Court Opinion

ID: 5876837
Source: CourtListenerOpinion
Date Created: 2022-01-13 02:03:46.503093+00
Date Added: 2024-06-11T08:44:53.005143
License: Public Domain

Sandler, J. P. (dissenting in part).
The facts governing statutory sections and legal background are fully set forth in Mr. Justice Bloom’s comprehensive and interesting opinion. Notwithstanding its persuasiveness, I am unable to agree with the conclusion he reached. It seems to me clear that the language changes introduced into General Obligations Law § 5-519 in 1965 were not intended to overthrow the construction of the section (then General Business Law § 376) adopted in 1912 in Curtiss v Teller (157 App Div 804, affd 217 NY 649) and reaffirmed explicitly by the Court of Appeals in Bowery Sav. Bank v Nirenstein (269 NY 259). It seems to me equally clear that, as a matter of statutory construction, those changes did not alter the relevant meaning of General Obligations Law § 5-519.
As pointed out in Mr. Justice Bloom’s opinion, the statutory sections relating to usurious transactions have existed in essentially their present form since 1837. As presently codified, and as relevant to the issues presented, General Obligations Law § 5-511 declares all usurious contracts void and directs the court, upon an appropriate showing of the usurious character of the transaction, to enjoin any prosecution on an instrument embodying it, and order such instrument to be surrendered and canceled. General Obligations Law § 5-513 authorizes an action by the borrower to recover from a usurious lender the excess of the amounts paid over the lawful rate. General Obligations Law § 5-515 provides that a borrower who commences an action to recover “money, goods or things in action taken in violation of the foregoing provisions of this title” is not required to “pay or offer to pay any interest or principal on the sum or thing loaned”, and that the court shall not require “the payment or deposit of the principal sum or interest, or any portion thereof, as a condition of granting relief to the borrower”.
The section with which we are primarily concerned is General Obligations Law § 5-519. At the time of the decision in Curtiss v Teller (supra), that section (then General Business Law § 376) read as follows: “Every person who shall repay or return the money, goods or other thing so taken, accepted or received, or the value thereof, shall be acquitted and discharged from any *560other or further forfeiture, penalty or punishment, which he may have incurred, by taking or receiving the money, goods or other things so repaid, or returned, as aforesaid.”
The precise issue in this case — the effect under that provision of the return by a lender of excess interest received in a usurious transaction — was squarely presented in Curtiss v Teller (supra). Following a comprehensive review of the historical development of the statutory law, the opinion of the Appellate Division concluded as follows (at pp 817-818): “The contention of the defendant, in effect, amounts to a restoration of the old chancery rule, which saved to the lender the money which he had actually advanced upon the usurious loan, together with interest thereon * * * I think the repayment or return of ‘the money, goods or other thing so taken accepted or received, or the value thereof’ which acquits the lender, referred to in section 376, includes obligations or securities which, under the provisions of section 373, the court may declare void and enjoin prosecution thereon, and order surrendered and cancelled. It is true that if a lender makes so complete a restitution there would seem little or nothing left for which he could be prosecuted under any provision of the usury article * * * unless he would still be liable to criminal prosecution under the Penal Law (§ 2400). But that would seem not to be barred”. The Court of Appeals affirmed without opinion (217 NY 649, supra).
In Bowery Sav. Bank v Nirenstein (supra, at pp 263-264), the Court of Appeals explicitly reaffirmed the rule set forth in Curtiss v Teller (supra):
“Assuming that after a proper trial of the issue as raisecf by the answer it is found that usurious payments were made, rnay the plaintiff then, by the mere deposit of the usurious excess, relieve itself of further consequences for its wrong in a civil action? The question is no longer open in this court. In Curtiss v. Teller (157 App. Div. 804) former Presiding Justice Kruse, of the Appellate Division, fourth department, after ably reviewing the historical development of the statutory law upon this subject, reached the conclusion that the above quoted section 376 could not be construed so as to exempt the usurer from any further consequences by the mere deposit of the amount found to be usurious. This court unanimously affirmed (217 N. Y. 649) * * *
“The ‘statute is peremptory and unequivocal in enacting that an usurious obligation is absolutely void.’ (Sabine v. Paine, 223 N. Y. 401, 405.) Section 376 was never intended and cannot be construed to emasculate section 373. In so far as usury permeates the transaction, the restitution must be complete. (Kellogg v. Adams, 39 N. Y. 28.) It is true that if a lender makes so *561complete a restitution there would seem little or nothing left from which he could be acquitted or discharged. This section, however, must be read in the light of the fact that at one time there existed a penalty of treble damages for usury * * * which has since been repealed. In deciding the case at bar we reaffirm that this section 376 was not intended to furnish a simple means of eviscerating the usury laws.” And so the rule has remained. (See, Yakutsk v Alfino, 43 AD2d 552; Crawford v Carlton, 73 AD2d 530.)
In 1963, the provisions governing civil liability for usury were transferred without significant change to the General Obligations Law, General Business Law § 376 being reenacted as General Obligations Law § 5-519. In 1965, the Legislature amended General Obligations Law § 5-519 to make language changes which, it is here urged, overrule and reverse the construction of the section that had been adopted in Curtiss v Teller (supra) and consistently adhered to thereafter. General Obligations Law § 5-519 now reads: “Every person who shall repay or return the money, goods or other things so taken, accepted or received, or the value thereof, shall be discharged from any other or further forfeiture or penalty which he may have incurred under sections 5-511 or 5-513, by taking or receiving the money, goods or other thing so repaid, or returned, as aforesaid.” (Emphasis added.)
