IN THE SUPREME COURT OF 

CALIFORNIA

SANFORD J. WISHNEV,

Plaintiff and Respondent,

v.

THE NORTHWESTERN MUTUAL LIFE INSURANCE 

COMPANY,

Defendant and Appellant.

S246541

Ninth Circuit

16-16037

Northern District of California

3:15-cv-3797-EMC

November 14, 2019

Justice Corrigan authored the opinion of the Court, in which 

Chief Justice Cantil-Sakauye and Justices Chin, Liu, Cuéllar, 

Kruger, and Groban concurred.
1

WISHNEV v. THE NORTHWESTERN MUTUAL LIFE 

INSURANCE COMPANY

S246541

Opinion of the Court by Corrigan, J.

The body of California law prohibiting usury derives from 

a variety of sources, including a constitutional amendment. (Cal 

Const.,1 art. XV, § 1.) The amendment sets the maximum 

interest rates lenders may charge but exempts specified classes 

of lenders from those rate restrictions. The amendment also

authorizes the Legislature to regulate “in any manner” the 

compensation these exempt lenders may receive. (Ibid.)

We accepted a request from the United States Court of 

Appeals for the Ninth Circuit to determine whether exempt 

lenders must comply with a voter-approved limitation that was 

in place before the amendment was enacted in 1934.2 The 

precise question we agreed to consider is set forth in the footnote 

 

1 Further references to articles are to the California 

Constitution.

2 See California Rules of Court, rule 8.548(a) (“On request of the 

United States Supreme Court, a United States Court of Appeals, 

or the court of last resort of any state, territory, or 

commonwealth, the Supreme Court may decide a question of 

California law if: [¶] (1) The decision could determine the 

outcome of a matter pending in the requesting court; and [¶] (2) 

There is no controlling precedent”).
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2

below.3 Simply stated, the question is: Are exempt lenders like 

The Northwestern Mutual Life Insurance Company 

(Northwestern Mutual) required to obtain a borrower’s signed 

agreement in order to charge compound interest on a loan? We 

conclude the lenders are not so obligated.

I. BACKGROUND

Northwestern Mutual offers a life insurance product 

referred to as “permanent” life insurance.

4

 It pays a benefit 

upon death and accumulates a cash value during the insured’s 

lifetime. The policy also pays an annual dividend to the 

policyholder, who may take out loans secured by the cash value 

of the policy.

5

Between 1967 and 1976, Northwestern Mutual issued four 

permanent life policies to Sanford J. Wishnev, who completed 

and signed an application for each. None of the applications 

disclosed that Northwestern Mutual would charge compound 

interest. After Wishnev submitted each signed application, 

Northwestern Mutual sent him the requested policy. Each 

states that “[t]his policy and the application, a copy of which is 

 

3 The Ninth Circuit posed the question as follows: “Are the 

lenders identified in Article XV of the California Constitution, 

see Cal. Const. art. XV, § 1, as being exempt from the restrictions 

otherwise imposed by that article, nevertheless subject to the 

requirement in section 1916–2 of the California Civil Code that 

a lender may not compound interest ‘unless an agreement to 

that effect is clearly expressed in writing and signed by the party 

to be charged therewith’?”

4 Whole and universal life insurance are examples of permanent 

life insurance.

5 Policyholders can also have unpaid premiums automatically 

treated as loans.
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Opinion of the Court by Corrigan, J.

3

attached when issued, constitute the entire contract.” The

policies do explain that loan interest is compounded annually,

but Wishnev was not required to sign and return any copy.

At some point after 1980, Wishnev took out four loans 

secured by his four policies. Northwestern Mutual assessed 

compound interest on the loan balances.

Wishnev filed a putative class action suit in state court 

alleging Northwestern Mutual’s assessment of compound 

interest was barred because he never signed an agreement to 

that effect. He claims damages because the loan balances, 

increased by compound interest, reduced the amount he 

received in annual dividends. Wishnev seeks to certify a class 

of all persons who were charged similar compound interest in 

the previous four years. On behalf of the class, he requests 

actual damages along with treble the amount of all interest paid 

within one year of the filing of the complaint.

Northwestern Mutual removed the action to federal 

district court and moved to dismiss. It argued that, as an 

exempt lender, it was not required to obtain a borrower’s signed 

consent to charge compound interest.6 The court denied the 

dismissal motion, holding that Northwestern Mutual was 

 

6 Northwestern Mutual further argued that, even if it were 

subject to the limitation on assessing compound interest, it had 

complied because Wishnev signed an agreement containing the 

mandated disclosure. It urged that the policy application 

Wishnev signed, together with attached policy containing the 

disclosure, formed the parties’ “ ‘entire contract’ ” under 

Insurance Code section 10113. Because we conclude that 

Northwestern Mutual is not subject to the compound interest 

limitation, it is unnecessary to address this question.
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Opinion of the Court by Corrigan, J.

4

required to get signed consent and failed to do so. (Wishnev v. 

Northwestern Mut. Life Ins. Co. (N.D.Cal. 2016) 162 F.Supp.3d 

930, 947, 949, 953 (Wishnev I).)

The district court in Wishnev I stands alone in its 

determination that exempt lenders must obtain a borrower’s

signed consent to impose compound interest. (Wishnev v. 

