Opinion ID: 2612211
Heading Depth: 2
Heading Rank: 1

Heading: Usury Claim.[2]

Text: The trial court's ruling implicitly adopted a rate of 12% per annum as the applicable rate of interest for appellant's usury claim. Respondents, however, urge that for the purposes of this appeal the correct rate of interest is 18% per annum. In 1973, when the loan agreement was executed, NRS 99.050 provided for a maximum interest rate of 12% per annum. NRS 99.050 was amended in 1979. See 1979 Nev. Stats. Ch. 498. Although that amendment increased the maximum rate to 18% per annum, it also included a provision making the increased rate inapplicable to any loan contract made before the amendment's effective date. Id. at § 4. Thus, the lower court did not err in utilizing 12% per annum as the maximum rate of interest.
Appellant next contends that the transaction with First Federal involved two separate loans: a construction loan from March 1973 to December 1973; and a take-out loan commencing January 1974 and running for a period of twenty years. According to appellant, the Building Loan Agreement established a separate construction agreement, while the Promissory Note and Deed of Trust created a permanent financing agreement for a period of 240 months. If the construction loan is viewed separately from the take-out loan, appellant asserts that the construction loan would be usurious. The lower court, however, determined that only one loan was contemplated by the loan agreements. We agree. The general presumption is that where two or more written instruments are executed contemporaneously the documents evidence but a single contract if they relate to the same subject matter and one of the two refers to the other. McClean v. Hillman, 352 S.W.2d 310, 313 (Tex.Civ.App. 1962). Cf. Haspray v. Pasarelli, 79 Nev. 203, 380 P.2d 919 (1963) (separate memorandum part of contract for purposes of statute of frauds); Bowker v. Goodwin, 7 Nev. 135 (1871) (separate agreement part of promissory note for purposes of revenue stamp requirement). In the present case, the loan documents constitute the only evidence offered in support of or in opposition to the motion for summary judgment which is relevant to the issue of the number of loans. No evidence was presented by affidavit, or otherwise, that the parties intended those documents to create two separate loans. The documents are unambiguous with respect to this issue. Cf. Mullis v. Nevada National Bank, 98 Nev. 510, 654 P.2d 533 (1982) (ambiguous contracts can create triable issue of fact). All the relevant documents were executed by the same parties on March 7, 1973. All of those documents address the same subject matter  a $1,500,000 loan between appellant and respondent First Federal. The Building Loan Agreement states that deposit of the loan proceeds in the LIP account shall conclusively be deemed a full and complete consideration for [the promissory] note and Deed of Trust... . Because no genuine issue of material fact existed, the trial court did not err in finding, as a matter of law, that only one loan was contemplated by the loan agreements. See generally McPherron v. McAuliffe, 97 Nev. 78, 624 P.2d 21 (1982).
The lower court held that the amounts of interest paid by Collins must be amortized over the life of the loan as originally provided in the promissory note and other loan documents. Collins, however, challenges that ruling, arguing that for the purposes of usury calculations, interest should be prorated over the actual life of the loan, i.e., from the inception of the loan to the date of default or that interest should be calculated for each year of the loan. Collins ignores a fundamental principle of usury law  that [t]he usurious character of a transaction is determined as of the time of its inception. Curtis v. Securities Acceptance Corp., 166 Neb. 815, 91 N.W.2d 19, 26 (Neb. 1958) (emphasis added). The actual life of the loan is not to be considered when determining whether a loan is usurious. Watson Const. Co. v. Amfac Mortgage Corp., 124 Ariz. 570, 606 P.2d 421 (Ariz. App. 1979). Nevertheless, Collins contends that NRS 99.050 (1973) should be interpreted to mean that if interest charged on a loan exceeds 12% of the outstanding principal for any one year, then the loan is usurious. Although NRS 99.050 (1973) provides that a contracted rate of interest may not exceed the rate of 12% per annum, that statute does not mean that the interest rate cannot exceed 12% annually or 12% for any one year. The words twelve percent per annum refer to the rate of interest and not the time of payment. Montgomery Federal Savings & Loan Ass'n v. Baer, 308 A.2d 768, 771 (D.C. Cir.1973). Thus, interest payments, for the purpose of usury calculations, must be prorated over the entire term of the contract. See Tanner Development Co. v. Ferguson, 561 S.W.2d 777 (Tex. 1977); see also Sharp v. Mortgage Security Corp. of America, 215 Cal. 287, P.2d 819 (Cal. 1932).
