Credit Acceptance Corporation, Plaintiff-Appellant, v. Yenny Holguin, Defendant-Respondent. (2026)

Appeal from a Decision and Order of Ithaca City Court (Peacock, J.), entered November 26, 2025, which denied plaintiff-appellant's motion for a default judgment and, sua sponte, dismissed the complaint.

Plaintiff-Appellant Credit Acceptance Corporation ("CAC") commenced this action to recover the unpaid balance remaining after the vehicle securing defendant's retail installment contract was repossessed and sold. Defendant failed to answer the complaint, appear in City Court, oppose plaintiff's motion for default judgment, or otherwise contest liability. Although City Court found defendant to be in default, it denied plaintiff's application for judgment and dismissed the complaint after concluding, upon its own initiative, that the transaction was not a retail installment sale governed by the Motor Vehicle Retail Instalment Sales Act ("MVRISA"), but instead constituted a criminally usurious loan rendered void as a matter of law. NY Pers. Prop. Law §§ 301 et seq.

City Court reasoned that because the retail installment contract contemplated assignment to CAC immediately after execution and because contingent late charges were assessed following defendant's default, the transaction should be recharacterized as a direct loan from CAC imposing interest in excess of New York's criminal usury limit. CAC appeals, contending that the transaction falls squarely within the statutory framework established by MVRISA, that assignment of the contract did not alter its legal character, that contingent post-default late charges do not constitute interest for purposes of the criminal usury statutes, and that plaintiff otherwise established its entitlement to a default judgment as a matter of law. Defendant has neither appeared nor submitted a brief on appeal. For the reasons that follow, the Court agrees with CAC that the judgment of the City Court must be reversed.

STANDARD OF REVIEW

As the intermediate appellate court reviewing a judgment of City Court, this Court possesses broad authority to review questions of both law and fact and to render the judgment warranted by the record. Uniform City Court Act §§ 1701, 1702(d), 1703(a); CPLR §§ 5501(c), 5522(a). Such " authority is as broad as that of the trial court [internal citations omitted] " Northern Westchester Professional Park Assoc. v. Town of Bedford, 60 NY2d 492, 499 (1983).

Because the material facts are undisputed, this appeal presents only questions of law concerning the proper characterization of the underlying transaction and the legal consequences flowing from the documentary evidence. The relevant facts are established entirely by the written retail installment contract, the accompanying business records, and the procedural history of the action. Accordingly, this Court independently determines whether the transaction is governed by MVRISA and whether plaintiff established its entitlement to judgment as a matter of law.

UNDISPUTED FACTS

The material facts are undisputed. On February 24, 2020, defendant purchased a 2013 Cadillac ATS from an automobile dealership located in Corning, New York. The parties negotiated a cash purchase price of $14,998.00. Defendant paid $5,500.00 directly to the dealership as a down payment and financed the remaining balance pursuant to a written retail installment contract requiring sixty-six monthly payments of $370.16 at an annual percentage rate of 22.99 percent. The agreement identified defendant as the "Buyer" and the dealership as the "Creditor-Seller." Defendant executed the contract and initialed each page.

The agreement bears all of the characteristics of a retail installment contract governed by MVRISA. It identifies the motor vehicle purchased, itemizes the negotiated cash purchase price, down payment, amount financed, finance charge, annual percentage rate, total sale price, taxes, governmental fees, optional products, and payment schedule. The agreement grants the dealership a security interest in the vehicle until the indebtedness is satisfied, contains the disclosures required by the Federal Truth in Lending Act, and expressly contemplates that the dealership may assign its rights under the contract to a financing agency, after which defendant's installment payments would be made to the assignee.

The record further establishes that defendant negotiated exclusively with the dealership concerning the purchase of the vehicle and the terms of the retail installment sale. Nothing in the record suggests that plaintiff negotiated the purchase price, sold the vehicle to defendant, advanced funds directly to defendant, or otherwise participated in the underlying retail sales transaction. Rather, the documentary record confirms that, after execution of the retail installment contract, the dealership assigned its contractual rights to plaintiff pursuant to a separate financing arrangement expressly contemplated by both the agreement and MVRISA. Defendant accepted delivery of the vehicle, acquired the rights and responsibilities of ownership, and thereafter enjoyed the benefits of the transaction before subsequently defaulting upon the payment obligations.