Northwestern Mut. Life Ins. Co. (9th Cir. 2018) 880 F.3d 493, 

501–502 (Wishnev II).) Three other district courts in the Ninth 

Circuit have concluded to the contrary. (Ibid.; see Martin v. 

Metro. Life Ins. Co. (N.D.Cal. 2016) 179 F.Supp.3d 948, 954–955; 

Washburn v. Prudential Ins. Co. of Am. (N.D.Cal. 2015) 158 

F.Supp.3d 888, 896; Lujan v. New York Life Ins. Co. (N.D.Cal.,

Aug. 9, 2016, No. 16-CV-00913-JSW) 2016 WL 4483870, p. *5.)

II. DISCUSSION

California’s usury laws, which regulate the charging of 

interest, are far from a model of clarity. Their sources include

(1) an uncodified, voter-approved initiative (9C West’s Ann. Civ. 

Code (2010 ed.) foll. § 1916.12, pp. 187–238), (2) voter-approved 

constitutional provisions currently found in article XV, and 

(3) statutes scattered throughout various codes regulating 

lenders considered exempt under article XV. (See Rabin & 

Brownlie, Usury Law in California: A Guide Through the Maze 

(1987) 20 U.C. Davis L.Rev. 397, 398.) Administrative 

provisions, federal law, and state common law also play a role. 

(Id. at p. 397.) The interplay among these sources continues to 

generate confusion. We begin with a brief history of California’s 

usury laws to put the relevant authorities into perspective.
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Opinion of the Court by Corrigan, J.

5

A. California’s Usury Laws

In the early years of California’s statehood, the 

Legislature declined to set maximum interest rates for loans

and instead enacted a law generally allowing parties to agree in 

writing for “ ‘any rate of interest whatever on money due . . . .’ ” 

(Carter v. Seaboard Finance Co. (1949) 33 Cal.2d 564, 575 

(Carter).) Over time, the Legislature enacted usury statutes 

governing maximum interest chargeable by lenders that 

typically make small loans, such as pawnbrokers and personal 

property brokers. (Id. at pp. 575–576.) 

In 1918, California voters approved an initiative measure 

that took a uniform approach to usury (hereafter the “initiative” 

or “1918 initiative”).

7

 (§§ 1916–1-1916–5; Carter, supra, 33 

Cal.2d at p. 576.) The initiative repealed statutory schemes 

covering various classes of lenders and replaced them with a 

maximum allowable interest rate applicable to all loans and 

lenders. (§ 1916–4; Carter, at p. 576.) No loans or lenders were 

exempted from the sweep of the 1918 initiative. Because the 

initiative does not authorize legislative amendment, voters 

alone have the power to amend or repeal it.8 (Art. II, § 10, 

 

7 The 1918 initiative is uncodified. Further unspecified section

references are to West’s designation of the initiative as sections

1916–1 to 1916–5 of the Civil Code. (9C West’s Ann. Civ. Code, 

supra, foll. § 1916.12, pp. 187–238.)

8 The Legislature or voters (through the initiative power) may 

place measures on the statewide ballot proposing to repeal or 

amend laws enacted by initiative. (Art. II, §§ 8, subds. (a)–

(c), 10, subd. (c); art. XVIII, § 1; cf. People v. Kelly (2010) 47 

Cal.4th 1008, 1037–1040.)
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Opinion of the Court by Corrigan, J.

6

subd. (c); Penziner v. West American Finance Co. (1937) 10 

Cal.2d 160, 171 (Penziner).)

In addition to setting the allowable interest rate, the 1918 

initiative provides that interest may not be compounded “unless 

an agreement to that effect is clearly expressed in writing and 

signed by the party to be charged therewith.” (§ 1916–2.) We 

refer to this requirement as the compound interest limitation. 

Ultimately, the question here turns on whether subsequent 

changes impliedly repealed the compound interest limitation as 

to exempt lenders.

Under the 1918 initiative, a lender that charges interest 

above the rate cap or violates the compound interest limitation 

is subject to stringent statutory penalties. Such a lender forfeits 

the right to collect any interest. (§ 1916–2.) Further, the 

principal debt is not due until the full term of the loan has 

expired. (Ibid.) The effect of these provisions is to confer upon 

the borrower the free use of the lender’s money for the duration 

of the loan period. In addition, if a borrower pays a lender more 

than is authorized by the 1918 initiative, the borrower is 

entitled to recover treble the amount paid if the action is brought 

within one year of payment. (§ 1916–3, subd. (a).)

The 1918 initiative contains five sections, the first three of 

which limit interest rates and set penalties for violating its 

restrictions.9 The first section sets a presumptive annual 

interest rate of 7 percent but allows parties to contract in 

writing for an annual rate of up to 12 percent. (§ 1916–1.) This 

 

9 The fourth section repeals any inconsistent laws and the fifth 

section refers to the initiative as the “ ‘usury law.’ ” (§§ 1916‒4, 

1916‒5.)
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rate-setting provision establishes what contracting parties are 

legally authorized to do in setting interest rates. 

The second section sets out what parties cannot do. It 

prohibits any person or entity from receiving, “directly or 

indirectly,” more than 12 percent annual interest on any “loan 

or forbearance of money, goods or things in action . . . .” (§ 1916–

2.) The sentence containing that prohibition concludes with the 

compound interest limitation: “and . . . interest shall not be 

compounded, nor shall the interest thereon be construed to bear 

interest unless an agreement to that effect is clearly expressed 

in writing and signed by the party to be charged therewith.” 

