Opinion
NOT TO BE PUBLISHED
Humboldt County Super. Ct. No. DR090011.
REARDON, J.
After a bench trial in this mortgage and foreclosure dispute, a deed executed in favor of respondent Richard T. Homem was rescinded and title to real property was returned to appellant Lisa Charter. The trial court rejected her cause of action for damages under the Mortgage Foreclosure Consultant Act (MFCA). (Civ. Code, § 2945 et seq.) Charter appeals, contending that the trial court erred when it found that (1) usury laws did not apply to this matter and (2) Homem did not act as a foreclosure consultant. We affirm the judgment.
All statutory references are to the Civil Code unless otherwise indicated.
I. FACTS
In April 2007, Charter’s grandmother hired Homem to do yard work at Charter’s Fortuna home. In June 2007, foreclosure proceedings were initiated against Charter by her mortgage lender, USDA Rural Housing Service (USDA), and a trustee’s sale was set for June 28, 2007.
Before the sale, Homem asked Charter whether she was interested in selling her home. Charter was not, as she was attempting to refinance her mortgage. Liens on the property were held by Professional Credit Management, Wells Fargo Auto Finance, and Charter’s ex-husband. When Charter realized she would be unable to independently refinance, she asked Homem to loan her the money needed to pay off her mortgage. Initially, Homem was reluctant to do so because of the liens against the property. Charter called Homem three times the day before the USDA foreclosure sale asking him to make the loan.
On June 28, 2007, Homem decided to loan the money to Charter. He and Charter met with her attorney, Thomas Hjerpe, at the foreclosure sale. Homem tendered a cashier’s check for the amount owed to USDA. Immediately after halting the sale, a deed of trust was drafted, signed by Charter and Homem, notarized, and filed with the recorder’s office.
On July 3, 2007, a promissory note drafted by Hjerpe was executed in favor of Homem for a loan of up to $166,600. The note’s terms included an 8 percent interest rate, 12 monthly interest-only payments of $1,110.66, payment of the liens on Charter’s property, and a $15,000 loan fee due in August 2008. The total amount loaned by Homem was $151,710.13.
Charter made all monthly payments due on the note from August 2007 through January 2008. She missed payments for February and March 2008. Homem agreed to postpone foreclosure proceedings after Charter signed over title to her 2001 Volkswagen Jetta in lieu of the missed payments. Homem agreed to give the car back on receipt of the delinquent payments. Charter made the April 2008 payment.
In May and June 2008, Charter again failed to make her monthly payment. In June 2008, Homem initiated foreclosure proceedings by issuing a notice of default. Charter failed to pay the $15,000 loan fee when it came due in August 2008. In October 2008, Homem purchased the property at the trustee’s sale for $180,456.52. In November 2008, after Charter ignored his three-day notice to quit, Homem filed an unlawful detainer action. (Homem v. Charter (Super. Ct. Humboldt County, No. CV080867.) The unlawful detainer action was later stayed pending the outcome of the litigation that is the subject of this appeal.
In January 2009, Charter filed the instant action seeking equitable relief and damages. In her February 2009 amended complaint, she alleged that the June 2007 promissory note was usurious and that Homem was a foreclosure consultant within the meaning of the MFCA. She sought equitable relief and treble damages as allowed by the MFCA. (§ 2945 et seq.) Homem cross-complained for injunctive relief.
In June 2009, the trial court issued an injunction allowing Charter to retain possession of the property pending resolution of the litigation. In April 2010, after a bench trial, the trial court issued a tentative decision, exercising its equitable authority. It rescinded the trustee’s deed and the promissory note, and rewrote the note’s terms to remove the $15,000 loan fee. The court’s goal was to place each party in the position they sought to be in on June 28, 2007, avoiding a windfall to either party.
In June 2010, the trial court issued an amended decision. It found that Homem received an interest rate in excess of the statutorily allowed maximum rate. However, the trial court found no evidence that Homem intended to receive a usurious rate of interest. Based in part on this finding, the trial court found insufficient evidence to show Homem was a foreclosure consultant within the meaning of section 2945. It noted that Homem halted the foreclosure sale before preparation and execution of any document to protect himself.
II. DISCUSSION
A. Usurious Promissory Note
Charter raises two issues on appeal. First, she contends that the trial court erred when it declined to apply usury laws to this matter, specifically by finding that Homem lacked the necessary intent for usury. She argues this presents a pure question of law based on undisputed facts, thus necessitating de novo review. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 800-801.)
Charter’s argument is misplaced. Whether a loan is usurious and the lender had a usurious intent are always questions of fact. (Boerner v. Colwell Co. (1978) 21 Cal.3d 37, 44; West Pico Furniture Co. v. Pacific Finance Loans (1970) 2 Cal.3d 594, 603.) Ghirardo was decided in a court of law with undisputed facts. (See Ghirardo v. Antonioli, supra, 8 Cal.4th at pp. 799.) Further, Ghirardo decided whether usury laws applied to credit sales, a question of law necessitating independent review. (Id. at p. 801.) Here, the trial court conducted a bench trial and sat as a court of equity to rule on disputed facts. Charter’s case is distinguishable.
