Summary
In Flushing National Bank v. Pinetop Building Corp., 54 A.D.2d 555 (2d Dep't 1976), the Second Department said, "Section 190.40 of the Penal Law was not intended to cover loans by banks."
Summary of this case from Discover Bank v. BrownOpinion
September 20, 1976
In an action inter alia upon a promissory note, defendants appeal from a judgment of the Supreme Court, Queens County, entered April 27, 1976, which is in favor of plaintiff. Judgment affirmed, with costs. The plaintiff is a national bank which loaned money to defendant Pinetop Building Corp., the maker of a promissory note. The individual defendants are guarantors of that note. At the trial, it was adduced that the loan was at an interest rate of 27.5% per year. Defendants contend that under section 190.40 Penal of the Penal Law, which makes loans at an interest rate in excess of 25% per annum criminally usurious, the entire loan, principal and interest, is illegal and void, and hence unenforceable. Under subdivision 6 of section 108 and section 235-b Banking of the Banking Law, the sole penalty for any usurious loan by a banking institution is the forfeiture of interest. Section 190.40 Penal of the Penal Law was not intended to cover loans by banks (see Franklin Nat. Bank of L.I. v De Giacomo, 20 A.D.2d 797; Reisman v Hartmann Son, 51 Misc.2d 393). Martuscello, Acting P.J., Latham, Margett, Rabin and Hawkins, JJ., concur.