The issue presented by this Partial Summary Judgment Motion is whether a lender is entitled to recover the principal of a loan where the interest rate violates N.J.S.A. 2C:21-19, the Criminal Usury Statute. This question has not yet been decided in any reported decision in this state.
Many material facts in this case are in dispute. They include the status of WALNUT HILL ASSOCIATES ("WALNUT HILL"), a New Jersey General Partnership composed of MEDFORD LAND COMPANY, INC., a Corporation, and GERALD D. VINGL, an individual, the amount of money actually loaned, as well as the method of calculating the interest rate.
The motion sub judice, however, presents this court with an issue solely involving questions of law. Such issues may be resolved on the basis of the pleadings and affidavits alone. R. 4:46-2, T & M Homes, Inc. v. Mansfield Tp., 162 N.J. Super. 497, 502, 393 A.2d 613 (Law Div.1978). For the purposes of this motion, the moving papers are to be considered in a light most favorable to the party opposing the motion, with all doubts resolved against the movant. Baer v. Sorbello, 177 N.J. Super. 182, 185, 425 A.2d 1089 (App.Div.1981).
The plaintiff contends that a loan was made to the defendants in the amount of $1,600,000. The defendants concede the loan was at least $1,300,000. Defendants have filed a counterclaim for money damages.
Loans which are in excess of $50,000 are regulated by N.J.S.A. 2C:21-19. Stuchin v. Kasirer, 237 N.J. Super. 604, 610 n. 3, 568 A.2d 907 (App.Div.1990). N.J.S.A. 2C:21-19(a)(2) provides that:
Any loan or forbearance with an interest rate which exceeds 30% per annum shall not be a rate authorized or permitted by law, except if the loan or
forbearance is made to a corporation any rate not in excess of 50% per annum shall be a rate authorized by law.
A violation of this statute triggers a risk of incarceration for a three year period since it constitutes a third degree offense. N.J.S.A. 2C:43-6(a). The violator also faces a fine of up to $250,000. N.J.S.A. 2C:21-19(b).
The Criminal Usury Statute makes no mention of the effect on a loan contract which carries a rate of interest determined to be criminally usurious. WALNUT HILL urges the court to find, under the common law, that the contract for the loan is unenforceable and the parties are to be left where the court finds them if the interest rate is found to be in violation of the criminal statute. See e.g. Ryan v. Motor Credit Co., Inc., 132 N.J. Eq. 398, 28 A.2d 181 (E. & A. 1942). The application of this rule would prevent SCHURAN from recovering any of the principal of the loan to WALNUT HILL.
Defendant's reliance on this common law doctrine is misplaced. Usury was unknown to the common law, and is solely a creature of statute. Missouri, Kansas & Texas Co. v. Krumseig, 172 U.S. 351, 19 S. Ct. 179, 43 L. Ed. 474 (1898). The earliest statutes dealing with this subject in New Jersey voided instruments tainted with usury. Judge, later Justice Pashman, in dealing with a usurious mortgage loan under N.J.S.A. 31:1-3, traced the evolution of usury legislation in New Jersey from the earliest statutes providing for complete forfeiture through the enactment of N.J.S.A. 31:1-3, which provides for forfeiture of interest only. Gorrin v. Higgins, 73 N.J. Super. 243, 179 A.2d 554 (Ch.Div.1962). As they stand today, neither N.J.S.A. ...