        IN THE SUPREME COURT OF
               CALIFORNIA

             SANFORD J. WISHNEV,
             Plaintiff and Respondent,
                         v.
   THE NORTHWESTERN MUTUAL LIFE INSURANCE
                    COMPANY,
             Defendant and Appellant.

                           S246541

                        Ninth Circuit
                          16-16037

                Northern District of California
                     3:15-cv-3797-EMC



                     November 14, 2019

Justice Corrigan authored the opinion of the Court, in which
Chief Justice Cantil-Sakauye and Justices Chin, Liu, Cuéllar,
Kruger, and Groban concurred.
    WISHNEV v. THE NORTHWESTERN MUTUAL LIFE
                INSURANCE COMPANY
                            S246541


              Opinion of the Court by Corrigan, J.


      The body of California law prohibiting usury derives from
a variety of sources, including a constitutional amendment. (Cal
Const.,1 art. XV, § 1.) The amendment sets the maximum
interest rates lenders may charge but exempts specified classes
of lenders from those rate restrictions. The amendment also
authorizes the Legislature to regulate “in any manner” the
compensation these exempt lenders may receive. (Ibid.)
      We accepted a request from the United States Court of
Appeals for the Ninth Circuit to determine whether exempt
lenders must comply with a voter-approved limitation that was
in place before the amendment was enacted in 1934.2 The
precise question we agreed to consider is set forth in the footnote




1
   Further references to articles are to the California
Constitution.
2
  See California Rules of Court, rule 8.548(a) (“On request of the
United States Supreme Court, a United States Court of Appeals,
or the court of last resort of any state, territory, or
commonwealth, the Supreme Court may decide a question of
California law if: [¶] (1) The decision could determine the
outcome of a matter pending in the requesting court; and [¶] (2)
There is no controlling precedent”).


                                1
    WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                         COMPANY
                 Opinion of the Court by Corrigan, J.


below.3 Simply stated, the question is: Are exempt lenders like
The Northwestern Mutual Life Insurance Company
(Northwestern Mutual) required to obtain a borrower’s signed
agreement in order to charge compound interest on a loan? We
conclude the lenders are not so obligated.
                       I. BACKGROUND
       Northwestern Mutual offers a life insurance product
referred to as “permanent” life insurance.4 It pays a benefit
upon death and accumulates a cash value during the insured’s
lifetime. The policy also pays an annual dividend to the
policyholder, who may take out loans secured by the cash value
of the policy.5
      Between 1967 and 1976, Northwestern Mutual issued four
permanent life policies to Sanford J. Wishnev, who completed
and signed an application for each. None of the applications
disclosed that Northwestern Mutual would charge compound
interest. After Wishnev submitted each signed application,
Northwestern Mutual sent him the requested policy. Each
states that “[t]his policy and the application, a copy of which is

3
   The Ninth Circuit posed the question as follows: “Are the
lenders identified in Article XV of the California Constitution,
see Cal. Const. art. XV, § 1, as being exempt from the restrictions
otherwise imposed by that article, nevertheless subject to the
requirement in section 1916–2 of the California Civil Code that
a lender may not compound interest ‘unless an agreement to
that effect is clearly expressed in writing and signed by the party
to be charged therewith’?”
4
  Whole and universal life insurance are examples of permanent
life insurance.
5
  Policyholders can also have unpaid premiums automatically
treated as loans.


                                  2
    WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                         COMPANY
                 Opinion of the Court by Corrigan, J.


attached when issued, constitute the entire contract.” The
policies do explain that loan interest is compounded annually,
but Wishnev was not required to sign and return any copy.
     At some point after 1980, Wishnev took out four loans
secured by his four policies. Northwestern Mutual assessed
compound interest on the loan balances.
       Wishnev filed a putative class action suit in state court
alleging Northwestern Mutual’s assessment of compound
interest was barred because he never signed an agreement to
that effect. He claims damages because the loan balances,
increased by compound interest, reduced the amount he
received in annual dividends. Wishnev seeks to certify a class
of all persons who were charged similar compound interest in
the previous four years. On behalf of the class, he requests
actual damages along with treble the amount of all interest paid
within one year of the filing of the complaint.
      Northwestern Mutual removed the action to federal
district court and moved to dismiss. It argued that, as an
exempt lender, it was not required to obtain a borrower’s signed
consent to charge compound interest.6 The court denied the
dismissal motion, holding that Northwestern Mutual was



6
  Northwestern Mutual further argued that, even if it were
subject to the limitation on assessing compound interest, it had
complied because Wishnev signed an agreement containing the
mandated disclosure. It urged that the policy application
Wishnev signed, together with attached policy containing the
disclosure, formed the parties’ “ ‘entire contract’ ” under
Insurance Code section 10113. Because we conclude that
Northwestern Mutual is not subject to the compound interest
limitation, it is unnecessary to address this question.


