Opinion
NOT TO BE PUBLISHED
APPEAL from the Superior Court of Riverside County. Gloria Trask, Judge, Super.Ct.No. RIC397623
Allen L. Wisdom, in pro. per., for Defendant and Appellant.
Richard T. Gilbert, in pro. per.; and Jeffrey S. Mintz for Plaintiff and Respondent.
No appearance for Plaintiff and Respondent Kathryne Anne Gilbert.
OPINION
King, J.
The primary issue in this case is the nature of a financial transaction between plaintiffs Richard and Kathryne Gilbert and defendant A. L. Wisdom. Plaintiffs argue that the transaction was a loan subject to the usury laws, and that the interest on the loan was usurious. Defendant argues that the transaction was a refinance of an existing purchase money loan on real property, and a bona fide credit sale. Accordingly, he finds the usury law inapplicable.
After plaintiffs filed a motion for summary adjudication, the trial court found that the transaction was a loan at a usurious rate of interest.
Defendant appeals the resulting judgment.
We agree with the trial court that the transaction was a loan with a usurious interest rate, and we affirm the trial court’s decision on the motion for summary adjudication on the usury cause of action. However, we agree with defendant that the subsequent procedure for entry of judgment was faulty, and we therefore reverse the judgment and remand for further proceedings on the remaining causes of action.
I. FACTS AND PROCEDURAL HISTORY
A. The Pleadings
On January 29, 2004, plaintiffs filed a complaint with six causes of action: declaratory relief, injunctive relief, usury, accounting, intentional infliction of emotional distress, and negligent infliction of emotional distress.
A demurrer to this cause of action was sustained without leave to amend.
The latter count was directed at defendant Shoshone Service Corporation, the trustee in the deed of trust, and the entity handling the proposed foreclosure sale.
The complaint alleges that, in 1983, plaintiffs borrowed $9,500 from defendant, as shown by an attached promissory note and deed of trust on plaintiffs’ property in Mountain Center, California. The note calls for the payment of 15 percent interest, and it is alleged that the maximum allowable rate under the usury law on the date of the note was 13.5 percent. Plaintiffs alleged that the total due on the note, without interest, was $2,536.98. They also allege that defendant contends that the note is not usurious and that the total due on the note is $40,690.72.
In the second cause of action, plaintiffs seek to enjoin the threatened foreclosure, and seek to recover attorney fees under the note. The third cause of action seeks cancellation of interest as a result of the alleged usury.
Defendant denied the allegations of the complaint and asserted four affirmative defenses.
B. The Motion for Summary Adjudication
On June 16, 2005, plaintiffs filed their motion for summary adjudication of the declaratory relief and usury causes of action. They argued that they were entitled to summary adjudication because defendant had no defense to either cause of action. They also argued that, because of the usurious interest rate on the promissory note, interest should be cancelled, and past interest should be applied to reduce the principal debt. A declaration from Mrs. Gilbert, with exhibits, accompanied the motion.
Defendant opposed the motion, and filed his own declaration in support of his opposition.
After argument, the trial court granted the motion as to the usury cause of action. It found the 15 percent interest rate usurious, and cancelled all past and future interest on the note. In addition, it specifically found that the case of Ghirardo v. Antonioli (1994) 8 Cal.4th 791 (Ghirardo) was inapplicable to the facts of this case.
C. Undisputed Facts
The parties agree on the following facts. On July 26, 1983, plaintiffs borrowed $9,500 from defendant, who was their employer at the time. The interest rate on the borrowing was 15 percent per annum. The maximum legal interest rate at the time was 13.5 percent.
Since defendant disagreed with the characterization of the transaction as a loan, we will use the more neutral term “borrowed” to describe the transaction until we analyze the nature of the transaction further below.
The borrowing was evidenced by a promissory note and deed of trust on plaintiffs’ real property in Mountain Center. The proceeds were not actually used for the purchase, construction, or improvement of real property. At the time of the transaction, defendant was not a real estate broker, and he did not sell the real property covered by the deed of trust to plaintiffs. The borrowing was not arranged by a real estate broker.
