Plaintiff has commenced this action by way of a Summons and Motion For Summary Judgment In Lieu of Complaint, thereby invoking the provisions of CPLR § 3213, claiming recovery upon an instrument for the payment of money only. According to the Affirmation submitted by Plaintiff's counsel, Plaintiff seeks recovery of $ 110,000.00 upon certain promissory note. The initial application contains no Affidavit from Plaintiff and no proof of service of the initial pleading is provided.

The promissory note upon which Plaintiff seeks recovery was given by Defendants PARK SLOPE ADVANCED MEDICAL PLLC and FIRST HEALTH MEDICAL MANAGEMENT INC. as the obligors with personal guarantees executed by Defendants WILLIAM J. COLETTO and ROBERT KENT. The promissory note, dated May 17, 2011, was in the principal amount of $ 100,000.00 due and payable with interest of $ 10,000.000, for a total repayment of $ 110,000.00 on August 17, 2011, some 90 days following its execution.

Defendants PARK SLOPE ADVANCED MEDICAL PLLC and ROBERT KENT have appeared by counsel and have interposed strenuous opposition to Plaintiff's application. Defendant WILLIAM J. COLETTO has appeared pro se and likewise has submitted opposition. Defendant FIRST HEALTH MEDICAL MANAGEMENT INC. is in default of both appearance and pleading herein. In reply to the opposition, Plaintiff provides a vacuous Affidavit asserting that the monies advanced to Defendants (and thus evidenced by the promissory note upon which he seeks judgment) constitute his lifetime savings. Parenthetically, the Court notes that Plaintiff includes a second $ 100,000.00 note, dated May 23, 2011 which requires repayment of $ 113,333.00 on September 23, 2011 but upon which he has not sued herein.

The provisions of CPLR § 3213 allow a party to apply for accelerated judgment in the place and stead of the usual complaint only where the action is based upon either a judgment of a court of competent jurisdiction or upon an instrument for the payment of money only. The latter category includes, among other items, promissory notes, St. John Associates Engineers P.C. v. Chase Architectural Associates P.C. 106 AD2d 743 (3rd Dept. 1984) and personal guaranty agreements, Council Commerce Corp. v. Paschalides 92 AD2d 579 (2nd Dept. 1983). The instruments sued upon by Plaintiff herein fall within the latter two categories, thus entitling him to bring this application.

That having been said, the function of the Court upon an application pursuant to CPLR § 3213 (just as under CPLR § 3212) is that of issue finding and not issue determination. In order for a party to prevail upon an application for summary judgment, it must be clear that there are absolutely no material issues of fact, Sillman v. Twentieth Century-Fox Film Corp. 3 NY2d 395 (1957). The proponent of a motion for summary judgment must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient admissible evidence to the Court that would effectively eliminate any material issues of fact from the proceeding, Zuckerman v. City of New York 49 NY2d 557 (1980). If the applicant is successful in meeting the mandates for a prima facie case, only then does the burden shift to the party opposing the application to produce evidentiary proof that is legally sufficient to demonstrate the existence of a material issue of fact, Zuckerman v. City of New York, supra. [*2]

In the matter that is before the Court, it is clear that Plaintiff has sustained his burden of bringing forth sufficient evidentiary proof to make a prima facie showing of entitlement to the relief that he seeks. The burden now shifts to the appearing Defendants to demonstrate the presence of actual and triable issues of fact, if any, that may be sufficient to defeat summary judgment in Plaintiff's favor.

In their opposing papers, Defendants PARK SLOPE ADVANCED MEDICAL PLLC and ROBERT KENT advance claims of usury with respect to the transaction at issue. It is asserted by the appearing Defendants that Plaintiff should be denied recovery since the loan herein is tainted by the spectre of usury. Plaintiff replies, stating that the defense of usury may not be advanced by or on behalf of a corporation.

New York has two statutes which govern usury, one civil (General Obligations Law § 5-501) and the other criminal (Penal Law § 190.40). Civilly, the maximum rate of interest is nominally fixed at 6% per annum (with certain exceptions in the Banking Law, which relate to financial institutions and are not applicable to the present matter, which contain a substantially higher ceiling). Criminally, usury lies where the amount of interest charged exceeds 25% per annum.

While the note which Plaintiff seeks to enforce does not specify the interest rate, it states a principal amount of $ 100,000.00, with the amount of interest due and payable at maturity of $ 10,000.00 for a total stated matured balance due and payable of $ 110,000.00. Since the instrument upon which Plaintiff sues is expressly due and payable on August 17, 2011 (ninety days after the date of its making), the application of simple mathematical calculation yields an annualized interest rate of 40%. This rate of interest exceeds both the civil usury limitation as set forth in GOL § 5-501 and the criminal usury limitation that is found in PL § 190.40.

A finding of usury (which must be made by clear and convincing evidence rather than by a mere fair preponderance) must be based upon intent that is both general and objective in nature (rather than specific and subjective) and further, must be found to have been extant at the time of the consummation of the loan transaction, Hartley v. Eagle Insurance Co. 222 NY 178 (1918). Indeed, the voluntary charging of interest upon an obligation at a rate that exceeds the statutory maximum is per se usurious, with the required intent simply being the intent to obtain the stated rate of interest in an amount in excess of the rate allowed by law, National Equipment Rental Ltd. v. Stanley 177 F Supp 583 (USDC EDNY, 1959), aff'd 283 F 2d 600 (CA 2nd Cir. 1960).

