Opinion
C076532
09-18-2018
JEFFERSON G. SMITH, Plaintiff and Appellant, v. MOV HOK TANG et al., Defendants and Respondents.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 34201200124454CUORGDS)
Plaintiff Jefferson G. Smith bought real property in a credit sale transaction promising to pay sellers Mov Hok Tang and Lynn Muy Tang over time. Plaintiff was unable to pay and lost the property in a nonjudicial foreclosure. He sued the sellers for usury, rescission of the trustee's sale, breach of the covenant of good faith and fair dealing, and unfair business practices -- all based on plaintiff's contention that a modification of the credit sale agreement was a "forbearance" subjecting the transaction to (and violating) usury laws proscribing interest rates exceeding specified limits. (Cal. Const., art. XV, § 1; Civ. Code, §§ 1916.12-1 to 1916.12-5.) Plaintiff appeals from summary judgment entered in favor of the sellers contending triable issues require reversal. We affirm the judgment.
FACTS AND PROCEEDINGS
In August 2006, plaintiff purchased real property in Elk Grove from defendants for $1.5 million in a credit sale transaction, pursuant to which plaintiff paid $800,000 and signed a promissory note, secured by a deed of trust (DOT) on the property, to pay the seller the $700,000 balance plus interest in a balloon payment in August 2008. Plaintiff failed to pay. Defendants initiated nonjudicial foreclosure proceedings (Civ. Code, § 2924 et seq.) by recording a notice of default and election to sell. Plaintiff then owed over $900,000 -- the remaining unpaid balance of the sale price ($700,000), plus accrued interest ($166,878), plus a late penalty ($43,343) authorized by the promissory note, plus attorney fees and foreclosure service costs ($9,675).
In August 2009, plaintiff and defendants executed a "Modification and Extension of Promissory Note Agreement" (Modification) which halted the foreclosure upon plaintiff's payment of $380,000, extended the time for plaintiff to pay the balance, and increased the effective interest rate. The Modification provided that the total amount then owed by plaintiff was over $900,000; plaintiff must immediately pay $380,000; the remaining balance of nearly $540,000 plus interest was due in full no later than August 2011; and all other terms of the original note and DOT would remain in effect. The Modification itself makes clear that the $380,000 payment was not a bonus or premium as consideration for a new agreement (as characterized by plaintiff), but rather was partial payment on amounts already owed by plaintiff to defendants under the original agreement and foreclosure statutes. The Modification stated: "SMITH desires, in return for an extension of time to pay the Note balance owing and to induce TANG to halt his foreclosure action under the Deed of Trust, to make a partial payment toward the balance owing on the Note and TANG's incurred attorney's fees and foreclosure service costs [recited as $9,675 in the Modification], in the amount of $380,000."
Although plaintiff timely paid the initial $380,000 installment, he paid nothing else by August 2011.
Defendants recorded another notice of default and election to sell. Plaintiff did not pay or tender payment. Defendants purchased the property at the trustee's sale held in May 2012.
Plaintiff filed this lawsuit in May 2012 and a first amended complaint in July 2013, alleging four counts for (1) usury, (2) rescission of trustee's sale, (3) breach of the covenant of good faith and fair dealing, and (4) unfair business practices in violation of Business and Professions Code section 17200 et seq. All causes of action were predicated on the claim that the Modification violated the usury laws.
Defendants moved for summary judgment or summary adjudication of each count on the grounds that plaintiff cannot establish a prima facie case. Defendants asserted the usury count failed because the parties' agreement (original and modified) was a "seller carryback agreement," i.e., "credit sale," which is exempt from usury laws, and therefore the agreement was not usurious, and plaintiff paid no usurious interest. All counts failed because they were predicated on the meritless usury claim, and plaintiff breached the agreement, did not tender performance of his obligations, and cannot show any unlawful business practice.
