Opinion ID: 1389352
Heading Depth: 1
Heading Rank: 8

Heading: The proper standard of appellate review

Text: (2a) Ghirardo asserts the question of whether a transaction is usurious is a question of fact and that a reviewing court's role is limited to deciding whether the trial court's findings are supported by substantial evidence. Ghirardo contends we must uphold the trial court's finding of usury because substantial evidence supports the finding. Antonioli responds that the substantial evidence standard does not govern because the facts are undisputed. Antonioli is correct. The trial court's finding of usury is subject to our independent review for two reasons. First, Ghirardo acknowledges that The facts most relevant to this appeal are undisputed. (Italics added.) When the decisive facts are undisputed, we are confronted with a question of law and are not bound by the findings of the trial court. ( Mole-Richardson Co. v. Franchise Tax Bd. (1990) 220 Cal. App.3d 889, 894 [269 Cal. Rptr. 662]; see generally, 9 Witkin, Cal. Procedure (3d ed. 1988) Appeal, § 278, p. 289 [ Where the evidence is in conflict, the appellate court will not disturb the verdict of the jury or the findings of the trial court. (Other italics omitted.)].) We see no reason why this well-established rule should not apply to usury cases. In DCM Partners v. Smith (1991) 228 Cal. App.3d 729 [278 Cal. Rptr. 778], the Court of Appeal reversed a trial court finding of usury based, as in this case, on undisputed facts. (See also 4 Miller & Starr, supra, § 10:2, p. 648 [[T]he issue of usury is a question of law if the evidence is undisputed.].) Second, we are not persuaded the substantial evidence standard is as broad as may have previously been suggested. Ghirardo is correct that we have stated, Whether a particular transaction is a usurious loan or a sale is a question of fact. ( West Pico Furniture Co. v. Pacific Finance Loans, supra, 2 Cal.3d 594, 603 ( West Pico ).) Properly understood, however, that characterization does not mean the question of whether a transaction is subject to the usury law is necessarily and in all respects a question of fact. West Pico itself makes that point. Although we upheld the trial court's finding that the purported sales at issue were actually loans, we held them to be exempt from the usury law and reversed the trial court's judgment. West Pico thus shows that a trial court's finding of usury is not the last word. Moreover, as we later explained, In all such [i.e., usury] cases the issue is whether or not the bargain of the parties, assessed in light of all the circumstances and with a view to substance rather than form, has as its true object the hire of money at an excessive rate of interest. [Citation.] The existence of the requisite intent is always a question of fact. ( Boerner v. Colwell Co. (1978) 21 Cal.3d 37, 44 [145 Cal. Rptr. 380, 577 P.2d 200].) The circumstances giving rise to the transaction in dispute  including whether the parties intended a loan rather than a sale  are generally disputed by the parties. A question of disputed intent, in particular, is rooted in the facts of the case. The court must therefore determine the true nature of the transaction. ( West Pico, supra, 2 Cal.3d at pp. 603-604.) It is that determination which presents a question of fact. The question of usury, however, also can require more than a factual determination of who did what and why they did it. Once the historical facts of the transaction are determined, the question of whether that type of transaction is subject to the usury proscription is a question of law. For example, in Southwest Concrete Products v. Gosh Construction Corp. (1990) 51 Cal.3d 701 [274 Cal. Rptr. 404, 798 P.2d 1247], the nature of the transaction had been decided by the trier of fact to be an interest payment on an overdue commercial account. The question before us was whether that type of transaction was subject to the usury law. We did not treat that issue as being a question of fact. And as noted above, in West Pico, supra, 2 Cal.3d 594, the trial court had found the transaction to be a loan, but we concluded it was of a type that was exempt from the usury law. The foregoing cases suggest that the question of whether a transaction is usurious is generally a mixed question of fact and law. (3) As explained in a nonusury case, There are three steps involved in deciding a mixed fact/law question. The first step is the establishment of basic, primary or historical facts. The second is the selection of the applicable law. The third is the application of law to the facts. All three trial court determinations are subject to appellate review. Questions of fact are reviewed by giving deference to the trial court's decision. Questions of law are reviewed under a nondeferential standard, affording plenary review. ( People v. Louis (1986) 42 Cal.3d [969] at p. 985 [232 Cal. Rptr. 110, 728 P.2d 180].) However, as to the third step, the application of law to fact, difficulty is encountered and views as to the correct approach are mixed.... [¶] `In our view, the key to the resolution of this question is the nature of the inquiry that is required to decide `whether the rule of law as applied to the established facts is or is not violated.' [Citation.] If application of the rule of law to the facts requires an inquiry that is `essentially factual,' [citation]  one that is founded `on the application of the fact-finding tribunal's experience with the mainsprings of human conduct,' [citation]  the concerns of judicial administration will favor the [trial] court, and the [trial] court's determination should be classified as one of fact reviewable under the clearly erroneous standard. If, on the other hand, the question requires us to consider legal concepts in the mix of fact and law and to exercise judgment about the values that animate legal principles, then the concerns of judicial administration will favor the appellate court, and the question should be classified as one of law and reviewed de novo.' ( McGhan Medical Corp. v. Superior Court (1992) 11 Cal. App.4th 804, 809-810 [14 Cal. Rptr.2d 264], quoting People v. Louis (1986) 42 Cal.3d 969, 986-987 [232 Cal. Rptr. 110, 728 P.2d 180], brackets in McGhan. ) (2b) Applying the foregoing analysis to the present circumstance, we conclude a trial court's determination of the historical basis of the transactions  in common parlance, what happened  raises a question of fact. (As explained above, however, in this case those facts are largely undisputed.) The question, however, of the legal characteristics of that transaction, i.e., whether it was subject to the usury law, requires an application of law to the facts. Whether a type of transaction is subject to usury is a question that can have practical significance far beyond the confines of the case then before the court. (See, e.g., Southwest Concrete Products v. Gosh Construction Corp., supra, 51 Cal.3d 701 [deciding usury issue of statewide importance].) If such questions were effectively removed from the consideration of the appellate courts, the development and clarification of the important issues affecting commerce would be impeded. Such a question `... requires us to consider legal concepts in the mix of fact and law and to exercise judgment about the values that animate legal principles....' ( McGhan Medical Corp. v. Superior Court, supra, 11 Cal. App.4th at p. 810.) The determination in the present case of whether the debt restructuring is a loan subject to the usury law, rather than being an exempt transaction of a different character, is such a question. We conclude it is a question of law subject to independent review. For the foregoing reasons, we shall independently determine whether the trial court was correct in finding the settlement notes to be usurious. Moreover, even if the substantial evidence standard applied, under the substantive principles we shall set forth, there was no substantial evidence to support the finding that the settlement was a loan or forbearance.