Factual findings made by the trier of fact are reviewed for substantial evidence. (Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, 500-501.) If any substantial evidence or any reasonable inference from that evidence supports the findings, we cannot substitute our judgment for that of the trial court. (Janisse v. Winston Investment Co. (1957) 154 Cal.App.2d 580, 582.)
Charter argues that because the note charged a usurious interest rate, the court was required to find that Homem had a usurious intent. Generally, lenders are entitled to a maximum annual interest rate of 7 percent on real property loans. Through a written contract, parties may set the interest rate as high as 10 percent, or at the level of the Federal Reserve’s discount rate plus 5 percent. (Cal. Const., art. XV, § 1, subds. (1)-(2).) Any higher rate is usurious. The essential elements of a cause of action for usury are: (1) that the transaction must be a loan or a forbearance; (2) that the interest to be paid exceeded the statutory maximum; (3) that the loan and interest must be repayable by the borrower; and (4) that the lender must have a willful intent to enter into a usurious transaction. (WRI Opportunity Loans II LLC v. Cooper (2007) 154 Cal.App.4th 525, 533.)
There is a rebuttable presumption that a loan’s interest rate is not usurious. (Janisse v. Winston Investment Co., supra, 154 Cal.App.2d at p. 586.) As the borrower, Charter bore the burden of proving the essential elements of a usurious loan. (See Terry Trading Corp. v. Barsky (1930) 210 Cal. 428, 433.) The trial court found that Homem did not have a willful intent for the purposes of usury.
The intent element is narrow, and may be proven by showing the lender took more interest than is statutorily allowed. (See Ghirardo v. Antolioni, supra, 8 Cal.4th at p. 798.) The trier of fact must determine whether the lender’s intent was usurious by considering the loan’s substance, and not merely the form of the loan. (Janisse v. Winston Investment Co., supra, 154 Cal.App.2d at p. 582.) The circumstances and negotiations preceding the loan may be considered when determining the lender’s intent. (Terry Trading Corp. v. Barsky, supra, 210 Cal. at p. 432.)
Charter is correct that the note charged a usurious rate of interest. As the trial court found, Homem loaned Charter $151,710.13, with monthly interest-only payments to be made at 8 percent interest. When Charter missed the March and April 2008 payments, she gave Homem her Jetta in lieu of the payments. The trial court found that the Jetta was worth $7,443. Based on the loan amount, the payments made by Charter, and the actual price of the Jetta, the interest rate Charter was charged on the note was 17.546 percent. The highest interest rate Homem could have charged was 11.25 percent, thus making the rate charged usurious. (See Cal. Const., art. XV, § 1, subds. (1)-(2).) The trial court correctly found that the rate of interest was usurious. However, sufficient evidence exists to support its conclusion that Homem did not intend to receive this usurious rate.
The federal discount interest rate for July 2007 was 6.25 percent.
At the time Homem made the loan to Charter, he was unaware of the terms of the promissory note. Those terms, including the length of the loan, the $15,000 fee, and the 8 percent interest rate, were supplied by Charter as approved terms from previous loan negotiations. Homem was unaware his loan would cover liens on Charter’s property until after payment of the USDA mortgage and execution of a deed of trust in his name. Homem was told, and at all times believed, that the terms of the note were fair.
Homem was not knowledgeable or experienced in loaning money. He had never loaned money for a promissory note, and was previously uninformed about the process. Homem paid Charter’s defaulting mortgage before obtaining a promissory note or deed of trust to secure repayment. He is not an attorney or real estate broker, and holds no professional licenses of any kind. The promissory note was drafted by Hjerpe. Homem considered Hjerpe to serve as both his and Charter’s attorney throughout the entire process, relied on his advice, and expected to be protected by him. These circumstances support the conclusion that Homem lacked a usurious intent.
B. Mortgage Foreclosure Consultant
Charter also argues that the trial court erred by failing to find that Homem met the statutory definition of a foreclosure consultant under section 2945. She reasons that he performed services for compensation related to halting a foreclosure sale, obtained a loan for a defaulting owner, and saved a residence from foreclosure. (§ 2945.1, subd. (a)(1), (6), (8).) She argues that violation of the statute entitled her to more than $130,000 in actual and punitive damages. (§ 2945.6, subd. (a).)