In opposition to the motion for summary judgment, plaintiff claimed defendants' undisputed facts were "disputed" but, as noted by the trial court, plaintiff did not offer any material facts demonstrating a material factual dispute. Instead, plaintiff "disputed" defendants' characterization of the Modification. Plaintiff argued the August 2009 Modification was actually a "forbearance," i.e., an agreement not to enforce a claim on its due date, which is subject to usury laws, and that the total "interest" including other charges due from plaintiff in connection with the forbearance was usurious.
Plaintiff pointed to discovery responses that Mr. Tang stated, "Plaintiff paid $380,000 on or about August 7, 2009[,] as part of the previously produced Modification and Extension of Promissory Note Agreement, dated August 6, 2009, to induce Defendants to extend the time for Plaintiff to pay amounts owing and defaulted under the Note and to halt Defendants' foreclosure action under the Deed of Trust." And Mr. Tang testified in deposition that the reason for entering the 2009 modification was because plaintiff "offered to pay that for us to stop the foreclosing." Plaintiff suggested his $380,000 payment was a premium given as consideration for the extension.
However, as noted earlier, the Modification itself makes clear that the $380,000 was not a bonus or premium, but rather was partial payment on amounts already owed by plaintiff to defendants. The Modification stated: "SMITH desires, in return for an extension of time to pay the Note balance owing and to induce TANG to halt his foreclosure action under the Deed of Trust, to make a partial payment toward the balance owing on the Note and TANG's incurred attorney's fees and foreclosure service costs [recited as $9,675 in the Modification], in the amount of $380,000." We observe post that plaintiff owed the attorney fees and service costs pursuant to the parties' contract and/or statutes governing nonjudicial foreclosures.
The trial court concluded the subject transaction was a seller carryback agreement (credit sale) exempt from usury laws, and the subsequent modification did not alter the character and was therefore also exempt from California's usury laws, and plaintiff's "dispute" with this conclusion did not create a triable issue of material fact. As noted by the trial court, defendants' motion asserted the failure of the usury claim disposed of all causes of action, i.e., the first count (usury) failed because the transaction was exempt from usury laws; the second count (rescission of trustee's sale) failed because the transaction was exempt from usury laws, and plaintiff breached the agreement and did not tender performance; the third count (covenant of good faith and fair dealing) failed because the transaction was exempt from usury laws, and plaintiff breached the agreement and did not tender performance; and the fourth count (unfair business practices) failed because the transaction was exempt from usury laws and plaintiff could not show any unlawful business practice. The trial court entered summary judgment in favor of defendants.
DISCUSSION
I
Standard of Review
Whether a particular transaction is usurious is generally a question of fact but, where the facts are undisputed, the question whether that type of transaction is subject to the usury laws is a question of law subject to de novo review. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799-801 (Ghirardo) [determination whether debt restructuring was loan subject to usury law was question of law subject to independent review].)
A motion for summary judgment should be granted if the submitted papers show that "there is no triable issue as to any material fact," and that the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c), hereafter § 437c.) A defendant meets his burden of showing that a cause of action has no merit if he shows that one or more elements of the cause of action cannot be established, or that there is a complete defense. (§ 437c, subd. (p)(2).) Once the defendant has met that burden, the burden shifts to the plaintiff to show that a triable issue of material fact exists. (Ibid.)
Although one who asserts usury has the burden of proving it (Ghirardo, supra, 8 Cal.4th at pp. 798-799), "[t]he burden of persuasion remains with the party moving for summary judgment. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850, 861.) When the defendant moves for summary judgment, in those circumstances in which the plaintiff would have the burden of proof by a preponderance of the evidence, the defendant must present evidence that would preclude a reasonable trier of fact from finding that it was more likely than not that the material fact was true (id. at p. 851), or the defendant must establish that an element of the claim cannot be established, by presenting evidence that the plaintiff 'does not possess and cannot reasonably obtain, needed evidence.' (Id. at p. 854.) We review the record and the determination of the trial court de novo. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.)" (Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003; see also, Miller v. Deptartment of Corrections (2005) 36 Cal.4th 446, 460.)
