Opinion
No. CV–010213–11/KI.
2012-06-13
Caryn BARAFF, Plaintiff, v. SIMCHA YEHOSHUA COHEN & TOTAL LEARNING CENTER, LLC, Defendants.
Matthew Bondy, Mishaan, Dayon & Lieblich, New York, attorneys for defendant. Perry Ian Tischler, The Law Offices of Perry Ian Tischler, P.C., Bayside, attorneys for plaintiff.
Matthew Bondy, Mishaan, Dayon & Lieblich, New York, attorneys for defendant. Perry Ian Tischler, The Law Offices of Perry Ian Tischler, P.C., Bayside, attorneys for plaintiff.
DECISION/ORDER
DEVIN P. COHEN, J.
Recitation, as required by CPLR § 2219(a), of the papers considered in the review of this Motion
+---------------------------------------------------+ ¦Papers ¦Numbered¦ +------------------------------------------+--------¦ ¦Notice of Motion and Affidavits Annexed ¦1 ¦ +------------------------------------------+--------¦ ¦Order to Show Cause and Affidavits Annexed¦ ¦ +------------------------------------------+--------¦ ¦Answering Affidavits ¦2 ¦ +------------------------------------------+--------¦ ¦Replying Affidavits ¦3 ¦ +------------------------------------------+--------¦ ¦Exhibits ¦ ¦ +------------------------------------------+--------¦ ¦Supplemental Affidavit ¦ ¦ +---------------------------------------------------+
Upon review of the foregoing papers and after oral argument, defendant Simcha Yehoshua Cohen's motion for summary judgment and to vacate any default is decided as follows:
Procedural History
This breach of contract action arises from the defendants' alleged failure to repay a loan from plaintiff in the amount of $30,000.00. Plaintiff commenced this action by service of a summons and complaint on or about February 3, 2011 seeking $30,000.00 plus interest from May 2010. The individual defendant, (Rabbi Dr.) Simcha Yehoshua Cohen (hereinafter Mr. Cohen), filed a pro-se answer on or about March 1, 2011. In his answer Mr. Cohen sets forth a general denial, contends that no written documentation of a loan exists, that any loan has been repaid and that at the current time there are no existing loan obligations ( see Cohen answer). The corporate defendant, Total Learning Center, has not submitted an answer or otherwise appeared in this action and is not a party to this motion.
This matter was adjourned various times in the personal appearance part (Part 11). On December 15, 2011 both sides appeared by counsel and a review of the court file indicates that any default by defendant was vacated, on consent, by the Honorable Noach Dear. As both sides were then represented by counsel, the matter was set down for trial in Part 15. The instant motion was subsequently referred to this court for oral argument.
Mr. Cohen now moves for summary judgment dismissing the complaint arguing substantial repayment of the loan and that the interest rate charged on the loan by plaintiff is usurious under General Obligations Law § 5–501(1) and New York Penal Law § 190.40, and void under General Obligations Law § 5–511(2). Mr. Cohen also moves for an order vacating any default judgment and for reasonable attorneys fees.
Motion to Vacate Default Judgment
The court file indicates that the default was vacated, on consent, on December 15, 2011. Accordingly, the court need not address this branch of the motion as it is moot.
Motion for Summary Judgment
In his motion, Mr. Cohen acknowledges that on or about December 2009, plaintiff, who was at the time employed by defendants, “arranged for a personal loan to defendant of $30,000.00 cash” (Rogal affirmation at ¶ 7c). Mr. Cohen contends that he believed that the loan agreement was “with an individual named Brooklyn Jimmy and which loan, upon information and belief, was assumed by [plaintiff] Caryn Baraff” (Cohen affidavit in support of motion at ¶ 3). Mr. Cohen contends that beginning in January 2010, he paid plaintiff “$400.00 cash in interest a week for sixty (60) weeks for a total of $24,000.00 in cash” ( id. at ¶ 5). Mr. Cohen contends that he “intended to continue making payments through $500 .00 postdated checks that were later cancelled” ( id. at ¶ 7). Mr. Cohen contends that the $400.00 a week for 60 weeks in interest-only payments equated to a 78% interest rate on the original $30,000.00 loan (Rogal affirmation at ¶ 8). Mr. Cohen argues that this interest rate is usurious under General Obligations Law § 5–501(1) and New York Penal Law § 190.40, and that the loan is void under General Obligations Law § 5–511(2). Alternatively, Mr. Cohen argues that he fulfilled his “basic obligation under the loan” through his payments of $24,000.00 and that the reason he has not paid the remainder of the principle is due to the excessive interest charged by plaintiff (Rogal affirmation at ¶ 11). As such, Mr. Cohen contends, no issue of fact remains and plaintiff's complaint should be dismissed (Rogal affirmation at ¶¶ 8–9).