Preliminarily it seems to me clear that the changes relied upon were not intended to affect the long-settled construction of the section. As noted in Mr. Justice Bloom’s opinion, the changes were made in a chapter of the law (L 1965, ch 328) which included, following an investigation into the loan-shark racket, a criminal usury law (former Penal Law § 2401, now Penal Law §§ 190.40-190.50) that, inter alia, made it a felony to charge interest in excess of 25% per annum.
The specification of sections 5-511 and 5-513 in the amended General Obligations Law § 5-519 was almost certainly intended to avoid any possible misunderstanding as to the application of that section to the simultaneously enacted criminal usury section. This conclusion is buttressed by the fact that the amendment also dropped from the section the words “or punishment” which had appeared previously in the phrase “forfeiture, penalty or punishment”. It does not seem to me a persuasive refutation of this inference that the Court of Appeals had held many years before in People v Young (207 NY 522) that then General Business Law § 376 did not provide immunity with regard to then-existing criminal usury law. Assuming that the Legislature in 1965 was even aware of that precedent and its *562relevance, it was surely not unreasonable for the Legislature to undertake to make the situation absolutely clear in a year in which their attention had been focused dramatically on the evils of loan-sharking.
In any event, it is surely extremely implausible that the Legislature would have chosen the language changes here relied on as the method of overthrowing a long-standing judicial construction of the section, and one of such large importance in this area of the law.
No doubt legislation may sometimes have consequences not intended by its authors. But a central problem with the interpretation pressed here is that the language changes relied on did not in fact change the relevant meaning of the section. The statutory language before the change, which discharged under specified circumstances lenders in usurious transactions “from any other or further forfeiture, penalty or punishment, which he may have incurred by taking or receiving the money, goods or other thing so repaid, or returned”, embraced “forfeitures” or “penalties” under General Obligations Law §§ 5-511, 5-513. At least as to those sections the change in language did not alter the meaning of the section.
Let me acknowledge that the specification of the two sections undeniably points up a difficulty in the construction adopted in Curtiss v Teller (supra) and reaffirmed by the Court of Appeals in Bowery Sav. Bank v Nirenstein (supra), a difficulty that both decisions quite clearly recognized. As interpreted in those two decisions, it is not easy to see what practical function was served by what, at the time of the decisions, was General Business Law § 376. Looked at from the perspective of time, the reference to the once-existing statutory authorization for treble damages actions does not appear to be a satisfactory explanation for the Legislature to have enacted the section in the form in which it had been .enacted.
The present wording of General Obligations Law § 5-519 makes it even more difficult to see what function it serves that is consistent with the long-settled construction. Conceivably this doubtful aspect of the prevailing construction may, in a proper case, invite a fresh consideration of the issue by the Court of Appeals, notwithstanding the fact that the rule in question has been followed for over 70 years without provoking any corrective action by the Legislature. But it is surely inappropriate for this court, on the basis of language changes not intended to change the rule and which did not in any way alter the meaning of the section, to overthrow a principle established by the Court of Appeals and twice reaffirmed by this court in decisions rendered *563after the 1965 amendment. (See, Yakutsk v Alfino, supra; Crawford v Carlton, supra.)
The underlying problem here is that we are dealing with a body of law enacted almost 150 years ago under very different circumstances than prevail today. As applied to the situation here presented, the relevant sections appear to confront the courts with two alternative constructions, neither of which is satisfactory. One construction, that which was adopted in Curtiss v Teller (supra), appears to mandate unconscionable results in many situations and, indeed, an unconscionable result here. It simply does not make any sense that this lender should not be permitted to recover at least the money that she lent. On the other hand, the alternative construction urged by Mr. Justice Bloom, and which was indeed the approach taken in chancery prior to the passage of the 1837 sections, appears to eliminate any motive for a lender not to engage in usurious transactions. It was clearly this aspect of the matter that influenced the determination in Curtiss v Teller (supra) and was forcefully underlined by the comment of the Court of Appeals in Bowery Sav. Bank v Nirenstein (supra, at p 264): “Section 376 was never intended and cannot be construed to emasculate section 373.”
I personally am unable to see why it should not be possible to update these ancient statutory sections to permit the court to reach fair and reasonable results; why it should not be possible to authorize sanctions sufficient to discourage usurious loans without mandating forfeitures that in many situations are clearly disproportionate to the wrong that occurred.
In one respect I believe that a modification of Special Term’s order is appropriate. As already observed, General Obligations Law § 5-513 permits a borrower who has paid money in excess of that which is lawfully permitted to recover only the excess. The issue apparently was not raised at Special Term, and indeed was not raised here. However, the language is so explicit that it would seem to me appropriate to modify Special Term’s order accordingly.
Accordingly, the order of the Supreme Court, New York County (McQuillan, J.), entered February 6,1984, granting the motion of plaintiff for summary judgment, declaring the loan void by reason of usury, and directing surrender of the note and other relevant documents, and also requiring repayments of all sums previously paid, should be modified to limit the recovery of previously made payments to that sum which is in excess of the lawfully permitted rate, and otherwise affirmed.