Plaintiffs had acquired the Mountain Center property in 1979 from Mrs. Gilbert’s brother, Christopher Carreiro, and his wife. Plaintiffs took title subject to an existing note, called the Harper note. The Harper note was secured by a deed of trust on the property.
After a payment on November 19, 1988, defendant did not demand further payment until November 19, 2002. He failed to communicate with plaintiffs “from either November 1988 or February 1989 until November 2002.” On May 2, 2003, defendant commenced nonjudicial foreclosure proceedings.
D. Disputed Facts
Defendant submitted a statement of additional facts in support of his opposition to the motion for summary adjudication. These alleged facts were based on his declaration in opposition to the motion.
In his declaration, defendant asserted that, “As of 1983, Richard and Kathryne Gilbert were both employed by me at a business I owned called Taylor’s Lodge. At this time, the Gilberts lived and were owners of [the subject property] . . . . [¶] . . . In or about the middle of 1983, Richard Gilbert approached me and told me that he and Kathryne were in default of their obligations to make a balloon payment owed on a promissory note that was secured by a first deed of trust (the ‘Harper Deed of Trust’) and that he feared that the Subject Property would be lost in foreclosure if the obligation owed under the Harper Deed of Trust was not satisfied in full. During this conversation, Mr. Gilbert requested that I assist him in preventing the loss of the subject property through foreclosure. [¶] . . . In response to Mr. Gilbert’s inquiry, I agreed to assist the Gilberts in refinancing the secured obligation owed against the Subject Property under the Harper Deed of Trust. In this regard, Mr. Gilbert and I agreed that I would contact the holders of the secured obligation (the Harpers) and negotiate a satisfaction of the promissory note that was secured by the Harper Deed of Trust. Mr. Gilbert and I agreed that the Gilberts would execute a new promissory note in favor of me in an amount reflective of what I would have to pay in order to obtain a reconveyance of the Harper Deed of Trust. During this discussion, I informed Mr. Gilbert that I would have to borrow the money from my bank, Peninsula Bank, and that the Gilberts would have to be responsible for repaying me whatever interest I was going to be charged by Peninsula Bank for the loan.” Defendant goes on to state that plaintiffs agreed to this transaction, and that he then negotiated a payoff of the Harper note for $8,500. Defendant then borrowed $10,000 from Peninsula Bank to be used to pay off the Harper note and to pay other expenses associated with the transaction. The promissory note was in the amount of $9,500.
Mr. Gilbert submitted a reply declaration in which he disputed the factual assertions of defendant. Mr. Gilbert denied telling defendant that he was in default on the Harper note, denied asking defendant to help prevent foreclosure on the property, and denied that he requested defendant to contact the Harpers. Mr. Gilbert also stated that defendant did not tell him he was borrowing the money from Peninsula Bank, and Mr. Gilbert further denied that he discussed the 15 percent interest rate with defendant.
II. STANDARD OF REVIEW
The standard of review guides our analysis. The general standard of review for orders granting or denying summary adjudication is an independent standard of review: “On appeal, we review the trial court’s order granting summary adjudication de novo . . . . [Citation.] ‘Since a motion for summary judgment or summary adjudication “involves pure matters of law, ” we review a ruling on the motion de novo to determine whether the moving and opposing papers show a triable issue of material fact.’ [Citation.]” (Maxconn Inc. v. Truck Ins. Exchange (1999) 74 Cal.App.4th 1267, 1272.)
Plaintiffs agree that independent review is appropriate. Defendant does not discuss the standard of review, but raises only a legal issue, i.e., the applicability of Ghirardo to this case.
Our Supreme Court has discussed the standard of review in summary adjudication appeals as follows: “At the threshold, we believe that the Court of Appeal was right to subject to independent review the superior court’s order denying summary adjudication of the issue of the London Insurers’ duty to indemnify. A ruling denying summary adjudication is so scrutinized. [Citation.] It resolves a pure question of law [citation], namely, whether there is any triable issue as to any material fact and, if not, whether the moving party is entitled to adjudication in his favor as a matter of law [citation]. The same is true of a ruling granting summary adjudication. [Citations.]” (Certain Underwriters at Lloyd’s of London v. Superior Court (2001) 24 Cal.4th 945, 972.)
