## Facts

- R. & R. Mohring Enterprises, Inc. (the company) obtained a one-year commercial loan from Ron King Corporation (King) secured by a mortgage on the company’s real property in Nassau County, New York.
- The loan terms included an 18% annual interest rate, a two-point (2%) loan-origination fee charged at closing, and a 24% annual interest rate if the borrower defaulted or failed to pay the loan at maturity.
- The note called for monthly payments (interest-only) and a balloon payment at the maturity date.
- The company did not make the required monthly payments.
- King declared a default, accelerated the debt, and filed a foreclosure action.
- King moved for summary judgment of foreclosure and sale and related relief, including an order of reference to compute the amount due, appointment of a receiver, and default judgment against Richard Mohring based on a personal guaranty.
- The defendants opposed, arguing the loan was void for criminal usury because the 24% default rate combined with the two-point fee allegedly produced an effective annual rate above the 25% criminal-usury cap, and also asserting fraud-based defenses tied to alleged oral assurances about refinancing.

## Issues

1. Whether King established entitlement to summary judgment in foreclosure by submitting the note, mortgage, and proof of default.
2. Whether the defendants raised a triable issue that the loan was criminally usurious (Penal Law § 190.40) because default interest and the origination fee allegedly pushed the effective interest rate above 25%, thereby voiding the loan.
3. Whether the defendants’ fraud and related equitable defenses (based on alleged oral promises of refinancing) created a factual dispute sufficient to defeat summary judgment.

## Decision

- The court (Sup. Ct., Nassau County) granted King’s motion for summary judgment of foreclosure and sale, finding King proved the existence of the debt and the defendants’ default.
- The court rejected the criminal-usury defense, ruling that the defendants did not show the lender willfully charged or received interest above the 25% criminal-usury threshold at the time the loan was made; the 24% rate applied only upon default or nonpayment at maturity.
- The court found the two-point origination fee did not, on this record, convert the transaction into a criminally usurious loan; defendants offered only conclusory assertions rather than proof that the fee was a sham to disguise additional interest.
- The court dismissed the defendants’ fraud-based and related defenses, holding that self-serving claims about oral assurances could not overcome the written loan documents and were insufficient to raise a material factual dispute.
- The court issued an order of reference to compute the sums due, entered default judgment against the individual guarantor, and appointed a receiver to collect and preserve rents during the foreclosure.

## Legal Principles

- A plaintiff seeking summary judgment in a mortgage-foreclosure action generally meets its initial burden by producing the mortgage, the unpaid note, and evidence of the borrower’s default; the burden then shifts to the defendant to produce admissible evidence of a triable defense.
- Under New York law, a corporation is barred from asserting civil usury, but it may attempt to assert criminal usury; to succeed, the borrower must show the lender willfully charged, took, or received interest exceeding 25% per annum and that the transaction was usurious when made.
- A higher interest rate that applies only after default or after nonpayment at maturity is typically treated as a post-breach consequence rather than part of the interest rate used to test whether the loan was usurious at inception.
- Loan-origination fees or “points” are not automatically treated as interest for usury purposes; the borrower must present evidence that the fee was a device to collect additional interest beyond what the documents state.
- Conclusory affidavits and allegations of oral promises generally do not defeat summary judgment where written agreements govern the parties’ obligations and the defendant fails to provide concrete proof of fraud or other recognized defenses.
- In a foreclosure action, a court may grant ancillary relief such as an order of reference, appointment of a receiver to protect the collateral and rental income, and default judgment against a guarantor who fails to appear or oppose.

## Conclusion

The court granted foreclosure summary judgment to Ron King Corporation because it proved the note, mortgage, and default, and the defendants failed to present admissible evidence that the loan was criminally usurious or that alleged oral assurances about refinancing created a viable fraud or equitable defense; the court therefore struck the defenses, issued an order of reference, entered default judgment on the guaranty, and appointed a receiver.


Ron King Corp. v. R. & R. Mohring Enterprises, Inc., 2011 N.Y.Misc.Lexis 4642 (2011)