Del Mar v. Caspe

Article XV of the California Constitution capped the interest rates on personal loans at 10 percent per year, although the provision exempted certain types of lenders from the cap. A ballot measure amended Article XV to expand the exemptions to include loans made or arranged by licensed real estate brokers and secured by liens on real property. The California legislature passed a statute interpreting the language of the amendment so as to construe the word “arranged” broadly. The statute justified its liberal construction by averring that the threat of having one’s license revoked would prevent brokers from facilitating abusive or fraudulent loans. Ole Mohus made several loans to Dorothy Del Mar (plaintiff). Mohus enlisted the services of Dennis Caspe (defendant), an attorney and licensed real estate broker, in formalizing the loans. Among other tasks, Caspe calculated outstanding principal and interest, prepared promissory notes and deeds of trust, determined market interest rates, and charged fees for his services. Del Mar issued several notes for which Caspe was involved in the preparation. All the notes were secured by a second deed of trust on Del Mar’s residence and carried interest rates of between 13 and 15 percent. Caspe was licensed as a real estate broker when all the notes were executed except for one, which was executed during an eight-month window when his license was not active. Mohus died, and Caspe became the executor of his estate. Caspe demanded that Del Mar pay the estate the amount due under the notes. Del Mar paid under protest and sued to recover treble damages, arguing that the notes violated Article XV and were thus usurious. The trial court held that none of the notes were usurious, and Del Mar appealed.