APPEAL from a judgment of the Superior Court of Nevada County, Sean P. Dowling, Judge. (Super. Ct. No. 76151)
The opinion of the court was delivered by: Robie , Acting P. J.
CERTIFIED FOR PUBLICATION
In California, a loan secured by a lien on real property is exempt from the constitutional prohibition on usury if the loan is made or arranged by a licensed real estate broker. (Cal. Const., art. XV, § 1; Civ. Code,*fn1 § 1916.1.) Section 1916.1 explains that "a loan . . . is arranged by a person licensed as a real estate broker when the broker . . . acts for compensation or in expectation of compensation for soliciting, negotiating, or arranging the loan for another."
In this case, we conclude that even when the lender on such a loan is a corporation that is wholly owned by the arranging broker, the broker can still be found to have arranged the loan "for another" for purposes of section 1916.1. We also conclude that in such a situation, the broker may be found to have arranged the loan "in expectation of compensation" even if the only compensation the broker will receive is the profit his wholly owned corporation reaps from the interest on the loan. Based on these conclusions, we affirm the judgment here.
FACTUAL AND PROCEDURAL BACKGROUND
When plaintiff Gregory W. Bock, trustee of the Bock Family Trust, needed a loan, a third party put him in contact with defendant Leo Speckert, a licensed real estate broker and the sole shareholder of defendant California Capital Loans, Inc. (California Capital). Speckert told Bock what the terms of the loan would be and made out disclosure statements regarding the loan. California Capital loaned Bock $1.2 million secured by a deed of trust on certain real property the trust owned. Speckert did not take a commission on the transaction.
The promissory note for the loan provided for an interest rate of 15 percent, with monthly interest-only payments to commence in April 2009 and to continue until March 2012, when the entire loan principal was to be repaid. When Bock defaulted on the loan payments, California Capital foreclosed and purchased the trust's property at a trustee's sale under the deed of trust in April 2010. In May 2010, Bock filed suit against California Capital and Speckert, claiming (among other things) that the interest rate on the loan exceeded the maximum allowed by the California Constitution and therefore the trustee's sale was void. Ultimately, a brief court trial was held in August 2011 on Bock's claim of usury. The trial court found the note was exempt from the constitutional usury prohibition under section 1916.1, which applies to "any loan . . . made or arranged by any person licensed as a real estate broker by the State of California, and secured, directly or collaterally, in whole or in part by liens on real property." Accordingly, the trial court entered judgment in favor of defendants.*fn2 Following the denial of his motion for a new trial, Bock timely appealed.
On appeal, Bock contends section 1916.1 did not apply here because the loan was made by California Capital, not Speckert, and Speckert cannot be deemed to have arranged the loan within the meaning of the statute because: (1) he did not act in expectation of receiving a commission on the transaction; and (2) he did not arrange the loan "for another" because the lender was his wholly owned corporation. Finding no merit in these arguments, we affirm.
Section 1 of article XV of the California Constitution imposes certain limitations on the amount of interest that can be charged on a loan. That provision also contains an exemption for "any loans made or arranged by any person licensed as a real estate broker by the State of California and secured in whole or in part by liens on real property." As relevant here, section 1916.1 implements that exemption by specifying that "a loan . . . is arranged by a person licensed as a real estate broker when the broker . . . acts for compensation or in expectation of compensation for soliciting, negotiating, or arranging the loan for another."
Under the part of section 1916.1 at issue here, then, a licensed real estate broker can be deemed to have arranged a loan only if the broker "act[ed] for compensation or in expectation of compensation" and the broker "solicit[ed], negotiat[ed], or arrang[ed] the loan for another." (See Green v. Future Two (1986) 179 Cal.App.3d 738, 742-743 ["a loan is arranged by a person licensed as a real estate broker only if two things occur. One is that the broker acts for another or others, not for himself. The other is that he receives or expects to receive compensation"].)
Arranging A Loan "For ...