(Ibid.) Any contract that violates the second section is “null and 

void” as to any agreement to pay interest, and no legal action 

may be maintained to recover interest “in any sum” under the 

contract.10 (§ 1916–2.)

 

10 In its entirety, section 1916–2 reads as follows: “No person, 

company, association or corporation shall directly or indirectly 

take or receive in money, goods or things in action, or in any 

other manner whatsoever, any greater sum or any greater value 

for the loan or forbearance of money, goods or things in action 

than at the rate of twelve dollars upon one hundred dollars for 

one year; and in the computation of interest upon any bond, 

note, or other instrument or agreement, interest shall not be 

compounded, nor shall the interest thereon be construed to bear 

interest unless an agreement to that effect is clearly expressed 

in writing and signed by the party to be charged therewith. Any 

agreement or contract of any nature in conflict with the 

provisions of this section shall be null and void as to any 

agreement or stipulation therein contained to pay interest and 

no action at law to recover interest in any sum shall be 

maintained and the debt can not be declared due until the full 

period of time it was contracted for has elapsed.” 
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The third section establishes civil and criminal penalties. 

It allows recovery of treble damages and provides, under 

specified circumstances, that a person who receives interest 

beyond that legally authorized is guilty of felony loan-sharking. 

(§ 1916–3.)

The 1918 initiative’s “one-size-fits-all” approach proved to 

be unworkable in the marketplace. It lacked the flexibility 

needed to tailor regulations for particular types of loans and 

lenders. (See Carter, supra, 33 Cal.2d at p. 577.) “Numerous 

attempts were made to change the rates of interest and to 

prescribe rates and regulations different from or inconsistent 

with the provisions of the [1918 initiative].” (Ibid.) These 

attempted modifications were ruled improper to the extent they 

constituted revisions of the initiative without a vote of the 

electorate. In addition, the initiative’s interest rate cap could be 

easily avoided. Lenders were able to circumvent interest rate 

limits by extracting various “charges” from borrowers. (Ibid.) 

Ultimately, the Legislature placed a proposed constitutional 

amendment on the statewide ballot to address the infirmities of 

the 1918 initiative. (Carter, at p. 577; see Ballot Pamp., Gen.

Elec. (Nov. 6, 1934), argument in favor of Assem. Const. Amend.

No. 79, p. 18 (Ballot Pamp.).) 

In November 1934, voters approved the proposed 

amendment, which was added to the Constitution as former 

article XX, section 22 (hereafter “amendment” or “1934

amendment”). (Carter, supra, 33 Cal.2d at p. 577.) The first 

paragraph contains a rate-setting provision substantially 

similar to the 1918 initiative, except that the annual interest 

rate permitted is reduced to 10 percent. (Compare former art. 

XX, § 22, 1st par. with § 1916–1.) 
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Opinion of the Court by Corrigan, J.

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The second paragraph of the 1934 amendment prohibits 

charging annual interest greater than 10 percent. (Former 

art. XX, § 22, 2d par.) The second paragraph expands upon the 

1918 initiative’s attempt to prohibit lenders from “directly or 

indirectly” exceeding the maximum rate. It clarifies that no 

lender may “by charging any fee, bonus, commission, discount 

or other compensation receive from a borrower more than ten 

per cent per annum . . . .” (Former art. XX, § 22, 2d par., italics 

added.) Aside from reducing the maximum allowable interest 

from 12 to 10 percent, this provision is substantially similar to 

the first part of section 1916–2. (Penziner, supra, 10 Cal.2d at 

p. 172.) However, the 1934 amendment makes no mention of 

the compound interest limitation. (See Penziner, at p. 172.) 

Indeed, it says nothing about the compounding of interest. 

(Former art. XX, § 22.) This omission gives rise to the 

controversy here.11

Importantly, the third paragraph of the 1934 amendment 

for the first time exempts certain lenders from its restrictions. 

(Former art. XX, § 22, 3d par.) These exempt lenders include 

credit unions, licensed pawnbrokers, and certain banks, among 

others. Insurance companies were not exempted when the 

amendment was originally enacted. (See ibid.)

There are two distinct components to the 1934

amendment governing exempt lenders. First, it declares that 

“none of the above restrictions” shall apply to exempt lenders. 

 

11 Also, unlike the 1918 initiative, the amendment does not 

address penalties or the consequences of violating its 

restrictions. (Compare former art. XX, § 22 with §§ 1916–2,

1916–3, subd. (b).)
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(Former art. XX, § 22, 3d par.) Thus, exempt lenders are not 

bound by interest rate provisions contained in the first two 

paragraphs. (Carter, supra, 33 Cal.2d at pp. 579–580.) Second, 

the amendment explicitly authorizes the Legislature to 

prescribe maximum interest rates applicable to exempt lenders 

and to “in any manner fix, regulate or limit, the fees, bonus, 

commissions, discounts or other compensation which all or any 

of the said exempted classes of persons may charge . . . .” (Former 

art. XX, § 22, 3d par., italics added.) This delegation of 

legislative authority confers flexibility the 1918 initiative did 

not. While the 1918 initiative could only be modified by voters, 

the 1934 amendment specifically empowered the Legislature to 

enact and modify laws regulating exempt lenders.