                                  3
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


required to get signed consent and failed to do so. (Wishnev v.
Northwestern Mut. Life Ins. Co. (N.D.Cal. 2016) 162 F.Supp.3d
930, 947, 949, 953 (Wishnev I).)
     The district court in Wishnev I stands alone in its
determination that exempt lenders must obtain a borrower’s
signed consent to impose compound interest. (Wishnev v.
Northwestern Mut. Life Ins. Co. (9th Cir. 2018) 880 F.3d 493,
501–502 (Wishnev II).) Three other district courts in the Ninth
Circuit have concluded to the contrary. (Ibid.; see Martin v.
Metro. Life Ins. Co. (N.D.Cal. 2016) 179 F.Supp.3d 948, 954–955;
Washburn v. Prudential Ins. Co. of Am. (N.D.Cal. 2015) 158
F.Supp.3d 888, 896; Lujan v. New York Life Ins. Co. (N.D.Cal.,
Aug. 9, 2016, No. 16-CV-00913-JSW) 2016 WL 4483870, p. *5.)
                        II. DISCUSSION
       California’s usury laws, which regulate the charging of
interest, are far from a model of clarity. Their sources include
(1) an uncodified, voter-approved initiative (9C West’s Ann. Civ.
Code (2010 ed.) foll. § 1916.12, pp. 187–238), (2) voter-approved
constitutional provisions currently found in article XV, and
(3) statutes scattered throughout various codes regulating
lenders considered exempt under article XV. (See Rabin &
Brownlie, Usury Law in California: A Guide Through the Maze
(1987) 20 U.C. Davis L.Rev. 397, 398.)             Administrative
provisions, federal law, and state common law also play a role.
(Id. at p. 397.) The interplay among these sources continues to
generate confusion. We begin with a brief history of California’s
usury laws to put the relevant authorities into perspective.




                                  4
    WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                         COMPANY
                  Opinion of the Court by Corrigan, J.


      A.    California’s Usury Laws
      In the early years of California’s statehood, the
Legislature declined to set maximum interest rates for loans
and instead enacted a law generally allowing parties to agree in
writing for “ ‘any rate of interest whatever on money due . . . .’ ”
(Carter v. Seaboard Finance Co. (1949) 33 Cal.2d 564, 575
(Carter).) Over time, the Legislature enacted usury statutes
governing maximum interest chargeable by lenders that
typically make small loans, such as pawnbrokers and personal
property brokers. (Id. at pp. 575–576.)
      In 1918, California voters approved an initiative measure
that took a uniform approach to usury (hereafter the “initiative”
or “1918 initiative”).7 (§§ 1916–1-1916–5; Carter, supra, 33
Cal.2d at p. 576.) The initiative repealed statutory schemes
covering various classes of lenders and replaced them with a
maximum allowable interest rate applicable to all loans and
lenders. (§ 1916–4; Carter, at p. 576.) No loans or lenders were
exempted from the sweep of the 1918 initiative. Because the
initiative does not authorize legislative amendment, voters
alone have the power to amend or repeal it.8 (Art. II, § 10,




7
  The 1918 initiative is uncodified. Further unspecified section
references are to West’s designation of the initiative as sections
1916–1 to 1916–5 of the Civil Code. (9C West’s Ann. Civ. Code,
supra, foll. § 1916.12, pp. 187–238.)
8
  The Legislature or voters (through the initiative power) may
place measures on the statewide ballot proposing to repeal or
amend laws enacted by initiative. (Art. II, §§ 8, subds. (a)–
(c), 10, subd. (c); art. XVIII, § 1; cf. People v. Kelly (2010) 47
Cal.4th 1008, 1037–1040.)


                                   5
    WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                         COMPANY
                  Opinion of the Court by Corrigan, J.


subd. (c); Penziner v. West American Finance Co. (1937) 10
Cal.2d 160, 171 (Penziner).)
      In addition to setting the allowable interest rate, the 1918
initiative provides that interest may not be compounded “unless
an agreement to that effect is clearly expressed in writing and
signed by the party to be charged therewith.” (§ 1916–2.) We
refer to this requirement as the compound interest limitation.
Ultimately, the question here turns on whether subsequent
changes impliedly repealed the compound interest limitation as
to exempt lenders.
      Under the 1918 initiative, a lender that charges interest
above the rate cap or violates the compound interest limitation
is subject to stringent statutory penalties. Such a lender forfeits
the right to collect any interest. (§ 1916–2.) Further, the
principal debt is not due until the full term of the loan has
expired. (Ibid.) The effect of these provisions is to confer upon
the borrower the free use of the lender’s money for the duration
of the loan period. In addition, if a borrower pays a lender more
than is authorized by the 1918 initiative, the borrower is
entitled to recover treble the amount paid if the action is brought
within one year of payment. (§ 1916–3, subd. (a).)
      The 1918 initiative contains five sections, the first three of
which limit interest rates and set penalties for violating its
restrictions.9 The first section sets a presumptive annual
interest rate of 7 percent but allows parties to contract in
writing for an annual rate of up to 12 percent. (§ 1916–1.) This


9
 The fourth section repeals any inconsistent laws and the fifth
section refers to the initiative as the “ ‘usury law.’ ” (§§ 1916‒4,
1916‒5.)


                                   6
     WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                          COMPANY
                  Opinion of the Court by Corrigan, J.


rate-setting provision establishes what contracting parties are
legally authorized to do in setting interest rates.
      The second section sets out what parties cannot do. It
prohibits any person or entity from receiving, “directly or
indirectly,” more than 12 percent annual interest on any “loan
or forbearance of money, goods or things in action . . . .” (§ 1916–
2.) The sentence containing that prohibition concludes with the
compound interest limitation: “and . . . interest shall not be
compounded, nor shall the interest thereon be construed to bear
interest unless an agreement to that effect is clearly expressed
in writing and signed by the party to be charged therewith.”
(Ibid.) Any contract that violates the second section is “null and
void” as to any agreement to pay interest, and no legal action
may be maintained to recover interest “in any sum” under the
contract.10 (§ 1916–2.)



