Moore v. Plaza Commercial Corp.

• Decision Date: 17 November 1959
• Citation: 192 N.Y.S.2d 770,9 A.D.2d 223
• Parties: Carl E. MOORE, Plaintiff-Appellant, v. PLAZA COMMERCIAL CORP., Defendant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 770

192 N.Y.S.2d 770

9 A.D.2d 223

Carl E. MOORE, Plaintiff-Appellant, v. PLAZA COMMERCIAL CORP., Defendant-Respondent.

Supreme Court, Appellate Division, First Department.

Nov. 17, 1959.

Julius Helfand, New York City, of counsel (Stanley C. Lesser, New York City, with him on the brief, Helfand & Lesser, New York City, attys.), for plaintiff-appellant.

Cecil A. Citron, New York City, of counsel (Sherman & Citron, New York City, attys.), for defendant-respondent.

Before BREITEL, J. P., and VALENTE, McNALLY, STEVENS and BASTOW, JJ.

STEVENS, Justice.

This is an appeal from an order of Special Term which denied plaintiff's motion for summary judgment.

The plaintiff, assignee of a borrower, brought action against the defendant lender to recover pledged collateral on the grounds that the underlying loan was usurious. In the alternative, he seeks to recover money damages for the difference between the amount received by the lender on the sale of the collateral and the amount of the debt.

September 26, 1958 King, the borrower, executed a standard form promissory note for $10,000 with 6% interest per annum. The note was payable on demand and further stated 'Subject to conditions in attached letter.' The annexed letter dated September 26, 1958 was addressed to and accepted by the defendant. It states as follows:

'I have attached a Collateral Note, wherein this letter is referred to and which evidences a loan of $10,000 for 120 days, in connection with which loan the attached 25,000 shares of Consolidated Cuban Petroleum Corporation have been put up as collateral.

'It is agreed between the parties that the borrower has the full and complete right on the due date to repay the loan plus the 6% stated interest, and reclaim the 25,000 shares collateral subject only to the following condition:

'Should the market price of the stock exceed $1.00 per share at any time during the 120 days or at the due date, then the parties agree that stock shall be sold and that the profit therefrom, after deducting the full amount of the loan and interest, above the agreed price of 5/8 shall be divided equally between the parties, with 1/2 of said profits being for the account of the lender, and the other half for the account of the borrower.'

January 15, 1959, King assigned to the plaintiff his interest in the agreement and collateral security. On January 27, 1959, plaintiff paid to the defendant the sum of $1,000 on account. On February 26 and February 27, 1959 the collateral was sold at $1 per share and the defendant received $23,239.51, no part of which has been returned to the borrower or his assignee.

It is clear that the letter agreement provides that in the event the collateral were sold for more than $1 per share the parties would divide the profits evenly. Where a borrower surrenders contingent rights to profits in addition to a promise to pay principal and lawful interest, the transaction is usurious. Diehl v. Becker, 227 N.Y. 318, 125 N.E. 533; Heller v. Yaeger, 258 App.Div. 139, 15 N.Y.S.2d 771, reversed on other grounds 283 N.Y. 19, 27 N.E.2d 219; General Business Law, § 370.

The respondent urges that § 379 of the General Business Law exempts this loan from the general usury statutes. Section 379 of the General Business Law provides 'In any case hereafter in which advances of money, repayable on demand, to an amount not less than five thousand dollars, are made upon * * * negotiable instruments pledged as collateral security for such repayment, it shall be lawful to receive or to contract to receive and collect, as compensation for making such advances, any sum to be agreed upon in writing, by the parties to such transaction.'

The respondent argues that the transaction in issue fully complies with all the conditions of § 379 or, at least, there is only...