II
Usury
On appeal, plaintiff does not dispute that his 2006 purchase of the property was a "credit sale" exempt from usury laws. (Ghirardo, supra, 8 Cal.4th at pp. 795, 801-808.) Instead, he claims the 2009 Modification was a "forbearance" subject to the usury laws, because he paid defendants $380,000 cash as an "induce[ment]" so they would refrain from proceeding with nonjudicial foreclosure at that time, i.e., as "consideration" for the extension. We disagree with defendants' characterization of the $380,000 payment as a premium or bonus for the sellers. The $380,000 was an amount already owed by plaintiff to defendants. Actually, the amount already owed by plaintiff was almost $900,000, including the original $700,000 balance, interest, late fees provided for in the original Promissory Note and the Modification (which carried forward the obligations of the original Note), and attorney fees and foreclosure service costs owed by plaintiff pursuant to contract and/or statutes governing nonjudicial foreclosures. Plaintiff owed attorney fees pursuant to the original Note and the Modification, and he owed attorney fees and foreclosure service costs pursuant to statutes governing nonjudicial foreclosures. (Civ. Code, §§ 2924c, subds. (a)(1), (c), (d), 2924d, and 2924k; Moeller v. Lien (1994) 25 Cal.App.4th 822, 830 ["Civil Code sections 2924 through 2924k provide a comprehensive framework for the regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed of trust"].)
California Constitution, article XV, section 1, provides in part that, subject to exemptions not at issue here: ". . . No person, association, copartnership or corporation shall by charging any fee, bonus, commission, discount or other compensation receive from a borrower more than the interest authorized by this section upon any loan or forbearance of any money, goods or things in action. . . ." (Italics added.) Here, it is undisputed that the Modification calls for an interest rate higher than that allowed by the Constitution or by usury statutes (Civ. Code, §§ 1916.12-1 to 1916.12-5).
The essential elements of usury are: (1) The transaction must be a loan or forbearance; (2) the interest to be paid must exceed the allowed maximum; (3) the loan and interest must be absolutely repayable by the borrower, and (4) the lender must have a willful intent to enter into a usurious transaction, i.e., to take the amount of interest received. (Ghirardo, supra, 8 Cal.4th at p. 798.)
The constitutional proscription against usury applies by its express terms only to a "loan or forbearance." Without a loan or forbearance, usury cannot exist. (Ghirardo, supra, 8 Cal.4th at pp. 801-802.) In determining whether there is a loan or forbearance, courts look to the substance rather than the form of the arrangement. (Id. at p. 802.) The key question is whether the transaction has as its true purpose the hire of money at an excessive interest rate. (Roodenburg v. Pavestone Co., L.P. (2009) 171 Cal.App.4th 185, 193.)
A "credit sale" is not a "loan or forbearance," and modification of a credit sale is also not subject to the usury proscription. (Ghirardo, supra, 8 Cal.4th at pp. 795, 801-808.) The "credit sale" or "time-price" doctrine applies " 'when property is sold on credit as an advance over the cash price. In these circumstances, the seller finances the purchase of the property by extending payments over time and charging a higher price for carrying the financing. This type of transaction, often called a bona fide credit sale, is not subject to the usury law because it does not involve a loan or forbearance.' [Citations.]" (Id. at p. 803.) "The underlying policy of the credit-sale exemption is that, ' "On principle and authority, the owner of property, whether real or personal, has a perfect right to name the price on which he is willing to sell, and to refuse to accede to any other. He may offer to sell at a designated price for cash or at a much higher price on credit, and a credit sale will not constitute usury however great the difference between the two prices. . . ." ' [Citations.]" (Id. at p. 804.)