10
   In its entirety, section 1916–2 reads as follows: “No person,
company, association or corporation shall directly or indirectly
take or receive in money, goods or things in action, or in any
other manner whatsoever, any greater sum or any greater value
for the loan or forbearance of money, goods or things in action
than at the rate of twelve dollars upon one hundred dollars for
one year; and in the computation of interest upon any bond,
note, or other instrument or agreement, interest shall not be
compounded, nor shall the interest thereon be construed to bear
interest unless an agreement to that effect is clearly expressed
in writing and signed by the party to be charged therewith. Any
agreement or contract of any nature in conflict with the
provisions of this section shall be null and void as to any
agreement or stipulation therein contained to pay interest and
no action at law to recover interest in any sum shall be
maintained and the debt can not be declared due until the full
period of time it was contracted for has elapsed.”


                                   7
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                  Opinion of the Court by Corrigan, J.


       The third section establishes civil and criminal penalties.
It allows recovery of treble damages and provides, under
specified circumstances, that a person who receives interest
beyond that legally authorized is guilty of felony loan-sharking.
(§ 1916–3.)
      The 1918 initiative’s “one-size-fits-all” approach proved to
be unworkable in the marketplace. It lacked the flexibility
needed to tailor regulations for particular types of loans and
lenders. (See Carter, supra, 33 Cal.2d at p. 577.) “Numerous
attempts were made to change the rates of interest and to
prescribe rates and regulations different from or inconsistent
with the provisions of the [1918 initiative].” (Ibid.) These
attempted modifications were ruled improper to the extent they
constituted revisions of the initiative without a vote of the
electorate. In addition, the initiative’s interest rate cap could be
easily avoided. Lenders were able to circumvent interest rate
limits by extracting various “charges” from borrowers. (Ibid.)
Ultimately, the Legislature placed a proposed constitutional
amendment on the statewide ballot to address the infirmities of
the 1918 initiative. (Carter, at p. 577; see Ballot Pamp., Gen.
Elec. (Nov. 6, 1934), argument in favor of Assem. Const. Amend.
No. 79, p. 18 (Ballot Pamp.).)
      In November 1934, voters approved the proposed
amendment, which was added to the Constitution as former
article XX, section 22 (hereafter “amendment” or “1934
amendment”). (Carter, supra, 33 Cal.2d at p. 577.) The first
paragraph contains a rate-setting provision substantially
similar to the 1918 initiative, except that the annual interest
rate permitted is reduced to 10 percent. (Compare former art.
XX, § 22, 1st par. with § 1916–1.)


                                   8
     WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                          COMPANY
                 Opinion of the Court by Corrigan, J.


      The second paragraph of the 1934 amendment prohibits
charging annual interest greater than 10 percent. (Former
art. XX, § 22, 2d par.) The second paragraph expands upon the
1918 initiative’s attempt to prohibit lenders from “directly or
indirectly” exceeding the maximum rate. It clarifies that no
lender may “by charging any fee, bonus, commission, discount
or other compensation receive from a borrower more than ten
per cent per annum . . . .” (Former art. XX, § 22, 2d par., italics
added.) Aside from reducing the maximum allowable interest
from 12 to 10 percent, this provision is substantially similar to
the first part of section 1916–2. (Penziner, supra, 10 Cal.2d at
p. 172.) However, the 1934 amendment makes no mention of
the compound interest limitation. (See Penziner, at p. 172.)
Indeed, it says nothing about the compounding of interest.
(Former art. XX, § 22.)      This omission gives rise to the
                   11
controversy here.
      Importantly, the third paragraph of the 1934 amendment
for the first time exempts certain lenders from its restrictions.
(Former art. XX, § 22, 3d par.) These exempt lenders include
credit unions, licensed pawnbrokers, and certain banks, among
others. Insurance companies were not exempted when the
amendment was originally enacted. (See ibid.)
     There are two distinct components to the 1934
amendment governing exempt lenders. First, it declares that
“none of the above restrictions” shall apply to exempt lenders.



11
   Also, unlike the 1918 initiative, the amendment does not
address penalties or the consequences of violating its
restrictions. (Compare former art. XX, § 22 with §§ 1916–2,
1916–3, subd. (b).)


                                  9
     WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                          COMPANY
                  Opinion of the Court by Corrigan, J.