Following defendant's default, plaintiff provided the notices required under the contract and applicable law, including notice of repossession, notice of defendant's right to redeem the collateral, notice of the intended disposition of the vehicle, and notice of the resulting deficiency following the sale. Defendant neither redeemed the collateral nor otherwise cured the default. The vehicle was thereafter sold at a commercially reasonable auction. After application of the sale proceeds and all appropriate credits, a deficiency balance of $4,476.80 remained due and owing.

In support of its claim, plaintiff submitted the executed retail installment contract, sworn affidavits from individuals with personal knowledge, account histories, payment records, repossession and disposition notices, auction documentation, valuation materials, and documentary proof establishing both the commercial reasonableness of the disposition of the collateral and the calculation of the remaining deficiency balance. After City Court requested additional submissions concerning the disposition of the collateral, plaintiff provided supplemental affidavits and documentary evidence addressing those issues.

It bears repeating that defendant neither answered the complaint, appeared in the action, opposed plaintiff's motion for a default judgment, nor otherwise challenged the enforceability of the agreement. Plaintiff subsequently moved for a default judgment pursuant to CPLR § 3215. Following its review of plaintiff's submissions and supplemental proof, City Court determined that defendant was in default.

Notwithstanding defendant's default and the absence of any affirmative defense, City Court denied plaintiff's motion for a default judgment and, on its own initiative, dismissed the complaint. Although defendant never appeared and never asserted civil usury, criminal usury, fraud, unconscionability, or any other defense to enforcement of the agreement, City Court concluded sua sponte that the retail installment contract should be recharacterized as a criminally usurious loan because the agreement contemplated assignment to plaintiff and because contingent late charges assessed after defendant's default allegedly increased the effective interest rate above New York's criminal usury threshold.

Accordingly, the issues presented on this appeal are purely legal. Specifically, the Court must determine whether the transaction evidenced by the record constitutes a retail motor vehicle installment sale governed by MVRISA or, as City Court concluded, a disguised loan of money subject to New York's criminal usury statutes. The Court must further determine whether the contingent post-default charges constitute interest for purposes of those statutes and, if not, whether plaintiff established its entitlement to a default judgment upon the record.

DISCUSSION

I. The Transaction Constituted a Retail Installment Sale Governed by MVRISA

The principal issue on this appeal is whether the transaction constituted a retail motor vehicle installment sale governed by MVRISA or, as City Court concluded, a direct loan of money subject to New York's criminal usury statutes. This Court concludes that City Court erred and this transaction falls squarely within MVRISA and is not subject to New York's usury statutes.

New York law has long recognized a fundamental distinction between a loan of money and the sale of goods upon credit. Unlike a loan, a retail installment sale reflects the purchase of property at an agreed credit price payable over time. The extension of credit represents an integral component of the commercial transaction rather than a separate lending arrangement. The Legislature codified that longstanding distinction through MVRISA, establishing a comprehensive statutory framework governing retail motor vehicle installment sales. Pers. Prop. Law §§ 301 et seq.

MVRISA defines a "retail installment contract" as an agreement pursuant to which a retail seller retains a security interest in a motor vehicle sold upon installment payments. Pers. Prop. Law § 301(5). The statute prescribes the required contents of such agreements, mandates specified consumer disclosures, and expressly authorizes a retail seller to contract for and collect an agreed credit service charge. Pers. Prop. Law §§ 302, 303. In so doing, the Legislature recognized that retail sales upon credit differ fundamentally from loans of money and established a distinct regulatory framework governing such transactions.

The agreement before this Court satisfies every material requirement imposed by MVRISA. It identifies defendant as the buyer and the dealership as the creditor-seller, specifies the motor vehicle purchased, itemizes the negotiated cash purchase price, down payment, amount financed, finance charge, annual percentage rate, total sale price, taxes, governmental fees, and payment schedule, and grants the dealership a security interest in the vehicle until the indebtedness is satisfied. Defendant executed the agreement and initialed each page. City Court identified no respect in which the contract failed to comply with the statutory requirements governing retail installment contracts.

This was a textbook retail installment sale of a motor vehicle. Defendant did not obtain a cash advance from plaintiff, borrow funds with which to purchase the vehicle, or enter into a separate lending transaction. Rather, defendant purchased an automobile upon credit from a retail seller pursuant to a written retail installment contract expressly contemplated by MVRISA.