Whether at the time the loan was made Homem met the statutory definition of a foreclosure consultant under section 2945 is a question of law that we review de novo. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432.) The primary purpose of statutory interpretation is to ascertain the intent of the lawmakers so as to effectuate the purpose of the law. (E.g., Scripps Health v. Marin (1999) 72 Cal.App.4th 324, 332.) “Statutory interpretation begins with the text and will end there if a plain reading renders a plain meaning: a meaning without ambiguity, uncertainty, contradiction, or absurdity.” (Oden v. Board of Administration (1994) 23 Cal.App.4th 194, 201.) The court may also resort to the legislative history of the statute and the historical circumstances of its enactment when attempting to ascertain legislative intent. (Pacific Gas & Electric Co. v. Workers’ Comp. Appeals Bd. (2004) 114 Cal.App.4th 1174, 1180.) Applying these rules of interpretation, a court must “select the [statutory] construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute, and avoid an interpretation that would lead to absurd consequences.” (People v. Jenkins (1995) 10 Cal.4th 234, 246.)
A “foreclosure consultant” is defined as any person who solicits, offers to perform, or performs any service for compensation which they represent will in any manner assist a defaulting property owner postpone a foreclosure sale, obtain a forbearance from a beneficiary, or result in a related specified outcome. (§ 2945.1, subd. (a).) The purposes of the MFCA include (1) requiring foreclosure consultant contracts to be in writing, and (2) permitting the rescission of foreclosure consultant contracts. (§ 2945, subd. (c)(1).) The statute defines a “contract” as any agreement, or any term thereof, between the foreclosure consultant and a property owner for the rendition of foreclosure-related services. (§ 2945.1, subd. (h).) We conclude that in order for someone to meet the definition of a foreclosure consultant, an agreement for the performance of services for compensation must exist at the time foreclosure consultant services are allegedly rendered.
Since Homem made the loan, section 2945.1 has been amended twice. The only substantive change made was the addition of another subsection which is factually inapplicable to our case. (See Stats. 2010, ch. 596, § 1; Stats. 2009, ch. 630, § 11; Stats. 2004, ch. 177, § 7.)
The trial court correctly found that Homem does not qualify as a foreclosure consultant. In so concluding, the trial court cited its finding that he did not intend to enter into a usurious transaction. We have already rejected Charter’s challenge to this finding. (See pt. II.B., ante). Additionally, at the time of the June 2007 loan, no agreement required Homem to perform any of the listed services for compensation for Charter. Indeed, Homem had never made a loan or obtained a deed of trust before and was unaware how to conduct secured real estate transactions. The only agreements signed between Charter and Homem were the deed of trust and the promissory note, both of which were signed after the June 2007 foreclosure sale had been halted.
It also noted Homem could have denied Charter’s requests for a loan and proceeded as a bidder at the June 2007 foreclosure sale. Instead, he tendered a cashier’s check for the full amount of Charter’s defaulted mortgage prior to the execution of documents to protect himself.
Further, Charter’s three calls to Homem for help the day before the USDA foreclosure sale and his reluctance to make the loan supports an inference that Charter solicited his help, and not vice-versa. The record satisfies us that Homem did not act or perform in a manner consistent with the statutory definition of a foreclosure consultant.
C. Equitable Powers
Charter finally argues the trial court improperly sat as a court of equity. She argues equitable powers cannot be inserted into legal matters that are plain and fully covered by statute. (Lass v. Eliassen (1928) 94 Cal.App.175, 179.) She reasons that the MFCA was created specifically to prevent Homem’s actions, and the court erred by ignoring the specific legal remedies outlined in the statute.
Equitable powers derive from the maxim that “[f]or every wrong there is a remedy.” (§ 3523.) Equity originated in the need for an exception to the application of rules of law when strict enforcement of them would create injustice. (Estate of Lankershim (1936) 6 Cal.2d 568, 572-573.) For this reason, courts of equity are given broad powers to deal with unique circumstances. (Bechtel v. Wier (1907) 152 Cal. 443, 446.) Once a court of equity retains jurisdiction over a controversy, it will dispose of the whole controversy and grant specific relief and damages in the same action to avoid the multiplicity of suits. (See Watson v. Sutro (1890) 86 Cal. 500, 528-529; 13 Witkin, Summary of Cal. Law (10th ed. 2005) Equity, § 2, pp. 283-284.)
A trial court’s exercise of this equitable power is reviewed for an abuse of discretion. (City of Barstow v. Mojave Water Agency (2000) 23 Cal.4th 1224, 1256; Hartford Casualty Ins. Co. v. Travelers Indemnity Co. (2003) 110 Cal.App.4th 710, 724.) On appeal, we resolve all evidentiary conflicts in favor of the judgment and determine whether the court’s decision falls within the permissible range of options set by legal criteria. (Hirshfield v. Schwartz (2001) 91 Cal.App.4th 749, 771.)
Charter and Homem presented the trial court with competing requests for equitable relief. We have already concluded the trial court properly found Homem was not a foreclosure consultant pursuant to section 2945 and that there was sufficient
evidence to support a finding of lack of usury. (See pt. II.B., C., ante.) Therefore, no abuse of discretion occurred in granting equitable relief.
The judgment is affirmed.
We concur: Ruvolo, P.J., Rivera, J.