## Facts

- A property in Ossining, New York, was held in Jerry Bouffard’s name for the benefit of Riccardo Tedesco after a prior foreclosure-related transaction.
- In 2004, Tedesco sought high-risk financing and obtained a $175,000 loan secured by a mortgage on the property; the principal was not repaid.
- Tedesco later sought an additional $200,000; the lender’s principal declined further mortgage financing due to existing debt and instead proposed a “purchase” of the property.
- Bouffard executed a deed conveying the property to Befese, LLC for $200,000, coupled with an option allowing Bouffard/Tedesco to repurchase within 90 days for $220,000 (with later extensions).
- The lender structured the transaction to avoid foreclosure if the borrowers defaulted; Befese did not record the deed or take possession, and Bouffard/Tedesco remained in possession.
- The option was not timely exercised, and the property was later conveyed through the chain of title to Hawkes Crossing, LLC.
- After a nonjury trial, the court declared the deed to Befese null and void as security for a usurious loan and dismissed Hawkes Crossing’s cross-claims.

## Issues

1. Whether the deed to Befese, LLC, though absolute in form, was intended as security for a debt (an equitable mortgage) rather than an outright conveyance.
2. If the transaction was a secured loan, whether the option price created a usurious rate of return under New York law, rendering the loan and security void.
3. Whether Hawkes Crossing, LLC, as a subsequent transferee in the chain of title, could enforce rights based on the deed.

## Decision

- The Appellate Division affirmed the judgment insofar as appealed from.
- The deed-and-option arrangement was properly treated as an equitable mortgage securing a $200,000 loan.
- The implied interest from a $220,000 repurchase price over a short term was usurious; the loan was void and the deed given as security was properly declared null and void.
- Hawkes Crossing’s cross-claims were properly dismissed because its claimed rights derived from the void security deed.

## Legal Principles

- Equity treats an instrument absolute on its face as a mortgage when it is intended to secure repayment of a debt; courts evaluate intent and surrounding circumstances rather than form.
- A sale-and-repurchase-option structure may be recharacterized as a secured loan where the economic reality reflects lending rather than a true transfer of ownership.
- A usurious loan is void, and any conveyance or interest given as security for that loan is unenforceable.
- A subsequent transferee’s rights are limited where the chain of title depends on a deed that is void as security for a usurious transaction.

## Conclusion

The court upheld recharacterization of the deed-plus-option transaction as a secured loan and, finding the implied return usurious, affirmed that the loan and deed were void, eliminating enforcement rights for a later title holder whose claim depended on that deed.


Bouffard v. Befese, LLC, 111 A.D.3d 866, 976 N.Y.S.2d 510 (N.Y. App. Div. 2d Dep’t 2013)