Esther Seidel et al., Respondents, v. 18 East 17th Street Owners, Inc. et al., Appellants, et al., Defendants., 79 N.Y.2d 735

Summary

The borrowers gave the lender a bond in exchange for a loan that helped finance the purchase of a building. The bond was secured by a second mortgage on the building. Prior to the maturity date, title in the building transferred to the owners. The owners paid half of the bond principal amount when it came due and claimed the defense of usury when the lender sought to foreclose on the mortgage. The lower court had determined that the transaction could be viewed as a joint venture that was not subject to the usury law or alternatively that issues of good faith and fair dealing precluded application of the usury defense. The court refused to enforce the usurious loan. It found that (1) the usury defense was not waived when the building was transferred to the owners because that transaction was not a sale but merely a conversion to cooperative ownership, (2) estoppel in pais did not apply because the lender suffered no injury in the transaction, (3) an option given the lender for a floor ...