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District Court of Appeal, First District, Division 2, California.

Celeste APRA, by his attorney in fact, Frank C. Apra, Plaintiff and Appellant, v. Carmelita T. AUREGUY, Defendant and Respondent.*

Civ. 18961.

Decided: November 22, 1960

Bostwick & Caputo, San Jose, for appellant. William E. Ferriter, San Francisco, for respondent.

This is an appeal from a judgment construing an agreement between the parties in favor of the respondent and denying the relief requested by the appellant. On appeal, the only argument is that the lower court erred in its construction of the contract.

The record reveals the following facts: On November 16, 1955, the respondent purchased from the appellant an apartment house at 649 Jones Street in the City and County of San Francisco. Under the terms of the contract of sale, the appellant agreed to accept: 1) the equity in a house in Belvedere, California, and the equity in an apartment house at 1836 Vallejo Street, San Francisco; 2) approximately $15,500 in cash, and 3) a note in the amount of $22,000 bearing interest at the rate of 6 per cent per annum, beginning December 16, 1955; interest to be paid quarterly until December 16, 1956, at which time, principal and interest payments were to be made monthly at the rate of $167 per month until the note was fully paid. The note was secured by a second deed of trust on the Jones Street property.

On March 1, 1956, respondent loaned to the appellant the sum of $8,500. Appellant executed and delivered a promissory note for this amount to the respondent. As security for his $8,500 note, the appellant re-assigned to the respondent her $22,000 note and deed of trust on the Jones Street property. On the same date, the parties entered into an agreement which described the above mentioned transaction and also provided that if, after the payment and satisfaction of the $8,500 note, the appellant wished to sell the $22,000 note and deed of trust, the respondent was to have the first right to purchase the note and deed of trust and an option to buy the note and deed of trust for the same price as might be offered by a bona fide purchaser.

The agreement further provided: ‘It is further understood that in consideration of the $8,500 loan, specified payments of interest and principal shall be credited on the said $22,000 note and deed of trust as the same become due and payable until the due date of said $8,500 note or earlier termination thereof as hereinafter provided.’ [Emphasis supplied.] Then followed provisions stating: 1) that if the Jones Street property was sold or transferred, the appellant was to have the privilege to pay the $8,500 note; and 2) that the $22,000 note and deed of trust were to remain in escrow, subject to withdrawal only on the instructions of both parties, and subject to sale, etc., only with the consent of both parties.

Thereafter the appellant offered to pay off the $8,500 note by tendering the sum of $4,341 in full satisfaction thereof, and the respondent refused such tender. On May 22, 1958, the appellant filed his complaint in this action requesting: 1) an accounting as to the amount due and owing to respondent on the $8,500 note; 2) an accounting as to the amount due from the respondent on the $22,000 note and deed of trust; and 3) an injunction enjoining the defendant from refusing to convey back to the appellant the $22,000 note and deed of trust or the balance thereof.

At the brief trial, the parties stipulated as to the facts relating to the purchase of the Jones Street property, the $8,500 note and agreement executed pursuant thereto, and appellant's tender of $4,341. The parties agreed that the sole issue before the court was the interpretation of the above quoted and underlined language of the agreement of March 1, 1956, which was the only evidence introduced at the trial.

The trial court found the facts substantially as stated above, and found: 1) that the specified payments of interest and principal due on the $22,000 note should be credited on the $22,000 note and deed of trust as the same become due and payable [$167 a month] until the due date of the $8,500 note; 2) that the due date of the $8,500 note was March 1, 1959; 3) that appellant's tender of $4,341 in full satisfaction of the $8,500 note before the due date thereof, was premature as the appellant was prohibited by the agreement of March 1, 1956, from paying or extinguishing the $8,500 obligation within the three year period; and 4) that all specified payments of interest and principal on the $22,000 note are to be credited against the $22,000 note and deed of trust and not against the $8,500 note.

On appeal, it is argued that the trial court's construction of the provision in the agreement is erroneous because: 1) the only proper construction of that provision is that the monthly payments to the appellant from the respondent, on the $22,000 note, should be credited to the $22,000 note and at the same time credited to the $8,500 note executed by the appellant in favor of the respondent, thus reducing both notes proportionately; 2) that under the trial court's construction, during the life of the $8,500 note, $4,425.50 would be credited to the $22,000 note, in consideration of respondent's lending the appellant $8,500, which consideration would be unfair, unjust, and usurious, as appellant would be paying 17.4% interest per annum, in violation of the usury laws.

Respondent's only argument on appeal is that the issue of usury was not raised by the complaint or at the trial, and if that is the issue, the appellant has pursued the wrong remedy, by not pursuing the exclusive remedy provided by the usury laws.

 We cannot agree. It is well settled in this state that if the interpretation of a written document depends solely on the language of the instrument itself, the trial court's construction is not binding and a reviewing court will determine its meaning as a matter of law. Stevenson v. County of San Diego, 26 Cal.2d 842, 844, 161 P.2d 553.

 We think that without doing violence to the obvious intent of the parties, the contract could only be construed to mean that when the $167 monthly payments due from the respondent to the appellant were credited to the respondent's $22,000 note, they should at the same time be credited to the appellant's $8,500 note. The purpose of the entire transaction and the agreement was that the various amounts due between the parties be adjusted by bookkeeping entries in their accounts, without any monthly transfers of cash. Before the March 1 transaction, the respondent owed the appellant $167 a month on her $22,000 note; after the transaction, the appellant owed her this amount for the duration of the term of his $8,500 note. Common sense dictates that as the payments were credited to the $22,000 note, they would at the same time be credited to the $8,500 note, thus reducing both notes proportionately at the rate of $167 per month.

In view of the foregoing, the judgment is hereby reversed with directions to the trial court to enter a new judgment in accordance with the views herein expressed.

KAUFMAN, Presiding Justice.

DRAPER and SHOEMAKER, JJ., concur.