In opposition to Mr. Cohen's motion, plaintiff states that she loaned defendants $30,000.00 on or about December 2009 which was to be repaid at “a reasonable rate of interest” within six months (Baraff affidavit at ¶ 3). Plaintiff contends that the debt has been “repeatedly ratified” by the defendants through emails and a series of post-dated checks (Baraff complaint at ¶ 7). Plaintiff denies that defendants made monthly payments of $400.00, contending that defendants only made “minimal payments” and ceased making any payments as of May 2010 (Baraff affidavit at ¶ 3). Plaintiff also contends that the first of the post-dated checks were returned for insufficient funds after which she stopped attempting to cash the checks ( id. at ¶ 5). Plaintiff contends that the interest rate charged on the loan amounts only to 11% per annum (Tischler affirmation at ¶ 6c). Plaintiff refers to a copy of an email she claims to have sent in June 2010 and in which she contends she informed defendants that $31,800.00 was owed, consisting of the $30,000.00 principle borrowed in December 2009 plus $1,800.00 in interest accrued over six months (Baraff affidavit at ¶ 7).
Plaintiff contends that at the time of the loan she was employed by defendants and that she knew Mr. Cohen well. Plaintiff claims that because she was afraid defendants would not repay the loan, she invented a character named “Brooklyn Jimmy,” whom she acknowledges she represented to be a loan shark ( id. at ¶ 15). Plaintiff claims that she told Mr. Cohen she had borrowed the loan money from Brooklyn Jimmy hoping “with the specter of fear, that the defendant would repay what he owed” her ( id.). Plaintiff also states that in inventing Brooklyn Jimmy she was seeking to “evoke some measure of guilt” that would cause Mr. Cohen “to honor his obligation” (Baraff affidavit at ¶ 11). However, plaintiff also contends that no “Brooklyn Jimmy” existed and that Mr. Cohen was aware of this fact ( id. at ¶ 15).
In reply, Mr. Cohen argues for the first time that, as a matter of public policy, the court cannot condone the use of fear and intimidation as a means of collection and that the action should be dismissed on that basis alone (Cohen affidavit in reply ¶ 6).
A motion for summary judgment “shall be granted if, upon all the papers and proof submitted, the cause of action or defense shall be established sufficiently to warrant the court as a matter of law in directing judgment in favor of any party” (CPLR 3212[b] ); see Friends of Animals, Inc., v. Associated Fur Mfrs., 46 N.Y.2d 1065 [1979] ). However, the motion “shall be denied if any party shall show facts sufficient to require a trial of any issue of fact” (CPLR 3212[b]; see Zuckerman v. City of New York, 49 N.Y.2d 557). On a motion for summary judgment, “the court must view the evidence in the light most favorable to the nonmoving party” (Stukas v. Streiter, 83 AD3d 18, 23 [2d Dept 2011] ). The court's role on a motion for summary judgment “is not to resolve issues of fact or determine matters of credibility, but merely to determine whether such issues exist” (Kolvas v. Kirchoff, 14 AD3d 493, 493 [2d Dept 2005] ). “Summary judgment is a drastic remedy which should only be employed when there is no doubt as to the absence of triable issues” (Stukas v. Streiter, 83 AD3d 18 [2d Dept 2011] citing Millerton Agway Coop v. Briarcliff Farms, 17 N.Y.2d 57 [1966];Andre v. Pomeroy, 35 N.Y.2d 361, 364 [1974] ).
