In Thomas v. Hunt Mfg. Corp., 42 Cal.2d 734, 740, 269 P.2d 12, 16, the court said:

'The conscious and voluntary taking of more than the legal rate of interest constitutes usury and the only intent necessary on the part of the lender is to take the amount of interest which he receives; if that amount is more than the law allows, the offense is complete. (...