(Former art. XX, § 22, 3d par.) Thus, exempt lenders are not
bound by interest rate provisions contained in the first two
paragraphs. (Carter, supra, 33 Cal.2d at pp. 579–580.) Second,
the amendment explicitly authorizes the Legislature to
prescribe maximum interest rates applicable to exempt lenders
and to “in any manner fix, regulate or limit, the fees, bonus,
commissions, discounts or other compensation which all or any
of the said exempted classes of persons may charge . . . .” (Former
art. XX, § 22, 3d par., italics added.)       This delegation of
legislative authority confers flexibility the 1918 initiative did
not. While the 1918 initiative could only be modified by voters,
the 1934 amendment specifically empowered the Legislature to
enact and modify laws regulating exempt lenders.
      The final paragraph of the 1934 amendment contains
what this court has described as a “limited repealing clause”
(Penziner, supra, 10 Cal.2d at p. 174): “The provisions of this
section shall supersede all provisions of this Constitution and
laws enacted thereunder in conflict therewith.” (Former art.
XX, § 22.) We consider the significance of this language below.
     The 1934 amendment originally enacted as former article
XX, section 22 subsequently was amended and reenacted in its
current form as section 1 of article XV.12 (Bisno v. Kahn (2014)
225 Cal.App.4th 1087, 1100.) Article XV was again amended in

12
   Because article XV at present consists of a single section,
further citations to that article will omit the section reference as
superfluous. Further references to the relevant constitutional
provisions governing usury will be to their current designation,
article XV, unless the context requires citation to those
provisions as originally enacted in former article XX, section 22.



                                  10
     WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                          COMPANY
                 Opinion of the Court by Corrigan, J.


1979 to allow the Legislature to designate additional classes of
exempt lenders.13 In 1981, the Legislature amended the
Insurance Code to designate “incorporated admitted insurers”
as exempt under article XV. (Ins. Code, § 1100.1; Stats. 1981,
ch. 979, § 1, p. 3806.) It is undisputed that Northwestern
Mutual is an exempt lender.
       B.   Applicability of Compound Interest Limitation to
            Exempt Lenders
      Whether exempt lenders are subject to the compound
interest limitation is a question of statutory construction: Did
the 1934 amendment, the substance of which now appears in
article XV, repeal the compound interest limitation as to exempt
lenders?
      Standard rules of statutory interpretation guide the
analysis. (People v. Superior Court (Pearson) (2010) 48 Cal.4th
564, 571.) “We first consider the initiative’s language, giving the
words their ordinary meaning and construing this language in
the context of the statute and initiative as a whole. If the
language is not ambiguous, we presume the voters intended the
meaning apparent from that language, and we may not add to
the statute or rewrite it to conform to some assumed intent not
apparent from that language. If the language is ambiguous,


13
  The amendment was accomplished by Proposition 2, approved
by voters on November 6, 1979. (Ballot Pamp., Special Elec.
(Nov. 6, 1979) analysis of Prop. 2 by Legis. Analyst, p. 10; id.,
text of Prop. 2, p. 11.) The same proposition modified the
maximum interest rate applied to nonexempt lenders. The
latter modification of article XV, as well as other provisions in
article XV that did not appear in former article XX, section 22,
are not relevant to the legal question here.


                                 11
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


courts may consider ballot summaries and arguments in
determining the voters’ intent and understanding of a ballot
measure.” (Ibid.)
      Northwestern Mutual argues that the 1934 amendment
expressly repealed the compound interest limitation. The
language of the amendment does not support express repeal.
Article XV declares that “none of the above restrictions” apply
to exempt lenders. The “above restrictions” are those in the
immediately preceding two paragraphs establishing permitted
interest rates. (See Carter, supra, 33 Cal.2d at pp. 579–580.)
Those restrictions say nothing about compound interest. The
other component of article XV relating to exempt lenders is the
grant of legislative authority to set the maximum annual
interest rate and to “fix, regulate or limit, the fees, bonuses,
commissions, discounts or other compensation” charged by
exempt lenders. Again, the constitutional language does not
mention compound interest. Accordingly, there is no express
repeal.
       The      question      of    implied    repeal     remains.
“Notwithstanding the ‘presumption against repeals by
implication,’ repeal may be found where (1) ‘the two acts are so
inconsistent that there is no possibility of concurrent operation,’
or (2) ‘the later provision gives undebatable evidence of an intent
to supersede the earlier’ provision.” (Professional Engineers in
California Government v. Kempton (2007) 40 Cal.4th 1016,
1038.) “Because ‘the doctrine of implied repeal provides that the
most recently enacted statute expresses the will of the
Legislature’ [citation], application of the doctrine is appropriate
in those limited situations where it is necessary to effectuate the
intent of drafters of the newly enacted statute. ‘ “In order for


                                 12
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


the second law to repeal or supersede the first, the former must
constitute a revision of the entire subject, so that the court may
say that it was intended to be a substitute for the first.” ’ ”
(Ibid.)
      The question of whether the 1934 amendment repealed
the provisions of the 1918 initiative in whole or in part was first
addressed in Penziner, which held that the amendment did not
completely repeal the initiative. (Penziner, supra, 10 Cal.2d at
pp. 176–177.) Instead, the amendment repealed by implication
only those provisions of the 1918 initiative that were so
irreconcilable with the amendment that the two could not have
concurrent operation. (Penziner, at pp. 176–177; accord,
Nuckolls v. Bank of California (1937) 10 Cal.2d 266, 276–277.)
The court reasoned that the language of the amendment’s final
paragraph reflected an “intent that non-conflicting prior
statutes shall remain in force.” (Penziner, at p. 174.) Because
Penziner involved a lender that was not exempted by the 1934
amendment, the court had no occasion to consider whether or to
what extent the amendment impliedly repealed the 1918
initiative as to exempt lenders.
      In assessing whether the compound interest limitation
was impliedly repealed for exempt lenders, we consider whether
the limitation is irreconcilable with the conferred authority
under article XV to “fix, regulate or limit” an exempt lender’s
fees or “other compensation.”
      The terms “fees, bonuses, commissions, [and] discounts” in
article XV do not appear to embrace the assessment of
compound interest. But the catchall term “other compensation”
does.   Civil Code section 1915 defines interest as “the
compensation allowed by law or fixed by the parties for the use,