Usurious Interest Defense
Under New York General Obligations Law and New York Banking Law, if the interest rate on loans made to individuals exceeds sixteen percent (16%) per annum it is considered usurious (General Obligations Law § 5–501; Banking Law § 14–a; see also Stanley Weisz, P.C. Ret. Plan v. NCHD Associates, Inc., 237 A.D.2d 276 [2d Dept 1997] ). The interest rate under the New York Penal Law which qualifies as criminal usury is twenty-five percent (25%) per annum ( seePenal Law § 190.40). New York General Obligations Law further provides that any loan taken for “any greater sum, or greater value ... than is prescribed in section 5–501, shall be void[.]” (General Obligations Law § 5–511 [1] ). Debtors are relieved “of the obligation to repay principal and interest” on such void usurious contracts ( Palmiero v. Cayenne, 23 Misc.3d 1132[A] [Sup Ct, Kings County 2009]; see also Russo v. Carey, 271 A.D.2d 889, 889 [3d Dept 2000]; O'Donovan v. Galinski, 62 AD3d 769, 770 [2d Dept 2009] ). Upon proof that any such loan is in violation of General Obligations Law § 5–511(1), “the court shall declare the same to be void, and ... order the same to be surrendered and cancelled” (General Obligations Law § 5–511).
The parties present conflicting affidavits and inconsistent, inconclusive documentary evidence regarding the interest rate agreed upon and charged, and what payments have been made. Mr. Cohen's claimed $400.00 per week payments, if attributed only to interest, would equal an annual interest payment of $20,800.00 (400 x 52 = 20,800). The simple interest rate based on such payments for a $30,000.00 loan is 69% (20,800/30,000 = .69333). In his papers, Mr. Cohen calculates the interest rate to be 78%. However, it is unclear to the court how he arrived at this percentage based upon the payments he claims to have made. In either case, if Mr. Cohen's claims were to be believed, the interest rate would exceed both the 16% per annum civil, and 25% per annum criminal usury rates established under New York law, rendering the loan void ( seeGeneral Obligations Law § 5–501; Penal Law § 190.40).
In contrast, plaintiff claims that the amount of interest which had accrued on the loan in a matter of six months was $1,800.00 ( see Baraff affidavit at ¶ 6). Plaintiff claims this interest began to accrue in January 2010, with the six months ending in July 2010 ( see Baraff affidavit at ¶¶ 7–8). Plaintiff also claims that this “demonstrate[s] a charge of 11% per annum” (Baraff affidavit at ¶ 6.) Calculating simple interest on an annual basis, this interest would be doubled to equal an annual interest payment of $3,600.00. The simple interest rate for such payments on a $30,000.00 loan is 12% (3,600/30,000 = .12). When calculating effective interest on interest paid for loans with terms shorter than one calendar year, the interest rate would also be 12% (1,800/30,000 x 360/180 = .12). Accordingly, calculated either as simple interest on an annual basis or as effective annual interest the rate works out to 12% per annum. Thus, if plaintiff's version of the agreement is to be believed, the interest rate would be neither criminally nor civilly usurious under New York General Obligation Law (General Obligations Law § 5–501; Penal Law § 190.40).
Both sides acknowledge that no written loan agreement was ever executed establishing the terms of the loan and the rate of interest. In the absence of such a writing it remains to be seen whether, at trial, plaintiff can adequately prove the terms of the loan, including the interest rate and whether such interest is recoverable. However, such a determination is one of fact and credibility. While the admitted invention of a loan shark might reasonably be expected to impact plaintiff's credibility at trial, the court is cognizant that its role on a motion for summary judgment “is not to resolve issues of fact or determine matters of credibility, but merely to determine whether such issues exist” (Kolvas v. Kirchoff, 14 AD3d 493, 493 [2d Dept 2005] ). In light of the conflicting affidavits and evidence introduced by both sides, the court finds that there remain factual issues to be resolved and Mr. Cohen has failed to meet his burden of establishing that the terms of the loan were usurious as a matter of law. B. Coercion/Involuntary Payments
Over the last century, the courts have distinguished between payments made voluntarily and those made involuntarily. Payments, so long as made for the convenience of the debtor, are considered voluntary even if they are payments of illegally levied debt. To “make [the payment] involuntary, it must be made because of coercion in fact or coercion by law” (Vaughn v. Village of Portchester, 135 N.Y. 460, 463 [1892] [addressing plaintiff's payments of an illegally levied assessment against her property]; see also Neufeld v. City of New York, 93 AD 591, 592 [2d Dept 1904] [finding that a lien filed against a property which prevented plaintiff from obtaining a loan needed to make payment of a tax did not create coercion in the payment of that tax sufficient to make the payment involuntary] ).