The final paragraph of the 1934 amendment contains 

what this court has described as a “limited repealing clause” 

(Penziner, supra, 10 Cal.2d at p. 174): “The provisions of this 

section shall supersede all provisions of this Constitution and 

laws enacted thereunder in conflict therewith.” (Former art. 

XX, § 22.) We consider the significance of this language below.

The 1934 amendment originally enacted as former article 

XX, section 22 subsequently was amended and reenacted in its 

current form as section 1 of article XV.12 (Bisno v. Kahn (2014) 

225 Cal.App.4th 1087, 1100.) Article XV was again amended in 

 

12 Because article XV at present consists of a single section, 

further citations to that article will omit the section reference as 

superfluous. Further references to the relevant constitutional 

provisions governing usury will be to their current designation, 

article XV, unless the context requires citation to those 

provisions as originally enacted in former article XX, section 22.
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1979 to allow the Legislature to designate additional classes of 

exempt lenders.13 In 1981, the Legislature amended the 

Insurance Code to designate “incorporated admitted insurers”

as exempt under article XV. (Ins. Code, § 1100.1; Stats. 1981, 

ch. 979, § 1, p. 3806.) It is undisputed that Northwestern 

Mutual is an exempt lender.

B. Applicability of Compound Interest Limitation to 

Exempt Lenders 

Whether exempt lenders are subject to the compound 

interest limitation is a question of statutory construction: Did

the 1934 amendment, the substance of which now appears in 

article XV, repeal the compound interest limitation as to exempt 

lenders?

Standard rules of statutory interpretation guide the 

analysis. (People v. Superior Court (Pearson) (2010) 48 Cal.4th 

564, 571.) “We first consider the initiative’s language, giving the 

words their ordinary meaning and construing this language in 

the context of the statute and initiative as a whole. If the 

language is not ambiguous, we presume the voters intended the 

meaning apparent from that language, and we may not add to 

the statute or rewrite it to conform to some assumed intent not 

apparent from that language. If the language is ambiguous, 

 

13 The amendment was accomplished by Proposition 2, approved 

by voters on November 6, 1979. (Ballot Pamp., Special Elec. 

(Nov. 6, 1979) analysis of Prop. 2 by Legis. Analyst, p. 10; id., 

text of Prop. 2, p. 11.) The same proposition modified the 

maximum interest rate applied to nonexempt lenders. The 

latter modification of article XV, as well as other provisions in 

article XV that did not appear in former article XX, section 22, 

are not relevant to the legal question here.
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courts may consider ballot summaries and arguments in 

determining the voters’ intent and understanding of a ballot 

measure.” (Ibid.)

Northwestern Mutual argues that the 1934 amendment 

expressly repealed the compound interest limitation. The 

language of the amendment does not support express repeal. 

Article XV declares that “none of the above restrictions” apply 

to exempt lenders. The “above restrictions” are those in the 

immediately preceding two paragraphs establishing permitted

interest rates. (See Carter, supra, 33 Cal.2d at pp. 579–580.) 

Those restrictions say nothing about compound interest. The 

other component of article XV relating to exempt lenders is the 

grant of legislative authority to set the maximum annual 

interest rate and to “fix, regulate or limit, the fees, bonuses, 

commissions, discounts or other compensation” charged by 

exempt lenders. Again, the constitutional language does not 

mention compound interest. Accordingly, there is no express 

repeal.

The question of implied repeal remains. 

“Notwithstanding the ‘presumption against repeals by 

implication,’ repeal may be found where (1) ‘the two acts are so 

inconsistent that there is no possibility of concurrent operation,’ 

or (2) ‘the later provision gives undebatable evidence of an intent 

to supersede the earlier’ provision.” (Professional Engineers in 

California Government v. Kempton (2007) 40 Cal.4th 1016, 

1038.) “Because ‘the doctrine of implied repeal provides that the 

most recently enacted statute expresses the will of the 

Legislature’ [citation], application of the doctrine is appropriate 

in those limited situations where it is necessary to effectuate the 

intent of drafters of the newly enacted statute. ‘ “In order for 
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Opinion of the Court by Corrigan, J.

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the second law to repeal or supersede the first, the former must 

constitute a revision of the entire subject, so that the court may 

say that it was intended to be a substitute for the first.” ’ ” 

(Ibid.)

The question of whether the 1934 amendment repealed 

the provisions of the 1918 initiative in whole or in part was first 

addressed in Penziner, which held that the amendment did not 

completely repeal the initiative. (Penziner, supra, 10 Cal.2d at 

pp. 176–177.) Instead, the amendment repealed by implication 

only those provisions of the 1918 initiative that were so 

irreconcilable with the amendment that the two could not have 

concurrent operation. (Penziner, at pp. 176–177; accord, 

Nuckolls v. Bank of California (1937) 10 Cal.2d 266, 276–277.) 

The court reasoned that the language of the amendment’s final 

paragraph reflected an “intent that non-conflicting prior 

statutes shall remain in force.” (Penziner, at p. 174.) Because 

Penziner involved a lender that was not exempted by the 1934 

amendment, the court had no occasion to consider whether or to 

what extent the amendment impliedly repealed the 1918 

initiative as to exempt lenders.

In assessing whether the compound interest limitation 

was impliedly repealed for exempt lenders, we consider whether 

the limitation is irreconcilable with the conferred authority 

under article XV to “fix, regulate or limit” an exempt lender’s 

fees or “other compensation.”