“The motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Code Civ. Proc., § 437c, subds. (c), (f).) We therefore exercise our independent judgment to determine whether there was a triable issue of material fact, and whether the moving party was entitled to judgment as a matter of law.
All further statutory references are to the Code of Civil Procedure unless otherwise indicated.
The question of usury is a mixed question of law and fact. In Ghirardo, our Supreme Court defined our task as follows: “The question of usury, however, also can require more than a factual determination of who did what and why they did it. Once the historical facts of the transaction are determined, the question of whether that type of transaction is subject to the usury proscription is a question of law. For example, in Southwest Concrete Products v. Gosh Construction Corp. (1990) 51 Cal.3d 701 . . ., the nature of the transaction had been decided by the trier of fact to be an interest payment on an overdue commercial account. The question before us was whether that type of transaction was subject to the usury law. We did not treat that issue as being a question of fact. And as noted above, in West Pico [Furniture Co. v. Pacific Finance Loans (1970)] 2 Cal.3d 594, the trial court had found the transaction to be a loan, but we concluded it was of a type that was exempt from the usury law. [¶] The foregoing cases suggest that the question of whether a transaction is usurious is generally a mixed question of fact and law. As explained in a nonusury case, ‘There are three steps involved in deciding a mixed fact/law question. The first step is the establishment of basic, primary or historical facts. The second is the selection of the applicable law. The third is the application of law to the facts. All three trial court determinations are subject to appellate review. Questions of fact are reviewed by giving deference to the trial court’s decision. Questions of law are reviewed under a nondeferential standard, affording plenary review. [Citation.] However, as to the third step, the application of law to fact, difficulty is encountered and views as to the correct approach are mixed. . . . [¶] “‘In our view, the key to the resolution of this question is the nature of the inquiry that is required to decide “whether the rule of law as applied to the established facts is or is not violated.” [Citation.] If application of the rule of law to the facts requires an inquiry that is “essentially factual, ” [citation]--one that is founded “on the application of the fact-finding tribunal’s experience with the mainsprings of human conduct, ” [citation]--the concerns of judicial administration will favor the [trial] court, and the [trial] court’s determination should be classified as one of fact reviewable under the clearly erroneous standard. If, on the other hand, the question requires us to consider legal concepts in the mix of fact and law and to exercise judgment about the values that animate legal principles, then the concerns of judicial administration will favor the appellate court, and the question should be classified as one of law and reviewed de novo.’”’ [Citations.] [¶] Applying the foregoing analysis to the present circumstance, we conclude a trial court’s determination of the historical basis of the transactions--in common parlance, what happened--raises a question of fact. (As explained above, however, in this case those facts are largely undisputed.) The question, however, of the legal characteristics of that transaction, i.e., whether it was subject to the usury law, requires an application of law to the facts. Whether a type of transaction is subject to usury is a question that can have practical significance far beyond the confines of the case then before the court. [Citation.] If such questions were effectively removed from the consideration of the appellate courts, the development and clarification of the important issues affecting commerce would be impeded. Such a question ‘“‘. . . requires us to consider legal concepts in the mix of fact and law and to exercise judgment about the values that animate legal principles . . . .’”’ [Citation.] The determination in the present case of whether the debt restructuring is a loan subject to the usury law, rather than being an exempt transaction of a different character, is such a question. We conclude it is a question of law subject to independent review.” (Ghirardo, supra, 8 Cal.4th at pp. 800-801.)
Although the issue here was framed in terms of Ghirardo, the fact that the usury issue was decided on summary adjudication requires us to determine if there was a triable issue of material fact and, if not, whether the Gilberts were entitled to judgment as a matter of law.
