The following papers numbered 1 to 20 were read on the motion by defendant for an order pursuant to CPLR 3212 granting summary judgment, dismissing the complaint and for such other and further relief as this Court deems just and proper. PAPERS NUMBERED Notice of Motion / Santos Affidavit / Cooper Affirmation / Exhibits A-F / Memorandum of Law in Support 1-10 Letter Requesting Adjournment 11 Stipulation of Adjournment1 12 Affirmation in Opposition / Memorandum of Law in Opposition / Exhibit A 13-15 Cooper Affirmation in Reply / Santos Affidavit / Exhibits A-C 16-20 DECISION AND ORDER Plaintiffs allegedly loaned defendant $110,000.00 for the purpose of opening a restaurant pursuant to a written agreement executed on August 15, 2011 (hereinafter “the Agreement”). Plaintiffs allege that defendant breached the Agreement, defaulting in payment. Plaintiffs commenced this action on July 15, 2019, alleging that the full amount of the loan is owed plus costs, attorney’s fees, and interest in the amount of $1,000.00 per week from the date of the note through the date of payment (NYSCEF doc #1, p. 4). By order dated March 13, 2020 (Smith, J.), defendant’s pre-answer motion to dismiss was denied (Cooper Affirmation, Exhibit F). In the amended answer, defendant asserts two affirmative defenses: the action is barred by the statute of limitations, and the contract is unenforceable as it violates the New York usury law (Cooper Affirmation, Exhibit C). As plaintiffs filed a note of issue in this matter on October 12, 2021, the instant motion is timely. In the bill of particulars, plaintiffs assert that the Agreement was drafted by defendant or by a representative of the defendant. Plaintiffs allege that the Agreement states the amount of principal due is $110,000.00, and it provides for interest at a rate of $1,000.00 per week to be paid to plaintiffs (Cooper Exhibit E, p. 2). Plaintiffs allege that the date principal and interest were to be paid to plaintiffs was dependent upon the date the restaurant opened and the date the business began generating a profit. In the event the restaurant did not make a profit, defendant was 100 percent liable for the debt owed to plaintiffs, but the Agreement did not state a date which the principal would become due should the restaurant not make a profit (Cooper Exhibit E, p. 2). Defendant argues that he received the loan from plaintiffs and invested the proceeds of the loan in Mamajuana Café, which was owned by Rancho Vida, LLC and opened in December 2011. Defendant asserts that the restaurant was never profitable and closed in 2014. Insofar as the Agreement contains no express maturity date, defendant argues that it was payable on demand under UCC 3-108, and the applicable statute of limitations expired in August 2017, six years after the Agreement was executed by the parties (CPLR §213[2]). Alternatively, defendant argues pursuant to the terms of the agreement, the cause of action accrued one month after the restaurant opened, and the six year statute of limitations expired in January 2018. Defendant further argues the provision in the Agreement providing for interest at $1000.00 per week renders it unenforceable under New York’s usury law, which prohibits the enforcement of an agreement containing an interest rate in excess of 16 percent annually. Plaintiffs argue that the money was loaned to defendant to open a restaurant called Un Chin, which opened in August 2015, and the action was timely commenced (Larkin Affirmation, p. 2). Alternatively, plaintiffs contend that the Agreement provided for installment payments, the statute of limitations began to run on the date each installment became due, and the date of default on many of the installment payments would have been within the statute of limitations. Plaintiffs contend that the interest rate of the subject loan did not exceed the usury rate, the usury laws are not applicable to this action, and defendant does not establish that there was any usurious intent (Larkin Affirmation, p. 3). “The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers” (Winegrad v. New York University Medical Center, 64 NY2d 851, 853 [1985][internal citations omitted]). Once this showing has been made, the burden shifts to the party opposing the motion to produce evidence in admissible form sufficient to establish the existence of a triable issue of fact (Alvarez v. Prospect Hospital, 68 NY2d 320 [1986]). The evidence must be viewed in a light most favorable to the nonmoving party and it should be given the benefit of all favorable inferences (Gonzalez v. Metropolitan Life Ins. Co., 269 AD2d 495 [2d Dept 2000]). The Court “must accept as true the evidence presented by the nonmoving party, and the motion must be denied if there is even arguably any doubt as to the existence of a triable issue” (Baker v. Briarcliff School District, 205 AD2d 652, 653 [2d Dept 1994]). However, “[a] shadowy semblance of an issue or bald conclusory assertions, even if believable, are not enough to defeat a motion for summary judgment” (Costello