Garcia v. Wetzel

159 Cal. App. 3d 1093, 206 Cal. Rptr. 251, 1984 Cal. App. LEXIS 2496

• Court: California Court of Appeal
• Decided: September 11, 1984
• Docket: Civ. 53939
• Status: Published

Opinions

Opinion

BARRY-DEAL, J.

Simon Garcia and Odelia Garcia, his wife, appeal¹ from a summary judgment in favor of the respondent Wetzel. We affirm the judgment on the basis that the Legislature intended the exemption of the usury provision of the state Constitution (art. XV, § 1, amended Nov. 6, 1979), as clarified by Civil Code section 1916.1 (Stats. 1983, ch. 307, §§ 1, 2), to apply to real estate brokers who, acting as principals, make unsecured loans.

A summary judgment is proper only if there is no triable issue of fact and, as a matter of law, the moving party is entitled to judgment. (Code Civ. Proc., § 437c.)

In reviewing a summary judgment, we are limited to the facts shown in the affidavits and those admitted and uncontested in the pleadings. We determine only whether the facts so shown give rise to a triable issue of fact. Moreover, the moving party’s papers are strictly construed, while those of the opposing parties are liberally construed. A summary judgment is a drastic procedure to be used with caution, and doubts as to the propriety of granting the motion are resolved in favor of the party opposing the motion. (Corwin v. Los Angeles Newspaper Service Bureau, Inc. (1971) 4 Cal.3d 842, 851-852 [94 Cal.Rptr. 785, 484 P.2d 953].)

Viewing the instant record in the light of the above rules, the pertinent facts are as follows: respondent Wetzel, a licensed real estate broker, on May 8, 1979, agreed: (1) to lend appellants $18,122.99, the sum required to redeem appellants’ real property from a foreclosure sale scheduled for May 8, 1979; and (2) to assume appellants’ existing loan of $14,000 on the property. The written deposit receipt agreement stated that appellants were aware that Wetzel was purchasing the property for “profit and speculation. ” Appellants conveyed the property to Wetzel by a grant deed dated May 8, 1979. The agreement also provided a 30-day option to repurchase the property for $22,239.45, approximately $4,000 more than Wetzel had paid. Appellants subsequently exercised this option, paid this amount, and received a reconveyance of the property. On July 16, 1979, they filed the instant complaint alleging that the $4,000 charge represented an interest rate in violation of article XV, section 1 of the state Constitution.

The basis of the summary judgment in favor of respondent was the retrospective application of article XV, section 1. This court (Div. One) so held in Chapman v. Farr (1982) 132 Cal.App.3d 1021, 1023-1024 [183 Cal.Rptr. 606], citing Orden v. Crawshaw Mortgage & Investment Co. (1980) 109 Cal.App.3d 141, 145-146 [167 Cal.Rptr. 62], which explained the underlying rationale, i.e., the remedies previously provided for an allegedly usurious contract are in the nature of penalty, and no person in the state has a vested right in an unenforced statutory penalty or forfeiture.

However, neither Chapman v. Farr, supra, 132 Cal.App.3d 1021, nor any published authority in this state reached the instant question of whether the exemption of article XV, section 1, applies to licensed real estate brokers who make unsecured loans on their own accounts.² So far as pertinent, the exemption applies to loans “. . . made or arranged by any person licensed as a real estate broker by the State . . . and secured in whole or in part by liens on real property, . . .”³ (Italics added.) Respondent concedes that the loan would have been usurious in the absence of this exemption.

By statute, a real estate broker is defined as “. . .a person who, for a compensation . . . , does or negotiates ... for another or others: [1] (a) [s]ells or offers to sell, buys or offers to buy, ...” real property. (Bus. & Prof. Code, § 10131, subd. (a), italics added.) The two preliminary requirements that must be met to find that a person is acting as a real estate broker within the confines of his or her license are that he or she must be acting on behalf of someone else and must be working for compensation. (Froid v. Fox (1982) 132 Cal.App.3d 832, 839 [183 Cal.Rptr. 461].) Here, respondent admittedly acted on his own behalf and not on behalf of appellants, and he received as compensation the $4,000.

Business and Professions Code section 10133, subdivision (a), expressly exempts from the definition of a real estate broker “. . . [a]nyone who directly performs any of the acts within the scope of this chapter with reference to his own property . . . .” (Italics added.) As this court (Div. Two) explained in Robinson v. Murphy (1979) 96 Cal.App.3d 763, 768 [158 Cal.Rptr. 246], the above statute codifies a universally accepted rule that a person dealing with his or her own property is not acting as a broker. (Accord Froid v. Fox, supra, 132 Cal.App.3d 832, 841-842.) Recently, in Merrifield v. Edmonds (1983) 146 Cal.App.3d 336, 343 [194 Cal.Rptr. 104], we characterized the taking of personal loans as an activity that does not require a real estate license.

