REGENTS OF UNIVERSITY OF CALIFORNIA v. REGAN (1976)

The Regents of the University of California (‘the University’) seek a writ directing respondent Superior Court to rule in favor of the University on its motions for judgment on the pleadings, and for summary judgment, in an action brought against the University by Phil Regan and Jo B. Regan.

The University maintains a program for investment of its endowments; such funds are sometimes lent to businesses or to individuals. The Regans had obtained from the University such a loan of $175,000, on which there was an unpaid balance of $149,931.28 as of February, 1957. On the 15th of that month, the Regans refinanced the debt by borrowing from the Regents the sum of $225,000 and executing a promissory note for that amount, to bear interest at 6 per cent per annum. The note provided for annual payments of $20,000, principal and interest, with the unpaid balance due and payable on February 15, 1970. As security for the note, the Regans executed a deed of trust upon their royalty interest in certain gas and oil producing lands in Texas. In addition, to obtain the new loan, the Regans were required to give the University an option to acquire one-fourth of their oil royalty interest in such lands for the sum of $100, exercisable in 1970 when the new note was to be paid in full.

The Regans contend that the value of this option was $62,500 on February 15, 1957; that it constituted a bonus for obtaining the new loan; and that, when coupled with the rate of 6 per cent interest already absolutely payable on the principal sum of $225,000, it rendered the transaction usurious.

The usury laws (Cal.Const., art. XX, § 22; Stats.1919, p. LXXXIII; Civ.Code, §§ 1916–1—1916–5) do not mention the state, its agencies, or other public bodies. The Constitution of the State of California, article IX, section 9, states: ‘The University of California shall constitute a public trust, to be administered by the existing corporation known as ‘The Regents of the University of California,’ with full powers of organization and government, subject only to such legislative control as may be necessary to insure compliance with the terms of the endowments of the university and the security of its funds . . . Said corporation shall also have all the powers necessary or convenient for the effective administration of its trust, including the power to sue and to be sued . . .'

The University contends that the foregoing language recognizes it as an agency of the state and that the usury laws should therefore not be construed as applicable (citing C. J. Kuback Co. v. McGuire (1926), 199 Cal. 215, 248 P. 676). The University has been described as ‘an institution of the state,’ ‘a public corporation,’ and ‘a governmental agency’ (Estate of Royer (1899), 123 Cal. 614, 619, 620, 56 P. 461); a ‘public trust,’ and ‘a governmental institution’ (City Street Imp. Co. v. Regents etc. (1908), 153 Cal. 776, 777, 779, 96 P. 801); ‘a constitutional department or function of the state government’ (Williams v. Wheeler (1913), 23 Cal.App. 619, 622, 138 P. 937, 939); ‘a governmental function’ (Davie v. Board of Regents, ect. (1924), 66 Cal.App. 693, 698); ‘a state institution’ (Estate of Purington (1926), 199 Cal. 661, 666, 250 P.657); and ‘a branch of the state itself’ (Pennington v. Bonelli (1936), 15 Cal.App.2d 316, 321, 59 P.2d 448, 450).

In the absence of some contrary expression of legislative intention, the state and its agencies and its subdivisions are not included within or bound by a general statute. (State of California v. Marin Mun. W. Dist. (1941), 17 Cal.2d 699, 111 P.2d 651; Butterworth v. Boyd (1938), 12 Cal.2d 140, 82 P.2d 434; City of L.A. v. County of L.A. (1937), 9 Cal.2d 624, 72 P.2d 138; Estate of Miller (1936), 5 Cal.2d 588, 55 P.2d 491; Inglewood v. County of Los Angeles (1929), 207 Cal. 697, 280 P. 360.) Unless there are reasons for believing that the sovereign was intended to be affected (State v. Brotherhood of R.R. Trainmen (1951), 37 Cal.2d 412, 232 P.2d 857, cert. den. 342 U.S. 876, 72 S.Ct. 166, 96 L.Ed. 658), or unless the general statutory limitations on the rights of citizens embrace the state and its agencies by express words or necessary implication (People v. Biscailuz (1951), 107 Cal.App.2d 71, 236 P.2d 591; Dairy Belle Farms v. Brock (9150), 97 Cal.App.2d 146, 217 P.2d 704; Philbrick v. State Personnel Board (1942), 53 Cal.App.2d 222, 127 P.2d 634), general terms do not have the effect of restricting the powers of the state or of its agencies (State of California v. Marin Mun. W. Dist., supra, 17 Cal.2d 699, 111 P.2d 651; Butterworth v. Boyd, supra, 12 Cal.2d 140, 82 P.2d 434), and will not be so construed as to interfere with its performance of its functions. (Nutter v. City of Santa Monica (1946), 74 Cal.App.2d 292, 168 P.2d 741.)

The constitutional provision and the statute regulate the taking of interest by ‘persons,’ ‘corporations' and ‘associations.’ Where a contrary intention does not appear, such entities do not include governmental bodies. (See Hoyt v. Board of Civil Service Commrs. (1942), 21 Cal.2d 399, 132 P.2d 804.) Although the Legislature may lawfully subject the University to generally applicable statutes designed to promote the public welfare (see Tolman v. Underhill (1952), 39 Cal.2d 708, 249 P.2d 280), that intention will not be supplied by a court where the language or history of the enactment does not so indicate. The public policy of the state, with respect to the fiscal and educational affairs of the University, is generally left for determination by the Regents of the University. To leave University investment policy to the Regents is not in principle inconsistent with statutory regulation of interest rates charged, under the influence of motives of private gain, by ‘persons,’ ‘corporations' and ‘associations.’ (Cf. Meilink v. Unemployment Comm'n. (1942), 314 U.S. 564, 567, 62 S.Ct. 389, 86 L.Ed. 458.)

A writ will issue as prayed.

FOOTNOTES

FOOTNOTE.  

THE COURT:* FN* Before RATTIGAN, Acting P. J., CHRISTLAN, J., and EMERSON, J., assigned.