Mission Hills Dev. Corp. v. Western Small Bus. Inv. Co.

—Defendants appeal from a judgment declaring certain promissory notes to be usurious with no interest due thereon, and adjudging that they repay to plaintiffs such interest as had theretofore been paid.

Plaintiff owned approximately 182 acres of land of which 120 acres had been developed into a golf course. The remaining 62 acres had a fair market value of $6,000 per acre and were being held for future residential development. The golf course was in financial trouble with some $200,000 of past due loans outstanding. Additional funds were needed for its completion. A teamsters' union pension fund had agreed to lend $500,000 on the security of the 182 acres, but unfortunately the loan could not be made for two years.

Seeking sorely needed interim financing, plaintiffs contacted defendants and commenced negotiations for a loan. A loan of $500,000 was granted. Plaintiffs gave defendants two 5-year promissory notes totaling $500,000 and bearing interest at 9% percent per annum. Additionally, plaintiffs gave defendants an option to purchase the 62 acres reserved for residential development at a price of $3,000 per acre after the loan was repaid. At the same time defendants executed…