Judge: Christian R. Gullon, Case: 23PSCV00767, Date: 2023-09-08 Tentative Ruling

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Case Number: 23PSCV00767    Hearing Date: September 8, 2023    Dept: O

Tentative Ruling

AUXILIOR CAPITAL PARTNER’s APPLICATION FOR DEFAULT JUDGMENT is GRANTED, but in the reduced amount of $53,822.12 because 18% interest is usurious.

Background

This is a breach of contract case arising from a loan agreement.

On March 15, 2023, Plaintiff filed suit against ZYG WORLD INC and YURONG LIN[1] for:

On July 14, 2023, default was entered against Defendants.

On August 2, 2023, Plaintiff filed the instant application.

Discussion

The only defect noted with the complaint and application is that Plaintiff seeks pre-judgment interest at the contract rate of 18% per annum.[2] That, however, is usurious.

“‘“Usury is the exacting, taking or receiving of a greater rate than is allowed by law, for the use or loan of money.” [Citation.] A transaction is usurious if there is a loan at greater than the legal rate of interest or an exaction at more than the legal rate for the forbearance of a debt or sum of money due. [Citation.]’ [Citation.] 

“California Constitution, article XV, section 1 limits the interest rate for a ‘loan or forbearance’ of money not primarily for personal, family or household purposes, to the higher of: (1) 10 percent per annum or (2) 5 percent plus the rate of interest prevailing on the 25th day of the month preceding the earlier of the date of the extension of the contract to make the loan or forbearance or the date of making the loan or forbearance, established by the Federal Reserve Bank of San Francisco on advances to member banks under sections 13 and 13(1) of the Federal Reserve Act. [Citation.]” [Citations.] 

“‘When a loan is usurious, the creditor is entitled to repayment of the principal sum only. He is entitled to no interest whatsoever. [Citations.]’ [Citation.]” [Citation.] “The attempt to exact the usurious rate of interest renders the interest provisions of a note void. [Citations.]” [Citation.]” (Hardwick v. Wilcox¿(2017) 11 Cal.App.5th 975, 978–979.) “Where a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in party, the contract is void as to the latter and valid as to the rest.” (MKB Management, Inc. v. Melikian (2010) 184 Cal.App.4th 796, 803 (quoting Civil Code § 1599).) “If, on the other hand, a contract has only a single object and that object is unlawful, in whole or in part, the entire contract is void.” (Id. (citing Civil Code § 1598).) 

Notwithstanding the foregoing, when a loan is usurious, the creditor is entitled to repayment of the principal sum only and “no interest whatsoever.” (Hardwick v. Wilcox¿(2017) 11 Cal.App.5th 975, 978–979) (emphasis and underline added). “An exception to this general rule applies, however, when a borrower has defaulted on a loan and the loan becomes due. [Citation.]” (Grados v. Shiau (2021) 63 Cal.App.5th 1042, 1056. “Accordingly, the lender is entitled “to interest at the legal rate from the date the note matures until the date of judgment.” (Ibid.)

Here, applying for the foregoing principle, the calculation is as follows: ($47,505.62 [principal] x .10 (legal interest) = $4,750.562) divided by 365 yields a daily interest of $13.02. Consequently, the daily interest multiplied by 284 days (October 1, 2022 to July 12, 2023) equals $3,696.33.

Therefore, default judgment will be entered in the amount of the principal of $47,505.62 + accrued interest of $3,696.33 plus court costs of $805.00 and attorney fees pursuant to Local Rules of Court Rule 3.214 of $1,815.17 for a total of $53,822.12.

Conclusion

Based on the foregoing, the application is granted in the reduced amount. The court requests Plaintiff to file a modified proposed order.