However, in 1983, the Legislature added Civil Code section 1916.1,⁴ which became effective on January 1, 1984. (Stats. 1983, ch. 307, §§ 1, 2.) The new statute reads as follows: “The restrictions upon rates of interest contained in Section 1 of Article XV of the California Constitution shall not apply to any loan or forbearance made or arranged by any person licensed as a real estate broker by the State of California, and secured, directly or collaterally, in whole or in part by liens on real property. The term ‘made or arranged’ includes any loan made by a person licensed as a real estate broker as a principal or as an agent for others, and whether or not the person is acting within the course and scope of such license. ” (Italics added.)

There is a strong presumption in favor of the Legislature’s interpretation of a state constitutional provision, and that interpretation is controlling if not unreasonable. (Methodist Hosp. of Sacramento v. Saylor (1971) 5 Cal.3d 685, 692-694 [97 Cal.Rptr. 1, 488 P.2d 161].)

We find persuasive the reasoning and discussion of the Ninth Circuit, which recently was faced with the interpretation and application of Civil Code section 1916.1 in a substantially similar situation. (In re Lara (9th Cir. 1984) 731 F.2d 1455.) Recognizing the retroactive application of Civil Code section 1916.1 (Chapman v. Farr, supra, 132 Cal.App.3d 1021), and applying California law, the Ninth Circuit held (In re Lara, supra, 731 F.2d at p. 1459) that it was bound to accept the Legislature’s conclusion that a licensed real estate broker need not be acting in his licensed capacity for the usury exemption to apply. In doing so, the Ninth Circuit relied on the declaration of legislative purpose set forth below⁵ and (id., at pp. 1460-1461) rejected an equal protection argument predicated on the federal and state Constitutions. While we are not bound by In re Lara on a matter of state law (6 Witkin, Cal. Procedure (2d ed. 1971) Appeal, § 674, pp. 4587-4588), we find its reasoning compelling, and see no need to repeat it here. We are constrained to note, however, that the interest rate charged here is over 250 percent per annum. By permitting such a transaction, the Legislature may have gone too far to encourage mortgage lending in its attempt to make more money available to consumers and stimulate the housing industry, the declared purpose of article XV, section 1.⁶ (Ballot Pamp., Proposed Amend, to Cal. Const, with arguments to voters, Special Statewide Elec. (Nov. 6, 1979), pp. 10-13 (Prop. 2).)

The summary judgment is affirmed.

Scott, J., concurred.

1 The notice of appeal refers only to the summary judgment granted to respondent on January 15, 1981, on the first cause of action. No appeal was taken from the October 3, 1980, order sustaining the demurrer on the second, third, and fourth causes of action.

2 In Chapman v. Farr, supra, 132 Cal.App.3d at page 1026, the court was satisfied that the evidence indicated that the transaction was “ ‘arranged’ ” by the broker for his parents.

3 Respondent baldly asserts that the transaction was “secured” by the grant deed of the property. However, no deed of trust, mortgage, promissory note, or other security document was ever executed. Further, there was no obligation that survived the execution of the grant deed. (Cf. Cavanaugh v. High (1960) 182 Cal.App.2d 714, 719-720 [6 Cal.Rptr. 525].)

4 At oral argument we granted the parties permission to file additional letter briefs on the new statute and the recent decision of the Ninth Circuit, discussed subsequently.

5 Section 2 of the 1983 legislation provides: “The Legislature finds that the Legislature in adopting ACA 52 in 1979 (Res. Ch. 49, Stats. 1979), and the people in approving that measure as Proposition 2 in November of 1979, established an additional class exempt from interest rate limitations for persons licensed as real estate brokers by the State of California on the basis that real estate brokers are qualified by the state on the basis of education, experience, and examination, and that the licenses of real estate brokers can be revoked or suspended if real estate brokers perform acts involving dishonesty, fraud, or deceit with intent to substantially benefit themselves or others, or to substantially injure others. ” (Italics added.)

6 In 1979, the Legislature did enact Civil Code sections 1695-1695.14 on home equity sales contracts. (Stats. 1979, ch. 1029, § 1, p. 3536, eff. Jan. 1, 1980.) The intent and purposes of this legislation were “[t]o provide each homeowner with information necessary to make an informed and intelligent decision regarding the sale of his or her home to an equity purchaser; to require that the sales agreement be expressed in writing; to safeguard the public against deceit and financial hardship; to insure, foster, and encourage fair dealing in the sale and purchase of homes in foreclosure; to prohibit representations that tend to mislead; to prohibit or restrict unfair contract terms; to afford homeowners a reasonable and meaningful opportunity to rescind sales to equity purchasers; and to preserve and protect home equities for the homeowners of this state. , . .” (Civ. Code, § 1695, subd. (d)(1).)