Homami v. Iranzadi case brief

Homami v. Iranzadi case brief summary
260 Cal.Rptr. 6 (1989)

CASE SYNOPSIS

Appellant challenged a judgment from the Superior Court of Monterey County (California) for respondent in an action to collect on a promissory note because the parties' oral agreement to secretly pay interest to circumvent the payment of taxes was illegal.

CASE FACTS
Respondent brought an action against appellant to collect the balance due on a promissory note. Appellant claimed he had paid down the principal balance by an amount certain, and respondent claimed the payments represented interest only. The note stated that it bore no interest, but respondent testified at trial that the parties had an oral agreement for the payment of interest. Appellant challenged a judgment for respondent on grounds of illegality because respondent testified that he collected interest secretly in order to circumvent income tax laws.

DISCUSSION

• The court found that whether or not the evidence came from one side or the other, the disclosure of illegality was fatal to the case. 
• The court reversed the judgment and remanded, holding respondent was not entitled to collect interest pursuant to an oral agreement because the substance of the transaction was illegal.

CONCLUSION
The judgment for respondent in a suit to collect the balance due on a promissory note was reversed and remanded, and the court held that respondent was not entitled to collect interest pursuant to an oral side agreement to a non-interest bearing note because the substance of the transaction, to circumvent the payment of taxes, was illegal.


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