The terms “fees, bonuses, commissions, [and] discounts” in 

article XV do not appear to embrace the assessment of 

compound interest. But the catchall term “other compensation” 

does. Civil Code section 1915 defines interest as “the 

compensation allowed by law or fixed by the parties for the use, 
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or forbearance, or detention of money.” (Italics added.) That 

section of the Civil Code existed long before the enactment of the 

1934 amendment. Because voters are presumed to be aware of 

existing laws at the time a constitutional amendment is enacted 

(In re Lance W. (1985) 37 Cal.3d 873, 890, fn. 11), the voters who 

enacted the 1934 amendment presumably intended the term 

“compensation” to include interest as defined in the Civil Code.

Obviously, the more frequently interest is compounded, 

the greater a lender’s compensation will be for the use of its 

money. This is so because a borrower is obligated to pay interest 

on both the principal amount borrowed and on any interest 

compounded and added to the principal. Lewis v. Pacific States 

Sav. & Loan Co. (1934) 1 Cal.2d 691, 695, explained that 

compounded interest is taken into account when determining 

whether a transaction violates the maximum annual interest

allowed. Heald v. Friis-Hansen (1959) 52 Cal.2d 834, 840, 

confirmed that compounding the maximum allowable interest

rate at intervals shorter than one year results in an effective 

annual rate that is usurious. These cases rest on the premise 

that compounded interest is part of the lender’s compensation

for the use of its money. Thus, the term “compensation” 

encompasses compound interest that effectively increases the 

lender’s return.

Wishnev disputes this conclusion, arguing that the 

compounding of interest is a “method of calculating interest” 

and not a “charge” similar to the types of compensation listed in 

article XV. The federal district court in Wishnev I agreed, 

concluding that the terms “fees, bonuses, commissions, 

discounts or other compensation” in article XV “can reasonably 

be construed as reaching such things as loan fees and points, not 
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compound interest.” (Wishnev I, supra, 162 F.Supp.3d at 

p. 945.) The court pointed out that the second paragraph of 

article XV prohibits a lender from receiving “more than the 

interest authorized by this section” as a result of “charging any 

fee, bonus, commission, discount or other compensation . . . .” 

Because article XV distinguishes interest from the enumerated 

types of compensation, the court reasoned, those types of 

compensation must be distinct from interest, compound or 

otherwise. (Wishnev I, at p. 945.)

The district court’s attempted distinction misses the mark. 

The use of the term “interest” in the second paragraph of article 

XV simply refers to the maximum interest rate allowed by law. 

The 1934 amendment sought to prevent lenders from exceeding 

the rate cap by disguising interest as fees or other types of 

charges. As explained in the argument in favor of the 

amendment: “[The] inadequacy [of the 1918 initiative] is 

blatantly apparent. Its purpose has not been fulfilled. The loan 

shark still prospers and collects interests grossly in excess of the 

specified legal rate. Interest disguised as ‘charges’ is currently 

exacted at rates that range as high as eighteen hundred per cent 

per annum.” (Ballot Pamp., supra, argument in favor of Assem.

Const. Amend. No. 79, p. 18.) Properly construed, article XV 

treats “any fee, bonus, commission, discount or other 

compensation” as part of the interest received by a lender, not 

exclusive from it. Indeed, the long-standing general rule is “that 

the word ‘interest’ [is] broad enough to cover ‘bonus’, 

‘commission’, or any other form of ‘compensation’ paid to the 

lender for the use of the money . . . .” (In re Fuller (1940) 15 

Cal.2d 425, 434.)
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The district court’s attempt to characterize loan fees and 

points as “other compensation” while excluding compound 

interest is unpersuasive. (See Wishnev I, supra, 162 F.Supp.3d 

at p. 945.) Loan points are simply “additional interest” paid to 

the lender at the outset that is “added to the interest charged by 

the terms of the loan and amortized over the term of the loan to 

determine whether the total interest charged to the borrower 

exceeds the statutory maximum limits.” (11 Miller & Starr, Cal. 

Real Estate (4th ed. 2018) § 37:27, p. 37-110, fn. omitted.) Just 

as with loan points, compound interest must be taken into 

account to assess whether a transaction is usurious. (See Lewis 

v. Pacific States Sav. & Loan Co., supra, 1 Cal.2d at p. 695.) 

Both kinds of charges increase the lender’s compensation. 

There is no reason to treat the two differently under article XV.

Urging compound interest is excluded from “other 

compensation,” Wishnev invokes a rule of statutory construction 

known as ejusdem generis. This doctrine provides that “when a 

general word or phrase follows a list of specifics, the general 

word or phrase will be interpreted to include only items of the 

same class as those listed.”14 (Black’s Law Dict. (10th ed. 2014) 

p. 631, col. 1.) Wishnev argues that “other compensation” must 

be interpreted narrowly to mean only items similar to the 

specific terms that precede the general term.

 

14 As an example, in the phrase “sun, moon, planets, and other 

large bodies,” the general term “other large bodies” would be 

interpreted to mean other large heavenly bodies to be consistent 

with the more specific terms that precede it. The general term 

would not be given the much broader connotation it might 

otherwise have: a meaning that might embrace bodies of water 

or certain professional athletes.
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Maxims of statutory construction, including the doctrine

of ejusdem generis, are not immutable rules but instead are 

guidelines subject to exceptions. (Cf. In re Joseph B. (1983) 34 

Cal.3d 952, 957.) “In construing a statute a court’s objective is 

to ascertain and effectuate the underlying legislative intent. 

