Estate of Armondo J Mendoza

Case Number

24PR00341

Case Type

Hearing Date / Time

Tue, 09/23/2025 - 09:00

Nature of Proceedings

Review of Compliance with Prob. Code §11604(.5)

Tentative Ruling

Probate Notes:

The underlying transaction is a usurious loan.

The purported transferee for value (hereafter Probate Advance, LLC and Advance Inheritance, LLC) argues that the underlying transaction reflected in the terms of the agreement is not a “loan.”  This assertion is false, and the authorities cited by Probate Advance, LLC not only fail to persuade, but have been refuted numerous times by trial courts and appellate courts at the state and Federal level.

“A loan of money is a contract by which one delivers a sum of money to another, and the latter agrees to return at a future time a sum equivalent to that which he borrowed.”  (Civ. Code, § 1912.)  “A loan of money may or may not provide for interest payments.”  (Great American Ins. Co. v. National Health Services, Inc. (1976) 62 Cal.App.3d 785, 792.)

“In all such [i.e., usury] cases the issue is whether or not the bargain of the parties, assessed in light of all the circumstances and with a view to substance rather than form, has as its true object the hire of money at an excessive rate of interest.”  (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799–800 [emphasis added].) Further, "it is for the trier of the fact to determine whether the intent of the contracting parties was that disclosed by the form adopted, or whether such form was a mere sham and subterfuge to cover up a usurious transaction."  (Id. at p. 798.)

The plain language of the agreement at issue in this case shows Probate Advance, LLC and Advance Inheritance, LLC agreed to give Ms. Lean a sums of $5,000 a nd $20,000, in exchange for the payment of $9,900 and $36,000 respectively, paid from the Decedent’s estate. (Notice of Assignment, filed Oct. 8, 2024, and Nov. 1, 2024.)  This transaction, in its simplest substance, is the payment of funds from A to B, in exchange for B’s promise to “return at a future time a sum equivalent to that which [was] borrowed” (Civ. Code, § 1912) to A, with an additional amount tacked on for consideration in order to contractually justify the transaction.  

Therefore, the plain language of the agreement alone, in addition to all the circumstances surrounding the transaction at issue, shows the intent of the contracting parties was to enter into a loan.

The underlying transaction is not a “sale.”

Probate Advance, LLC also argues the transaction is not a loan, but is a sale. Probate Advance, LLC and Advance Inheritance, LLC reasons the transaction is a sale, because Probate Advance, LLC and Advance Inheritance, LLC purchased an assignable interest in Decedent’s estate, for the sum of $5,000 and $20,000 respectively.  In addition to citing zero legal authority for that proposition, Probate Advance, LLC offers no logical rationale for that proposition.

At its core, the underlying transaction was the exchange of money now, in return for a greater sum of money in the future.  This does not fit any definition of a sale, colloquially or legally.

Colloquially, according to Black’s Law Dictionary (“SALE,” Black's Law Dictionary (12th ed. 2024)), a sale is:

1. The transfer of property or title for a price. See UCC § 2–106(1).
2. The agreement by which such a transfer takes place. The four elements are (1) parties competent to contract, (2) mutual assent, (3) a thing capable of being transferred, and (4) a price in money paid or promised.

The dictionary’s editor includes the following citation for clarification:

A sale is a transfer of the absolute title to property for a certain agreed price. It is a contract between two parties, one of whom acquires thereby a property in the thing sold, and the other parts with it for a valuable consideration. If the property in any commodity be voluntarily transferred without a valuable consideration, it is a gift; if one article be exchanged for another, it is a barter; but a sale takes place only, when there is a transfer of the title to property, for a price.

(William W. Story, A Treatise on the Law of Sales of Personal Property § 1, at 1 (1853).)

Implied in all of these definitions and explanations is the common sense rationale that you cannot buy money with money.  A thing, other than money, must be purchased with money.

The Court of Appeals explains the legal definition of a sale as follows:

A sale is the transfer of the property in a thing for a price in money. The transfer of the property in the thing sold for a price is the essence of the transaction. The transfer is that of the general or absolute interest in property as distinguished from a special property interest. A loan, on the other hand, is the delivery of a sum of money to another under a contract to return at some future time an equivalent amount with or without an additional sum agreed upon for its use; and if such be the intent of the parties the transaction will be deemed a loan regardless of its form.

(Milana v. Credit Discount Co. (1945) 27 Cal.2d 335, 339 [emphasis added].)

Thus, the transaction at issue, at its core being an exchange of money for money, is not a sale, nor can be by any rational definition in existence now, or ever.

There is little if any risk in the underlying transaction that would justify the usurious return on investment at issue.

In addition to not addressing the above damning authorities to their argument, nor citing any supporting caselaw to the contrary, Probate Advance, LLC cites to three cases in the Los Angeles Superior Court for the proposition that the high rate of return on the loan is in consideration of the high amount of risk involved in making these types of loans. 

