Case ID: ad_174/html/0239-01.html
Source: Caselaw Access Project
Author: {"author": "Smith, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Karl Kaufman, Appellant, v. David L. Schwartz, Respondent.
    First Department,
    October 20, 1916.
    Injunction —suit to cancel chattel mortgage securing usurious loan — injunction restraining mortgagee from interfering with mortgaged property.
    A plaintiff who has brought suit in the Supreme Court to procure the cancellation of a chattel mortgage on the ground that it was given to secure a usurious loan which has matured, is entitled to an injunction restraining the defendant from proceeding to collect the loan, or from interfering with the mortgaged property, pending the determination of the action, even though when the defendant brought a subsequent suit in the Municipal Court to foreclose the mortgage, the plaintiff, as defendant in the second action, set up the same defense of usury.
    The plaintiff is entitled to the injunction as he was first to sue, and also because his remedy in the Municipal Court is not adequate in that the defendant in the Municipal Court action cannot prevent the plaintiff therein from taking possession of the property.
    
      Appeal by the plaintiff, Karl Kaufman, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 8th day of June, 1916, denying plaintiff’s motion for an injunction pendente lite.
    
    
      Charles J. Katzenstein, for the appellant.
    
      Joseph L. Lefkowitz, for the respondent.
   Smith, J.:

Plaintiff borrowed of the defendent $200 and gave to the defendant a chattel mortgage upon certain machinery described therein belonging to the plaintiff to secure the same. The loan became due. The plaintiff refused to pay the same on the ground that it was usurious, and the defendant threatened to foreclose said mortgage without legal proceeding and take possession of the machines covered thereby. The defendant also threatened that if the plaintiff did not pay the notes he would “ rip out the machines.” Thereafter and upon the 12th day of April, 1916, this action was commenced in the Supreme Court, in which it was sought to declare the notes given for the said loan and the said chattel mortgage usurious and that they be delivered up to the plaintiff and canceled, and that pending the determination of the action the defendant be enjoined from taking any proceeding to collect ttie said loan “or from in any way interfering with the property of this plaintiff mentioned in the said mortgage.” Thereafter and upon the 21st day of April, 1916, the defendant commenced an action in the Municipal Court to foreclose the chattel mortgage. In that action an answer was served alleging the defense of usury. Upon the 15th day of April, 1916, an order to show cause was granted temporarily enjoining the defendant as asked for in this action, and directing the defendant to show cause upon the 22d day of May, 1916, why the injunction should not be made permanent. That application it seems was denied, and upon a motion for reargument it was again denied upon June 8, 1916. From the order denying that motion this appeal is taken.

We think this injunction should have been made permanent. The mortgage had become due. If the mortgage were valid legal title had passed to the defendant and he could at any time have taken possession of the chattels. He was threatening to do so and to rip out the machines. Plaintiff has made. a prima facie case of a usurious loan, which would invalidate the mortgage. The defendant’s only answer to this application was that after the commencement of this action he brought an action in the Municipal Court to foreclose the mortgage, in which the plaintiff had put in an answer alleging usury the same as asserted in the complaint herein. His contention, therefore, is that the plaintiff has an adequate remedy at law to prove his usury in that action, and, therefore, does not need equitable relief. To this it may be answered, first, that this action was first commenced by the temporary injunction included in the order to show cause. By section 373 of the General Business Law (Consol. Laws, chap. 20; Laws of 1909, chap. 25) it is provided that where usury is shown in any instrument, “the court shall declare the same to be void, and enjoin any prosecution thereon, and order the same to be surrendered and canceled.” Moreover, the remedy in the Municipal Court is not adequate. While the defendant has commenced his action to foreclose, he has the legal right to take possession of the machines at any time, even while that action is pending, and this plaintiff is powerless to prevent that in a Municipal Court action, and needs this injunction for that purpose.

For these reasons the order should be reversed, with ten dollars costs and disbursements, and the motion granted upon the giving of an undertaking in the sum of $250.

Clarke, P. "J., McLaughlin, Scott and Dowling, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion granted on terms stated in opinion. Order to be settled on notice.