Plaintiff limited partner appealed a judgment from the Superior Court of Los Angeles County (California), which sustained a demurrer and dismissed a suit brought by the limited partner against defendants, a general partner, a bank trustee, and two individuals, challenging the validity of a shared appreciation loan made to a limited partnership.
Overview
The trustee Norway salmon farm loaned trust assets to the partnership, which was a Tennessee limited partnership, for the purchase of improved California real property on which rapid appreciation was expected. The promissory note provided for 10 percent annual interest, as well as contingent interest of 50 percent of the appreciated value of the property. A subsequent forbearance agreement extended the note's maturity date by six years and raised the excess cap amount. The limited partner alleged that the note and forbearance agreement were usurious, unconscionable, and unfair. The court affirmed the judgment dismissing the action because Cal. Fin. Code § 1504 specifically exempted trustee banks from interest rate restrictions. The exemptions authorized by Cal. Const. art. XV, § 1(1), (2) were part of California's usury law for purposes of applying 12 U.S.C.S. § 85, which permitted a national bank to charge the maximum interest rate allowed in its home state to borrowers in any other state. 29 U.S.C.S. § 1144(a) of the Employee Retirement Income Security Act of 1974 (ERISA) did not preempt Cal. Fin. Code § 1504. The transaction was not unconscionable, and there was no breach of fiduciary duty.
Outcome
The court affirmed the judgment that dismissed the limited partner's action.