Not only did Probate Advance, LLC not submit a request for judicial notice of these cases, or support that request with official copies certified for such judicial notice, but the explanation given for two of the three cases shows Probate Advance, LLC and Advance Inheritance, LLC has not even suffered any permanent loss to the funds they claim are indicative of the risk.

Selective wordsmithing that labels the remote chance a known estate value will not result in the payout of an identifiable sum a “contingency” is disingenuous and academically dishonest, especially when there are no conditions that have to be met before payout is guaranteed, and the only subsequent condition that could nullify the obligation is so remote it basically does not exist.  The lack of actual risk in these types of transactions was made painfully clear in a series of Law Review Articles published within the last decade.  (See David Horton, Andrea Cann Chandrasekher, Probate Lending (2016) 126 Yale L.J. 102, 130; David Horton, Borrowing in the Shadow of Death: Another Look at Probate Lending (2018) 59 Wm. & Mary L. Rev. 2447; David Horton & Reid K. Weisbord, Probate  Lending: Data from San Francisco (2022) 169 U. PA. L. REV. Online 293.)  Those articles identify almost every conceivable contrivance that similar probate loan companies have come up with to justify these very real loans.  

The articles not only collect cases across the nation showing how the probate loan company’s arguments have been refuted by several courts, but also more convincingly present empirical evidence gathered by the authors showing that the collection rate for these probate ‘loans’ are between 96-100%, at an average interest rate that nearly always exceeds state usury limits in exponential amounts. 

The fact that the risk in these cases is so remote that it does not actually exist, was pointed out in a recent opinion by the Ninth Circuit:

… obligation to make payments is sufficiently “guaranteed” by the terms of the agreement, such that what appears not to be a “loan” is nonetheless treated like one for the purposes of New York usury law. While the Court of Appeals has not addressed this possibility in the realm of litigation finance, at least one New York state trial court has held that a similar purported non-recourse litigation financing arrangement was a “loan” (and thus subject to usury laws) because the recovery of the underlying plaintiff—and therefore the financier's payment—was “almost guaranteed.” [Citations]. In Echeverria, the plaintiff Echeverria received a $25,000 “advance” from a company called LawCash to pursue his personal injury case, which he agreed to repay “at an interest rate of 3.85% compounded monthly to LawCash from any judgment awarded,” [citations], which the court noted was “an obviously usurious rate,” [citations]. In finding that the finance agreement constituted a loan, the court concluded that:

[T]here was a very low probability that judgment would not be in favor of the plaintiff. It is a strict liability labor law case where the plaintiff is almost guaranteed to recover. There is low, if any risk. This is troubling considering the enormous profits that will be made from the rapidly accruing, extremely high interest rates they are charging.

[Citations]. The court also noted that, just like a bank making a loan, LawCash was able to demand its rate of return. [Citations]. The court then found that because the investment was a “sure thing,” “it is a loan, not an investment with great risk.

(Fast Trak Investment Company, LLC v. Sax, (9th Cir. 2020) 962 F.3d 455, 466.)

The court in the case above relied upon an age-old principle stated in the Restatement of Contracts:

If the probability of the occurrence of the contingency on which diminished payment is promised is remote, or if the diminution should the contingency occur is slight as compared with the possible profit to be obtained if the contingency does not occur, the transaction is presumably usurious.

(Restatement (First) of Contracts (1932) § 527, comment a.)

Just as a matter of common sense, a contingency is an event that must occur prior to the springing forth of an obligation by one obliged; in this case Ms. Lean’s obligation to repay the loan out of the estate at final distribution.  But even a cursory review of the contract shows Ms. Lean’s obligation to repay was absolute, unless a subsequent condition defeated that obligation to pay the amount owed; the condition subsequent being the estate was not solvent.  This is evident in paragraph 2 of the contract, which contains not a single condition precedent that must occur before Ms. Lean is to be paid from the Decedent’s estate.

As a result of the above facts and law, the Court should make the following findings and orders:

• The agreements between Probate Advance, LLC and Advance Inheritance, LLC and Stephanie Lean are both loans, considering the plain language of the agreement and the totality of the circumstances.
• The agreement, if paid out any time before December 1, 2031, is usurious, thus grossly unreasonable, and the alleged risk is almost non-existent viewing the transaction of the parties from the date the agreement was signed.
• Probate Advance, LLC may only be repaid 10 percent interest on $5,000 compounded at an average daily rate according to loan industry standards before final distribution, and only 10% per annum simple interest thereafter, to be determined by the Court at final distribution.

Advance Inheritance, LLC may only be repaid 10 percent interest on $20,000 compounded at an average daily rate according to loan industry standards before final distribution, and only 10% per annum simple interest thereafter, to be determined by the Court at final distribution.

Appearances:

The court is open to the public for court business. The court is also conducting hearings via Zoom videoconference.

Meeting ID: 160 543 3416

Passcode: 5053334