La France Enterprises v. Van Der Linden

Plaintiff Madelaine Silverman together with her husband formed a corporation known as LaFrance Enterprises for the purpose of acquiring a liquor store business. The corporation purchased the business from one Tony Pickard in 1970.

Although the record is far from clear as to the details of the transaction, it appears that the business was somehow encumbered as security for a promissory note in favor of the defendants Albert and Katrina Van Der Linden. Pickard was personally obligated on the note which bore a 9Vi percent interest rate.

The terms of the sale were that Pickard would receive $65,000 plus the value of the inventory and La France Enterprises would assume the obligation on the note which had an outstanding balance of some $42,000. The Van Der Lindens agreed to permit the assumption by the corporation on several conditions: (1) Pickard would remain a guarantor of the note; (2) Madelaine Silverman would personally guarantee the note; (3) the rate of interest would be increased to 10 percent; and (4) Madelaine Silverman and another individual would execute a noninterest bearing note in favor of the Van Der Lindens for $3,200 payable at $75 per month.

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I agree that on the revivor of its corporate powers plaintiff La France Enterprises became eligible to obtain judgment, but I dissent from the court’s refusal to allow plaintiff to recover payment of usurious interest. I would direct judgment in favor of plaintiff for $6,503, the amount of interest paid within two years of suit (Code Civ. Proc., § 339, subd. 1).

The transaction at bench is relatively simple. The buyer of a business (plaintiff La France Enterprises) financed its purchase by borrowing $42,490 from third parties (defendants Van Der Lindens) who were secured creditors in that amount of the seller of the business (Pickard). To obtain this sum plaintiff gave the Van Der Lindens a promissory note for the full amount borrowed, $42,490 at 10 percent interest with repayment guaranteed by individual owners of plaintiff buyer and by the seller Pickard, and also delivered a second promissory note for $3,200, payable by individual owners of plaintiff buyer to the Van Der Lindens at the rate of $75 a month. Plaintiff La France Enterprises made payments on both notes by single monthly checks, whose amounts exactly totalled 12 percent interest on the sum borrowed.

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