A. The Usury Law
Ghirardo also provides the legal background for any discussion of the usury law: “The California Constitution, article XV, section 1, states ‘No person, association, copartnership or corporation shall by charging any fee, bonus, commission, discount or other compensation receive from a borrower more than the interest authorized by this section upon any loan or forbearance of any money, goods or things in action.’ The essential elements of usury are: (1) The transaction must be a loan or forbearance; (2) the interest to be paid must exceed the statutory maximum; (3) the loan and interest must be absolutely repayable by the borrower; and (4) the lender must have a willful intent to enter into a usurious transaction. [Citation.] The element of intent is narrow. ‘[T]he intent sufficient to support the judgment [of usury] does not require a conscious attempt, with knowledge of the law, to evade it. The conscious and voluntary taking of more than the legal rate of interest constitutes usury and the only intent necessary on the part of the lender is to take the amount of interest which he receives; if that amount is more than the law allows, the offense is complete.’ [Citation.] Intent is relevant, however, in determining the true purpose of the transaction in question because ‘. . . the trier of fact must look to the substance of the transaction rather than to its form. . . . “[I]t is for the trier of the fact to determine whether the intent of the contracting parties was that disclosed by the form adopted, or whether such form was a mere sham and subterfuge to cover up a usurious transaction.”’ [Citations.] A transaction is rebuttably presumed not to be usurious. [Citations.] The borrower bears the burden of proving the essential elements of a usurious transaction. [Citations.]” (Ghirardo, supra, 8 Cal.4th at pp. 798-799, fn. omitted.)
“The four essential elements of usury include a loan or forbearance, interest exceeding the statutory maximum, absolute repayability of loan and interest, and a lender with a ‘willful intent to enter into a usurious transaction.’ [Citation.] In determining whether a transaction is a loan or forbearance subject to the usury law, or some other sort of transaction that is not subject to that law, a court must look beyond the surface of the transaction to its substance. [Citation.]” (Jones v. Wells Fargo Bank (2003) 112 Cal.App.4th 1527, 1537-1538.)
B. Was There a Triable Issue of Material Fact?
The trial court did not make any factual findings. It merely made a legal decision that Ghirardo was not applicable to this case because defendant was not the seller of the real estate and, although the funds were used to pay off the Harper note, there was no restructuring of debt within the meaning of Ghirardo. In doing so, it apparently relied on the form of the transaction, as established by the undisputed facts, without inquiring further.
The undisputed facts clearly establish that the form of the transaction was as a loan of money from defendant to plaintiffs. The undisputed facts also establish that the proceeds of the loan were not used to purchase real property, that defendant was not a real estate broker, and that he did not sell the real property to plaintiffs. Thus, no applicable exemptions are apparent from the undisputed facts. Under those facts the trial court’s finding of usury was proper.
The parties cite Civil Code section 1912, which states: “A loan of money is a contract by which one delivers a sum of money to another, and the latter agrees to return at a future time a sum equivalent to that which he borrowed. . . .”
However, as noted above, the issue is not so simple because the trial court must “look beyond the surface of the transaction to its substance.” (Jones v. Wells Fargo Bank, supra, 112 Cal.App.4th at pp. 1537-1538.)
Defendant argues that the substance of the transaction was not really a loan but rather a restructuring of a bona fide credit sale. He argues that such a transaction is exempt from the usury law under Ghirardo: the transaction there was found to be “the functional equivalent of a modification to a credit sale that was exempt from the usury law.” (Ghirardo, supra, 8 Cal.4th at p. 808.)
Before reaching the merits of defendant’s argument, we must put it into the summary adjudication context. Acceptance of the argument would require us to accept the alleged facts stated in defendant’s declaration quoted above. But the facts of the declaration were contradicted by the declaration of Mr. Gilbert, and the disputed facts could not have been the basis for summary adjudication. Since the disputed facts would have been decided at trial, summary adjudication was inappropriate, i.e., triable issues of material fact existed. If, therefore, the trial court’s decision on the legal issue of usury had been in defendant’s favor as a result of the trial court’s acceptance of disputed facts, plaintiffs could have reasonably complained that summary adjudication should not have been granted.
Although the trial court made no factual determinations, it appears that the trial court did accept defendant’s version of events as an offer of proof and determined that, even if his version of the facts was accepted, a valid defense to the usury claim would not be established.