The United States Supreme Court has defined coercion “sufficient to make payment involuntary” as coercion where “there must be some actual or threatened exercise of power possessed, or believed to be possessed, by the party exacting or receiving the payment over the person or property of another, from which the latter has no other means of immediate relief than by making the payment” (Radich v. Hutchins, 95 U.S. 210, 213 [1877] ). The New York Court of Appeals has held that claims for repayment should be denied if it is “evident that the payment was involuntary and compelled by some duress” (Redmond v. City of New York, 125 N.Y. 632, 637 [1891] ).Conflicting statements are made by both parties regarding the role played by Brooklyn Jimmy in this matter. Mr. Cohen's attorney contends that Mr. Cohen “believed he was accepting a loan from an individual referred to as Brooklyn Jimmy and was fearful of not repaying the loan” (Rogal affirmation at 5). However, no mention is made in Mr. Cohen's own affidavit in support of the motion regarding fearfulness, coercion or duress. Furthermore, Mr. Cohen fails to cite any case law or to move for dismissal on the basis that his payments under the loan were involuntary due to coercion or duress.
In her opposition papers, plaintiff acknowledges inventing Brooklyn Jimmy in hopes of evoking fear or guilt (Baraff affidavit at ¶ 11, 15) but also claims that Mr. Cohen was aware that Brooklyn Jimmy did not exist ( id. at 15). If true, this would seem to greatly undermine plaintiff's stated desire to “raise the specter of fear” in defendant Cohen. It is also unclear from the papers what representation was made regarding whether plaintiff or Mr. Cohen was ultimately responsible to Brooklyn Jimmy for the debt.
Mr. Cohen does raise, in conclusory fashion, in his reply papers that the agreement should be voided on public policy grounds due to plaintiff's use of fear and intimidation. However, this issue is specifically raised as a separate basis for relief (distinct from the usury defense) for the first time in reply and is not adequately raised and addressed as a basis for relief in Mr. Cohen's original motion papers ( see Allstate Ins. Co. v. Dawkins, 52 AD3d 826 [2d Dept 2008] [“function of reply papers is to address arguments made in opposition to the position taken by the movant, not to permit the movant to introduce new arguments or new grounds for the requested relief”] ).
The Real Brooklyn Jimmy
Perhaps unbeknownst to Ms. Baraff or Mr. Cohen, there is, or rather was, a historical figure called Brooklyn Jimmy. “Brooklyn Jimmy” Carroll was an undefeated middleweight boxer in the late 1800s. Mr. Carroll was considered one of the great boxers (gloved and bareknuckled) of his day, and was a close friend of Jack Dempsey. There is no doubt that in his day Brooklyn Jimmy Carroll would have cut an imposing and intimidating figure. There is, however, no evidence that Mr. Carroll ever engaged in loansharking or the enforcement of loansharking agreements. In any event, Mr. Carroll died, tragically, in December 1912, after being struck by a Brooklyn elevated train ( see The New York Times, obituary, Dec. 7, 1912; and see The Cyber Boxing Zone Encyclopedia–Old Timer section [although that source provides a later date of death] http:// cyberboxingzone.com/boxing/carroll-brooklynjimmy.html citing for fight record, Tracy Callis, Historian, International Boxing Research Organization] ).
Conclusion
Accordingly, as Mr. Cohen does not specifically move to dismiss on grounds of coercion or involuntary payments, and in light of the conflicting statements made by both sides regarding the role of Brooklyn Jimmy, the court finds that this issue remains, at most, a question of fact to be resolved at trial. Mr. Cohen's defenses regarding payment or partial payment of the loan likewise remain issues of fact for trial due to the conflicting statements and documentary evidence introduced by both parties.
The court notes that there is a question as to the extent to which the defenses of usury and coercion/involuntary payments are properly preserved by Mr. Cohen's answer as, to the court's knowledge, counsel has not moved to amend Mr. Cohen's pro se answer. However, assuming the defenses are properly preserved, the court finds that defendant has failed to meet its burdens of establishing that there are no material factual disputes and that he is entitled to judgment of dismissal as a matter of law.
Attorney's Fees
The underlying motion for summary judgment is denied. Accordingly, defendant's application for attorney's fees is likewise denied. However, the court also notes that as there is no writing memorializing the contract there is also no written provision allowing for attorneys fees.
For the foregoing reasons, the motion is denied, except to the extent that the branch of the motion seeking to vacate any default was previously granted on consent. The matter shall proceed to trial on July 11, 2012 in Part 15.