Opinion
Decision, originally published in 15 A.D.2d 932, reprinted to indicate deletion of the word "not" in the sentence beginning "Under such circumstances, even though purchase money mortgages in amounts higher than originally contemplated did [not] eventuate" (see lines 11 and 12 from bottom). — [Rep.
In an action for cancellation on the ground of usury, of two second mortgages upon real property and of the accompanying bonds and estoppel certificates, and for other relief, the defendant American Home Sales Corporation appeals from a judgment of the Supreme Court, Westchester County, entered April 6, 1960, upon the decision of the court after a nonjury trial, directing said defendant to surrender such instruments to the plaintiffs and authorizing the County Clerk to cancel and discharge the mortgages of record. Judgment reversed on the law and the facts, with costs to said defendant, and complaint dismissed on the merits, without costs. Findings of fact numbered 9, 10, 12, 13, 14, 17, 18, 20, 21, 22 and 23 are reversed; and the following new findings of fact are made: (1) that the respective amounts of the mortgages and bonds in suit represent the agreed balance of the sums due for the erection of the houses and for the expenses incidental to such mortgages and bonds, plus a sum equal to the legal rate of interest on the total sum of such balance and expenses; (2) that said defendant American did not demand and plaintiffs did not pay interest in excess of the legal rate of interest; and (3) that there was no mutual agreement for the payment and receipt of an additional or a usurious rate of interest. In our opinion, the plaintiffs failed to establish usury. The alleged claim of a 10% usurious bonus effected by a blanket charge for closing fees was not shown by clear and convincing proof. Plaintiffs did not contest the reasonableness of any of the cumulated charges, and unsupported proof of overcharge was not in and by itself evidence of usury ( Jefferson Tit. Mtge. Corp. v. Dempsey, 153 Misc. 32, 35-36, affd. 242 App. Div. 626, mod. on other grounds 266 N.Y. 190). If the amount of such expenses was exaggerated or misrepresented, such misconduct, while it may have been a fraud and may have given rise to an action therefor, did not constitute usury ( Morton v. Thurber, 85 N.Y. 550, 556; Guggenheimer v. Geiszler, 81 N.Y. 293, 296). The claim of usury must fail where the evidence leaves lacking proof "as to a definite exaction of a usurious sum" ( Carrington Bros. v. Gadsby, 237 App. Div. 195). The plaintiffs' attempt to establish an additional "30% bonus" was dispelled by proof, elicited by them, that in the business of mortgage financing, interest rates such as those involved here, namely, 6% per annum on five year mortgages, were denominated a 30% charge. Hence, the mere use of such verbiage does not prove the unlawful exaction of interest. In our opinion, upon all the proof adduced, there was here present the common situation where the builder and the buyers were merely disputing over the final price and credit terms to be extended to the buyers. Under such circumstances, even though purchase money mortgages in amounts higher than originally contemplated did eventuate, there was no usury merely because such mortgages resulted from the fact that the builder demanded and exacted a higher total price by reason either of increased cost of construction or the buyers' failure to pay the full price in cash ( Butts v. Samuel, 5 A.D.2d 1008; Del Rubio v. Duchesne, 284 App. Div. 89; Black v. Bederson, 10 A.D.2d 631; Bennis v. Thomas, 14 A.D.2d 895). Moreover, here it also appears that the bonds and mortgages were intended to be security given in satisfaction of unliquidated amounts due (cf. Thurston v. Cornell, 38 N.Y. 281, 285-286). Beldock, P.J., Christ, Hill, Rabin and Hopkins, JJ., concur.