                                 13
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


or forbearance, or detention of money.” (Italics added.) That
section of the Civil Code existed long before the enactment of the
1934 amendment. Because voters are presumed to be aware of
existing laws at the time a constitutional amendment is enacted
(In re Lance W. (1985) 37 Cal.3d 873, 890, fn. 11), the voters who
enacted the 1934 amendment presumably intended the term
“compensation” to include interest as defined in the Civil Code.
      Obviously, the more frequently interest is compounded,
the greater a lender’s compensation will be for the use of its
money. This is so because a borrower is obligated to pay interest
on both the principal amount borrowed and on any interest
compounded and added to the principal. Lewis v. Pacific States
Sav. & Loan Co. (1934) 1 Cal.2d 691, 695, explained that
compounded interest is taken into account when determining
whether a transaction violates the maximum annual interest
allowed. Heald v. Friis-Hansen (1959) 52 Cal.2d 834, 840,
confirmed that compounding the maximum allowable interest
rate at intervals shorter than one year results in an effective
annual rate that is usurious. These cases rest on the premise
that compounded interest is part of the lender’s compensation
for the use of its money. Thus, the term “compensation”
encompasses compound interest that effectively increases the
lender’s return.
      Wishnev disputes this conclusion, arguing that the
compounding of interest is a “method of calculating interest”
and not a “charge” similar to the types of compensation listed in
article XV. The federal district court in Wishnev I agreed,
concluding that the terms “fees, bonuses, commissions,
discounts or other compensation” in article XV “can reasonably
be construed as reaching such things as loan fees and points, not


                                 14
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                  Opinion of the Court by Corrigan, J.


compound interest.” (Wishnev I, supra, 162 F.Supp.3d at
p. 945.) The court pointed out that the second paragraph of
article XV prohibits a lender from receiving “more than the
interest authorized by this section” as a result of “charging any
fee, bonus, commission, discount or other compensation . . . .”
Because article XV distinguishes interest from the enumerated
types of compensation, the court reasoned, those types of
compensation must be distinct from interest, compound or
otherwise. (Wishnev I, at p. 945.)
      The district court’s attempted distinction misses the mark.
The use of the term “interest” in the second paragraph of article
XV simply refers to the maximum interest rate allowed by law.
The 1934 amendment sought to prevent lenders from exceeding
the rate cap by disguising interest as fees or other types of
charges. As explained in the argument in favor of the
amendment: “[The] inadequacy [of the 1918 initiative] is
blatantly apparent. Its purpose has not been fulfilled. The loan
shark still prospers and collects interests grossly in excess of the
specified legal rate. Interest disguised as ‘charges’ is currently
exacted at rates that range as high as eighteen hundred per cent
per annum.” (Ballot Pamp., supra, argument in favor of Assem.
Const. Amend. No. 79, p. 18.) Properly construed, article XV
treats “any fee, bonus, commission, discount or other
compensation” as part of the interest received by a lender, not
exclusive from it. Indeed, the long-standing general rule is “that
the word ‘interest’ [is] broad enough to cover ‘bonus’,
‘commission’, or any other form of ‘compensation’ paid to the
lender for the use of the money . . . .” (In re Fuller (1940) 15
Cal.2d 425, 434.)




                                  15
     WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                          COMPANY
                 Opinion of the Court by Corrigan, J.


      The district court’s attempt to characterize loan fees and
points as “other compensation” while excluding compound
interest is unpersuasive. (See Wishnev I, supra, 162 F.Supp.3d
at p. 945.) Loan points are simply “additional interest” paid to
the lender at the outset that is “added to the interest charged by
the terms of the loan and amortized over the term of the loan to
determine whether the total interest charged to the borrower
exceeds the statutory maximum limits.” (11 Miller & Starr, Cal.
Real Estate (4th ed. 2018) § 37:27, p. 37-110, fn. omitted.) Just
as with loan points, compound interest must be taken into
account to assess whether a transaction is usurious. (See Lewis
v. Pacific States Sav. & Loan Co., supra, 1 Cal.2d at p. 695.)
Both kinds of charges increase the lender’s compensation.
There is no reason to treat the two differently under article XV.
      Urging compound interest is excluded from “other
compensation,” Wishnev invokes a rule of statutory construction
known as ejusdem generis. This doctrine provides that “when a
general word or phrase follows a list of specifics, the general
word or phrase will be interpreted to include only items of the
same class as those listed.”14 (Black’s Law Dict. (10th ed. 2014)
p. 631, col. 1.) Wishnev argues that “other compensation” must
be interpreted narrowly to mean only items similar to the
specific terms that precede the general term.



14
  As an example, in the phrase “sun, moon, planets, and other
large bodies,” the general term “other large bodies” would be
interpreted to mean other large heavenly bodies to be consistent
with the more specific terms that precede it. The general term
would not be given the much broader connotation it might
otherwise have: a meaning that might embrace bodies of water
or certain professional athletes.