[Citation.] This fundamental rule overrides the ejusdem generis

doctrine, just as it would any maxim of jurisprudence, if 

application of the doctrine or maxim would frustrate the intent 

underlying the statute.” (Moore v. California State Bd. of 

Accountancy (1992) 2 Cal.4th 999, 1012.) “[E]jusdem generis is 

only an aid in getting the meaning and does not warrant 

confining the operations of a statute within narrower limits 

than were intended.” (Llewellyn, Remarks on the Theory of 

Appellate Decision and the Rules or Canons About How Statutes 

Are To Be Construed (1950) 3 Vand. L.Rev. 395, 405.)

Wishnev claims the express terms that precede the 

general term “other compensation” are types of loan charges and 

discounts. He characterizes compound interest as merely a 

method of calculating interest and not a charge or discount like 

those enumerated in article XV. The claimed distinction fails. 

On a more general level of abstraction, compound interest is 

indistinguishable from loan charges. Both give the lender 

greater compensation for the use of its money. Ultimately, the 

application of ejusdem generis here depends upon how broadly 

or narrowly one defines the similarities among the enumerated 

items. But any such effort must honor the ultimate goal of 

effectuating voter intent.

Wishnev’s narrow reading fails to honor the enactors’

intent in 1934. One stated purpose was to protect borrowers 

against “the oppressive burden of legally assessed charges” that 
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increase the lender’s compensation beyond the maximum 

allowable interest rate. (Ballot Pamp., supra, argument in favor 

of Assem. Const. Amend. No. 79, p. 19.) Interpreting “other 

compensation” narrowly does not serve that purpose. Wishnev

points to no ballot materials or other indicators of voter intent 

suggesting they sought to give the Legislature the power to 

regulate only certain types of compensation exempt lenders 

might extract from borrowers. His proposed application of the 

ejusdem generis doctrine would unduly confine the Legislature’s 

authority to regulate lender compensation, a power the 

amendment was intended to confer.

Determining that article XV confers legislative authority 

to regulate compound interest in some way does not fully answer 

the question of whether the particular compound interest 

limitation was impliedly repealed as to exempt lenders. We 

conclude that it was.

As explained, the ability to charge compound interest 

increases the amount of compensation a lender receives. The 

compound interest limitation regulates this extra compensation 

in a precisely defined way by limiting the circumstances under 

which a lender can compel its payment. However, the 1934 

amendment confers upon the Legislature the power to regulate 

an exempt lender’s compensation “in any manner.” This broad 

legislative authority necessarily conflicts with the more narrow 

compound interest limitation. For example, the Legislature 

could expressly allow an exempt lender to charge compound 

interest if that term is disclosed in an unsigned writing, rather 

than requiring signed consent to that particular term. But that 

approach to regulating lender compensation would be 
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inconsistent with a rigid and continued application of the 

compound interest limitation.

Wishnev argues that the compound interest limitation can 

be harmonized with the legislative authority granted under 

article XV. He describes the compound interest limitation as 

simply imposing a “procedural threshold of disclosure and 

consent before a particular loan agreement will be deemed to 

allow compounding of interest . . . .” In effect, he portrays the 

compound interest limitation as a regulation of the agreement in 

which certain loan charges may be imposed instead of a 

regulation of the charges themselves.

Wishnev mischaracterizes the limitation. Whether 

considered procedural or substantive, the limitation bans

compounding of interest in the absence of written notice and 

signed agreement. In other words, the 1918 initiative prohibits 

charging compound interest unless the limitation is satisfied. A 

lender that fails to comply with the limitation is not authorized 

to impose the compounding of interest at all and faces 

significant penalties if it does so. The compound interest 

limitation necessarily restricts legislative authority to specify 

when compounding is permitted. 

Because of the irreconcilable conflict between the focused 

compound interest limitation and the broad authority granted 

to the Legislature under the 1934 amendment, one might

conclude that the amendment now found in article XV impliedly 

repealed the limitation as to exempt lenders. Alternatively, it 

could be argued that no actual irreconcilable conflict arises until 

the Legislature exercises its authority in a manner that creates 

a conflict. A corollary of this argument is that the compound 
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interest limitation remains the default rule for exempt lenders

until irreconcilable legislation is enacted. This argument fails.

Shortly after the 1934 amendment was enacted, the court 

considered a similar contention in construing other applications 

of the amendment unrelated to the compound interest 

limitation. In Matulich v. Marlo Investment Co. (1936) 7 Cal.2d 

374, 376 (Matulich), the borrower argued that “until the 

legislature has acted under the authority given by [the 1934 

amendment], no conflict exists between the [1918 initiative] and 

the Constitution, and therefore the [1918 initiative] is still 

applicable.” The argument was rejected: “We are not able to see 

the force of this contention. There is nothing in this section of 

the Constitution which would intimate that the general 

restrictions placed upon all lenders of money by the provisions 

of the [1918 initiative] were to remain in force until the 

legislature had acted under the power given in said section. . . . 

