Decedent, Willette Thompson, died intestate on January 24, 2014, in the City of Buffalo, New York at the age of 74. She was survived by her daughters, Tarcia Brinson [hereafter, Tarcia] and Shanequa Washington, and her granddaughter Ashley Gilmer (the only child of her son Elwood Gilmer who had predeceased her in 1993). On May 20, 2014, temporary letters of administration were issued to Tarcia, with full letters of limited administration being issued to her on December 22, 2014. On February 9, 2015, a wrongful death action was commenced by Tarcia in Erie County Supreme Court [Index Number 810699/2015]. That action was subsequently settled on September 3, 2019 before the Hon. Frederick J. Marshall, J.S.C., who directed counsel for Tarcia to hold the sum of $25,560.13 in escrow with respect to decedent’s outstanding funeral bill1 and to make an application to this Court in order to determine the validity of that bill. By petition verified December 12, 2019, Tarcia seeks a determination from this Court that the funeral bill in question is “null and void”, and for related relief. A verified answer was interposed on September 17, 2020 by the funeral home, in which it claims that its bill is valid in all respects and should now be paid. Pending now before me is a motion by Tarcia seeking summary judgment dismissing the funeral home’s claim, and requesting that the amount held in escrow be used to pay a Medicare lien and attorney expenses, with the balance thereafter paid over to decedent’s distributees. The funeral home opposes Tarcia’s motion. The motion having been finally submitted, I now find and decide as follows. (A) After decedent died, Tarcia entered into a contract on January 30, 2014, with the funeral home for it to provide goods and services relating to decedent’s burial and her memorial service. At the time of signing, the “Itemization of Funeral Services and Merchandise Selected” [hereafter, the funeral agreement] stated that the total amount owed for services and merchandise was $12,410.00, and the document was signed by both the funeral director, Brian Lewis [hereafter, Lewis], and by Tarcia. The funeral agreement includes language regarding the interest rate to be charged on any balance remaining unpaid after March 1, 2014. The relevant portion of the funeral agreement reads as follows: “The foregoing has been read by (to) me and I hereby acknowledge receipt of a copy of same and agree to pay the above funeral account in the event that this account is not paid in accordance with the terms of this agreement, the undersigned hereby agrees to pay any and all costs and attorney’s fees incurred in connection with the collection of this account. *** This account becomes due on January 30, 2014. If bill remains unpaid beyond March 1, 2014 a late charge of 2 percent per month (annual rate 24 percent) may be added to the unpaid portion of the balance due.” A second document entitled “Promissory Note” [hereafter, the Note], dated January 30, 2014, was signed by Tarcia on January 31, 2014. The Note provides that Tarcia had until March 1, 2014 to pay the funeral home the full outstanding balance of $12,410.00, for the expenses of her mother’s funeral services. If the bill were not paid in full by that date, the Note states that “[a] late charge of 2 percent per month will be added to the unpaid portion of the balance due”. The relevant portion of the Note is as follows: “For value received, the undersigned, Tarcia L. Brown (the “Borrower”), at 51 Old Post Rd, Lancaster, NY 14086, promises to pay to the order of Brian K. Lewis Funeral Home (the “Lender”), at 347 Peckham St, Buffalo, NY 14206 (or at such other place as the Lender may designate in writing) the sum of $12, 410.00 with interest from March 1, 2014 on the unpaid principal at the rate of 2.00 percent per month. This account becomes due January 30, 2014. If bill remains unpaid beyond March 1, 2014 at late charge of 2 percent per month will be added to the unpaid portion of the balance due.” (B) Funeral expenses have long been upheld as a charge against an estate, which should take precedence above any and all other debts or claims for payment (see Estate of Einach, 1 Misc 2d 537, 540 [1955]). Surrogate Court Procedure Act 1811(1) states that “the reasonable funeral expenses of the decedent subject to the payment of expenses of administration shall be preferred to all debts and claims against his estate and shall be paid out of the first moneys received by [the] fiduciary.” The importance of giving priority to funeral expenses is well established (see Matter of Stiles, 126 Misc 715 [1926]; see also Matter of Tierney, 88 Misc 347 [1955]). Tarcia contends that, pursuant to General Obligations Law [GOL] §5-501, the Note is usurious and, pursuant to GOL §5-511, she asks that this Court find that the entire principal and interest amounts due for the funeral bill are void and may not be enforced. The funeral home, on the other hand, contends that the funeral agreement and the Note constitute “a contract and not a loan”, and that, “[i]f the transaction is not a loan, ‘there can be no usury, however unconscionable the contract may be’” (Jimenez v. Acheson, 42 AD3d 831, 832 [2007], quoting Seidel v. 18th E. 17th St. Owners, 79 NY2d 735, 744 [1992]; see also Keezing v. Rodriguez, 196 Misc 2d 408 [2003]). (i) The Note to the funeral home signed by Tarcia provides that a charge of 2 percent interest per month will be added after March 1, 2014 to any outstanding balance of the unpaid funeral expenses. Annualized at 2 percent, the interest rate being charged would be 24 percent. GOL §5-501 and NY Banking Law §14-a provide that it is illegal to “charge, take or receive any money, goods or things in action as interest on the loan or forbearance of any money, goods or things in action at a rate exceeding” 16 percent per year. Where usury is claimed, “a loan or forbearance of money at the prohibited rate of interest must be shown