We will follow the same course: we will assume that the disputed facts stated above were actually undisputed, and that defendant’s version of the facts is accurate. Thus, although the form of the transaction was a loan, the legal issue is whether the substance of the transaction was an exempt credit sale within the meaning of Ghirardo. Viewed from this perspective, there were no triable issues of material fact, and the only issue is whether plaintiffs were entitled to judgment as a matter of law.
C. Was the Transaction Subject to the Usury Law?
Accepting defendant’s facts, we focus on the issue of whether the substance of the transaction was subject to the usury law. As noted above, defendant contends that the loan was not usurious because it was part of a modification to an exempt credit sale.
In determining whether the usury law applies to this transaction, it is important to emphasize the basics: a loan of money (or a forbearance) is different from a sale. A loan is a contract under which money is delivered to another in return for a promise of repayment. (Civ. Code, § 1912.) A sale is a transfer of property for money. (Southwest Concrete Products v. Gosh Construction Corp., supra, 51 Cal.3d at p. 705.)
“A forbearance of money is the giving of further time for the payment of a debt or an agreement not to enforce a claim at its due date.” (Southwest Concrete Products v. Gosh Construction Corp. (1990) 51 Cal.3d 701, 705.)
The distinctions are significant because the usury law does not apply to the seller of real property. “Where the original transaction was exempt from the Usury Law, because it was a purchase money note, the debt was not created by a loan. One might assume, however, that an extension or postponement of the maturity of such a note is a forbearance. . . . However, an extension or modification of a purchase money note also does not constitute a forbearance but is merely a confirmation of the credit sale. If the parties agree that the due date of the loan will be extended but the borrower will pay an interest rate in excess of the legal maximum during the period of the extension, the excessive interest charged during the extension of a purchase money loan does not become usurious.” (8 Miller & Starr, Cal. Real Estate (3d ed. 2001) § 21:4, p. 25, fns. omitted.) This was the situation in Ghirardo. It is not the situation here. (8 Miller & Starr, Cal. Real Estate, supra, § 21:7, p. 35.)
Our Supreme Court described the facts of Ghirardo as follows: “The owners of undeveloped real property sold it to a prospective developer and received a promissory note and deed of trust to the property. The new owner sold it to another buyer, who purchased it subject to that note and deed of trust. No one contends either of these transactions was usurious. A payment dispute arose, and the new buyer sued the first seller to prevent foreclosure. After extensive negotiations, the parties agreed to a debt restructuring. The buyer paid the new obligation (except for a portion still in dispute), then claimed usury and sued the first seller.” (Ghirardo, supra, 8 Cal.4th at p. 795.)
In addition to Ghirardo, defendant cites DCM Partners v. Smith (1991) 228 Cal.App.3d 729. In that case, the buyer of real property requested an extension of time to pay a secured purchase money note which was part of the purchase price. The seller agreed, but the parties agreed to raise the interest rate to a usurious rate. The court found a bona fide credit sale which was not subject to the usury law. Since the original transaction was an exempt transaction, the bona fide sale and purchase of real property, the appellate court found that a modification of a purchase money note which extended the due date and increased the interest rate did not violate the usury law. (Id. at p. 732.)
In Ghirardo, our Supreme Court approved the reasoning in DCM. (Ghirardo, supra, 8 Cal.4th at p. 804.) It said: “We are not persuaded that a modification of a nonusurious transaction--a credit sale--should be subject to usury. The underlying policy of the credit-sale exemption is that, ‘“On principle and authority, the owner of property, whether real or personal, has a perfect right to name the price on which he is willing to sell, and to refuse to accede to any other. He may offer to sell at a designated price for cash or at a much higher price on credit, and a credit sale will not constitute usury however great the difference between the two prices . . . .”’ [Citation.]” The court concluded: “In short, the settlement and the resulting notes were substantially similar to the credit-sale modification approved in DCM, supra, 228 Cal.App.3d 729, and we conclude the rule stated in that case is sound. Thus, the settlement notes were the functional equivalent of a modification to an originally exempt credit sale. Such a modification is not subject to the usury law.” (Id. at p. 807.)