In order to accept appellant’s construction of said section of the 

Constitution, it would be necessary for the court to read into the 

section a provision not to be found therein, and which it is quite 

evident the framers thereof never intended to include therein. 

The court has no such authority.” (Ibid.)

Matulich’s holding has been consistently applied. Wolf v. 

Pacific Southwest Etc. Corp. (1937) 10 Cal.2d 183 addressed 

whether an exempt lender remained bound to comply with the 

1918 initiative’s interest rate cap until the Legislature exercised 

its authority over that class of lender under the 1934 

amendment. The court concluded that, if the Legislature had

not exercised its authority over a particular exempt lender, 

there was no statutory or constitutional law limiting the amount 

of interest the lender might receive. (Wolf v. Pacific Southwest 
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Etc. Corp., at p. 184.) Likewise, in Carter, supra, 33 Cal.2d at 

page 582, the court declared that “until the Legislature 

exercises the power granted to it by the amendment to regulate 

the business of lenders in a manner appropriate to each 

exempted class, the class not so governed by legislation is 

subject to no restriction on interest rates or charges.” (Accord, 

West Pico Furniture Co. v. Pacific Finance Loans (1970) 2 Cal.3d 

594, 614.) 

The analysis applies equally to the compound interest 

limitation, which is one of the “general restrictions” upon 

lenders contained in the 1918 initiative. (Matulich, supra, 7 

Cal.2d at p. 376.) Moreover, because voters are presumed to be 

aware of existing laws and their judicial construction (In re 

Lance W., supra, 37 Cal.3d at p. 890, fn. 11), it must be presumed 

they were aware that, by amending the Constitution in 1979 to 

allow the Legislature to designate additional classes of exempt 

lenders, lenders so designated would be relieved of the 

restrictions contained in the 1918 initiative, including the 

compound interest limitation. The Legislature was likewise 

presumptively aware of this settled law in 1981, when it enacted 

Insurance Code section 1100.1 and designated insurers like 

Northwestern Mutual as exempt for the first time. (See People 

v. Giordano (2007) 42 Cal.4th 644, 659.) 

This conclusion is consistent with the argument presented 

to voters, which declared that the 1918 initiative’s attempt to 

uniformly regulate all lenders “failed miserably.” (Ballot Pamp., 

supra, argument in favor of Assem. Const. Amend. No. 79, 

p. 19.) “[I]t was the purpose of the constitutional amendment of 

1934 to free the Legislature from the restraints imposed by 

inflexible usury provisions so that interest and charges more 
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appropriate to business conditions peculiar to each of the 

exempted classes could be established.” (Carter, supra, 33 

Cal.2d at p. 582.) The compound interest limitation was one 

such inflexible restraint the 1918 initiative applied uniformly to 

all lenders.

This court has repeatedly expressed in broad terms that 

designating lenders as exempt under the 1934 amendment also 

“operates to exempt those classes from the restrictions in the 

[1918 initiative].” (Heald v. Friis-Hansen, supra, 52 Cal.2d at 

p. 838; accord, Matulich, supra, 7 Cal.2d at pp. 376–377; Wolf v. 

Pacific Southwest Etc. Corp., supra, 10 Cal.2d at p. 184; Carter, 

supra, 33 Cal.2d at pp. 582–583; West Pico Furniture Co. v. 

Pacific Finance Loans, supra, 2 Cal.3d at p. 614.) Wishnev 

correctly points out that the compound interest limitation was 

not at issue in any of the cited cases. It is, of course, “axiomatic 

that a decision does not stand for a proposition not considered 

by the court.” (People v. Barker (2004) 34 Cal.4th 345, 354.) 

While the cited cases are not directly on point, their logical 

foundation assists in discerning electoral intent as to the 

compound interest limitation’s continued application.

There is little reason to believe voters intended to declare 

exempt lenders free from all of the restrictions of the 1918

initiative except the compound interest limitation. 

Nevertheless, Wishnev claims that cases discussing the impact 

of the 1934 amendment support such an outcome. Like the court 

in Wishnev I, supra, 162 F.Supp.3d at page 945, he places 

particular reliance on the following passage in Penziner: “The 

amendment does, however, place in the hands of the legislature 

the power to control certain of the charges of certain designated 

classes of lenders.” (Penziner, supra, 10 Cal.2d at p. 173, italics 
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added.) He also relies on the following sentence from the same 

decision: “All that the constitutional amendment does is to 

reduce the maximum permissible rate from 12 per cent to 10 per 

cent per annum; to exempt certain enumerated classes of 

lenders from certain of its provisions; and to place in the 

legislature a certain degree of control over the fixing of charges

made by the exempted groups.” (Id. at p. 177, italics added.) 

Taken together, these passages purportedly demonstrate that 

the 1934 amendment conferred upon the Legislature authority 

over only “certain” of the charges exempt lenders may exact, not 

all loan-related assessments.

As an initial matter, the admonition that “a decision does 

not stand for a proposition not considered by the court” applies 

equally to the authority relied upon by Wishnev. (People v. 

