225 A.D.2d 974 | N.Y. App. Div. | 1996
The principal issue presented is whether a bond executed on October 23, 1980, obligating defendant to pay plaintiffs $32,748.98 on October 23, 1982 with interest at the rate of 131/2% per annum in monthly installments of $50 commencing on November 1, 1980, is usurious. For the reasons that follow, we hold that it is and, accordingly, affirm Supreme Court’s order dismissing plaintiff’s complaint in this action to foreclose a mortgage, nullifying the bond and canceling the mortgage securing the bond.
The record evidence shows that defendant was employed by plaintiffs between 1970 and 1980 as the manager of their movie theaters located in the Village of Lake Placid, Essex County. In 1980, it was discovered that defendant had misappropriated funds belonging to plaintiffs. He admitted his defalcation and, without counsel, entered into negotiations with plaintiffs and their attorney regarding repayment of the funds that culminated in the execution of the subject bond and mortgage. In our view, plaintiffs’ acceptance of the bond from defendant constitutes a forbearance since the bond’s legal effect was to defer their right to pursue legal remedies to collect the debt presently owed to them by defendant for a period of two years, provided defendant complied with its terms (see, 72 NY Jur 2d, Interest and Usury, § 62, at 85; see also, Black’s Law Dictionary 580 [5th ed 1979]).
Plaintiffs’ remaining arguments do not require extended discussion. Plaintiffs’ usurious intent was not in issue since it could be implied from the bond that is usurious on its face given the fact the legal rate of interest on the date of its execution was 11%
Cardona, P. J., Mercure, Peters and Spain, JJ., concur. Ordered that the order is affirmed, with costs.
See, Historical Note Section 4.1 Interest Rate, McKinney’s Cons Laws of NY, Book 23A, General Obligations Law § 5-501, at 185.