Collins contends that the trial court erred in concluding, as a matter of law, that expenses for title insurance, recording fees, tax service fees and loan application fees should not be added to the amount of interest paid for purposes of computing usury. The loan settlement agreement reflects that approximately $3,316 in various fees was paid at the inception of the contract. The well-settled rule is that actual and reasonable expenses incurred as part of a loan transaction do not constitute interest for purposes of usury. See, e.g., Harris v. Guaranty Financial Corp., 244 Ark. 218, 424 S.W.2d 355 (Ark. 1968); Klett v. Security Acceptance Co., 38 Cal.2d 770, 242 P.2d 873, 884 (Cal. 1952); Pushee v. Johnson, 123 Fla. 305, 166 So. 847 (1936). Respondents attached to their motion for summary judgment an affidavit by Marvin Wholey, president of First Federal. Wholey swore that he was acquainted with the service fees charged appellant. His affidavit states that all of the disputed charges were actual expenses incurred by First Federal in establishing and servicing the loan. Collins' opposition papers are silent as to any specific facts showing that there is a genuine issue as to the reasonableness or actual expense of the service fees charged. NRCP 56(e) provides that when a motion for summary judgment is made and supported as provided in Rule 56, an adversary party who does not set forth specific facts showing a genuine issue to be resolved at trial may have a summary judgment entered against him. Van Cleave v. Kietz-Mill Minit Mart, 97 Nev. 414, 633 P.2d 1220 (1981); Bird v. Casa Royale West, 97 Nev. 67, 624 P.2d 17 (1981). Collins provided no documentation in support of his allegations that the service fees charged at the inception of the loan should be calculated as interest. Thus, the lower court properly granted respondents' motion for summary judgment.
The promissory note executed by the parties contained a provision that allowed First Federal to increase the rate of interest upon the balance of the note one per cent (1%) per annum during the period that [any] delinquency continues. Pursuant to this provision, First Federal collected approximately $5,700 in late charges. Appellant argues that the late charges collected by First Federal should be nullified as a penalty under state law because they constitute an unreasonable assessment of liquidated damages. Additionally, Collins contends that under state law, the late charges he paid should be added in the usury calculation as interest. See, e.g., Garrett v. Coast and So. Federal Savings and Loan Ass'n, 9 Cal.3d 731, 108 Cal. Rptr. 845, 511 P.2d 1197 (Cal. 1973) (late charges invalid unless reasonably related to actual damages); Consolidated Loans, Inc. v. Smith, 190 So.2d 522 (La. App. 1966) (late charges constitute additional interest). The lower court found that the federal regulations which permit federal savings and loan associations to include late charge provisions in their loan agreements, see 12 C.F.R. § 545.8-3 (1982), preempt any state law purporting to govern this question. Appellant argues, however, that the lower court improperly granted summary judgment in respondents' favor because the question of whether state law governs the validity of the late charges imposed on appellant's loan by First Federal involves complex constitutional issues of large public import. Although it is true that a motion for summary judgment should be denied if the record below is inadequate for consideration of the constitutional issues presented or to determine whether genuine issues of material fact exist, see, e.g., Carter v. Stanton, 405 U.S. 669, 92 S.Ct. 1232, 31 L.Ed.2d 569 (1972) (record inadequate); Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) (genuine issue of material fact present), a case may be disposed of by summary judgment if the constitutional question has been foreclosed by previous decisions. Agustin v. Quern, 611 F.2d 206 (7th Cir.1979). See also Veterans and Reservists for Peace in Vietnam v. Regional Commissioner of Customs, 459 F.2d 676 (3d Cir.1972) (summary judgment for government affirmed in action challenging constitutionality of Trading with the Enemy Act), cert. denied, 409 U.S. 933, 93 S.Ct. 232, 34 L.Ed.2d 188 (1972); Teague v. Regional Commissioner of Customs, 404 F.2d 441 (2d Cir.1968) (constitutionality of Trading with the Enemy Act upheld on motion for summary judgment), cert. denied, 394 U.S. 977, 89 S.Ct. 1457, 22 L.Ed.2d 756 (1969); Hawthorne v. United States, 115 F.2d 805 (5th Cir.1940) (constitutionality of cotton-marketing quota provisions of the Agricultural Adjustment Act upheld after lower court rendered summary judgment in government's favor). In Agustin v. Quern, supra , the circuit court affirmed the district court's summary judgment denying the plaintiff's claim that a retrospective application of an amendment to a state