Stanley Weisz, P. C. Retirement Plan v. NCHD Associates, Inc.

Mar 3, 1997
Versions:237 A.D.2d 276
655 N.Y.S.2d 381
1997 N.Y. App. Div. LEXIS 2097

In an action to foreclose a mortgage, the plaintiff appeals from an order and judgment (one paper) of the Supreme Court, Suffolk County (Henry, J.), entered November 16, 1995, which, after a hearing, is in favor of the defendants and against it, declaring the mortgage null and void and dismissing the complaint.

*277Ordered that the order and judgment is affirmed, with costs.

Pursuant to General Obligations Law § 5-501, a loan shall be deemed usurious if it exceeds an interest rate of 16% per annum (see, Banking Law § 14-a). It is well settled, however, that where a loan is made to a corporation, the corporation and the individual guarantors of a corporate obligation are prohibited by statute from interposing the defense of usury (see, General Obligations Law § 5-521; Schneider v Phelps, 41 NY2d 238; Webar, Inc. v Capra, 212 AD2d 594). An exception to the general rule is recognized, however, " 'where the corporate form is used to conceal a usurious loan to an individual to discharge his personal obligations, and not to further a corporate enterprise’ ” (Webar, Inc. v Capra, supra, at 595, quoting Sanders & Assocs. v Friedman, 137 AD2d 677).

Contrary to the plaintiff’s contention, the Supreme Court correctly found that the loan issued to the corporate defendant at an interest rate of 24% was, with the plaintiff’s knowledge, in actuality a loan to an officer of the corporate defendant being used to discharge his personal obligations, and therefore, usurious (see, Freitas v Geddes Sav. & Loan Assn., 63 NY2d 254; K.P. Assocs. v D'Agostino, 201 AD2d 537; Sanders & Assocs. v Friedman, supra). Inasmuch as the court’s determination was "based upon a fair interpretation of the evidence, and the factual findings based upon the credibility of the witnesses”, it will not now be disturbed (Wolfson v Kasa Lithuanian Fed. Credit Union, 168 AD2d 364; see also, Fried v Bolanos, 217 AD2d 823). Accordingly, the court properly declared the mortgage securing the loan null and void and dismissed the complaint (see, General Obligations Law § 5-511 [2]; Hilal v Lipton, 227 AD2d 378).

The plaintiff’s remaining contention is academic. Bracken, J. P., Santucci, Krausman and McGinity, JJ., concur.