v. Saidmehr, 236 AD2d 437, 438 [2d Dept 1997], quoting Mlcoch v. Smith, 173 AD2d 443, 444 [2d Dept 1991]). On a motion for summary judgment, it is not the court’s function to assess credibility, or to engage in the weighing of evidence (Rawls v. Simon, 157 AD3d 418 [1st Dept 2018]); Scott v. Long Island Power Auth., 294 AD2d 348 [2d Dept 2002]). “Resolving questions of credibility, determining the accuracy of witnesses, and reconciling the testimony of witnesses are for the trier of fact” (Bykov v. Brody, 150 AD3d 808, 809 [2d Dept 2017], quoting Kahan v. Spira, 88 AD3d 964, 966 [2d Dept 2011]). “A motion for summary judgment should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility” (Ruiz v. Griffin, 71 AD3d 1112, 1115 [2d Dept 2010][internal quotations omitted]; Civil Service Employee Association v. County of Nassau, 144 AD3d 1077 [2d Dept 2016]). In support of the motion, defendant submits, inter alia, an affidavit and the Agreement. Defendant’s affidavit states the subject loan was extended to him by Francisco and Carlos Almonte on terms and conditions that they dictated and included in the Agreement. Defendant states that plaintiffs, or someone on their behalf, drafted the Agreement based on the parties’ discussions, and defendant did not have a say in the terms for repayment (Santos Affidavit, p. 2). Defendant reportedly contributed the loan proceeds to build and stock Mamajuana Café, which opened in December 2011. Defendant states he became an investor in the restaurant with a right to repayment, but he was not an operating partner in the restaurant. The possibility that the plaintiffs might become partners in the restaurant was never contemplated or discussed at any time (Santos Affidavit, p. 2). Defendant states that the restaurant was not a successful venture, it never made a profit during its three years of operations, and it filed for bankruptcy in 2014. Defendant states the loan was to be repaid out of the profits of the restaurant, payments were to begin one month after the restaurant opened, and he was responsible for repayment even if the restaurant was not profitable enough to generate the $1,000.00 per week in interest (Santos Affidavit, p. 3). The Agreement between Victor Santos (receiver) and Francisco Almonte (lender) and Carlos Almonte (lender) states “[t]his is solely a loan agreement between the 3 parties and should be only used for that purpose.” It is undisputed that in August 2011 plaintiffs loaned defendant $110,000.00. The Agreement states the following terms for repayment: -Such said amount will be used for the opening of a restaurant, once this restaurant starts producing enough capital to produce benefit pay for the partners (one of whom is receiver) capital and interest should start to be paid to lender. This period should be 1 month after the restaurant opening. -Such lent amount shall be paid back to lender by receiver no matter whether restaurant flourishes or isn’t able to produce enough capital. Receiver becomes 100 percent liable for debt to lender in any case. -The amount stated is to be paid back by Receiver to lender in full plus an interest amount of $1,000.00 per week due on any business day of the week owed (Cooper Affirmation, Exhibit B).2 In New York, the civil usury statute provides that “[n]o person or corporation shall, directly or indirectly, charge, take or receive any money, goods or things in action as interest on the loan or forbearance of any money, goods or things in action at a rate exceeding the [maximum permissible interest rate]” (General Obligations Law §5-501[2]). The maximum rate of interest for a loan to an individual is 16 percent per annum. Any rate in excess of that amount is usurious (Banking Law §14-a[1]; O’Donovan v. Galinski, 62 AD3d 769 [2d Dept 2009]). “A usurious contract is void and relieves the borrower of the obligation to repay principal and interest thereon” (Zanfini v. Chandler, 197 AD3d 594, 595 [2d Dept 2021], quoting Venables v. Sagona, 85 AD3d 904, 905 [2d Dept 2011]; General Obligations Law §5-511[1]). As an exception to this rule, the statute provides that when a bank or loan association violates the usury statute, it instead forfeits all interest on the loan. This exception clearly does not apply here (see General Obligations Law §5-511[1]; Adar Bays, LLC, GeneSYS ID, Inc., 37 NY3d 320 [2021]). The usury statute is strictly construed, the burden of proof is on the borrower, and usury must be established by clear and convincing evidence (Zanfini, 197 AD3d at 596 [2d Dept 2021], citing Freitas v. Geddes Sav. & Loan Assn., 63 NY2d 254 [1984]). In determining whether the interest rate on a loan is usurious, the law looks not to its form, but its substance, or real character (O’Donovan v. Galinski, 62 AD3d 769 [2d Dept 2009]). To constitute usury, “it must appear that the real purpose of the transaction was, on the one side, to lend money at usurious interest reserved in some form by the contract and, on the other side, to borrow upon the usurious terms” (Bouffard v. Befese, 111 