Defendant argues that the transaction here was such a modification of an exempt transaction because the proceeds of the loan were used to pay off the Harper note. Thus, defendant’s note replaced the Harper note as the indebtedness on the property. Since the transaction modified an exempt credit sale of the property, defendant argues that the present transaction should also be exempt.
The argument ignores the fundamental differences between a loan and a sale. We agree with the trial court that this was not a credit sale, nor was it a modification of a credit sale, because defendant was not the seller of the property.
The effect of the transaction was not a modification or extension of the terms of an exempt credit sale, but rather a new loan by an unaffiliated third party which was used to pay off the previous purchase money note. Since the new loan was from a nonexempt lender, the usury law is applicable.
Defendant’s argument that the transaction was really a modification of a purchase money transaction blurs the line between a loan and a sale. The argument would treat all secured lenders as if they had been sellers of the property, and it would treat all secured notes as if they were purchase money notes. Even if the effect of the loan was to substitute the new note for the Harper note, the fact remains that, as between defendant and plaintiffs, the transaction was a loan transaction subject to the usury law.
Defendant’s argument is also weakened by his agreement that the proceeds of the loan were not actually used for the purchase, construction, or improvement of real property. This fact supports the conclusion that the loan was not a modification of a purchase money transaction.
Since we have concluded that the transaction was a loan at a usurious interest rate, we find that the trial court correctly granted the motion for summary adjudication on the third cause of action seeking cancellation of interest because of usury.
D. Further Proceedings and Entry of Judgment
Defendant raises a number of issues regarding the proceedings which took place after the trial court’s ruling on the usury issue. He argues that the ensuing judgment was procured by fraud, misuse of former California Rules of Court, rule 391, and error in allowing his attorney to withdraw from the case. He also objects to an interest rate offset against principal due on the note and to an award of attorney fees of $32,846. The latter award was offset against the stipulated amount due on the note to produce an award of $28,514.
The basic facts underlying these contentions is that, after the summary adjudication on September 14, 2005, the matter was set for trial. On the trial date, the parties announced that they had reached an agreement on the amounts due as a result of the court’s usury ruling. The basic terms of the settlement were stated on the record, but the parties told the court that it would be reduced to writing.
However, on December 7, 2005, defendant’s counsel filed a motion to withdraw as counsel. The motion alleged that the client had breached a fee agreement, and that there had been a breakdown in the attorney-client relationship. The motion was set for hearing on January 19, 2006. Nevertheless, on December 9, 2005, defendant’s counsel signed a stipulation setting out the amounts due and the agreement of counsel on the remaining issues in the action.
On December 22, 2005, defendant’s counsel signed a supplemental declaration in which he stated that there had not been a breakdown in the attorney-client relationship, and that he withdrew the contention as a ground for granting the motion.
Defendant opposed the withdrawal motion, but it was eventually granted on February 17, 2006. Notice of entry was filed on February 21, 2006, the same day as defendant was served with a proposed judgment.
On March 6, 2006, plaintiffs filed a notice of no objections to the proposed judgment, based on the theory that the five-day notice period of former California Rules of Court, rule 391 had expired on February 28, 2006. On the same day, defendant wrote plaintiffs’ counsel and stated that he could not agree to the proposed judgment without further information. On March 10, 2006, the trial court signed the proposed judgment, and it was filed on March 13, 2006. The judgment incorporated the numbers in the stipulation, including a stipulated offset of interest against principal, and an attorney fees award of $32,846, less $4,332 due on the note.
Since defendant lives in Idaho, it appears that there were significant delays in sending and receiving mail and served documents. For some reason, former California Rules of Court, rule 391, provides that section 1013, relating to service by mail, does not apply to service under former rule 391. The procedure obviously did not work well in this case because defendant became an out of state pro. per. litigant upon the service of notice of the granting of the motion to withdraw.
Although we agree with plaintiffs that defendant has not demonstrated prejudice in several of his procedural arguments, prejudice is inherent in the substantial awards for offsets and attorney fees.