Barker, supra, 34 Cal.4th at p. 354.) Penziner did not consider 

the compound interest limitation or even involve an exempt 

lender. Moreover, it is unremarkable that Penziner would 

characterize the 1934 amendment as conferring authority on the 

Legislature to regulate “certain” rather than “all” charges 

imposed by exempt lenders. By its plain terms, the legislative 

authority to regulate exempt lenders under article XV does not 

extend to all charges that may be loan-related. Instead, that 

authority is limited to “fees, bonuses, commissions, discounts or 

other compensation” that a lender may charge in connection 

with a loan. (Art. XV.) Not all charges that may be imposed by 

a lender necessarily fall within the definition of “other 

compensation.” It has long been held that “ ‘compensation’ ” 

paid to a lender for use of money is distinct from third-party 

charges or expense items that a borrower might pay to the 

lender, such as appraisal fees, recording fees, and insurance. (In 
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re Fuller, supra, 15 Cal.2d at p. 434.) Even under the 1918 

initiative, the Legislature had the authority to regulate such 

third-party expenses because the initiative restricts legislative 

action only as to maximum interest rates and the compensation 

a lender receives for the use of its money. (Cf. In re Fuller, at p. 

434.) A fee for a loan-related service, like an appraisal fee, does 

not compensate the lender for the use of its money. Instead, it 

is a cost paid to someone other than the lender, or 

reimbursement to the lender for a cost imposed by a third party.

As long as a charge falls within one of the specifically 

enumerated categories or can be considered “other 

compensation,” the Legislature has power to regulate that 

charge in any manner. The reference in Penziner to the 

Legislature having authority to control “certain” charges 

imposed by exempt lenders does not necessarily suggest that 

compound interest falls outside of the scope of the Legislature’s 

power.

Accordingly, we hold the 1934 amendment impliedly 

repealed the compound interest limitation as to exempt lenders. 

This conclusion does not mean exempt lenders may charge 

compound interest without a contractual or legal basis to do so.15 

It simply means they are not subject to statutory liability and 

penalties otherwise imposed by the 1918 initiative on 

nonexempt lenders. 

 

15 Wishnev concedes that the question of whether Northwestern 

Mutual had a contractual basis to charge compound interest 

here is distinct from the issue of whether Northwestern Mutual 

complied with the compound interest limitation.
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C. Application of Compound Interest Limitation

The Ninth Circuit asked whether the procedures 

employed by Northwestern Mutual satisfy the compound 

interest limitation.16 (Wishnev II, supra, 880 F.3d at p. 495.) As 

the Ninth Circuit recognized, this question only arises if it is 

first determined that exempt lenders are subject to the 

limitation.17 (Id. at p. 502.) Because the answer to the first 

question fully resolves the matter pending before the Ninth 

Circuit, its second question is rendered moot.

 

16 The second question posed by the Ninth Circuit reads as 

follows: “Does an agreement meet the requirement of section 

1916–2 if it is comprised of: (1) an application for insurance 

signed by the borrower, and (2) a policy of insurance containing 

an agreement for compound interest is subsequently attached to 

the application, thus constituting the entire contract between 

the parties pursuant to section 10113 of the California 

Insurance Code?” 

17 The Ninth Circuit and the parties seem to have assumed that 

Northwestern Mutual was an exempt lender at all relevant 

times. We express no view concerning whether a lender’s 

designation as exempt under article XV applies retroactively to 

a loan that may predate the designation.
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III. CONCLUSION

We answer the Ninth Circuit’s first question as follows. 

The provision in section 1916–2 prohibiting lenders from 

assessing compound interest “unless an agreement to that effect 

is clearly expressed in writing and signed by the party to be 

charged therewith” does not apply to lenders exempt under

article XV.

CORRIGAN, J.

We Concur:

CANTIL-SAKAUYE, C. J.

CHIN, J. 

LIU, J. 

CUÉLLAR, J.

KRUGER, J. 

GROBAN, J.
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Wishnev v. The Northwestern Mutual Life Insurance Company

__________________________________________________________________________________

Unpublished Opinion

Original Appeal

Original Proceeding XXX on request pursuant to rule 8.548, Cal. Rules of Court

Review Granted

Rehearing Granted

__________________________________________________________________________________

Opinion No. S246541

Date Filed: November 14, 2019

__________________________________________________________________________________

Court:

County:

Judge:

__________________________________________________________________________________

Counsel:

Drinker Biddle & Reath, Stephen C. Baker, Timothy J. O’Driscoll, Michael J. Stortz, Alan J. Lazarus, 

Matthew J. Adler and Marshall L. Baker for Defendant and Appellant.

Alston & Bird, Reed Smith, Thomas A. Evans; and Lisa Tate for The American Council of Life Insurers as 

Amicus Curiae on behalf of Defendant and Appellant.

Sidley Austin, Carol Lynn Thompson and Lisa E. Schwartz for Metropolitan Life Insurance Company as 

Amicus Curiae on behalf of Defendant and Appellant.

Brad Wenger; Dentons US, Laura L. Geist and Andrew S. Azarmi for Association of California Life and 

Health Insurance Companies as Amicus Curiae on behalf of Defendant and Appellant.

Bramson, Plutzik, Mahler & Birkhaeuser, Robert M. Bramson and Jennifer S. Rosenberg for Plaintiff and 

Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):

Timothy J. O’Driscoll

Drinker Biddle & Reath

One Logan Square, Suite 2000

Philadelphia, PA 19103

(215) 988-2700

Robert M. Bramson

Bramson, Plutzik, Mahler & Birkhaeuser

2125 Oak Grove Road, Suite 125

Walnut Creek, CA 94598

(925) 945-0200