law was tantamount to an ex post facto law. There, a well-developed body of ex post facto law permitted the lower court to render a summary judgment. [3] Id. at 209. Recently, the U.S. Supreme Court held that regulations issued by the Federal Bank Board allowing federal savings and loan associations to include in their loan agreements due-on-sale clauses preempted California decisional law which prohibited those clauses as unreasonable restraints on alienation. [4] Fidelity Federal Savings and Loan Ass'n v. de la Cuesta, ___ U.S. ___, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982) (Rhenquist, Stevens, J.J., dissenting). Because the federal regulations authorizing the imposition of late charges were adopted in the same document as were the due-on-sale regulations, see 12 C.F.R. 545.6-11(d)-(f) (1977); 41 Fed.Reg. 6283 (1976), and shared equally the Bank Board's expressions of preemptive intent, see 41 Fed.Reg. 6283, 6284 (1976), we hold that Fidelity, supra, is dispositive of the preemption issue. In the preamble accompanying the final publication of the late charge regulation, the Board explained its intent that the late charges imposed by federal savings and loans be governed exclusively by federal law. 41 Fed.Reg. 18286, 18287 (1976). The Board stated that it was and is the Board's intent to have late charges ... of federal associations governed exclusively by federal law. Therefore, charging of late charges ... by federal associations shall be governed and controlled solely by § 545.6-11 [now 12 C.F.R. § 545.8-3 (1982)].... Federal associations shall not be bound by or subject to any conflicting state law which imposes different late charges ... nor shall federal associations attempt to impose a higher late charge than permitted in § 545.6-11(e) ... on the ground that such higher charge is permissible under state law. 41 Fed.Reg. 18286, 18287 (1976) (emphasis added). The Board has unequivocally expressed its determination to displace state law respecting the imposition of late charges. [5] Federal regulations have no less preemptive effect than federal statutes... . When [an] administrator promulgates regulation intended to pre-empt state law the regulation will be upheld unless it exceeded the administrator's statutory authority or constituted an abuse of the administrator's discretion. Fidelity, 102 S.Ct. 3022. After reviewing the language and history of the Home Owners' Loan Act of 1933, 48 Stat. 128, as amended, 12 U.S.C. § 1461 et seq. (1976 ed. and Supp. IV), in light of the court's decision in Fidelity, there is no doubt that the promulgation of 12 C.F.R. § 545.8-3(d) was within the administrator's statutory authority and did not constitute an abuse of discretion. See Fidelity, 102 S.Ct. at 3025-3031. Accordingly, we hold that the Board's late charge regulation preempts application of any state law concerning the imposition, assessment or collection of late charges to federal savings and loan associations. Therefore, the late charges assessed and collected by First Federal do not constitute an unreasonable assessment of liquidated damages and were properly not calculated as interest. [6] See C.F.R. 545.6-11(d) (1977); 41 Fed. Reg. 6283, 6284 (1976) (amendments proposed February 6, 1976).
Appellant contends that the lower court erred in making factual determinations when granting respondents' motion for summary judgment regarding the exclusion of certain items of interest for the purpose of the usury calculations. Specifically, appellant claims that the trial court erred in excluding from its usury calculations the following amounts: (1) $21,166.66 as an erroneous entry of interest paid and reversal of said charge; (2) $95,331.70 as a year to date compilation of interest and not a separate charge of interest; (3) $3,000 as an erroneous entry of late charges as interest; (4) $7,433.42 as an erroneous entry for late charges and reversal thereof. Since both parties presented conflicting evidence concerning the exclusion of the above-enumerated amounts from the usury calculations, appellant argues that the lower court should not have granted the motion for summary judgment. We agree. Summary judgment may be granted when, as a matter of law, the moving party is entitled to judgment because there is no genuine issue as to any material fact. McPherron v. McAuliffe, 97 Nev. 78, 79, 624 P.2d 21 (1982); NRCP 56(c). Summary judgment, however, may not be used as a shortcut to the resolving of disputes upon facts material to the determination of the legal rights of the parties. Parman v. Petricciani, 70 Nev. 427, 436, 272 P.2d 492, 496 (1954). See also Mullis v. Nevada National Bank, 98 Nev. 510, 654 P.2d 533 (1982). Our review of the record indicates that a genuine issue of material fact exists with respect to whether First Federal improperly charged Collins the above enumerated amounts as interest due on his loan.
