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District Court of Appeal, Third District, California.

Marjorie WILSON, Plaintiff and Respondent, v. Kenneth WILSON and Nettie Wilson, Defendants and Appellants.*

Civ. 9603.

Decided: October 19, 1959

Henry V. Cleary, Plam Springs, for appellants. Francis J. McTernan, Garry, Dreyfus, McTernan & Keller, San Francisco, for respondent.

This is an appeal from a summary money judgment entered in favor of the respondent in an action on a promissory note, plus interest costs and attorneys' fees.

The facts show that appellant Nettie Wilson is Kenneth's mother. When Kenneth and Marjorie separated in 1954 they entered into a property settlement agreement by which they attempted to settle their property rights and other rights, duties and obligations arising out of the marriage relationship, including a provision for the support and maintenance of Marjorie, and of their two minor children. Specifically, the agreement provides that Marjorie was to receive the sum of $200 per month as and for the support and maintenance of their children and the sum of $250 a month for her own support for a period of two years. Included in the community property award to respondent was the sum of $9,000, payable as follows:

‘The sum of Six Thousand no/100 Dollars ($6,000.00) two (2) years from and after the date of execution of this Agreement, and the balance of the sum of Three Thousand and no/100 Dollars ($3,000.00) three (3) years from and after the date of execution of this Agreement, at no interest until the same shall become due and payable; that interest shall accrue at the rate of six per cent (6%) per annum; that the said sums shall be evidenced by promissory notes with sufficient security to insure their payment, it hereby being agreed that the signature of Nettie Wilson, mother of the Husband, as comaker, shall be deemed good and sufficient security.’

Notes in conformity with the foregoing provision of the property settlement agreement were executed by appellant and his mother on October 28, 1954, the date of the property settlement agreement. When the $6,000 note became due, appellants were unable to pay it and Kenneth proposed to Marjorie that he continue to pay the sum of $250 for her support and maintenance until the note was paid and likewise to continue to pay her the sum of $200 per month for the support and maintenance of their minor children. This proposal was submitted to plaintiff's then attorney in the form of a proposed memorandum of agreement with a covering letter. The memorandum of agreement was signed by Kenneth and Marjorie and dated November 19, 1956. The agreement, after reciting the above mentioned provisions of the property settlement agreement, provided as follows:

‘1. Kenneth D. Wilson does hereby agree to continue the said payments on account of the support and maintenance of said Marjorie E. Wilson in amount of $250.00 per month, payable on the 1st day of each and every month hereafter, and for the support and maintenance of said minor children in the amount of $200.00 per month until such time as the principal of said promissory note shall be paid and discharged in full. [Emphasis added.]

‘2. Marjorie E. Wilson waives the provisions of said promissory note providing for interest thereon after the due date thereof and agrees that no interest will be payable upon said note so long as the payments hereinabove provided shall be maintained.

‘3. At such time as the said principal sum of said promissory note shall be paid and discharged Kenneth D. Wilson shall have no further obligation to pay the said sum of $250.00 per month, or any other sum, pursuant to the provisions of said property settlement agreement or otherwise, on account of the support and maintenance of said Marjorie E. Wilson. Nothing herein shall be construed, however, to modify the obligation of Kenneth D. Wilson to continue payment of the said sum of $200.00 per month for the support and maintenance of the said minor children of the parties.

‘4. In consideration of the agreements of Kenneth D. Wilson hereinabove set forth, Marjorie E. Wilson hereby agrees to forbear legal action of any nature whatsoever for the enforcement or collection of said promissory note for such period of time as Kenneth D. Wilson shall continue of make payments on account of the support of said Marjorie E. Wilson as hereinabove specified.’

Thereafter, when the $3,000 note became due it was not paid and respondent commenced this action to recover on that note. Appellants answered, setting up the November 19, 1956, Memorandum of Agreement as an affirmative defense and by way of counterclaim alleged that the payments made pursuant to said agreement constituted usurious interest for the forbearance of suit on the $6,000 note. They sought to recover the amount provided for in Section 3 of Act 3757 of the General Laws, which provides in part as follows:

‘Every person, * * * who for any loan or forbearance of money, goods or things in action shall have paid or delivered any greater sum of value than is allowed to be received under the preceding sections, * * * may * * * recover in an action at law * * * treble the amount of the money so paid or value delivered in violation of said sections. * * *’ West's Ann.Civ.Code, § 1916–3.

