Teichner v. Klassman

• Decision Date: 02 March 1966
• Citation: 49 Cal.Rptr. 742,240 Cal.App.2d 514
• Court: California Court of Appeals Court of Appeals
• Parties: Leo TEICHNER, Plaintiff and Appellant, v. Harry KLASSMAN, etc., et al., Defendants and Respondents. Civ. 28515.

Page 742

49 Cal.Rptr. 742

240 Cal.App.2d 514

Leo TEICHNER, Plaintiff and Appellant, v. Harry KLASSMAN, etc., et al., Defendants and Respondents.

Civ. 28515.

District Court of Appeal, Second District, Division 2, California.

March 2, 1966.

Rehearing Denied March 21, 1966.

Hearing Denied April 27, 1966.

Zerner & Sims and Edward S. Sims, Los Angeles, for plaintiff and appellant.

Benjamin J. Goodman and Hubert R. Sommers, Los Angeles, for defendants and respondents.

HERNDON, Justice.

Appellant filed several separate actions to recover moneys which he had advanced to respondent for the purpose of financing the operations of the Embassy Club, a poker club in Gardena, California, of which respondent was the sole proprietor.

These actions were consolidated for trial since they were brought to recover successively accruing installments allegedly due and owing to appellant from time to time pursuant to the provisions of certain writings which purported to set forth the terms and conditions of appellant's advancements and respondent's obligations to repay them. The apparent complexity of this case is attributable very largely to the heteromorphic nature of these instruments and to the doubtful character of the legal relationships thereby created.

The Determinative Issue

Reduced to its simplest terms, the principal question presented to us by this appeal is this: Did the trial court err (1) in reaching its decision that the instruments and transactions here involved were designed and intended to evade the law governing the exaction of usurious interest, or (2) in computing the amount of the principal which appellant is entitled to recover? With respect to the major issues involved in this case, we find no error in the record and hold that the evidence supports the findings and the judgment.

The Written Instruments

On July 3, 1956, respondent, then allegedly the sole proprietor of said Embassy Club, contemporaneously signed and delivered to appellant four instruments providing as follows:

(1) 'Loan No. 7357.

'This is to certify that on 3 July 1956, Leo Teichner, loaned to the Embassy Club Sixty-Five Hundred Dollars ($6500.00), payable at the rate of One Hundred Fifty Dollars ($150.00) per month for forty two (42) months and Two Hundred Dollars ($200.00) on the forty third (43) month until paid. The initial payment shall begin on 15 July 1956 and continue on the fifteenth of each following month until paid.'

(2) 'This agreement entered into this day of 3 July 1956, between Harry Klassman DBA Embassy Club and Leo Teichner, is understood as follows:

'Harry Klassman DBA Embassy Club acknowledges the receipt of Sixty-Five Hundred ($6500.00) Dollars, loan from Leo Teichner as indicated by that certain note no. 7357 dated 3 July 1956. It is understood by both parties Harry Klassman and Leo Teichner, that in the event of the permanent closing of the Embassy Club that that note No. 7357 dated 3 July 1956, shall be cancelled and Harry Klassman shall be held harmless and is not responsible for further payment of said note. In the event of default of payment of said note the full balance of said not shall become due and payable and all costs incurred in collection of said note shall be payable by Harry Klassman.'

(3) 'This is to certify that for the sum of One Hundred ($100.00) Dollars, I Harry Klassman sell, transfer and assign to Leo Teichner, one unit or point in that limited partnership known as [the Embassy Club]. This sale is to be consummated upon final payment of that certain note No. 7357, Dated 3 July 1956, loaned to the Embassy Club by Leo Teichner. In the event of my death or demise I direct my heirs or executors to carry out in its entirety the terms of this agreement.'

(4) 'In the event of the sale of the Embassy Club the terms of the note and purchase of that certain point shall be accepted by the buyers of the Embassy Club or the option to either continue these agreements or sell said agreements under the following terms and shall be exercised by Leo Teichner.

'Terms as follows: Complete payment of Note No. 7357 amount Sixty-Five Hundred ($6500.00) Dollars and all revenue derived from sale of that certain point mentioned in that certain document to be purchased at a later date.'

Thereafter, on November 13, 1957, appellant and respondent entered into two further identical written agreements that provided as follows:

'This agreement entered into this 13th day of November, 1957, by and between HARRY KLASSMAN dba 'The Embassy Club' and LEO TEICHNER or assignees, located at 180 So. Vista Street, Los Angeles 36, California.

