Opinion ID: 1389352
Heading Depth: 1
Heading Rank: 4

Heading: The dispute and settlement

Text: A dispute arose in 1986 between Antonioli and Ghirardo regarding payments allegedly owing to Antonioli on the Gay note. (After Ghirardo purchased the property from Gay, Ghirardo had begun paying directly to Antonioli the payments owed by Gay. This eliminated the need for Ghirardo to pay Gay, who would in turn have to remit the payment to Antonioli.) Antonioli began nonjudicial foreclosure proceedings. Ghirardo sued to enjoin the foreclosure and obtained a temporary restraining order. After a trial court hearing on Ghirardo's request for a preliminary injunction and before decision, the parties reached a settlement agreement that resulted in a restructuring of the debt and dismissal of Ghirardo's action to enjoin the foreclosure. Under the settlement, Antonioli canceled the Gay note and reconveyed the Gay deed of trust. In exchange, Ghirardo agreed to pay $342,500 in cash and to execute two new secured notes payable to Antonioli in the amounts of $57,500 (the small note) and $1,072,867.47 (the large note). (For convenience we will hereafter occasionally refer to the two notes as the settlement notes or the debt restructuring.) Ghirardo also agreed, as and for consideration of this new Note, to pay a $100,000 fee, which the agreement stated was to be added to the principal of the [large] note. [1] The small note bore interest at the stated rate of 13 percent. The large note stated a 10 percent interest rate, but with the $100,000 fee included in the principal, the effective rate of interest was 17.46 percent. When the notes were executed, the maximum permissible rate was 10.5 percent. Ghirardo also agreed to pay $45,000 in attorney fees to Antonioli. Ghirardo paid the small note in full (including $4,362.12 in interest) and paid the total amount due under the large note (including $94,338.09 in interest), except for $151,566.82 that Antonioli inadvertently omitted from his payoff demand to the escrow holder. Antonioli's counsel promptly discovered this mistake and informed the escrow holder, but escrow had already closed. Antonioli informed Ghirardo of the error and requested payment of the additional amount. Ghirardo responded by stating his view, apparently for the first time, that both the large and the small notes were usurious. He demanded that Antonioli repay all interest paid on the notes. Antonioli declined.