AD3d 866, 869-870 [2d Dept 2013][internal quotations omitted]). Here, defendant established his prima facie entitlement to summary judgment by demonstrating that the interest rate on the loan was usurious. The loan at issue was for $110,000.00. It is undisputed the repayment terms provide for the payment of interest at a rate of $1000.00 per week to be paid to plaintiffs (Cooper Exhibit B, Agreement; Exhibit E, Bill of Particulars, p. 2). This is an annualized rate of interest in excess of 47 percent, almost three times the statutory limit. The terms of the Agreement, together with defendant’s affidavit establishes, prima facie, that the transaction was clearly usurious and should be deemed void. In opposition, plaintiffs failed to raise a triable issue of fact. The affidavits submitted by Francisco Almonte, Carlos Almonte and their brother, Joseph Almonte, each state plaintiffs agreed to loan defendant $110,000.00 in exchange for the same sum in return plus interest. Plaintiffs dispute which restaurant the loan was intended to fund, and dispute the date of accrual for a cause of action based on the Agreement. Plaintiffs maintain that defendant never made any payments due pursuant to the Agreement, and a balance of $110,000.00 plus interest is still due and owing (Larkin Affirmation, Exhibit A). Plaintiffs failed to raise a triable issue of fact in support of their counsel’s conclusory assertion that the subject transaction was not a loan agreement, but a business venture or investment not subject to the usury law. Plaintiffs argue that while the Agreement does not expressly state it, the intent of the parties was to bring plaintiffs into the restaurant as partners and such investments are not subject to the usury laws. Plaintiffs fail to point to any evidence in support of this contention, and the argument is contradicted by plaintiffs’ affidavits, which clearly state plaintiffs agreed to loan defendant $110,000.00. Furthermore, this assertion is inconsistent with the plain language of the Agreement, which states “[t]his is solely a loan agreement between the 3 parties and should be only used for that purpose.” It also specifically refers to plaintiffs as lenders and defendant as receiver (Cooper Affirmation, Exhibit B). It is clear that the arrangement, in form and substance, was a loan (see Seidel v. 18 E. 17th St. Owners, Inc., 79 NY2d 735 [1992]; Venables, 85 AD3d at 904). Plaintiffs argue there was no usurious intent (Memorandum of Law in Opposition, p. 8). However, where a loan agreement is usurious on its face and plaintiffs do not assert there was a mistake in the documented terms of the loan, usurious intent will be implied and usury is established as a matter of law (Roopchand v. Mohammed, 154 AD3d 986 [2d Dept 2017]; O’Donovan, 62 AD3d at 769). The Agreement provides for interest in the amount of $1,000.00 per week on a $110,000.00 loan, which is clearly usurious. Plaintiffs do not assert that the amount of interest documented in the Agreement was a mistake. Plaintiffs argue the doctrine of estoppel in pais applies, which precludes a borrower from interposing a usury defense when he, through a special relationship with the lender, induces reliance on the legality of the transaction. Here, plaintiffs do not submit any evidence suggesting there was special relationship between the parties which would induce such a reliance (see Kingsize Entertainment, LLC v. Martino, 155 AD3d 856 [2d Dept 2017]; cf. Pemper v. Reifer, 264 AD2d 625 [1st Dept 1999]; Russo v. Carey, 271 AD2d 889 [3d Dept 2000]). It is undisputed that the defendant and plaintiff Francisco Almonte were childhood friends. Although plaintiffs’ counsel makes the conclusory assertion that defendant prepared the Agreement and dictated the interest rate, plaintiffs fail to submit any documents or testimony in support of this assertion. Plaintiffs’ affidavits do not provide information supporting this conclusion. There is no evidence on this motion that defendant set a rate he knew to be usurious for the purpose of avoiding repayment of the loan. Plaintiffs fail to raise a triable issue of fact as to whether defendant may be estopped from raising usury as a defense. As plaintiffs commenced an action based on a usurious loan, the action is impermissible, the Agreement is void, and summary judgment may be properly granted to defendant (see Roopchand, 154 AD3d at 986). In light of the foregoing, the Court declines to consider the branch of defendant’s motion seeking summary judgment on the grounds that the action is barred by the statute of limitations. Accordingly, it is hereby ORDERED that the branch of defendant’s motion seeking summary judgment based on the affirmative defense of usury is granted and the complaint is dismissed; and it is further ORDERED that defendant shall serve a copy of this Decision and Order with notice of entry upon all parties and file proof of service on NYSCEF within ten (10) days of the date hereof. The foregoing constitutes the Decision and Order of the Court. Dated: April 12, 2022
