Court Opinion

ID: 9731236
Source: CourtListenerOpinion
Date Created: 2023-08-26 15:40:02.906207+00
Date Added: 2024-06-11T15:09:11.993337
License: Public Domain

WHITE, P. J.
I dissent as I do not find persuasive the Ninth Circuit’s reasoning in In re Lara (9th Cir. 1984) 731 F.2d 1455 as to equal protection. (Cal. Const., art. I, § 7; art. IV, § 16.) In Lara, supra, 371 F.2d at page 1462, the Ninth Circuit concluded that the exemption from the usury law of a real estate broker’s unlicensed lending activities had a reasonable basis because of this state’s extensive regulation of licensed brokers. The *1099court specifically pointed to the available sanctions of license suspension and revocation for a broker’s unlicensed activities when these involved fraudulent or dishonest dealings or a crime involving moral turpitude. (Bus. & Prof. Code, § 10177, subds. (b), (j) and (m).) However, as the majority opinion correctly points out at page 1097, ante, personal loans do not require a real estate license. The instant transaction demonstrates the irrationality of extending the exemption to any transaction made or arranged by a person with a real estate broker’s license. To me, a rational construction of the statute would apply the exemption only to a person with a real estate broker’s license acting within the scope of the license.
Here, appellants knew the amount charged and that Wetzel was engaged in the transaction for speculation. Thus appellants would have difficulty in showing that Wetzel’s loan involved dishonesty, fraud,1 or deceit2 with intent3 to substantially benefit himself and injure them. Thus, even if the transaction was a breach of fiduciary duty (see Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 782 [157 Cal.Rptr. 392, 598 P.2d 45]), the rarely invoked sanction of license revocation (e.g., Golde v. Fox (1979) 98 Cal.App.3d 167, 177 [159 Cal.Rptr. 864]) does not provide sufficient protection for consumer transactions like the instant one.
The instant transaction met the statutory definition of a loan (Civ. Code, § 1912)4 with interest (Civ. Code, § 1915).5 Direct lending is not a primary function of real estate brokers, but of the other entities who are exempted *1100from the usury provision precisely because their activities and interest rates are comprehensively regulated. Such an approach is consistent with the Legislature’s continuing concern with limiting interest rates. The first statute of this kind was enacted in 1861. (Stats. 1861, p. 184.) (See Carter v. Seaboard Fin. Co. (1949) 33 Cal.2d 564, 574-577 [203 P.2d 758].) The general usury laws have not been repealed. (See McConnell v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1983) 33 Cal.3d 816 [191 Cal.Rptr. 458, 662 P.2d 916].)
Further, Wetzel has failed to provide any rational basis as to why all transactions (not only those otherwise regulated) of any person with a broker’s license should be exempt from the usury provisions. (Cf., Riebe v. Budget Financial Corp. (1968) 264 Cal.App.2d 576 [70 Cal.Rptr. 654] [justifying former Cal. Const., art. XX, § 22, exemption of personal property brokers and higher interest allowed for them on the basis of the lesser security afforded by personal property and the greater costs of investigation and administration].) Other regulated lenders and licensees in this state also do not enjoy a similar exemption for any transactions beyond the scope of their licenses. I would strike down on grounds of equal protection the portion of Civil Code section 1916.1 which extends the usury exemption to any transactions not within the scope of a real estate broker’s license. In this society, consumers must be protected from greed.
Accordingly, I would conclude that as a matter of law, the instant loan transaction was not exempt from the usury provision.
Appellants’ petition for a hearing by the Supreme Court was denied November 21, 1984. Bird, C. J., was of the opinion that the petition should be granted.

See section 2 of the 1983 Legislation quoted on page 1098, ante, at footnote 5 of the majority opinion.

Fraud can be either actual or constructive. Civil Code section 1572 provides in relevant part: “Actual fraud, . . . consists in any of the following acts, committed by a party to the contract, or with his connivance, with intent to deceive another party thereto, or to induce him to enter into the contract: [f] 1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; [^i] . . . H] 3. The suppression of that which is true, by one having knowledge or belief of the fact; [|] 4. A promise made without any intention of performing it; or [fl 5. Any other act fitted to deceive.”
Civil Code section 1573 in relevant part provides: “Constructive fraud consists: [f] 1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, . . . [|] 2. In any such act or omission as the law specially declares to be fraudulent, without respect to actual fraud.”

A “deceit” is defined by Civil Code section 1710 as either “1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; [f] 2. The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true; [t] 3. The suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; or [H] 4. A promise, made without any intention of performing it.”

Civil Code section 1912, so far as pertinent, provides: “A loan of money is a contract by which one delivers a sum of money to another, and the latter agrees to return at a future time a sum equivalent to that which he borrowed. ...”

Civil Code section 1915, so far as pertinent, defines interest as: “. . . the compensation . . . fixed by the parties for the . . . forbearance, ... of money.”