In Ghirardo, sellers sold real property to a prospective developer pursuant to a promissory note and deed of trust, and the developer later sold the property to a new buyer subject to the note and deed of trust. (Id. 8 Cal.4th at p. 795.) No one contended either transaction was usurious. A payment dispute arose, and the buyer sued the first seller to prevent foreclosure. After extensive negotiations, the parties agreed to a debt restructuring that included the buyer's agreement to a $100,000 fee as consideration for the new Note, which was to be added to the principal of the original note. The buyer paid the new obligation, minus a portion in dispute, and sued the original seller alleging usury. (Id. at pp. 796-797.)
Ghirardo held that the settlement notes were the "functional equivalent of a modification to a credit sale" and were also exempt from the usury proscription. (Id. 8 Cal.4th at p. 808.) The Supreme Court (id. at pp. 803-808) agreed with and applied DCM Partners v. Smith (1991) 228 Cal.App.3d 729 (DCM), in which the owner of real property sold it in exchange for a promissory note and deed of trust from the buyer. That initial transaction was clearly exempt as a bona fide credit sale. When the buyer thereafter became unable to pay the note when due, the buyer requested an extension of the maturity date. The seller agreed in exchange for a 50 percent increase in the interest rate, from 10 percent to 15 percent. The buyer paid the extended note, then filed suit claiming usury. The Court of Appeal held that forbearance within the meaning of the usury law is an agreement to extend the time for payment of the obligation due either before or after the obligation's due date. (DCM, supra, 228 Cal.App.3d at p. 735.) However, whether a loan or forbearance of money is usurious depends on the nature of the transaction. (Id. at p. 733.) The usury law does not apply ". . . to a modified purchase money secured note initially created in an exempt transaction, the bona fide sale and purchase of real property, where the modification, done at the request of the trustor, consisted solely of increasing the rate of interest to reflect market conditions in consideration of extending the due date of the note." (DCM, supra, 228 Cal.App.3d at p. 732.)
The buyer in Ghirardo argued the credit-sale exemption should not apply because, at the time of the modification, the sellers had nothing to sell, having already sold the property to the buyer. (Id. 8 Cal.4th at p. 804.) The Supreme Court said DCM stated the better view: " 'In saying [the sellers] had nothing to sell[,] DCM [the buyer] wishes to minimize the value of [the sellers'] "right to foreclose." While there is a significant difference between a trustor of a secured note and an equity owner of improved real property, the latter status can be readily achieved by the former in a case like the one before us. Had [the sellers] declined DCM's invitation to renegotiate they would have entered DCM's default when it failed to make the balloon payment on the due date of the note and foreclosed on the property. At a modest cost [the sellers] would have become owners in the property with DCM losing its payments on principal and any increased equity resulting from appreciation. Thus the same factors influencing [the sellers'] initial decision to sell were present when they later agreed to renegotiate the note. . . . [The] depiction of the parties as being in substantially different circumstances when they renegotiated the secured note compared to their position at the time of initial sale is not borne out by the realities of the transaction.' " (Ghirardo, supra, 8 Cal.4th at p. 804.)
The Supreme Court added that treating the modification as a usurious transaction was "unnecessary to achieve the purpose of the usury law, which is '. . . to protect the necessitous, impecunious borrower who is unable to acquire credit from the usual sources and is forced by his economic circumstances to resort to excessively costly funds to meet his financial needs. Such a person does not have the same need to purchase property [orig. italics], and he does not need the public policy of the State for protection.' [Citation.]" (Ghirardo, supra, 8 Cal.4th at pp. 804-805.) Parties buying property are under no compulsion to accept a high rate of interest; they can simply walk away if they cannot afford the price. (Id. at p. 805.) The same applied to a land developer like Ghirardo, who was under no compulsion to buy the property. (Ibid.) When his development plans went awry, he could simply have walked away, but he instead wanted to keep the property and agreed to retain it on new terms, in effect substituting his seller with another prior seller. (Ibid.)