                                 16
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


      Maxims of statutory construction, including the doctrine
of ejusdem generis, are not immutable rules but instead are
guidelines subject to exceptions. (Cf. In re Joseph B. (1983) 34
Cal.3d 952, 957.) “In construing a statute a court’s objective is
to ascertain and effectuate the underlying legislative intent.
[Citation.] This fundamental rule overrides the ejusdem generis
doctrine, just as it would any maxim of jurisprudence, if
application of the doctrine or maxim would frustrate the intent
underlying the statute.” (Moore v. California State Bd. of
Accountancy (1992) 2 Cal.4th 999, 1012.) “[E]jusdem generis is
only an aid in getting the meaning and does not warrant
confining the operations of a statute within narrower limits
than were intended.” (Llewellyn, Remarks on the Theory of
Appellate Decision and the Rules or Canons About How Statutes
Are To Be Construed (1950) 3 Vand. L.Rev. 395, 405.)
      Wishnev claims the express terms that precede the
general term “other compensation” are types of loan charges and
discounts. He characterizes compound interest as merely a
method of calculating interest and not a charge or discount like
those enumerated in article XV. The claimed distinction fails.
On a more general level of abstraction, compound interest is
indistinguishable from loan charges. Both give the lender
greater compensation for the use of its money. Ultimately, the
application of ejusdem generis here depends upon how broadly
or narrowly one defines the similarities among the enumerated
items. But any such effort must honor the ultimate goal of
effectuating voter intent.
      Wishnev’s narrow reading fails to honor the enactors’
intent in 1934. One stated purpose was to protect borrowers
against “the oppressive burden of legally assessed charges” that


                                 17
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


increase the lender’s compensation beyond the maximum
allowable interest rate. (Ballot Pamp., supra, argument in favor
of Assem. Const. Amend. No. 79, p. 19.) Interpreting “other
compensation” narrowly does not serve that purpose. Wishnev
points to no ballot materials or other indicators of voter intent
suggesting they sought to give the Legislature the power to
regulate only certain types of compensation exempt lenders
might extract from borrowers. His proposed application of the
ejusdem generis doctrine would unduly confine the Legislature’s
authority to regulate lender compensation, a power the
amendment was intended to confer.
      Determining that article XV confers legislative authority
to regulate compound interest in some way does not fully answer
the question of whether the particular compound interest
limitation was impliedly repealed as to exempt lenders. We
conclude that it was.
      As explained, the ability to charge compound interest
increases the amount of compensation a lender receives. The
compound interest limitation regulates this extra compensation
in a precisely defined way by limiting the circumstances under
which a lender can compel its payment. However, the 1934
amendment confers upon the Legislature the power to regulate
an exempt lender’s compensation “in any manner.” This broad
legislative authority necessarily conflicts with the more narrow
compound interest limitation. For example, the Legislature
could expressly allow an exempt lender to charge compound
interest if that term is disclosed in an unsigned writing, rather
than requiring signed consent to that particular term. But that
approach to regulating lender compensation would be



                                 18
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


inconsistent with a rigid and continued application of the
compound interest limitation.
      Wishnev argues that the compound interest limitation can
be harmonized with the legislative authority granted under
article XV. He describes the compound interest limitation as
simply imposing a “procedural threshold of disclosure and
consent before a particular loan agreement will be deemed to
allow compounding of interest . . . .” In effect, he portrays the
compound interest limitation as a regulation of the agreement in
which certain loan charges may be imposed instead of a
regulation of the charges themselves.
      Wishnev mischaracterizes the limitation.           Whether
considered procedural or substantive, the limitation bans
compounding of interest in the absence of written notice and
signed agreement. In other words, the 1918 initiative prohibits
charging compound interest unless the limitation is satisfied. A
lender that fails to comply with the limitation is not authorized
to impose the compounding of interest at all and faces
significant penalties if it does so. The compound interest
limitation necessarily restricts legislative authority to specify
when compounding is permitted.
      Because of the irreconcilable conflict between the focused
compound interest limitation and the broad authority granted
to the Legislature under the 1934 amendment, one might
conclude that the amendment now found in article XV impliedly
repealed the limitation as to exempt lenders. Alternatively, it
could be argued that no actual irreconcilable conflict arises until
the Legislature exercises its authority in a manner that creates
a conflict. A corollary of this argument is that the compound



                                 19
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


interest limitation remains the default rule for exempt lenders
until irreconcilable legislation is enacted. This argument fails.
      Shortly after the 1934 amendment was enacted, the court
considered a similar contention in construing other applications
of the amendment unrelated to the compound interest
limitation. In Matulich v. Marlo Investment Co. (1936) 7 Cal.2d
374, 376 (Matulich), the borrower argued that “until the
legislature has acted under the authority given by [the 1934
amendment], no conflict exists between the [1918 initiative] and
the Constitution, and therefore the [1918 initiative] is still
applicable.” The argument was rejected: “We are not able to see
the force of this contention. There is nothing in this section of
the Constitution which would intimate that the general
restrictions placed upon all lenders of money by the provisions
of the [1918 initiative] were to remain in force until the
legislature had acted under the power given in said section. . . .
In order to accept appellant’s construction of said section of the
Constitution, it would be necessary for the court to read into the
section a provision not to be found therein, and which it is quite
evident the framers thereof never intended to include therein.
The court has no such authority.” (Ibid.)
       Matulich’s holding has been consistently applied. Wolf v.
Pacific Southwest Etc. Corp. (1937) 10 Cal.2d 183 addressed
whether an exempt lender remained bound to comply with the
1918 initiative’s interest rate cap until the Legislature exercised
its authority over that class of lender under the 1934
amendment. The court concluded that, if the Legislature had
not exercised its authority over a particular exempt lender,
there was no statutory or constitutional law limiting the amount
of interest the lender might receive. (Wolf v. Pacific Southwest


