On June 17, 2024, Justice Ruchelsman of the Kings County Commercial Division issued a decision in Manna Capital Solutions LLC v. W & D Consultants Corp., 2024 NY Slip Op. 32061(U), holding that a side letter granting a lender part ownership of the borrower did not make the related loan usurious, explaining:
To assert claims the debt owed is unlawful it must be established that ( 1) the debt was unenforceable in whole or in part because of state or federal laws relating to illegal usury, (2) the debt was incurred in connection with the business of lending money at a usurious rate, (3) the usurious rate was at least twice the enforceable rate, and (4) as a result of all the above factors the plaintiff was injured in his or her business or property.
A side letter agreement was entered into between the parties whereby the plaintiff Manna Capital Solutions LLC was given a twenty-five percent share of defendant W & D Consultants Corp., on condition it provide the loan for one million dollars. Further, Manna, as partial owner was not required to pay back any of the funds. The defendants assert that additional ownership interest renders the amount of interest to which the plaintiff will receive greater than twenty-five percent rendering the loan illegal usury.
In Nile Capital Management LLC v. Knox Lawrence International LLC, 2011 WL 11166380 [Supreme Court New County 2011] the court rejected that argument in a case with almost identical facts. In that case the plaintiff filed a motion for summary judgement in lieu of a complaint based upon a promissory note not paid back. The court held the plaintiff had met its prima facie burden. In attempting to create a question of fact the defendant argued the ownership interest given the plaintiff increased the rate of interest to a usurious rate. The court rejected that argument pointing out that ownership interests in any company is not interest for the purpose of calculating the applicable interest rates. The court held that was a novel and unsupported argument regarding calculation of the interest rate.
Thus, any ownership interest given to the plaintiff was not an interest rate which could thereby be added to increase the legal interest rate of eighteen percent and somehow render the rate usurious.
Therefore, the promissory note was not usurious as a matter of law and these arguments provide no basis upon which to deny summary judgement.
(Internal quotations and citations omitted).