SUPREME COURT OF THE STATE OF NEW YORK

Appellate Division, Fourth Judicial Department

1011 

CA 16-00356 

PRESENT: CENTRA, J.P., CARNI, LINDLEY, CURRAN, AND SCUDDER, JJ. 

 

MEHMET CANAL, PLAINTIFF-APPELLANT, 

V MEMORANDUM AND ORDER

ABDULAZIZ MUNASSAR, DEFENDANT-RESPONDENT, 

ET AL., DEFENDANTS. 

 

PIRRELLO, PERSONTE & FEDER, ROCHESTER (STEVEN E. FEDER OF COUNSEL),

FOR PLAINTIFF-APPELLANT.

LAFAY, BYRNE & LAFAY, P.C., ROCHESTER (ANTHONY P. LAFAY OF COUNSEL),

FOR DEFENDANT-RESPONDENT. 

 

Appeal from an order of the Supreme Court, Monroe County (John M.

Owens, A.J.), entered July 29, 2015. The order denied the motion of

plaintiff for partial summary judgment and granted the cross motion of

defendant Abdulaziz Munassar for summary judgment dismissing the

amended complaint against him. 

It is hereby ORDERED that the order so appealed from is

unanimously modified on the law by denying the cross motion,

reinstating the amended complaint against defendant Abdulaziz

Munassar, granting the motion in part and dismissing the defense and

counterclaim of that defendant for usury, and as modified the order is

affirmed without costs. 

Memorandum: Abdulaziz Munassar (defendant) borrowed $127,000

from plaintiff for the purchase of a residence in the Town of Greece.

The loan was secured by a mortgage on the property, and the total on

both the note and the mortgage was $170,000. The note states that the

interest rate during the term of the note would be “zero (0.00%)

because of the religious beliefs and requirements of Borrower.” The

difference of $43,000 between the principal set forth in the note and

mortgage of $170,000 and the amount disbursed at closing of $127,000

was stipulated by the parties to be “in the nature of interest.” In

June 2013, approximately one year later, defendant defaulted on the

loan by failing to make the required monthly and balloon payments, and

plaintiff commenced this foreclosure action. In his answer to the

amended complaint, defendant asserted a defense and counterclaim for

usury. Plaintiff moved for partial summary judgment seeking, inter

alia, dismissal of the usury defense and counterclaim, and defendant

cross-moved for summary judgment dismissing the amended complaint

against him based upon the defense of usury. The matter was referred

to a judicial hearing officer (JHO) for a hearing on the issue of
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CA 16-00356 

usury only. Following the hearing, the JHO issued a bench decision

finding that the interest rate was 50.5% and that the loan was

therefore usurious, and Supreme Court granted defendant’s cross motion

for summary judgment dismissing the amended complaint against him. We

conclude that the court erred in granting the cross motion and instead

should have granted that part of plaintiff’s motion for partial

summary judgment dismissing defendant’s usury defense and

counterclaim. We therefore modify the order accordingly. 

In determining whether the interest charged exceeded the usury

limit, courts must apply the traditional method for calculating the

effective interest rate as set forth in Band Realty Co. v North

Brewster, Inc. (37 NY2d 460, 462, rearg denied 37 NY2d 937; see

Oliveto Holdings, Inc. v Rattenni, 110 AD3d 969, 972). According to

that method, “[s]o long as all payments on account of interest did not

aggregate a sum greater than the aggregate of interest that could

lawfully have been earned had the debt continued to the earliest

maturity date, there would be no usury” (Band Realty Co., 37 NY2d at

464 [internal quotation marks omitted]). In applying the traditional

formula, “[t]he discount, divided by the number of years in the term

of the mortgage, should be added to the amount of interest due in one

year, and this sum is compared to the difference between the principal

and the discount in order to determine the true interest rate”

(Hammelburger v Foursome Inn Corp., 76 AD2d 646, 648, mod on other

grounds 54 NY2d 580). 

Applying that formula to the case at bar, which involves a

five-year mortgage of $170,000 with a $43,000 “discount” with no

additional interest, we add $8,600, which is one-fifth of the

discount, to the interest over the first year (0%), arriving at a sum

of $8,600. Comparing the $8,600 figure to the difference between the

principal and the discount retained by plaintiff, i.e., $127,000, the

interest rate was 6.77% per annum. That interest rate is well below

the civil usury rate of 16% per annum (see General Obligations Law 

§ 5-501 [1]; Banking Law § 14-a [1]).

Defendant attempts to base his claim of usury on his advanced

interest payment, asserting that the annual interest rate should be

calculated by dividing the total interest to be received over the

five-year period, $43,000, by the total received at closing, $127,000,

resulting in an annual interest rate of 33.8%. Defendant’s argument

is unavailing, however, inasmuch as “the Court of Appeals has held

that ‘interest on the whole amount of principal agreed to be paid at

maturity, not exceeding the legal rate, may be taken in advance’ ”

(Martell v Drake, 124 AD3d 1200, 1201, quoting Band Realty Co., 37

NY2d at 463-464). Moreover, defendant’s argument fails to account for

the fact that the loan here, unlike the one-year term at issue in Band

Realty Co., Martell and Oliveto, is for a term of five years.

Entered: November 18, 2016 Frances E. Cafarell

Clerk of the Court