Respondent demurred generally to the affirmative defense and counterclaim and appellants moved for summary judgment on the pleadings. The trial court denied appellants' motion for summary judgment and sustained respondent's demurrer without leave to amend. Thereafter, respondent moved for summary judgment on the complaint and the motion was granted.

We have determined that the usury law does not apply in this case. Even assuming that the $6,000 note constituted a loan or forbearance by respondent of that amount of her share in the community property, the six per cent interest therein provided for after its due date was not usurious. As stated in Sharp v. Mortgage Security Corp., 215 Cal. 287, 290–291, 9 P.2d 819, 820:

‘* * * The contract must in its inception require a payment of usury or it will not be held a violation of the statute and it may not be judged after some default of the borrower, which default alone authorizes penalties or forfeitures which, if exacted in the beginning, would have been a violation of the statute.’

That is, as set forth in Knoll v. Schleussner, 112 Cal.App.2d 876, 881, 247 P.2d 370, 373:

‘A contract which in its inception is unaffected by usury can never be invalidated by any subsequent usurious transaction.’ See also Goldenzwig v. Shaddock, 31 Cal.App.2d 719, 722, 88 P.2d 933.

And it was held in Messersmith v. Reilly, 70 N.D. 638, 296 N.W. 920, 922, that, where the original note was not usurious, an agreement to pay interest in excess of the lawful, maximum rate for extension of time for payment of the original note was not usurious, the court declaring:

‘Even where the subsequent contract is to pay illegal interest in consideration of any forbearance with reference to the original transaction, this does not impart the taint of usury to the original transactions.’

However, the amount of the interest in excess of the legal rate was held to be applied on the principal and interest on the valid contract.

As stated in Penziner v. West American Finance Co., 133 Cal.App. 578, 590, 24 P.2d 501, 506:

‘* * * Where the excessive interest is caused by a contingency under the lender's control, or not under the borrower's control, the transaction is usurious; otherwise when the contingency is under the borrower's control.’

Here it was within appellants' power to terminate the obligation to pay respondent $250 a month by discharging the overdue note. In addition, as pointed out by the trial court in its ‘Memorandum of Opinion’ the alleged usurious transaction had its inception in the property settlement agreement executed between respondent and Kenneth D. Wilson while husband and wife prior to the time an interlocutory decree of divorce was entered. The agreement of November 19, 1956, has a direct connection with the original property settlement and support agreement and the two notes called for therein.

Appellants further contend that an issue of fact was presented by the pleadings and therefore the trial court erred in granting respondent a summary judgment. The motion was based upon all the papers and records on file and the trial court weighed and considered all the affidavits on file, which include that of appellant Kenneth D. Wilson. His affidavit incorporated all the allegations of the appellants' affirmative defense and counterclaim and incorporated all of the documents upon which the defense and counterclaim depended, as well as the other documents and papers involved in the transaction between the parties. Thus every legal issue was before the court. There is no claim that the note sued upon was paid. Appellants defend upon a claim of usury and this claim rests on the legal interpretation of the various documents before the court. No question was raised as to the existence of these documents nor as to the terms of any document before the trial court nor was there any conflict of material facts in any of the affidavits. Thus a legal question alone was presented to the trial court. Further, it does not now behoove appellants to assert the question of whether the payments made under the agreement were usurious was one of fact, since they themselves made a like motion for a summary judgment. So far as the record shows, the question is raised in this court for the first time. It is a general rule of appellate review ‘early established and long adhered to’ that questions not raised in the trial court will not be considered on appeal. MacKenzie v. Angle, 82 Cal.App.2d 254, 263, 186 P.2d 30. See, also, Damiani v. Albert, 48 Cal.2d 15, 306 P.2d 780.

Respondent requests that this court render her reasonable attorneys' fees for services rendered on this appeal. The promissory note provides for reasonable attorney's fees ‘in case suit is instituted to collect this note’. It is stated in Cirimele v. Shinazy, 134 Cal.App.2d 50, 52, 285 P.2d 311, 312, 52 A.L.R.2d 860:

‘* * * A contract for a reasonable attorney's fee in enforcing its provisions embraces an allowance for legal services rendered upon appeal as well as during the trial.’ See, also, Dankert v. Lamb Finance Co., 146 Cal.App.2d 499, 503–504, 304 P.2d 199.

