Legal Question in Real Estate Law in California

Re: Default Promissory Note

It appears you have violated 2 laws: 1. making a contract that has its performance secured by real property, 2. usury. Usury is a crime. A contract whose performance is secured by real property is void. So, I would give up any hope of collecting any interest whatsoever, unless you want to risk the possibility of going to jail. You are, however, entitled to your principal back under the theory of unjust enrichment. You will have to sue in small claims court in California in order to obtan a judgment for the balance not paid back yet.--But, hey, think of the money you saved by not hiring an attorney to assist you in preparing the note.

Re: Default Promissory Note

In addiiton to what Mr. McCoy says, you should be entitled to statutory simple interest of 10% annually. Small claims court sounds like the best route to go. California's nice to visit at summer's end. When you get a judgment, you could record it with the county recorder, and that serves as a lien against real property.

Re: Default Promissory Note

There is another serious problem connected with the usury here. If the borrower has already paid you some interest -- as it appears from your facts he has -- he is entitled to damages of three times the amount of interest already paid. Civil Code section 1916-3.

The conclusion that the loan is usurious rests upon two assumptions: (1) that by "6% daily compound daily interest, you mean 6% per day, and not 6% per annum, compounded daily; and (2) you don't qualify for an exemption, i.e. you aren't a national bank, licensed real estate broker, etc.

There is a one-year statute of limitations on claims for recovery of treble damages, so if you are going to sue, you're somewhat better off waiting until one year after you were last paid interest.

Finally, you speak of "property" without specifying whether you mean personal property or real property. Either can be pledged as collateral to secure the performance of a contract (I don't know where Mr. McCoy got the notion that it was criminal????), but the methods for perfecting a security interest differ and so to some extent do the rules govering jurisdiction of suits to foreclose upon the collateral. A pledge of real property must be in writing, signed by the pledgor, and suit must be brought in the state (and county) where the real property is located.