Blue Chip Coffee, Inc. v. Applebaum

128 Misc. 2d 963, 491 N.Y.S.2d 900, 1985 N.Y. Misc. LEXIS 3033

Opinion

OPINION OF THE COURT

Herbert Kramer, J.

A motion was made for summary judgment pursuant to CPLR 3213 based on a promissory note. A cross motion for reverse summary judgment was made on the ground that the note in question was usurious under applicable New York law. The reply papers indicated that during the period in question, the New York usury law (General Obligations Law § 5-501) was preempted by 12 USC § 86a

* in the case of business or agricultural loans. Defendant now contends that the said statute is not applicable to loans made by non-Federal banks. In a case of first impression in New York State, this court holds that 12 USC § 86a applies to loans made by all persons or organizations and is not limited to Federally chartered banks. “The plain language of the statute indicates that it applies to loans made by a ‘person’ ” (Omega Constr. Co. v Murray, 129 Mich App 509, 513, 341 NW2d 535, 537; see also, Licata v Beninate, 436 So 2d 1331 [La App]; Brann v Flagship Bank, 450 So 2d 237 [Fla App]; City of New York Dept. of Consumer Affairs v Coney Is. Serv. Sta., 113 Misc 2d 1012).

Since an issue of fact is created as to whether the loan in question is for business or agricultural purposes, the court orders a hearing at a date to be settled in the notice of settlement ordered herewith. This court holds that the Federal statute preempts New York usury laws in the case of business or agricultural loans.

12 USC § 86a provides:

“(a) * * *

“If the applicable rate prescribed in this section exceeds the rate a person would be permitted to charge in the absence of this section, such person may in the case of a business or agricultural loan in the amount of $1,000 or more, notwithstanding any State constitution or statute which is hereby preempted for the purposes of this section, take, receive, reserve, and charge on any such loan, interest at a rate of not more than 5 per centum in excess of the discount rate, including any surcharge thereon, on ninety-day commercial paper in effect that the Federal Reserve bank in the Federal Reserve district where the person is located.

“(b) Definitions

“For the purpose of this part —

“(1) the term ‘loan’ includes all secured and unsecured loans, credit sales, forbearances, advances, renewals or other extensions of credit made by or to any person or organization for business or agricultural purposes;

“(2) the term ‘interest’ includes any compensation, however denominated, for a loan;

“(3) the term ‘organization’ means a corporation, government or governmental subdivision or agency, trust, estate, partnership, cooperative, association, or other entity; and

“(4) the term ‘person’ means a natural person or organization.”