not being authorized or permitted by law to do so he knowingly charges takes or receives and this is the critical part of any money or other property as interest on the loan and it continues i'm familiarity at the stage with the text the point is my adversary the court below and many other courts in the district below seem to take a position that writes out those words from the statute if property is something different than money then there must be a way to value that property and there is m cases that value property and then it becomes simple is that amount over the interest rate of twenty five dollars or is that amount lower than twenty five percent now in order to do that this case i actually pretty easy what you need to do is distinguish between the i guess there's three different components there's the principle in this case that was thirty five we only got thirty three but thirty five thousand dollars so there's the principal component nd there is what's known as the discount component and then rd there is the look back now i think the tricky part and the problem that's caused the line of cap the line of cases and of union capital is that there's too much focus on the look back now if you pretend to look back doesn't matter at all that's the portion where you look back over the past twenty days you see what the lowest price was pretend that doesn't exist in this case and in just about all the others before your honor's right now with that discount over the principle it's always over twenty five percent let's look what happens here in this particular case the math is very simple it's a five thousand dollars debt conversion it's an issue here and that's why i'm going to use that when it works whether i was going to convert one dollar or ten dollars or the entire thirty five thousand dollars basically the way the math works is every single time five thousand dollars equals seven thousand six hundred and ninety two dollars i think in zero dollars thirty cents but the point is five thousand dollars that you want to convert that's how much debt goes away from the thirty five thousand dollars loan from thirty five dollars down to thirty that turns into stock of seven thousand six hundred and ninety two let me walk you through an example if it's one dollar if the trading is one dollar and fats with it happens to be trading at that day then because the math is easy one dollar equals seven thousand six hundred and ninety two shares and ask you this if i had borrowed money or five month money o is what happened later you're talking about the problem hypothetical business and i prefer right now what in your hypothetical was there also a fiscal a fixed discount in addition to what you're in you're talking about now you're talking about no but using only the facts that you supplied no it's not user is because it's an option relating to the future and and that gets to effectively the look back because the look back portion which i said we can ignore  all of these cases and certainly in this one that's irrelevant because it's always more than my seven thousand six hundred and ninety two dollars so in your example of effectively what would happen is the five thousand dollars so we started thirty five dollars it goes down to thirty because we're extra we're discharging that debt we're now at thirty thousand dollars and that five thousand dollars turns into minimally and that's the key minimally seven thousand six hundred and ninety two dollars every time you know in your example it might actually be is based on the future it's a warrant or an option which looks at the future that's completely different from here where we have a fixed discount so the discount is what makes this something that can properly be considered as  interest because you otherwise it's the exact same transaction right your client is not actually paying any money out and essentially there is an equity transaction that you are now trying to say is part of the original loan and can be valued in the interest calculation yes what i'm saying is when you break it down into the three components principle this principle we have a small fight over the two thousand dollars for the attorneys fees there but principle is principle then there is a over and above whatever arguing here is the look back which yes in the future that can be a whole lot of profits and frankly that doesn't matter but then there's the guaranteed discount the way five thousand dollars always constantly turns into seven  thousand five hundred and sixty dollars shares but each of those examples is equal to seven thousand six hundred and ninety two dollars it's a constant value then it becomes really simple is that seven thousand six hundred and ninety two dollars as compared with five thousand dollars is that more than twenty five percent and the answer is yes it's math and then the only question and really that's the issue before your court before this court is is it your client to our counsel when this transaction was affected i was not involved in that i came on later but my understanding is yes falls from obligations willingly and knowingly entered into before addressing counsel specific points i think it's important to convey to underlying issues that should be kept in mind when considering why the lower court and numerous other courts rejected these arguments over and over again the st relates to the policy considerations behind new york's usury laws we know the policy and we know why the usury laws recreated namely to prevent taking advantage of the poor of the desperate the needy the archetype of scenario is the head of going back to the policy i think there are essentially four tears let's get to the policy later looks let's do the text st ok so there are three relevant parts of the new york general obligation by section five hundred considered less vulnerable than the individual getting a loan shark on the street just trying to put food on the table two or three presumes more sophistication when an individual is is accepting a loan in excess of two hundred and fifty thousand the legislature presumed that they were counseled or that they have a degree of sophistication where they're not subject to this predatory lending and then tear for our corporations the the most sophisticated they are presumed if they're taking a loan of two million five hundred thousand dollars or more that they don't need any protection there's no usury defense for them  speaking of the sophistication of the party to court asked appellant whether the corporation was counsel at the time of this transaction this is very important at the time of the issuance of this note the corporation had six directors all on six figure salaries one of those directors was the chief strategy officer after five months in charge when this during which this note was issued that individual became the general counsel of the corporation  property as interest alone could you just deal with that textual price sure council put emphasis on or other property that property must be exchanged i think i think we can all agree on that at the time of contracting when determination is to be made there's nothing exchanged except a pelleas money going to a palace now sure interest is never given back immediately but what district courts have struggled with is the uncertainty of whether this thirty five percent discount we could argue all day whether it is guaranteed or not i have examples that show that it is not but whether this thirty five percent discount would ever be realised would ever be exercised and it's it's outside of the control of appellant outside of the control of the pelly it's subject to the market it's subject to the regulation it's subject to