Winnett v. Roberts

Decision Date08 April 1986
Citation225 Cal.Rptr. 82,179 Cal.App.3d 909
CourtCalifornia Court of Appeals Court of Appeals
PartiesDon E. WINNETT et al., Plaintiffs and Appellants, v. Andrew J. ROBERTS et al., Defendants and Respondents. Civ. 24354.

Kronick, Moskovitz, Tiedemann & Girard, Leonard M. Friedman, Thomas C. Hughes, Sacramento, Fred Crane and Michael V. Hesse, Riverside, for plaintiffs and appellants.

Daniel G. Nauman, Sacramento, for defendants and respondents.

PUGLIA, Presiding Justice.

Plaintiffs Don and Susan Winnett brought an action to enjoin the foreclosure sale of real property under a trust deed securing a $7,000 promissory note given by plaintiffs to defendants Andrew and Elane Roberts. Plaintiffs alleged the note was usurious and that no part of it had been paid. The trial court issued a temporary restraining order halting the sale, conditioned upon plaintiffs paying defendants the principal within five days. Although the $7,000 principal was paid within five days, the court denied a preliminary injunction, declaring: "The note is not usurious because it was arranged by a licensed real estate broker and is secured by real property."

After the foreclosure sale was held, plaintiffs amended their complaint, seeking to set aside the sale and recover damages. Thereafter, the trial court granted defendants' motion for summary judgment. Following entry of judgment plaintiffs moved to set aside the trustee's sale and trustee's deed. The trial court denied the motion. Plaintiffs appeal from the judgment and the order denying their post-judgment motion.

On appeal, plaintiffs' principal contention is that the $7,000 note, which calls for interest at an annual rate of 40 percent, is usurious. Defendants counter that the loan is exempt from the usury law. For the reasons which follow, we conclude that the exemption of loans made or arranged by real estate brokers from the constitutional restrictions relating to usurious loans does not apply where the borrower is the only real estate broker involved in the loan transaction. We shall therefore reverse the judgment.

Summary judgment is proper only where the moving party is entitled to judgment as a matter of law because all documents submitted and matters judicially noticed in the proceeding and all inferences reasonably deducible therefrom raise no triable issues as to any material fact. (Code Civ.Proc., § 437c, subd. (c); D'Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 20, 112 Cal.Rptr. 786, 520 P.2d 10.) The facts material to this appeal are undisputed.

In August 1981, defendants loaned plaintiffs $7,000. In return, plaintiffs executed a $7,000 promissory note secured by a deed of trust on real property. The note, payable August 17, 1982, bore annual interest of 40 percent. At the time of the loan, plaintiff Don Winnett was a licensed real estate broker; he borrowed the money to pay for personal expenses. Defendant Andrew Roberts, who lent the money to plaintiffs, was not a licensed real estate broker.

The note was not paid when it became due. In October 1982 defendants initiated proceedings to foreclose on the real property securing the note. A notice of trustee's sale was recorded July 28, 1983.

On August 9, 1983, plaintiffs made a written tender of the principal sum of $7,000 plus 10 percent interest as a final settlement of the debt. Sufficient funds were available in plaintiffs' bank account to satisfy the tender, but defendants rejected the offer. Plaintiffs filed this lawsuit on August 22, 1983, the scheduled date of the foreclosure sale.

The trustee's sale was delayed by operation of the temporary restraining order and payment of the $7,000 principal. It was held on September 12, 1983. The trustee sold the property to defendants for $4,415.51.


Under California Constitution, article XV, section 1 et seq. (hereafter article XV), the maximum interest rate which may be charged on loans in writing for "use primarily for personal, family or household purposes" is 10 percent per annum. Exempted from the interest rate limitation are "any loans, made or arranged " by any person licensed as a real estate broker by the State of California and secured in whole or in part by liens on real property, ..." (Emphasis added.) 1 The loan at issue here was usurious unless the real estate broker exemption applies. The real estate broker exemption was enacted as part of an initiative measure, Proposition 2, at the November 1979 special election.