The Supreme Court rejected the buyer's argument that he became the "necessitous, impecunious borrower" the law intends to protect when the property was being foreclosed. (Ghirado, supra, 8 Cal.4th at p. 805.) "To be sure, he may lose the property, but he will do so only if the seller forecloses, and that is encouraged by the very rule [he] advocates [to treat the modification as a usurious transaction]." If an extension will bring the transaction within the usury law, the seller is more likely to foreclose than to agree to an extension. (Ibid.) The Supreme Court, like DCM, rejected the suggestion of some commentators that the extension should be treated as exempt only if the interest rate stays the same as the original rate or is reduced. (Ghirado, at p. 805.) "First, it would be unfair to both sides of the transaction. The only alternative to foreclosure for a seller who has suffered a default should not be an extension on more favorable terms to the buyer. That is unfair and impractical. Indeed, for that reason, it also prejudices the buyer who wishes to renegotiate because a seller who has two choices -- foreclosure or extension on new terms favorable only to the buyer -- will plainly be more likely to foreclose." (Id. at pp. 805-806.) Second, an extension for a reduced rate of interest could be usurious even if a higher initial rate was not. (Id. at p. 806.)
In Ghirardo, supra, 8 Cal.4th at page 806, the buyer tried to distinguish DCM because DCM "emphasize[d]" in a footnote that the seller "did not receive any additional charges, fees or consideration [for the modification] other than to increase the interest rate to reflect market conditions." (DCM, supra, 228 Cal.App.3d at p. 737, fn. 5.) DCM also noted that in two prior decisions, " '[t]he beneficiary of the secured note extracted a substantial cash premium as part of the consideration for the modification.' " (Ghirardo, at p. 806, citing DCM, at p. 738.) Mr. Ghirardo pointed out that the trial court in his case found that as part of the settlement Mr. Ghirardo agreed to pay $100,000 as a " 'fee, bonus, commission or other compensation for forbearance and extension of credit.' " (Ghirardo, at p. 807.) The Supreme Court was "not persuaded that the noted comments were essential to the DCM court's reasoning or that they render[ed] DCM distinguishable from the present case. The relevant fact is not how the payments are characterized but whether they are in fact interest. In DCM the stated interest rate was increased from 10 percent to 15 percent, a rate that exceeded the legal maximum [for usury]. In the present [Ghirardo] case, the asserted maximum rate was exceeded because the $100,000 additional payment was deemed to be additional interest. We do not believe the DCM decision would have been different if the 10 percent facial interest rate had remained unchanged, but a bonus payment had increased the effective rate to 15 percent. In either case the relevant figure would have been the 15 percent effective interest." (Ghirardo, at pp. 806-807.)
The Supreme Court held "the settlement notes were neither a loan nor a forbearance within the meaning of usury law. They were instead the functional equivalent of a modification to a credit sale that was exempt from the usury law. Under these circumstances, the settlement notes were not usurious." (Ghirardo, supra, 8 Cal.4th at p. 808.) Justice Mosk disagreed in a lone dissent. (Id. at pp. 809-811, Mosk, J. dissenting.)
We apply Ghirardo and DCM and conclude that the 2009 Modification was a modification to a credit sale exempt from usury laws.
Plaintiff argues this case is distinguishable from Ghirardo and DCM, because this was not a mere modification of a credit sale; rather, plaintiff paid $380,000 to "induce" defendants to halt the foreclosure and extend the time for plaintiff to pay amounts owing and defaulted under the Note. Plaintiff argues this case is more similar to the cases distinguished in DCM on the ground that the beneficiaries of the secured notes extracted a " 'substantial cash premium as part of the consideration for the modification.' " (Clarke v. Horany (1963) 212 Cal.App.2d 307 (Clarke); In re Pillon-Davey & Associates (Bankr. N.D.Cal. 1985) 52 B.R. 455 (Pillon-Davey).)
However, plaintiff fails to discuss Clarke or Pillon-Davey to show how or why they should govern here, and in fact they are materially distinguishable from our case.
