Opinion
May 5, 1986
Appeal from the Supreme Court, Westchester County (Walsh, J.).
Order modified by (1) deleting the word "usurious" from the first line of the second decretal paragraph and substituting therefore the word "illegal", and (2) adding the following as the fifth decretal paragraph thereof: "The parties are directed to proceed to a hearing to determine if these loans may be held to be unconscionable under Connecticut law". As so modified, order affirmed, with costs to the defendant Anthony Macchia.
Special Term properly determined that Connecticut's substantive usury laws should be applied to these transactions (see, e.g., Pioneer Credit Corp. v Catalano, 51 Misc.2d 407, affd 28 A.D.2d 595) and that these mortgage-secured loans were not illegal under Connecticut law (see, Conn Gen Stat Ann § 37-9). Nonetheless, we view the appellant's usury claims as raising a cognizable issue as to whether these loans may be held to be unconscionable under Connecticut Law.
In mortgage-secured loans in excess of $5,000, Connecticut law substitutes an ad hoc unconscionability standard for the more strict and finite terms of a usury interest-rate ceiling (see, e.g., Hamm v Taylor, 180 Conn. 491, 429 A.2d 946). Consequently, a hearing is required (see, e.g., Hamm v Taylor, 180 Conn. 491, 495-497, 429 A.2d 946, 949, supra; cf. Society for Sav. v Chestnut Estates, 176 Conn. 563, 409 A.2d 1020) to examine the surrounding commercial contexts of these particular loans, including their commercial setting, risks, purposes and effects, and to determine if, in light of the evidence presented, they are "`so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract'" (Hamm v Taylor, 180 Conn. 491, 496, 429 A.2d 946, 949, supra, quoting from UCC 2-302 Comment 1).
Finally, we note, parenthetically, that should this matter proceed to foreclosure and sale and should respondent seek a deficiency judgment against the appellant due to the inadequacy of the proceeds of the sale, these loans would be usurious for that purpose under Connecticut law (Conn Gen Stat Ann §§ 37-4 — 37-6) and subject to appropriate remedies under Connecticut law (see, e.g., Atlas Realty Corp. v House, 120 Conn. 661, 183 A 9; Hamm v Taylor, supra; cf. Associated E. Mtge. Co. v Highland Park, 172 Conn. 395, 374 A.2d 1070). Mollen, P.J., Thompson, Rubin and Spatt, JJ., concur.