The essence of defendant’s arguments is that he never agreed to the award of offsets and attorney fees. He essentially ignores his counsel’s stipulation of December 9, 2005, and argues that it was never served on him. In our view, the real issue raised by his argument is the validity of the stipulation.
The parties apparently acted pursuant to section 664.6. It provides: “If parties to pending litigation stipulate, in a writing signed by the parties outside the presence of the court or orally before the court, for settlement of the case, or part thereof, the court, upon motion, may enter judgment pursuant to the terms of the settlement. . . .” Here, defendant’s counsel stipulated to evidentiary facts and the remaining trial issues, and the judgment merely reiterated the stipulation.
It is settled, however, that an attorney may not sign a stipulation under section 664.6 for his client. (Levy v. Superior Court (1995) 10 Cal.4th 578, 583; see generally 1 Witkin, Cal. Procedure (4th ed. 1996) Attorneys, § 272, pp. 336-338.) “[Section 664.6] requires the ‘parties’ to stipulate in writing or orally before the court that they have settled the case. The litigants’ direct participation tends to ensure that the settlement is the result of their mature reflection and deliberate assent. This protects the parties against hasty and improvident settlement agreements by impressing upon them the seriousness and finality of the decision to settle, and minimizes the possibility of conflicting interpretations of the settlement. [Citations.] It also protects parties from impairment of their substantial rights without their knowledge and consent. [Citation.]” (Levy v. Superior Court, supra, at p. 585, fn. omitted.) “Accordingly, settlement is such a serious step that it requires the client’s knowledge and express consent. [Citation.]” (Id. at p. 583.) Since defendant did not sign the settlement agreement, it is not enforceable against him under section 664.6. (Id. at p. 586.)
The trial court should not have entered judgment based on the stipulation, and we therefore reverse that portion of the judgment. Since the offset issues will arise upon remand, we will briefly describe those issues for the benefit of the parties and the trial court.
E. The Offsets Against the Remaining Principal Due on the Note
The trial court initially approved the offset of past interest payments against the principal amounts due. At the time, defendant’s counsel objected on grounds that such an offset had neither been pled nor requested in the noticed motion for summary adjudication.
At the hearing on the summary adjudication motion, the trial court indicated its belief that plaintiffs were entitled to an offset for all past interest which had been paid, in accordance with our opinion in Gibbo v. Berger (2004) 123 Cal.App.4th 396. In that case, we held the usury law applicable and said: “Gibbo also was entitled to recover from Berger the usurious interest Gibbo had paid on the note under her cause of action for unjust enrichment. [Citation.] The interest should be calculated by deducting the $15,000 principal from the amount of money Gibbo actually had paid to Berger [$19,125]. The balance would represent interest which Gibbo is entitled to recover from Berger. Moreover, because Berger sought to foreclose on the note and thus initiated proceedings to that end against Gibbo, the statute of limitations does not apply and Gibbo may recover all interest actually paid. [Citation.] Gibbo likewise may be entitled to treble damages under section 3 of the Usury Law, which authorizes a trial court to award three times the amount of interest paid to the lender for a period of one year. [Citation.] This award is discretionary. Therefore, we remand to allow the trial court to exercise its discretion in addressing Gibbo’s statutory damage request. [Citation.]” (Id. at p. 404.)
When the offset issue was discussed at the hearing of the summary judgment motion, defendant’s counsel reserved his right to argue at trial that the court could not order an offset because it had not been pled. Although the usury cause of action merely sought cancellation of usurious interest, the declaratory relief cause of action asked the court to determine if the interest rate was usurious and, if so, the penalty for the usury. Similarly, the prayer for relief on the usury cause of action merely asked for cancellation of all interest on the promissory note. However, there was a general prayer for “such other and further relief as the court deems just and proper, ” and we think that these allegations of the prayer adequately support the request for an offset.
Although the trial court did indicate that, in its view, an offset automatically followed a finding of usury, the trial court also indicated its willingness to review the issue if a court trial was necessary. Eventually, the summary adjudication only found that plaintiffs were entitled to a cancellation of interest pursuant to the usury cause of action. The court denied summary adjudication as to the declaratory relief cause of action because the amount of usurious interest had not been proven and, as a result, “the court cannot offset usurious interest actually paid against the remaining principal balance of the note[.]”
