Creative Ventures, LLC v. Jim Ward & Associates

Plaintiffs Creative Ventures, LLC (Creative), and Arden 2002, LLC (Arden), borrowed nearly $3 million from defendant Jim Ward & Associates (JWA), a California Corporation, to finance two real property development projects. The loans were evidenced by four promissory notes secured by deeds of trust on the real property. Each of the notes called for interest payments in excess of the maximum permitted by the California Constitution. (Cal. Const., art. XV, § 1.) The interest charges would have been lawful if the loans had been “made or arranged” by a licensed real estate broker (Civ. Code, § 1916.1), as JWA held itself out to be. As it happened, JWA was not so licensed. Upon discovering the deficiency, plaintiffs sued JWA for usury, breach of contract, and fraud. As to the usury and breach of contract causes of action, plaintiffs also named as defendants 54 individual investors (Investors) to whom JWA had assigned fractional interests in the notes.

The trial court found JWA liable for usury and fraud. The court found Investors were not liable for usury because they were holders in due course of the loan instruments. JWA and plaintiffs have filed cross-appeals. We shall…