Here, the general defense of usury has been interposed by counsel on behalf of both one corporate defendant and one individual defendant. The practice of charging interest at a rate higher than that allowed by applicable law constitutes usury and any loan of money or the forbearance thereof which is in excess of the legal rate is deemed to be usurious, Matias v. Arango 289 AD2d 459 (2nd Dept. 2001). The civil usury defense is unavailable to and may not be interposed by a corporation or other business entity such as a limited liability company, GOL § 5-521 and is likewise unavailable to any party who acts as a guarantor of such an indebtedness, Schneider v. Phelps 41 NY2d 238 (1977). That having been said, however, the maximum rate of interest that may be charged in such an instance cannot exceed 25% per annum, as prescribed by the criminal usury statute. Where the interest rate charged exceeds 25% per annum, the defense of criminal usury may be asserted, even on behalf of a corporate obligor as well as any guarantors of such an indebtedness, In Re Colad Group Inc. 324 BR 208 (Bankr. W.D.NY 2005), A. Conner General Contracting Inc. v. Rols Capital Corp. 145 AD2d 452 (2nd Dept. 1988). [*3]

In the matter that is sub judice, the promissory note upon which Plaintiff sues clearly provides for interest to be charged at the rate of 40% per annum, which is substantially in excess of the 25% floor that is set forth in the criminal usury statute. An examination of Penal Law § 190.40 is both instructive and controlling in this regard. That statute reads as follows:

"§190.40 Criminal Usury In The Second Degree

A person is guilty of criminal usury in the second degree

when, not being authorized or permitted by law to do so, he

knowingly charges, takes or receives any money or other

property as interest on the loan or forbearance of any money

or other property, at a rate exceeding twenty five per centum

per annum or the equivalent rate for a longer or shorter

period.

Criminal usury in the second degree is a

Class E felony."

Based upon the facts and circumstances and all of the proof adduced, the Court is driven to the inescapable conclusion that the transaction at issue herein is usurious, in contravention of the provisions of Penal Law § 190.40 and further, that the defense of criminal usury may be and has been properly interposed herein.

Since usury has been established by clear and convincing evidence, the Court must next make a determination as to the statutory remedy that is applicable to case at bar. While the provisions of the Penal Law may apply, the Court finds that the General Obligations Law is equally controlling with respect to remediation. Section 5-511(1) of the General Obligations Law decrees that a contract that is found to be usurious is void ab initio and so continues in perpetuity, Wilkie v. Roosevelt 3 Johns. Cas. 206 (Supreme Court of Judicature, 1802), Sabine v. Paine 223 NY 401 (1918). The provisions of General Obligations Law Section 5-511(2) mandate that "...the court shall declare the same to be void, enjoin any prosecution thereon, and order the same to be surrendered and cancelled." G.O.L. § 5-511(2). The language of the statute is mandatory, leaves no room for judicial discretion and therefore requires a declaration by this Court that the entire obligation sought to be enforced by Plaintiff is null and void, from its very inception, Szerdahelyi v. Harris 67 NY2d 42 (1986).

Inasmuch as Plaintiff has unsuccessfully moved for summary judgment, the provisions of CPLR § 3212((b) permit the Court to "search the record" and, if legally efficacious, it may sua sponte grant summary judgment in favor of the non-moving party without the need for a cross-motion, provided that the same is confined to the action or causes of action interposed by the moving party, Costello v. Hapco Realty Inc. 305 AD2d 761 (2nd Dept. 2003), Santagata v. Vinegar Hill Group LLC 41 AD3d 576 (2nd Dept. 2007). While the language of that statute appears to be permissive on its face, there is substantial authority which indicates that searching the record is mandatory, Wilkinson v. Skinner 34 NY2d 53 (1974).

Upon a careful review of the entire record before the Court, it is clear that reverse summary judgment pursuant to CPLR § 3212(b) is appropriate, both legally and factually. For the reasons hereinabove set forth, reverse summary judgment will be granted in favor of Defendants, dismissing this action with [*4]prejudice.

Accordingly, the Court determines that the promissory note sought to be enforced by Plaintiff is void ab initio, that the same is and shall continue to be wholly unenforceable, that the same is and shall be cancelled and of no further force and effect and that Plaintiff shall be barred, enjoined and prohibited from taking any steps to enforce the promissory note or any portion thereof.

Accordingly, it is

ORDERED, ADJUDGED and DECREED that the application of Plaintiff for summary judgment in his favor pursuant to CPLR § 3213 shall be and the same is hereby denied in its entirety; and it is further

ORDERED, ADJUDGED and DECREED that upon searching the record, reverse summary judgment pursuant to CPLR § 3212(b) shall be and the same is hereby granted in favor of Defendants; and it is further

ORDERED, ADJUDGED and DECREED that the promissory note between Plaintiff as obligee and Defendants as obligors and guarantors dated May 17, 2011 shall be and the same is hereby declared to be null, void, cancelled, void and of no force and effect; and it is further

ORDERED, ADJUDGED and DECREED that Plaintiff, his successors and assigns shall be and are hereby barred, enjoined and prohibited from enforcing or attempting to enforce the promissory note or any portion thereof; and it is further

ORDERED, ADJUDGED and DECREED that this action be and is hereby dismissed with prejudice.

This constitutes the decision, judgment and order of this Court.

Dated: February 7, 2014

Riverhead, New York

_____________________________

HON. JEFFREY ARLEN SPINNER

J.S.C.