Usury and Lending Laws; Enforcement and Defense of Notes and Guaranties
The California Constitution limits the interest that can be charged on a non-exempt loan to no more than ten percent (10%) per year. There is nothing black and white about usury. Given that the usury law is complex and is riddled with so many exceptions that the law’s application itself seems to be the exception rather than the rule. The two most common exemptions to usury are loans made to corporations and loans arranged by a licensed broker. A borrower may be entitled to money damages for all monies paid and treble (three times) damages based on interest paid during the last two years prior to filing law suit, as well cancellation of future interest payments.
Canon Law specializes in usury laws, representing both lenders and borrowers. Usury matters often cross over into real estate laws, as loans are often secured by deeds of trust against properties. As such, Canon Law’ expertise in real estate litigation and enforcing or enjoining foreclosure sales compliment the firm’s usury litigation practice.
Canon Law further specializes in enforcement of Notes and Guaranties, including pursuing debtors for deficiency judgments (anti-deficiency laws and the one-action rule). Throughout the years, the Firm has represented many lenders, assisting them in completing foreclosure sale of underlying collateral properties, as well as pursing borrowers and guarantors for outstanding loans. Such litigation often crossovers into other fields of law such as bankruptcy, quiet title, and foreclosure laws.
Canon Law also represents multiple borrower/debtor clients in their defense against enforcement of Notes and Guaranties. These defenses are often based on theories such as sham guaranty, wrongful foreclosure, anti-deficiency laws, usury, and other predatory lending laws.
Hardwick et al
Alameda County Superior Court (Oakland)
Usury
Canon Law represented a lender who had made multiple short term loans throughout a 15 year period to the borrower. The underlying Notes were secured by real estate properties in Oakland, California. Borrower claimed that the underlying notes were usurious, and connected in that they were renewals of each other, and thus sought to recover all interest paid in the last 15 years. Canon Law argued on behalf of the Lender that the loans throughout the years were not renewals of each other, but rather refinances of each other, and thus, the borrower was only entitled to recover paid interest on only the most recent notes, if any.
De La Carrierr et al
Los Angeles County Superior Court
Quiet Title-Breach of Note-Statute of Limitations
Canon Law represented a lender in a five day trial before Honorable Michael Johnson, Judge, Los Angeles Superior Court. The Note was about ten years old. Borrower claimed that due to passage of time, the loan had expired (4 year statute of limitations for written contracts). However, lender claimed that because the Note was secured by a deed of trust, a 10 year statute of limitation applied. Borrower also claimed that the Note was usurious, and that the lender should not be entitled to any interest. Lender argued that usury was not applicable because the Borrower never intended to repay the loan, whatsoever. The court issued judgment for Canon Law’s client, ruling that the lender’s claims were not barred by statute of limitations, and granted the lender’s request for return of principle, and post maturity interest. Lender also recovered full attorney fees.
Field v Fadia
Los Angeles County Superior Court
Usury-Quiet Title
Canon Law represented a borrower. Borrower claimed that because the underlying Note was usurious, the Note holder was not entitled to any interest, and that all prior payments offset the principle amount of the Note. Lender claimed that Note was exempt from usury laws because the borrower himself was a licensed broker. Canon Law argued that for the broker exemption to apply, the Note had to be arranged by a broker. The fact that borrower himself was a broker was incidental and irrelevant. The litigation resulted in the borrower being credited for all prior interest payments made against the principle amount of the Note (essentially an interest free loan).
Schaefer v Emad
Los Angeles County Superior Court
Commercial Guaranty
Canon Law represents a Lender. Borrower defaulted on an underlying Note which was secured by real estate properties in Los Angeles. Lender foreclosed on the collateral properties, recovery a portion of the outstanding Note. Now, in this action, Lender is pursuing the Guarantors of the Note for the outstanding balance (deficiency).
Pensco et al
Canon Law is currently representing a lender in the Court of Appeal, 1st Division, San Francisco. Over a period of 12 years, lender had lent borrower multiple short term loans, amounting to about Two Million Dollars. Borrower had sued for usury, seeking to recover all interest paid throughout the 12 years. Lender, before the Court of Appeal, is arguing that the Trial Court was incorrect in granting judgment for borrower, because the borrower’s claims were barred by ‘release’ and ‘statue of limitations’. The Court of Appeal is now tasked to find whether a ‘release of known and unknown claims’ is applicable to unknown usury claims. Further, the Court of Appeal is tasked to distinguish between a ‘loan renewal’ versus a ‘loan refinance’.