                                 20
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


Etc. Corp., at p. 184.) Likewise, in Carter, supra, 33 Cal.2d at
page 582, the court declared that “until the Legislature
exercises the power granted to it by the amendment to regulate
the business of lenders in a manner appropriate to each
exempted class, the class not so governed by legislation is
subject to no restriction on interest rates or charges.” (Accord,
West Pico Furniture Co. v. Pacific Finance Loans (1970) 2 Cal.3d
594, 614.)
      The analysis applies equally to the compound interest
limitation, which is one of the “general restrictions” upon
lenders contained in the 1918 initiative. (Matulich, supra, 7
Cal.2d at p. 376.) Moreover, because voters are presumed to be
aware of existing laws and their judicial construction (In re
Lance W., supra, 37 Cal.3d at p. 890, fn. 11), it must be presumed
they were aware that, by amending the Constitution in 1979 to
allow the Legislature to designate additional classes of exempt
lenders, lenders so designated would be relieved of the
restrictions contained in the 1918 initiative, including the
compound interest limitation. The Legislature was likewise
presumptively aware of this settled law in 1981, when it enacted
Insurance Code section 1100.1 and designated insurers like
Northwestern Mutual as exempt for the first time. (See People
v. Giordano (2007) 42 Cal.4th 644, 659.)
      This conclusion is consistent with the argument presented
to voters, which declared that the 1918 initiative’s attempt to
uniformly regulate all lenders “failed miserably.” (Ballot Pamp.,
supra, argument in favor of Assem. Const. Amend. No. 79,
p. 19.) “[I]t was the purpose of the constitutional amendment of
1934 to free the Legislature from the restraints imposed by
inflexible usury provisions so that interest and charges more


                                 21
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                  Opinion of the Court by Corrigan, J.


appropriate to business conditions peculiar to each of the
exempted classes could be established.” (Carter, supra, 33
Cal.2d at p. 582.) The compound interest limitation was one
such inflexible restraint the 1918 initiative applied uniformly to
all lenders.
      This court has repeatedly expressed in broad terms that
designating lenders as exempt under the 1934 amendment also
“operates to exempt those classes from the restrictions in the
[1918 initiative].” (Heald v. Friis-Hansen, supra, 52 Cal.2d at
p. 838; accord, Matulich, supra, 7 Cal.2d at pp. 376–377; Wolf v.
Pacific Southwest Etc. Corp., supra, 10 Cal.2d at p. 184; Carter,
supra, 33 Cal.2d at pp. 582–583; West Pico Furniture Co. v.
Pacific Finance Loans, supra, 2 Cal.3d at p. 614.) Wishnev
correctly points out that the compound interest limitation was
not at issue in any of the cited cases. It is, of course, “axiomatic
that a decision does not stand for a proposition not considered
by the court.” (People v. Barker (2004) 34 Cal.4th 345, 354.)
While the cited cases are not directly on point, their logical
foundation assists in discerning electoral intent as to the
compound interest limitation’s continued application.
       There is little reason to believe voters intended to declare
exempt lenders free from all of the restrictions of the 1918
initiative    except     the   compound      interest   limitation.
Nevertheless, Wishnev claims that cases discussing the impact
of the 1934 amendment support such an outcome. Like the court
in Wishnev I, supra, 162 F.Supp.3d at page 945, he places
particular reliance on the following passage in Penziner: “The
amendment does, however, place in the hands of the legislature
the power to control certain of the charges of certain designated
classes of lenders.” (Penziner, supra, 10 Cal.2d at p. 173, italics


                                  22
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                 Opinion of the Court by Corrigan, J.


added.) He also relies on the following sentence from the same
decision: “All that the constitutional amendment does is to
reduce the maximum permissible rate from 12 per cent to 10 per
cent per annum; to exempt certain enumerated classes of
lenders from certain of its provisions; and to place in the
legislature a certain degree of control over the fixing of charges
made by the exempted groups.” (Id. at p. 177, italics added.)
Taken together, these passages purportedly demonstrate that
the 1934 amendment conferred upon the Legislature authority
over only “certain” of the charges exempt lenders may exact, not
all loan-related assessments.
      As an initial matter, the admonition that “a decision does
not stand for a proposition not considered by the court” applies
equally to the authority relied upon by Wishnev. (People v.
Barker, supra, 34 Cal.4th at p. 354.) Penziner did not consider
the compound interest limitation or even involve an exempt
lender. Moreover, it is unremarkable that Penziner would
characterize the 1934 amendment as conferring authority on the
Legislature to regulate “certain” rather than “all” charges
imposed by exempt lenders. By its plain terms, the legislative
authority to regulate exempt lenders under article XV does not
extend to all charges that may be loan-related. Instead, that
authority is limited to “fees, bonuses, commissions, discounts or
other compensation” that a lender may charge in connection
with a loan. (Art. XV.) Not all charges that may be imposed by
a lender necessarily fall within the definition of “other
compensation.” It has long been held that “ ‘compensation’ ”
paid to a lender for use of money is distinct from third-party
charges or expense items that a borrower might pay to the
lender, such as appraisal fees, recording fees, and insurance. (In


