Summary
The Appellate Division, First Department affirmed the trial court's grant of summary judgment on liability in favor of plaintiff ECO Engg., Inc. against defendant Source Renewables, LLC for breach of promissory notes and related guarantees totaling $3.75 million. The court rejected the defendants' affirmative defense of criminal usury, holding that applying a higher default interest rate only after maturity does not violate Penal Law § 190.40. The unanimous decision was issued on February 13, 2025.
Topics
Practice areas
Questions Presented
- Whether the defendants' usury defense is viable under Penal Law § 190.40.
- Whether the summary‑judgment order granting plaintiff judgment on breach of the promissory notes should be affirmed.
Holdings
- The notes are not usurious because the higher default rate was applied only after maturity and the borrower could avoid the higher rate by timely payment.
- Summary judgment is affirmed because defendants raised no genuine issue of material fact and cannot establish the usury defense.
Key quotations
“Plaintiff is entitled to summary judgment for breach of the promissory notes and related guarantees because it established that the parties entered into the contracts, that plaintiff is the holder of the loan documents, and that defendants defaulted on the payments.”
“Nor are defendants able to prove their affirmative defense of usury because both the plain text of the notes at issue and plaintiff's conduct in billing only the non‑usurious default rate post‑maturity establishes that the notes are not usurious under the criminal usury statute, Penal Law § 190.40.”
Factual background
Plaintiff made five commercial loans to defendant totaling $3.75 million between October 2020 and November 2021, each memorialized by a note with identical terms. Defendant defaulted on payment, prompting plaintiff to sue to enforce the notes.
Procedural history
The Supreme Court, New York County entered an order on June 13, 2024 granting plaintiff's motion for summary judgment on liability. Defendants appealed to the Appellate Division, First Department.