if the defense is to prevail” (Morris Plan Industrial Bank v. Faulds, 269 App Div 238, 240 [1945]; see also Orvis v. Curtiss, 157 NY 657, 660 [1899]). In determining whether a transaction is usurious, a Court must examine several factors: “‘The rudimentary element of usury is the existence of a loan or forbearance of money’ (Matter of City of Binghamton [Ritter], 133 AD2d 988, 989, lv dismissed 70 NY2d 1002; see, General Obligations Law §5-501; see also, 72 NY Jur 2d, Interest and Usury, §62, at 84). ‘[Where] there is no loan, there can be no usury’ (Oxhandler Structural Enters. v. Billard, 104 Misc 2d 38, 39). When a transaction is challenged as usurious, courts traditionally look beyond the standard form of the transaction and attempt to ascertain its true nature (see, Kuklis v. Treister, 83 AD2d 545). In other words, ‘[a] transaction must be considered in its totality and judged by its real character, rather than by the name, color, or form which the parties have seen fit to give it’ (Lester v. Levick, 50 AD2d 860, 862-863 [Christ, J., dissenting], revd on dissenting mem below 41 NY2d 940; see, 72 NY Jur 2d, Interest and Usury, §56, at 76). Significantly, there is a strong presumption against a finding of usury (see, Giventer v. Arnow, 37 NY2d 305, 309; Lehman v. Roseanne Investors Corp., 106 AD2d 617, 618), and this defense must be established by clear and convincing evidence as to all its elements (Giventer v. Arnow, supra, at 309; Matter of City of Binghamton [Ritter], supra, at 989)” (Feinberg v. Old Vestal Rd. Assoc., 157 AD2d 1002, 1003-1005 [1990], emphasis added). Furthermore, as the Court in Sogeti USA, LLC v. Whirlwind Bldg. Sys., 496 F. Supp. 2d 380, 382 [2007], pointed out: “[T]he law of usury is not even applicable to agreements for the provision of goods and services as they are not considered to constitute loan agreements. In re Renshaw, 229 B.R. 552, 557 (2d Cir. BAP 1999) (‘[t]he sale of goods and services are exempt from the usury law [because] [u]nlike an entity which lends money, it is not illegal for an entity providing goods and services to charge one price for cash and another price (original price plus a Service Charge) for a sale on credit.’). Feinberg v. Old Vestal Rd. Assocs., 157 AD2d 1002 (NY App. Div. 1990))” (emphasis added). (ii) Tarcia contends that the language and terms employed in the Note require this Court to construe it as a loan. Specifically, Tarcia refers to the title of the contract as a “Promissory Note”, and to the use of the terms “lender” and “borrower”, as evidence that the document is intended to have the same force and effect as a loan or forbearance agreement. The specific verbiage in the Note is not disputed, but the funeral home disagrees that such language turns the transaction into “a loan or forbearance” agreement. The funeral agreement is a one page document that lists the merchandise selected for the decedent’s funeral arrangements, including the purchase of a casket, death certificates, and use of the funeral home facilities and staff. Its terms are simple and itemized. There is no language in this agreement which would render it a loan or forbearance agreement. Rather, the terminology employed demonstrates that the purpose and intent of the agreement is for a sale of merchandise and services to be provided by the funeral home in connection with decedent’s memorial service and burial. The Note mirrors language that is included in the funeral agreement and, in essence, clarifies and expands those terms. While the terms “Lender” and “Borrower” employed in the Note are consistent with verbiage often used in loan or forbearance agreements, it is clear that the Note in this case was not intended to represent a loan agreement. The Note simply reinforced the terms of the funeral agreement, making clear what was required if the bill for decedent’s funeral and associated services were not paid by March 1, 2014. So viewed, this was simply an agreement for the possible payment of those goods and services over time; and, if that extended period were to occur, the price would be higher by the addition of interest. As our Court of Appeals pointed out in Mandelino v. Fribourg, 25 NY2d 145, 151 [1968]: “‘A contract which provides for a rate of interest greater than the legal rate upon a deferred payment, which constitutes consideration for a sale, is not usurious.’ This principle seems to have been regularly followed at the Appellate Division. ‘There is no usury in the normal purchase-money transaction where a seller demands a higher price because the consideration is not all in cash’” (emphasis added, quoting McAnsh v. Blauner, 222 AD 381, 382 [1928]; and Butts v. Samuel, 5 AD2d 1008 [1958]).2 Accordingly, I find that the funeral agreement is not a loan, but a contract for the purchase of goods and services, and therefore is not governed by the usury laws. The inclusion of the language describing the charge of an additional 2 percent interest rate per month subsequently is also not deemed usurious, as rates higher than the legal rate of interest may be applied to contracts for the sale of goods on credit. I make the same findings with respect to the Note. (C) I conclude that neither the Note nor the funeral agreement, considered either separately or together, constitute a loan or forbearance agreement. That being so, Tarcia’s claim of usury fails. Accordingly, I conclude that Tarcia’s motion for summary judgment requesting that the funeral agreement and the Note be voided as usurious, must be, and it hereby is, denied in all respects. Additionally, the $25,560.13 currently being held in escrow pursuant to the direction of Supreme Court shall be paid to the funeral home as payment in full for the outstanding amount of decedent’s funeral bill within twenty (20) days of the date hereof. This decision shall constitute the Order of this Court and no other or further decree or order shall be required. Dated: March 11, 2021