                                 23
     WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                          COMPANY
                  Opinion of the Court by Corrigan, J.


re Fuller, supra, 15 Cal.2d at p. 434.) Even under the 1918
initiative, the Legislature had the authority to regulate such
third-party expenses because the initiative restricts legislative
action only as to maximum interest rates and the compensation
a lender receives for the use of its money. (Cf. In re Fuller, at p.
434.) A fee for a loan-related service, like an appraisal fee, does
not compensate the lender for the use of its money. Instead, it
is a cost paid to someone other than the lender, or
reimbursement to the lender for a cost imposed by a third party.
      As long as a charge falls within one of the specifically
enumerated categories or can be considered “other
compensation,” the Legislature has power to regulate that
charge in any manner. The reference in Penziner to the
Legislature having authority to control “certain” charges
imposed by exempt lenders does not necessarily suggest that
compound interest falls outside of the scope of the Legislature’s
power.
      Accordingly, we hold the 1934 amendment impliedly
repealed the compound interest limitation as to exempt lenders.
This conclusion does not mean exempt lenders may charge
compound interest without a contractual or legal basis to do so.15
It simply means they are not subject to statutory liability and
penalties otherwise imposed by the 1918 initiative on
nonexempt lenders.


15
  Wishnev concedes that the question of whether Northwestern
Mutual had a contractual basis to charge compound interest
here is distinct from the issue of whether Northwestern Mutual
complied with the compound interest limitation.



                                  24
     WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                          COMPANY
                 Opinion of the Court by Corrigan, J.


       C.   Application of Compound Interest Limitation
      The Ninth Circuit asked whether the procedures
employed by Northwestern Mutual satisfy the compound
interest limitation.16 (Wishnev II, supra, 880 F.3d at p. 495.) As
the Ninth Circuit recognized, this question only arises if it is
first determined that exempt lenders are subject to the
limitation.17 (Id. at p. 502.) Because the answer to the first
question fully resolves the matter pending before the Ninth
Circuit, its second question is rendered moot.




16
   The second question posed by the Ninth Circuit reads as
follows: “Does an agreement meet the requirement of section
1916–2 if it is comprised of: (1) an application for insurance
signed by the borrower, and (2) a policy of insurance containing
an agreement for compound interest is subsequently attached to
the application, thus constituting the entire contract between
the parties pursuant to section 10113 of the California
Insurance Code?”
17
   The Ninth Circuit and the parties seem to have assumed that
Northwestern Mutual was an exempt lender at all relevant
times. We express no view concerning whether a lender’s
designation as exempt under article XV applies retroactively to
a loan that may predate the designation.


                                 25
   WISHNEV v. THE NORTHWESTERN MUTUAL LIFE INSURANCE
                        COMPANY
                Opinion of the Court by Corrigan, J.


                     III. CONCLUSION
      We answer the Ninth Circuit’s first question as follows.
The provision in section 1916–2 prohibiting lenders from
assessing compound interest “unless an agreement to that effect
is clearly expressed in writing and signed by the party to be
charged therewith” does not apply to lenders exempt under
article XV.


                                                   CORRIGAN, J.


     We Concur:

     CANTIL-SAKAUYE, C. J.
     CHIN, J.
     LIU, J.
     CUÉLLAR, J.
     KRUGER, J.
     GROBAN, J.




                                26
See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Wishnev v. The Northwestern Mutual Life Insurance Company
__________________________________________________________________________________

Unpublished Opinion
Original Appeal
Original Proceeding XXX on request pursuant to rule 8.548, Cal. Rules of Court
Review Granted
Rehearing Granted

__________________________________________________________________________________

Opinion No. S246541
Date Filed: November 14, 2019
__________________________________________________________________________________

Court:
County:
Judge:

__________________________________________________________________________________

Counsel:

Drinker Biddle & Reath, Stephen C. Baker, Timothy J. O’Driscoll, Michael J. Stortz, Alan J. Lazarus,
Matthew J. Adler and Marshall L. Baker for Defendant and Appellant.

Alston & Bird, Reed Smith, Thomas A. Evans; and Lisa Tate for The American Council of Life Insurers as
Amicus Curiae on behalf of Defendant and Appellant.

Sidley Austin, Carol Lynn Thompson and Lisa E. Schwartz for Metropolitan Life Insurance Company as
Amicus Curiae on behalf of Defendant and Appellant.

Brad Wenger; Dentons US, Laura L. Geist and Andrew S. Azarmi for Association of California Life and
Health Insurance Companies as Amicus Curiae on behalf of Defendant and Appellant.

Bramson, Plutzik, Mahler & Birkhaeuser, Robert M. Bramson and Jennifer S. Rosenberg for Plaintiff and
Respondent.
Counsel who argued in Supreme Court (not intended for publication with opinion):

Timothy J. O’Driscoll
Drinker Biddle & Reath
One Logan Square, Suite 2000
Philadelphia, PA 19103
(215) 988-2700

Robert M. Bramson
Bramson, Plutzik, Mahler & Birkhaeuser
2125 Oak Grove Road, Suite 125
Walnut Creek, CA 94598
(925) 945-0200