Therefore, respondent is entitled to her attorneys' fees on appeal.

The judgment is affirmed and appellants are directed to pay to respondent attorneys' fees on this appeal in the sum of Five Hundred Dollars.

I dissent.

By their separation agreement, made before their divorce action was filed, Kenneth and Marjorie Wilson measured and defined their property rights and the obligations of Kenneth to support her thereafter. That agreement provided:

‘1. The Wife shall receive as return of her separate property and as her share of the community property, the following:

‘a. Real Property, the home of the parties hereto, situated in the City of Santa Rosa, County of Sonoma, State of California, more particularly described as: [here follows description of the property]

‘b. All the household furniture and furnishings therein.

‘c. 1954 Ford Mainline ranch wagon, Model No. 59–A.

‘d. The sum of Nine Thousand and no/100 Dollars ($9,000.00) payable as follows, to wit:

‘The sum of Six Thousand and no/100 Dollars ($6,000.00) two (2) years from and after the date of execution of this Agreement, and the balance of the sum of Three Thousand and no/100 Dollars ($3,000.00) three (3) years from and after the date of execution of this Agreement, * * *.’

Kenneth agreed to pay all of the community debts and Marjorie to pay the balance due on the automobile and upon a note secured by a deed of trust on the real property. It was stipulated that in addition to the foregoing Kenneth should pay Marjorie $100 per month for the support of each of the minor children during their minority, and ‘As and for the support and maintenance of the Wife herein, the Husband shall pay the sum of Two Hundred Fifty and no/100 Dollars ($250.00) per month for a period of twenty-four (24) months from and after the date of entry of any Interlocutory Decree of Divorce, which payments shall be due and payable on the first day of each and every month for so long as the same are payable.’ By the agreement certain property was allocated to Kenneth. When the interlocutory decree of divorce was entered the court adopted the settlement agreement and made it, by reference, a part of the court's decree. The upshot of this was that other than as stipulated Kenneth was absolved from all obligation to pay any further sums or turn over any further property to Marjorie for any purpose whatever. His obligations assumed the form of a simple contract debt in discharge of which he was to pay her $250 per month for two years, $6,000 more at the end of that two-year period and a final $3,000 at the end of the succeeding year. The demands of this contract debt he discharged for two years by payment of $250 a month for that period; but he was unable to pay the $6,000 when it fell due. It was at this juncture that the second agreement was made between them and that is the agreement and the only agreement that appellant claims to have been usurious.

By the plain terms of the second agreement Kenneth purchased, from Marjorie, her forbearance to enforce the collection of the $6,000 for the price of $250 a month for so long as he should elect to purchase forbearance at that price. That rate of compensation for forbearance was clearly usurious.

‘The term ‘forbearance’ as used in the usury acts signifies the contractual obligation of the creditors to forbear during a given period to require of the debtor payment of an existing debt then due and payable. * * * The forbearance, or giving time for the payment, of a debt is, in substance, a loan, and when there is an existing and matured debt, a charge made by the creditor for his binding promise to forbear for a definite period to collect it, greater than that allowed by law, will subject the debt forborne to all the penalties prescribed by the law for usury. If the transaction is in reality an agreement for forbearance, the fact that it takes the form of, and that the parties agree that it shall be considered, an exchange of paper, cannot change its usurious nature, and it is immaterial that the parties did not regard an added sum as interest if it was in fact paid for forbearance.'

That the second contract was understood by the parties to be a contract to forbear the collection of a debt then due is clear from the language of the agreement itself, from which I quote the following:

‘In consideration of the agreements of Kenneth D. Wilson hereinabove set forth, Marjorie E. Wilson hereby agrees to forbear legal action of any nature whatsoever for the enforcement or collection of said promissory note for such period of time as Kenneth D. Wilson shall continue to make payments on account of the support of said Marjorie E. Wilson as hereinabove specified.’

The reference to the character of the payments Kenneth agreed to make as being further support for Marjorie cannot change the character of the transaction. He owed her no further obligations to support her and his failure to pay the $6,000 note when it fell due cast no further obligation upon him. The legal effect of the agreement, without regard to the attempt to make it appear something else, was that Kenneth was purchasing forbearance at an usurious price. I would reverse the judgment.

WARNE, Justice pro tem.

PEEK, J., concurs.