Thus, in Clarke, the "premium" was an extra $4,000 in cash given by the payor to the payee and paid by the payee to the payee's agent as compensation for negotiating the refinancing agreement. (Id. 212 Cal.App.2d at pp. 309-310.) " 'The exaction of a commission from the borrower by the lender's agent will render the transaction usurious if such exaction is known to and authorized or ratified by the lender.' " (Id. at p. 310.)
Here, there was no commission or premium or bonus. The $380,000 was part of a past-due amount already owed by plaintiff for the original credit sale balance of $700,000, plus interest and late fees per the original Note and Modification, plus attorney fees and foreclosure service costs of $9,675. The attorney fees were owed by plaintiff pursuant to the parties' contract and pursuant to statutes governing nonjudicial foreclosure. (Civ. Code, §§ 2924c, subd. (a)(1), (b), (c), 2924d, 2924k.) The foreclosure service costs were also owed by plaintiff pursuant to the statutes. (Civ. Code, §§ 2924c, subd. (a)(1), (c), (d), 2924d, 2924k; Moeller v. Lien, supra, 25 Cal.App.4th at p. 830.)
To hold, as plaintiff proposes, that a seller cannot accept partial payment on amounts already owed without converting the transaction into one subject to usury laws, is unsupported by any authority from plaintiff and instead would lead to the result disfavored, as earlier noted, by Ghirardo, which said, "The only alternative to foreclosure for a seller who has suffered a default should not be an extension on more favorable terms to the buyer. That is unfair and impractical. Indeed, for that reason, it also prejudices the buyer who wishes to renegotiate because a seller who has two choices -- foreclosure or extension on new terms favorable only to the buyer -- will plainly be more likely to foreclose." (Id. 8 Cal.4th at pp. 805-806.)
In the other case cited but not discussed by plaintiff, Pillon-Davey, a federal bankruptcy judge held that an "additional $34,482.31" paid as consideration for an extension appeared to place the extension agreement within the usury definition of forbearance. (Id. 52 B.R. at p. 459.) Here, the $380,000 was not an additional payment. Plus, lower federal court opinions are not binding or controlling on California courts on matters of state law. (Howard Contracting, Inc. v. G.A. MacDonald Construction Co. (1998) 71 Cal.App.4th 38, 52.) Though a California court may view a federal judge's decision as persuasive (Aleman v. AirTouch Cellular (2012) 209 Cal.App.4th 556, 576, fn. 8), we do not consider Pillon-Davey persuasive because its main reasoning, i.e., that the extension could not be a credit sale because the seller of the property no longer had anything to sell, was expressly rejected by both Ghirardo and DCM. (Ghirardo, supra, 8 Cal.4th at p. 804, citing DCM, supra, 228 Cal.App.3d at p. 739.) The Supreme Court in Ghirardo, supra, 8 Cal.4th at page 807, also said it did not believe DCM would have been decided differently if the 10 percent facial interest rate had remained unchanged, but a "bonus payment had increased the effective rate to 15 percent."
Pillon-Davey's secondary reasoning, i.e., that the parol evidence rule precluded the court from considering certain affidavits (id. 52 B.R. at p. 459), has no bearing on our case.
Plaintiff cites Sheehy v. Franchise Tax Board (2000) 84 Cal.App.4th 280, which cited DCM as supposed authority for the proposition that a forbearance may occur in credit sales transactions where the original note is modified to extend the period of payment. (Sheehy, at p. 284.) However, we need not analyze this dictum in Sheehy. Sheehy did not involve a loan or a forbearance subject to usury laws, but rather interest charged as a penalty assessment for late payment of taxes, to which the constitutional prohibition against usurious interest did not apply. (Ibid.) The appellate court rejected the taxpayer's argument that delay in enforcement of the tax laws was, in effect, a forbearance. (Id. at p. 283.) The interest assessment did not violate the purpose of the usury laws; its true purpose was not the hire of money at an excessive interest rate, but rather a penalty assessment and to recover the loss of use of the money due. (Ibid.)