'For the sum of Sixty-Five Hundred ($6,500.00) Dollars, which is to be invested in the Embassy Club, receipt of which is hereby acknowledged by signature of Harry Klassman, Leo Teichner or assignees are to receive the sum of One Hundred and Thirty ($130.00) Dollars per month, commencing on December 15th, 1957, and each subsequent 15th of each and every month, as long as The Embassy Club is in existence.

'In the event of the closing of The Embassy Club, Harry Klassman does hereby indemnify and guarantee that the difference between the amount received by Leo Teichner or assignees, and the sum of Sixty-Five Hundred and 00/100 ($6,500.00) Dollars, shall be reimbursed to the abovementioned Leo Teichner, or assignees. Upon receipt of the amount of Sixty-Five Hundred and 00/100 ($6,500.00) Dollars, Leo Teichner or assignees hereby release Harry Klassman from the abovementioned guarantee, but shall continue to receive the sum of One Hundred and Thirty ($130.00) Dollars each and every month, so long as The Embassy Club shall remain in existence.

'In the event of the sale of The Embassy Club, the new owners shall be notified and shall be bound by the terms of this Agreement.

'Leo Teichner or assignees, their assigns or heirs, are to be held harmless from all debts incurred by The Embassy Club, all tax liabilities, (State and Federal), law suits, and specifically any and all liabilities encumbered by The Embassy Club. In the event of any law suits, or damage suits, Harry Klassman guarantees that the abovementioned Leo Teichner or assignees will be held harmless at all times.

'The $6,500.00 invested in The Embassy Club Shall be known as one (1) unit, or one percent (1%) of the total ownership of The Embassy Club, and in the event Leo Teichner or assignees should desire to sell this one (1) unit, the right of first refusal shall be given to Harry Klassman, and he shall have the right upon refusal to approve the purchaser of said unit.

'In the event of the complete sale of The Embassy Club, 1/100 of the net sales price shall go to Leo Teichner or assignees if they at that time elect to sell, or the new owner shall be bound by this Agreement.

'In the event of the death of Harry Klassman, his heirs, assigns or executors shall carry out in full the terms of this agreement.'

Finally, on October 30, 1960, appellant and respondent entered into another written agreement essentially identical to those of November 13, 1957, quoted above, except that appellant advanced the sum of $26,000 and the number of 'points' or 'units' referred to were four instead of one.

Respondent's Payments

Respondent made the monthly payments required by these several agreements, with certain minor exceptions which the parties stipulate amounted to $615, until September 15, 1961. It is agreed that of the total amount of $45,500 advanced by appellant, respondent repaid $26,515, i. e., $9,225 on the July 3, 1956 loan of $6,500; $5,785 on each of the November 13, 1957 loans of $6,500, and $5,720 on the October 30, 1960 loan of $26,000. In addition, the trial court credited respondent with further payment in the amount of $3,916.12 as the result of attachments made by, and released to, appellant in connection with his several actions. ¹

Decision of Trial Court

Having heard the evidence, the trial court determined that these transactions constituted a series of usurious loans and entered judgment in appellant's favor for $15,068.88, being the difference between the total sum advanced by appellant and the total sum credited to respondent by way of repayment. It is from this determination that appellant appeals, contending, in essence, that the trial court erred in failing to find these several transactions to be good faith loans in which either the repayment of principal or the payment of interest were subject to a hazardous contingency and therefore were without the purview of the usury laws.

As stated in Gruner v. Barber, 207 Cal.App.2d 54, 57, 24 Cal.Rptr. 292, 294: 'We find ourselves immediately presented with the oft-repeated and time-honored rule that when a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence, contradicted or uncontradicted, that will support the finding, and when two or more inferences can reasonably be deduced from the facts, a reviewing court is without power to substitute its deductions for those of the trial court. (Brewer v. Simpson, 53 Cal.2d 567, 2 Cal.Rptr. 609, 349 P.2d 289.)'

In the instant case, the trial court found that the various 'points' or 'interests' in the Embassy Club purportedly transferred, or to be transferred, in connection with the several transactions entered into between the parties were securities within the meaning of the Corporate Securities Law. Since no permit had been secured from the Commissioner of Corporations for the transfer of these securities, the agreements relating thereto were void.

In addition, the court expressly found that the several loans and purported transfers of percentage interests in the club were 'entered into by the [appellant] and [respondent] with the intent on the part of each of them to evade the usury laws of the State of California and for the purpose of usurious...