Opinion
Rehearing Denied July 15, 1930
Hearing Granted by Supreme Court Aug. 11, 1930
Appeal from Superior Court, Alameda County; Warren V. Tryon, Judge.
Action by E.H. Liebelt against Thomas Carney, sometimes known as Thomas Carney Company. From a judgment for defendant, plaintiff appeals.
Affirmed.
COUNSEL
Edison MacLeod, of Oakland, for appellant.
John M. Dvorin, of Los Angeles, for respondent.
OPINION
SPENCE, J.
Appellant brought an action against respondent for treble damages for alleged usury. This appeal is taken from a judgment in favor of respondent. The evidence showed that appellant was purchasing two motor trucks under conditional sales contracts from General Motors Corporation and was unable to make his final payment. The respondent was in the business of automobile financing and selling of used cars. Appellant called at respondent’s office in December, 1926, and it was arranged that respondent should "take the contracts over from General Motors." Respondent paid General Motors Corporation the amount due and obtained the certificates of ownership. A new conditional sales contract covering these trucks payable in one year in installments was made between respondent and appellant for an amount considerably in excess of the amount paid by respondent to General Motors Corporation. After the execution of the contract respondent assigned the contract to the Commercial Securities Corporation, to which corporation appellant made all installment payments with the exception of the final payment, which he was unable to make. Appellant again called at respondent’s office in November, 1927, and at his request respondent "bought that contract back" from the Commercial Securities Corporation and a new conditional sales contract was entered into between appellant and respondent for an amount considerably in excess of the amount paid by respondent to the Commercial Securities Corporation. Thereafter this contract was assigned by respondent to the Merchants’ Security Company, which company collected from appellant all of the payments due thereunder.
This action was prosecuted by appellant on the theory that these transactions were not sales, but loans at usurious rates of interest, and that the Usury Law permits a recovery of treble damages against the lender, even though all of the payments on these transactions were made to the assignees of the lender. These are, in substance, the contentions made by appellant on this appeal. For the reasons hereinafter stated, we deem it unnecessary to determine whether the transactions constituted sales or loans, but will assume they were loan transactions at usurious rates of interest. The question then is whether under our Usury Law the borrower may recover treble damages from the lender for usurious interest paid by the borrower to the assignee of the lender upon a non-negotiable contract.
The right to recover treble damages for usury is purely statutory, and the same may be said of the entire subject of usury. At the time the Usury Law (St.1919, lxxxiii, Act 3757, Deering’s Gen.Laws) was enacted there was no general Usury Law in this state, and the borrower could neither defend against alleged usury nor recover back alleged usurious interst paid. Since the enactment of the Usury Law all of the lender’s rights depend upon the construction to be placed upon the statute. Section 3 of the act provides: "Every person *** who for any loan or forbearance of money *** shall have paid or delivered any greater sum or value than is allowed to be received *** may *** recover in an action at law against the person. *** who shall have taken or received the same, *** treble the amount of the money so paid or value delivered ***." In construing section 3 it should be noted that, in the absence of statutory provisions for the recovery of usurious interest paid, the borrower may not recover back such interest when he has voluntarily paid the same. 14 Cal.Jur. p. 686; Matthews v. Ormerd, 140 Cal. 578, 74 P. 136; London & S.F. Bank v. Bandmann, 120 Cal. 224, 52 P. 583, 65 Am.St.Rep. 179; Harralson v. Barrett, 99 Cal. 607, 34 P. 342. The primary purpose of all usury laws is to provide a defense to the necessitous borrower against a claim for interest in excess of the amount allowed by law. In most jurisdictions, if the borrower fails to assert that defense and voluntarily pays the usurious interest, he has no remedy. There is an apparent exception to this rule, where the lender assigns a negotiable instrument not usurious on its face to a bona fide purchaser for value before maturity. In that case the borrower may recover from the lender the usurious interest paid to the assignee for the reason that the borrower could not interpose the defense of usury against the assignee, and the payment of the usurious interest is therefore considered involuntary. Culver v. Osborne, 231 Ill. 104, 83 N.E. 110; Harbaugh v. Tanner, 163 Ind. 574, 71 N.E. 145; Kock v. Block, 29 Ohio St. 565.
In some jurisdictions, in addition to declaring the agreement void as to the interest in excess of the amount allowed by law or declaring the agreement void as to all interest therein provided, the statutes contain provisions for the recovery of the usurious interest after payment. Some of the statutes provide for a double or treble penalty. The purpose of these provisions is incidental to the main purpose of the statutes which is to prevent the exacting of usurious interest by giving the borrower his defense against its collection.
In the present case the appellant was not urging the Usury Law as a defense, but was seeking to recover from respondent treble the amount of interest which he had paid to respondent’s assignees. He alleged in his complaint that respondent received the usurious interest, but his evidence showed that all the interest was received by the assignees. Under such circumstances the respondent is not the person who had "taken or received" the interest within the meaning of section 3 of the Usury Law. It may well be, as contended by appellant, that he had no cause of action for treble damages against the assignees, as there was no proof that they had any knowledge of the usury. Nevertheless, the mere making of the contracts did not entitle the appellant to treble damages against the respondent under our statute. Duke v. Levy (Cal.Sup.) 281 P. 496; Haines v. Commercial Mortgage Co., 200 Cal. 609, 254 P. 956, 255 P. 805, 53 A.L.R. 725; Coulter v. Collins, 71 Cal.App. 381, 235 P. 465. Nor did the assignment of these nonnegotiable contracts deprive him of his defense if the contracts were in fact usurious. Appellant could have asserted the defense of usury in any action involving his rights under the contracts, but, having failed to avail himself of the defense provided, and having voluntarily paid the interest to respondent’s assignees, we find nothing in section 3 warranting the conclusion that appellant is entitled under the circumstances to recover treble damages against respondent. Some statutes, like that of Kentucky, specifically provide for recovery "from the lender or forbearer, although the payment thereof was made to the assignee." Kentucky Stats. § 2219-2. We find no similar provision of the Usury Law of this state.
The judgment is affirmed.
We concur: NOURSE, P.J.; STURTEVANT, J.