Appellant contends that the trial court erred in determining, as a matter of law, that the amount of interest charged may be computed against a principal sum which has not been disbursed to the borrower. The general rule precludes charging interest on such sums. See, e.g., Carson Meadows, Inc. v. Pease, 91 Nev. 187, 533 P.2d 458 (1975); accord Tri-County Federal Savings and Loan Ass'n of Waldorf v. Lyle, 280 Md. 69, 371 A.2d 424 (Md. App. 1977); Miller v. First State Bank, 551 S.W.2d 89 (Tex.Civ.App. 1977), modified, 563 S.W.2d 572 (Tex. 1978); 92 A.L.R.3d 769 § 8 (1979). A loan is disbursed if the borrower has control over the proceeds. See American Acceptance Corp. v. Schoenthaler, 391 F.2d 64 (5th Cir.1968), cert. denied, 392 U.S. 928, 88 S.Ct. 2287, 20 L.Ed.2d 1387 (1968); Williamson v. Clark, 120 So.2d 637 (Fla.App. 1960); Knight v. First Federal Savings & Loan Ass'n, 151 Ga. App. 447, 260 S.E.2d 511 (Ga. App. 1979); Tri-County, supra . In the instant case, the material issue of fact is whether Collins had control over the loan proceeds deposited in the LIP account. We conclude that a genuine issue exists concerning that material question of fact. The Building Loan Agreement attached to respondents' motion for summary judgment is the only evidence which addresses the issue of control of the funds deposited in the LIP account. [7] The Agreement provided that the proceeds deposited in the LIP account would be disbursed only to provide funds for the construction of the Reef Hotel and in accordance with either the Five Payment Plan or the Loan Order Plan. The Five Payment Plan stated that funds would be disbursed from the LIP account, subject to First Federal's approval, when the contractor submitted a request for payment based upon actual work completed which was approved by owner. The Loan Order Plan provided that either Collins or the contractor or both of them could obtain funds for construction by presenting to First Federal a written loan disbursement warrant drawn upon the monies in the LIP account. The warrant constituted a representation that the funds withdrawn would be used in the construction. Although this method of disbursement was not subject to First Federal's approval, the Association did have the power to require Collins and the contractor to produce receipted bills and releases of lien rights concerning the construction of the Reef Hotel prior to disbursement of funds. The question confronting this court is whether the above-mentioned agreement vested sufficient control over the LIP account in appellant so that the loan proceeds were disbursed, allowing First Federal to charge interest on the full amount of the loan from its outset and without regard to the actual disbursement of funds to appellant. The Maryland Court of Appeals considered a similar issue in Tri-County, supra . There, the Maryland court found that although the lender had charged interest on the full amount of the construction loan, 75% of the principal had never been subject to the borrower's control, rendering the loan usurious. In Tri-County, however, the funds held in reserve for later payment to materialmen were deposited in the lender's general account with a different bank. The account was used for payment of employees' salaries and other monthly expenses of the lender. Id. at 425. See also American Acceptance Corp. v. Schoenthaler, 391 F.2d 64 (5th Cir.1968), cert. denied, 392 U.S. 928, 88 S.Ct. 2287, 20 L.Ed.2d 1387 (1968); Williamson v. Clark, 120 So.2d 637 (Fla.App. 1960). In Knight v. First Federal Savings & Loan Ass'n, 151 Ga. App. 447, 260 S.E.2d 511 (Ga. App. 1979), the borrower contended that an escrow account into which he was obligated to tender $100,000 on a $2,000,000 loan created an accumulation of undisbursed funds upon which interest was improperly charged. Additionally, the borrower asserted that because the lender's approval of withdrawals was required, it had full use of the fund. The Georgia court, however, ruled that the borrower's later allegation was not supported by the record. Since both lender and borrower were permitted to use the fund only for the replacement and maintenance of the collateral (a college dormitory and furnishings and appliances located therein), the court held that the escrow fund did not create a usurious loan. Id. at 515. See also Deposit Guaranty National Bank v. Shipp, 205 So.2d 101 (La. App. 1967). In the present case, the record does not reveal whether the loan proceeds were in fact deposited into the LIP account or retained in First Federal's general account. Additionally, no evidence was presented to the lower court that established which of the two disbursement plans the parties utilized. Our review of the materials submitted in support of and in opposition to the cross motions for summary judgment demonstrates that a genuine issue as to the material fact of control exists. See Mullis v. Nevada National Bank, 98 Nev. 510, 654 P.2d 533 (1982).