fluctuations in volume in stock prices the corporation listed it's just too uncertain  our terms of the laundrymen there are there are several things if appelle if appellant becomes delisted they can't convert there's no there will be no stock to exchange if if the stock price is trending downward there's no thirty five percent discount because the appellant has three days to deliver the stock while it may be valued at one point at the section at the moment it's converted at a thirty five percent discount within the thirty day window of this transaction the stock fluctuated over three hundred percent in those thirty days and on a single day over forty percent downward so that any discount can can disappear in a matter of hours in especially in this market of penny stocks where these stocks fluctuate greatly  some other examples of uncertainty that the district courts have mentioned whether plaintiff or appellee would would exercise the right whether it could i mentioned because of the status of the fluctuations in volume there could simply be no demand for the stop so there's no realisation of that thirty five percent discount there's no property exchanged pursuant to one thousand nine hundred and forty the corporation could simply run out of shares actually in a in a case where mr rescue is also my adversary that's what happened to corp could fire the transfer agent that's what happened here there's no way to say that this is guaranteed either the discount itself or the realization of profits from that discount and how  impermissible twenty five percent rate i think another issue with this thirty five dollars is your position the property has to be exchanged when it could time the line closes and when the option is well at the time the option is exercise that that's a different  track of argument at the time the contract that it has it's something has to happen at the time along along close correct what property needs to be exchanged not merely the potential for property to be exchange in the future which may or may not be exchanged it's too speculative and that's what the district courts have found time and time again that our federal warriner an option that was part of this long package it would be not  discounted and essences discounted warrant a warrant with the provision for a discount doesn't change that situation is still too speculative still and still not part of the base interest on th this transaction i would say the court of appeals in inside vs eighteen west th street well it wasn't this transaction they did acknowledge that such a conversion could transform a loan into an equity investment and in certain circumstances inside all they found that it did not using sidel only the the king supreme court has addressed a note like this squarely and then it's been at the district court level as you know  i think the rd case that now pending before the circuit raising these issues is there a benefit to having the new york court of appeals address some or all of the issues in a case like this i don't see a benefit your honor i think this court is more than capable with the case law that's out there to either predict or create and amalgamation of bring together several decisions to to come to the right outcome there are several motions to certify that have been out there one in the l g capital matter against party in genesis was denied yesterday so i'm not sure and it was not renewed in this matter if if i recall correctly so i think there's only one motion to certify outstanding that would be blue city but cardinal and blue city of kind of track together in terms of what they're doing believe the share panel members would there be any harm to any of the parties in this case if we were to certifying any or all of the using this the same arguments been rejected time and time again to just walk away from their obligations they think they don't owe any money back they're taking loans and then when when it suits them they the fire the transfer agent they ignore their they ignore their obligations completely a loan or an equity investment or it begins as a loan is money in exchange for an eight percent return to be paid on the maturity date the the district court and a few courts in new york and analyze this and said at the point of conversion it becomes an equity investment which would not be covered by those that direct disagree with your honor on that point because that's the calculus for an interest in a usury determination must be made at the time of contracting what you can see from the four corners of the document so taking of the contract you have no idea whether this option of purchase will ever be x was correct if i may pick up on some of the points that were just addressed it's not an equity investment i know that's what the lower court said it's that it's already been paid it starts out as a loan and then it gets converted to st as payment that's it the payment has already occurred there's no continuation if i choose to pay you and i don't i don't for you what payment has already it's the payment for the loan if we have a loan you loan me one hundred dollars and then pursuant to that loan you have the right to instead of having one hundred dollars given back to you you would like property a stick of gum and overpriced stick of gum that bear with me i then give you the stick of gum i don't owe you the one hundred dollars anymore you elected to get the stick of gum you don't then have the right to say well i might actually hold onto that stick of gum and sell it to someone else next week for you know a whole lot less than one hundred dollars and therefore if i can maybe in the future i sell that stick of gum for only one dollar that's not fair because of the ninety nine dollars that i'm not going to get and that's what we just heard so many speculative things that could happen those are all called possible breaches of contract so like the lower court below and like all those cases below what you hear is there may be a refusal at the transfer agent level there may be a bankruptcy there may be noncompliance was securities closing  and so at closing it's not worth anything and it's over twenty percent covered there's a covered by this no that's an entirely separate line of cases that's what i'm talking about is the look back and that's frankly irrelevant to the question of whether or not the discount here which always means that my five thousand turns into seven thousand six hundred you're talking about a war and that's the flow line of cases i'm talking about the union capital and it and they got it wrong you there's so many different cases you can look at collins versus commissioner it's at the time of receipt you can look at the i can pronounce this good munson versus united states case in new york itself you can look at the shelton court case every single time you look at news value and at the time of the actual contract what we're talking about what you just talked about with my adversary those are potential breaches in every single contract there's always a potential breach if you hire my law firm i could commit practice if you have an employment contract maybe you don't get paid maybe you don't do your job every contract imaginable has potential for breach that doesn't affect value and it certainly doesn't affect our ability in here to constantly see five thousand equal seven thousand six hundred no matter how many shares are needed to get to seven thousand six hundred and if you get to seven thousand six hundred there's no way to do it without going above twenty five percent the question for you is whether or not that's interest but as you know from the questions interesting thank you both nicely done we'll take it