Although the trial court did not make any monetary awards at the September 14, 2005, hearing, it invited the parties to reach an agreement on the amounts owed. Defendant’s counsel subsequently stipulated that the sum of $8,526.33 had been paid on the note through August 1989. Although the face value of the note was $9,500, and the total interest payments were $6,236.12, the parties stipulated that “the agreed principal balance of the note as of November 4, 2005 is $4,332.00, subject to offset for attorney fees and court costs to be awarded to plaintiffs as the prevailing party in this action[.]” After applying the offset for attorney fees, judgment was entered for plaintiffs against defendant for $28,514, plus court costs.
The stipulated principal balance of $4,332 was a negotiated amount, based on the stipulated amounts of principal and interest paid, and other payments and costs. Although we agree with the trial court that interest on the note was properly cancelled following a usury finding, the interest offset issue involves a determination of whether past interest is recoverable from the lender as an offset to the principal due on the note.
A borrower is normally limited in his or her recovery of past interest to that paid within the past two years (§ 339), but this limitation is not applicable when the lender brings a foreclosure action, and the borrower files a counterclaim for usury. (8 Miller & Starr, Cal. Real Estate, supra, § 21:37, p. 161.) Since the lender here did not bring a judicial foreclosure action, and no counterclaim was filed, it would appear that the statute of limitations may be applicable. Nor was there a separate claim for unjust enrichment, as there was in Gibbo.
Defendant now contends the trial court erred by signing a judgment which ordered an offset for past interest paid. However, the judgment is not that clear because it is based on a stipulated principal amount. The judgment does not state whether the court automatically applied an offset for all past interest paid. Since any such offset was based on the stipulated amount, and since the stipulation is not enforceable against defendant, the interest offset issue should be reconsidered by the trial court on remand.
The judgment states: “After cancelling all interest on the note and crediting Plaintiffs and Defendant, A. L. Wisdom, each with their respective payments and offsets through November 4, 2005, the unpaid note principal is $4,332.00, which is subject to immediate offset for Plaintiffs’ attorney’s fees and costs incurred in this action[.]”
More importantly, defendant’s counsel stipulated to an award of attorney fees as well as the amount of the fees owed. Counsel also stipulated that the amount awarded as attorney fees and court costs could be offset against the principal balance remaining due. This stipulation was also carried forward into the judgment. The stipulation to an award of attorney fees was apparently based on an attorney fee provision in the promissory note, read in the light of Civil Code section 1717, as well as defendant’s counsel’s review of plaintiffs’ billing statements. Defendant’s counsel also excused plaintiffs’ attorney from filing a motion under Code of Civil Procedure section 1033.5. Defendant’s counsel obviously lacked authority to concede that his client owed more than $30,000 to plaintiffs in payment for their attorney fees. (Levy v. Superior Court, supra, 10 Cal.4th 578.)
Since the stipulation is not enforceable against defendant, the trial court should, on remand, consider any issues which defendant raises relating to the award of attorney fees to plaintiffs, and to the offset of such fees against the principal amount due.
If the trial court eventually awards attorney fees to either party, and if there is a request for an award of attorney fees on this appeal, the trial court should consider any such request. A request for attorney fees on appeal would raise the interesting question of whether a party who appears in propria persona (but whose brief was apparently drafted by an attorney) can recover attorney fees for the ghost-written appellate brief. We express no opinion on the issue now.
In an offhand request at the end of their brief, plaintiffs ask for an award of their attorney fees and costs on appeal. Since the case is remanded for further proceedings, we deny the request without prejudice to its renewal in the trial court.
III. DISPOSITION
The trial court’s granting of summary adjudication in favor of plaintiffs on the third cause of action for cancellation of interest due to usury is affirmed. On all other issues, the judgment is reversed, and the case is remanded to the trial court for further proceedings in the light of the views expressed in this opinion. Each party to bear their own costs on appeal.
We concur: Ramirez, P.J., Richli, J.