Court Opinion

ID: 3159774
Source: CourtListenerOpinion
Date Created: 2015-12-03 16:07:27.906001+00
Date Added: 2024-06-11T12:06:07.827254
License: Public Domain

State of New York
                    Supreme Court, Appellate Division
                       Third Judicial Department
Decided and Entered: December 3, 2015                    520978
________________________________

ROBERT J. HAWKINS et al.,
                    Respondents,
      v

ROXANNE LYNNE EAVES, as
   Executor of the Estate of                 MEMORANDUM AND ORDER
   LEONARD B. WILCOX,
   Deceased, and as Trustee
   of the LEONARD B. WILCOX
   LIVING TRUST,
                    Appellant.
________________________________

Calendar Date:    October 22, 2015

Before:    Peters, P.J., Garry, Rose and Clark, JJ.

                              __________

      Law Office of Alfred Paniccia Jr., Binghamton (Alfred
Paniccia Jr. of counsel), for appellant.

      Menter, Rudin & Trivelpiece, PC, Syracuse (Teresa M.
Bennett of counsel), for respondents.

                              __________

Rose, J.

      Appeal from an order of the Supreme Court (Lebous, J.),
entered October 10, 2014 in Broome County, which denied
defendant's motion to dismiss the complaint.

      Plaintiff Robert J. Hawkins borrowed money from Leonard B.
Wilcox in August 2009, March 2010 and December 2010. Each loan
was secured by a separate promissory note. In January 2011,
Wilcox and Hawkins modified all three promissory notes to, among
other things, include plaintiff Hawkins Homes, LLC as an
                               -2-               520978

additional obligor. In February 2012, Wilcox made a fourth loan
to plaintiffs in exchange for another promissory note. Although
plaintiffs repaid the December 2010 loan in full, they ultimately
defaulted on the August 2009, March 2010 and February 2012 loans,
whereupon Wilcox filed money judgments by confession against
plaintiffs and commenced a CPLR article 52 proceeding to enforce
them. In response, plaintiffs commenced this action against
defendant, who is the executor and trustee of Wilcox's estate and
living trust.1 Plaintiffs' complaint asserts, among other
things, that each of the four loans is usurious and, therefore,
void.2 Defendant then moved to dismiss the complaint, arguing,
among other things, that plaintiffs failed to state a cause of
action and certain of plaintiffs' claims are barred by the
statute of limitations. Supreme Court denied the motion in all
respects, and defendant now appeals.

      Plaintiffs' first cause of action alleges that the December
2010 loan charged interest at a rate in excess of 22% per year,
making it usurious and, therefore, void as a matter of law (see
General Obligations Law § 5-501; Banking Law § 14-a; see also
General Obligations Law § 5-513; Seidel v 18 E. 17th St. Owners,
79 NY2d 735, 740 [1992]). Defendant contends, however, that this
loan was fully repaid almost three years before the commencement
of this action and, even if it was usurious, this cause of action
is time-barred. We agree. There is no dispute that the December
2010 loan was paid in full in June 2011. Further, the parties
agree that any cognizable claim that plaintiffs may have to
recover the interest they paid in excess of the legal rate is
barred by the one-year statute of limitations (see CPLR 215 [6]).
In an effort to sidestep the limitations period, plaintiffs argue
that this cause of action is not a cause of action at all.
Rather, they contend that it is an equitable recoupment defense

    1
        Wilcox died in March 2014.
    2
        At oral argument, plaintiffs stated that they are
pursuing their demand for vacation of the judgments by confession
and the transcripts thereof in the parallel CPLR article 52
enforcement proceeding, and they are no longer seeking such
relief in this action.
                              -3-                520978

seeking only an offset against any usurious amounts that
defendant might recover in the parallel CPLR article 52
proceeding and, thus, it is timely because it was not barred at
the time that those claims were first asserted (see CPLR 203
[d]). Regardless of whether such a defense may be interposed in
that proceeding, however, plaintiffs cannot do so here because
equitable recoupment can only be asserted as a counterclaim or as
an affirmative defense (see Carlson v Zimmerman, 63 AD3d 772, 774
[2009], DeMille v DeMille, 5 AD3d 428, 429 [2004]), and defendant
seeks no recovery in this action against which their request for
an offset could be applied.

      The second and third causes of action challenge the August
2009 and March 2010 loans. Plaintiffs allege that, in both
cases, Wilcox required them to make so-called "bonus payments" in
exchange for forbearances on the loans, which, when added to the
12% interest rate appearing on the face of the notes, render the
loans usurious. Notably, defendant does not challenge the facial
sufficiency of these allegations. Instead, defendant argues that
these causes of action require dismissal because of evidence
presented by plaintiffs in opposition to her motion to dismiss,
which, in defendant's view, indicates that the bonus payments are
not calculable as additional interest. However, the record does
not reflect that this argument was made to Supreme Court, and
plaintiffs contend that they were not afforded an opportunity to
address it. Accordingly, it is unpreserved for our review (see
Anthony DeMarco & Sons Nursery, LLC v Maxim Constr. Serv. Corp.,
130 AD3d 1409, 1411 [2015]; Stein v Kendal at Ithaca, 129 AD3d
1366, 1367 [2015]), and we will not disturb Supreme Court's
denial of defendant's motion to dismiss plaintiffs' second and
third causes of action.

      Plaintiffs' fourth cause of action alleges that the terms
of the February 2012 loan required plaintiffs to pay "points"
that resulted in an interest rate of 14.5% per year, in addition
to an annual interest rate of 12%. Accepting these allegations
as true and granting plaintiffs the benefit of every possible
inference, as we must at this stage of the proceedings (see EBC
I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]; Delaware
County v Leatherstocking Healthcare, LLC, 110 AD3d 1211, 1213
[2013]), this loan would carry a criminally usurious interest
                              -4-                  520978

rate in excess of 25% (see Penal Law § 190.40). Thus, we agree
with Supreme Court's decision to deny dismissal of this cause of
action. We have considered defendant's remaining contentions and
find them to be unavailing.

     Peters, P.J., Garry and Clark, JJ., concur.

      ORDERED that the order is modified, on the law, without
costs, by reversing so much thereof as denied defendant's motion
to dismiss the first cause of action; motion granted to that
extent and said cause of action dismissed; and, as so modified,
affirmed.

                             ENTER:

                             Robert D. Mayberger
                             Clerk of the Court