We conclude that, as a matter of law on undisputed facts, neither the original agreement nor the Modification were subject to the usury proscriptions.
We need not address defendants' alternate argument that the transaction was also exempt from usury laws as having been arranged by a broker -- a point disputed by plaintiff.
III
Plaintiff's Other Contentions
Plaintiff argues other triable issues precluded summary judgment: (1) Whether the late charge was an unenforceable penalty; and (2) whether, as alleged in the complaint, plaintiff is excused from the general rule requiring tender of the amount owed in order to seek rescission of the trustee's sale (the second cause of action).
However, all of plaintiff's claims were predicated on the usury claim -- for which we have already explained summary judgment was appropriate. Indeed, plaintiff admits on appeal that "Whether the 2009 Agreement [Modification] was a forbearance was a central issue for each of Smith's Causes of Action, as each Cause of Action was based at least in part on the allegation that the 2009 Agreement was usurious."
Plaintiff fails to show any remaining triable issue after defeat of the usury claim. He cites authority for the general proposition that a late penalty may be deemed invalid if it is unreasonable under the circumstances, and in the absence of a reasonable relationship to actual damages a penalty is invalid. In his reply brief, he challenges defendants' arguments that plaintiff has no viable claim because he never paid the late charge, and that the late fee was reasonable because plaintiff's failure to pay real estate taxes forced defendants to pay the overdue taxes ($92,548) plus late fees totaling $142,222.
However, we need not address these arguments because plaintiff's first amended complaint asserted no actionable cause of action for the late fee apart from the usury claim. It is the complaint which delimits the issues that must be addressed in a motion for summary judgment. (FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381.) Plaintiff's complaint, under the usury count, alleged with respect to the late payment fee of five percent that "Since there was only to be one installment payment at maturity, any late charge would equal $35,000 and would raise the effective interest rate to 13%, a usurious rate higher than is allowed by California law." And the complaint alleged that, when plaintiff was unable to make the August 2011 payment, "Defendants applied the late fee increasing the balance by $34,852 and increasing the effective interest rate from the Modification forward to 15%, again a usurious rate higher than is allowed by California law." The remaining counts incorporated these allegations by reference. Additionally, the complaint's second count for rescission of trustee's sale alleged defendants were not entitled to a late charge and plaintiff was not required to tender the amount owed because of "the usurious nature of the loan." The third count for breach of the covenant of good faith and fair dealing alleged defendants insisted on "substantial increases in principal and other charges, amounting to usury, in order to prevent foreclosure" and "charg[ed] excessive interest, proceeding through foreclosure based on a usurious contract, charging an excessive late payment penalty and incorporating said penalty into the redemption amount for the real property . . . ." The fourth count alleged the unfair business practice was that defendants "intentionally engaged in usurious transactions." Thus, although the complaint sought an order that the late fee was a void unlawful penalty, the basis was the allegation that the late fee in effect raised the interest to a usurious rate.
Southwest Concrete Products v. Gosh Construction Corp. (1990) 51 Cal.3d 701, found it unnecessary to address validity of a late charge as a liquidated damage provision after concluding the late charge was exempt from the usury law under the time-price doctrine and the principle that a debtor by voluntary act (i.e., nonpayment) cannot render an otherwise valid contract usurious. (Id. at p. 709.)
We conclude the late fee does not present a triable issue precluding summary judgment.
As to plaintiff's failure to tender performance to cure default, the complaint alleged plaintiff was excused from tendering performance because the debt was invalid as a violation of usury laws. The defeat of plaintiff's usury claim renders moot any question whether tender was excused.
We conclude summary judgment was proper.
DISPOSITION
The judgment is affirmed. Defendants shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1)-(2).)
HULL, Acting P. J. We concur: BUTZ, J. MAURO, J.