Manufacturers & Traders Co. v. Erie County Industrial Development Agency

Appellate Division of the Supreme Court of New York

Manufacturers & Traders Co. v. Erie County Industrial Development Agency

280 A.D.2d 909, 719 N.Y.S.2d 914, 2001 N.Y. App. Div. LEXIS 1297

Appellate Division of the Supreme Court of the State of New York·Decided February 7, 2001·Published

Opinion

—Order unanimously modified on the law and as modified affirmed without costs in accordance with the fol[910] lowing Memorandum: Supreme Court properly determined that the 60% interest rate on the “deferred interest bonds-B” (type B bonds) was not usurious. Those bonds were issued to the underwriter as part of his fee per the initial principal amount of $2,140.95, and interest accreted at that artificially high rate until December 1, 1995 to ensure payment of that fee in the accreted amount of $480,000. “Unless the real purpose of the transaction was, on the one side, to lend money at usurious interest and, on the other side, to borrow upon usurious terms dictated by the lender, there can be no usury” (Fried v Bolanos, 187 AD2d 108, 110).

The court erred, however, in determining that the bonds continued to accrete interest at 60% following the default on December 1, 1995. The indenture provides for that interest rate until December 1, 1995 only, and, because the bonds represented a portion of the underwriter’s fee, it is evident that the parties did not intend that interest rate to continue after that date. We therefore modify the order by providing that the type “B” bonds accreted interest at the rate of 60% until December 1, 1995 only. (Appeal from Order of Supreme Court, Erie County, Kane, J. — Interest.) Present — Green, J. P., Wisner, Scudder, Burns and Lawton, JJ.

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—Order unanimously modified on the law and as modified affirmed without costs in accordance with the fol[910] lowing Memorandum: Supreme Court properly determined that the 60% interest rate on the “deferred interest bonds-B” (type B bonds) was not usurious. Those bonds were issued to the underwriter as part of his fee per the initial principal amount of $2,140.95, and interest accreted at that artificially high rate until December 1, 1995 to ensure payment of that fee in the accreted amount of $480,000. “Unless the real purpose of the transaction was, on the one side, to lend money at usurious interest and, on the other side, to borrow upon usurious terms dictated by the lender, there can be no usury” (Fried v Bolanos, 187 AD2d 108, 110).

The court erred, however, in determining that the bonds continued to accrete interest at 60% following the default on December 1, 1995. The indenture provides for that interest rate until December 1, 1995 only, and, because the bonds represented a portion of the underwriter’s fee, it is evident that the parties did not intend that interest rate to continue after that date. We therefore modify the order by providing that the type “B” bonds accreted interest at the rate of 60% until December 1, 1995 only. (Appeal from Order of Supreme Court, Erie County, Kane, J. — Interest.) Present — Green, J. P., Wisner, Scudder, Burns and Lawton, JJ.

Manufacturers & Traders Co. v. Erie County Industrial Development Agency, 280 A.D.2d 909, 719 N.Y.S.2d 914, 2001 N.Y. App. Div. LEXIS 1297 (N.Y. Ct. App. 2001).

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280 A.D.2d 909 (Manufacturers & Traders Co. v. Erie County Industrial Development Agency) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Opinion

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