Roland Ford for defendant.
Donald J. Lyons for plaintiff.
enter into this picture. If the law desires to protect people from usurious rates of interest at the inception of a mortgage agreement, it would be inconsistent to permit people to be assessed additional penalties, premiums or bonuses when because of no fault of theirs they are compelled to dispose of the mortgaged premises. In my opinion, under existing law, they should be permitted to do so by paying no more than the interest rate prescribed in the Banking Law. Of course, a person who gives a mortgage without an acceleration of payment clause has placed himself in a position where he cannot satisfy the mortgage if the bank or other lending institution refuses to let him so satisfy it before the maturity date. That, however, is a different proposition than permitting a mortgagee to collect usurious interest if prepayment is allowed. It is true that in the case at hand the amount involved is small and barely in excess of the legal 6%. However, if the principle is upheld that bonuses such as that under consideration here are legal, any amount could be required. Laws basically designed to protect the public should not be interpreted to reach this result. The defendant refers to
Meaker v. Fiero (145 N.Y. 165) as authority for settlement of the question at issue. I believe it is clear that the
Meaker case is good authority for all points cited therein, but I fail to see that the facts therein coincide with those involved in this case. The fact that the amount of the bonus herein so clearly exceeds the legal interest rate, in my opinion, distinguishes this case from authorities which might otherwise appear to be contrary. I do not agree with the plaintiff that the pleadings herein permit disposition of this matter on the theory of duress and coercion under the authority of
Kilpatrick v. Germania Life Ins. Co. (183 N.Y. 163). In view of the conclusion that I have reached, however, independent of the rule set forth in that case, further consideration of this point is immaterial. An order may accordingly be entered striking out the answer herein as being insufficient as a matter of law. Defendant's motions are denied.
(Supplemental opinion, September 26, 1951.)
In my previous opinion upon this case, I found that the defendant had violated the provisions of law relative to usury and that the plaintiff was entitled to recovery. The defendant now contends that even if this be the case, the plaintiff should not recover under section 108 of the Banking Law, but should be limited to recovery under the provisions of the General Business Law relative to usury. (General Business Law, § 370 et seq.) I am unable to agree with this position, and I am constrained to hold that the plaintiff is entitled to recover double the total amount of interest paid since March 25, 1949, in accordance with section 108 of the Banking Law. Plaintiff computes this sum to be $506.44. My own computation, from the schedule submitted by the defendant, would indicate that the amount should be slightly more, but in view of the demand made by the plaintiff, I will direct that judgment be entered in the aforesaid sum of $506.44. I base my conclusion upon the fact that for the purposes of preventing usury under section 108 of the Banking Law, the Legislature intended the provisions of that section to cover savings banks as well as commercial banks. I am cognizant of the fact that section 2 of the Banking Law distinguishes between a "bank" and "savings bank". I believe, however, that that distinction was never intended to apply to restrictions against usury. Section 2, although distinguishing between banks and savings banks, includes a parenthetical clause stating, in effect, that the distinguishing definition applies "unless a different meaning appears from the context". As far as I can determine, the courts have always held that the context of section 108 is such as to include savings banks. For example, in East New York Sav. Bank v. Lang (261 App. Div. 981) it was held that the defense of usury under section 108 was available to a defendant who was sued by a savings bank. This position is further buttressed by the fact that the courts have often held that section 108 is applicable to industrial banks and private bankers, even though, on its face, it may be construed as referring only to "banks" and trust companies. Accordingly, I reached the conclusion that the literal interpretation of section 108 urged by the defendant is not only without basis but is contrary to judicial interpretation and precedent, even though the precise point may not have been specifically passed upon.