Preliminarily, we point out that the meaning of the term "made" appearing in the real estate broker exemption is not in issue. In common parlance, the person who makes the loan of money is the lender. (See, e.g., Civ.Code, §§ 1916.8; 1916.9, subd. (c); 1917.020, subd. (e); Fin.Code, §§ 24002, 24007, 24009.) The person who receives the loan is the borrower (see, e.g., Fin.Code, § 18004). By analogy to the language of article XV dealing with "loans made by" building and loan associations, banks, credit unions, and other exempt lenders, an exempt loan is "made" under the real estate broker exemption when the broker acts as a principal in the transaction by lending his own money. (See Harroch and Dana, The Real Estate Broker Exemption from the California Usury Law (Cont.Ed.Bar 1985) Selected Articles from the Real Property Law Reporter 171, 173-174; 4 Miller & Starr, Current Law of Cal. Real Estate (1985 supp.) § 28:25, p. 438.) Statutory and decisional law is in accord. (Civ.Code, § 1916.1; Stats. 1983, ch. 307, § 1; Orden v. Crawshaw Mortgage & Investment Co. (1980) 109 Cal.App.3d 141, 167 Cal.Rptr. 62; Garcia v. Wetzel (1984) 159 Cal.App.3d 1093, 206 Cal.Rptr. 251; In re Lara (9th Cir.1984) 731 F.2d 1455, 1462.) Where as here the only participant in the loan transaction who is licensed as a real estate broker is the borrower, the loan has not been "made" by the broker within the meaning of the exemption. Defendants do not contend to the contrary.

In this appeal the parties debate the meaning of the term "arranged" as used in the real estate broker exemption. Underlying the summary judgment in favor of defendants is the trial court's conclusion, in denying the preliminary injunction, that the $7,000 loan from defendants was "arranged" by the borrower, plaintiff Don Winnett, a licensed real estate broker.

Courts and commentators have observed that the meaning of "arranged" is unclear. Standing alone and without explication, "arranged" fails to convey precisely what activities on the part of a licensed real estate broker constitute arrangement of a loan. (In re Lara, supra, 731 F.2d at pp. 1462-1463; Harroch and Dana, Selected Articles from the Real Property Law Reporter, supra, at pp. 174-175; 4 Miller & Starr, Current Law of Cal. Real Estate, supra, § 28:25, p. 43 8.) Like many other words in common usage (see Carman v. Alvord (1982) 31 Cal.3d 318, 326-327, 182 Cal.Rptr. 506, 644 P.2d 192; Mills v. County of Trinity (1980) 108 Cal.App.3d 656, 660, 166 Cal.Rptr. 674), "arranged" is a term of amorphous dimensions.

In the present context, defendants submit that the identity of the loan arranger turns on the relative involvement of the borrower and lender in the necessary and formal steps culminating in the loan. This mechanical approach renders the term "arranged" almost meaningless. In the sense urged by defendants, every borrower participates in arranging a loan, if only by signing a promissory note and holding out his hand to receive the money; every lender participates in arranging a loan, if only by securing the necessary funds and tendering the money.

Where statutory or constitutional phrases are uncertain, a fundamental rule of construction is that the courts look to the apparent legislative intent to effectuate the purpose of the law. (Massachusetts Mutual Life Ins. Co. v. City and County of San Francisco (1982) 129 Cal.App.3d 876, 880, 181 Cal.Rptr. 370.) As with other constitutional provisions, language in a constitutional initiative measure should be read in context and given a liberal and common-sense interpretation which will promote rather than defeat the objectives of the framers. (Ibid.; Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 245, 149 Cal.Rptr. 239, 583 P.2d 1281; Mills v. County of Trinity, supra, 108 Cal.App.3d at p. 660, 166 Cal.Rptr. 674.) Where " 'a word of common usage has more than one meaning,' " one that will best serve the legislative purpose should be adopted, " 'even though the ordinary meaning of the word is thereby enlarged or restricted ....' " (Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 Cal.3d 222, 232, 110 Cal.Rptr. 144, 514 P.2d 1224.) Also, the courts should " 'construe enactments to give specific content to terms that might otherwise be unconstitutionally vague. [Citations.]' " (Amador, 22 Cal.3d at p. 245, 149 Cal.Rptr. 239, 583 P.2d 1281 , quoting Associated Home Builders etc., Inc. v. City of Livermore (1976) 18 Cal.3d 582, 598, 135 Cal.Rptr. 41, 557 P.2d 473.)

As an aid in discerning the probable intent of uncertain language, it is appropriate to consider the ballot summary, arguments, and analysis presented to the electorate in connection with an initiative measure. (Amador, 22 Cal.3d at pp. 245 -246, 149 Cal.Rptr. 239, 583 P.2d 1281.) Since the adopting body is presumed to be aware of existing laws (In re Lance W. (1985) 37 Cal.3d 873, 890, fn. 11, 210 Cal.Rptr. 631, 694 P.2d 744), it is also proper to construe a term used in the measure in light of related enactments which by prior judicial or administrative construction have already invested the term with a special meaning. (County of Sacramento v. Hickman (1967) 66 Cal.2d 841, 850-851, 59 Cal.Rptr. 609, 428 P.2d 593.)

The ballot pamphlet analysis by the Legislative Analyst accompanying Proposition 2 explained: "Under existing law, loans made or arranged by any person licensed as a real estate broker by the State of California and...

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