Nothing in the record alters the essential character of that transaction. The fact that the dealership subsequently assigned its contractual rights to plaintiff did not retroactively transform the retail sale into a loan of money, nor did it alter the legal relationship created when defendant purchased the vehicle. At every stage of the transaction, defendant remained the purchaser of an automobile under a retail installment contract, not the borrower of money from a lending institution.

Accordingly, both the statutory framework enacted by the Legislature and the documentary record compel the same conclusion: the transaction at issue is a retail installment sale governed by MVRISA. City Court therefore erred in recharacterizing the agreement as a criminally usurious loan.

II. New York's Time-Price Doctrine Precludes Recharacterization of this Credit Sale as a Loan

The conclusion that the transaction before the Court constitutes a retail installment sale rather than a loan of money is consistent with New York's longstanding time-price doctrine. For well over a century, New York courts have recognized the fundamental distinction between a bona fide credit sale and a loan of money. A seller may lawfully charge one price for immediate payment and another for payment over time. The difference between the cash price and the credit price represents compensation for extending credit in connection with the sale of goods, rather than interest charged for the loan or forbearance of money. Consequently, a bona fide retail credit sale ordinarily falls outside the scope of New York's usury statutes.

The Third Department has consistently recognized that distinction. In Johnstown Bank v. American Sur. Co. of NY, 6 AD2d 4, 7 (3rd Dept. 1958), the Court explained that an agreement representing the terms of a sale of personal property upon credit " is not ordinarily subject to the ban against usury as would be the case if it were a loan." Likewise, in Marine Midland Bank, N.A. v. Sanford, 139 AD2d 881 (3rd Dept. 1988), the Third Department rejected the contention that a retail installment agreement for the purchase of personal property constituted a usurious lending transaction. Those principles control this appeal.

The record is devoid of evidence that defendant sought or received a loan of money. Defendant did not borrow funds from plaintiff with which to purchase an automobile. Rather, defendant negotiated the purchase of a specific vehicle from a retail dealership, paid a substantial down payment directly to the seller, accepted delivery of the vehicle, and agreed to satisfy the remaining balance through installment payments secured by the collateral itself. City Court's analysis effectively disregards the settled distinction between a retail credit sale and a loan of money. The transaction evidenced by this record possesses every hallmark of a bona fide retail installment sale and none of the characteristics of a direct lending transaction. Accordingly, the time-price doctrine independently confirms that the agreement falls outside the scope of New York's criminal usury statutes and cannot properly be recharacterized as a usurious loan.

III. Assignment of the Retail Sale Contract Did Not Alter the Nature of the Transaction

The Court of Appeals has long recognized that the contemporaneous transfer of automobile financing documents to a finance company does not transform an otherwise valid credit sale into a loan of money. Rather, the transaction remains what the parties created, i.e., a retail sale upon credit followed by an assignment of contractual rights. In Flatbush Auto Discount Corp. v. McCarthy-Bernhardt Buick, Inc., 9 NY2d 776 (1961), the Court of Appeals refused to disregard the legal structure of an automobile financing transaction merely because the retail installment contract was contemporaneously assigned to a financing entity. Although Flatbush Auto predates MVRISA in its present form, its reasoning remains entirely consistent with the Legislature's later recognition that retail installment contracts may routinely be assigned to financing agencies without altering the essential character of the underlying sale.

Here, although the assignment was anticipated from the outset, nothing in the record suggests that CAC negotiated the purchase price, established the financing terms with defendant, advanced funds directly to defendant, or otherwise supplanted the dealer as the seller in the underlying retail transaction. Subsequent courts considering materially indistinguishable financing arrangements have consistently reached the same conclusion. In Garcia v. Chrysler Capital LLC, 2016 WL 5719792 (S.D.NY 2016), the District Court rejected the argument that a finance company's preapproval transformed a retail installment sale into a usurious loan merely because it approved credit before execution of the contract and accepted assignment immediately thereafter. The court observed that MVRISA expressly authorizes assignments negotiated between dealers and financing agencies and concluded that nothing in the statute prohibits the routine coordination inherent in indirect automobile financing. Most importantly, the purchaser negotiated solely with the dealer and entered into a bona fide contract for the purchase of an actual automobile, not for a loan of money. See, Credit Acceptance Corp. v. Traylor, 2024 WL 2273522 (Monroe Cty. Sup. Ct. 2024), the court, relying upon Credit Acceptance Corp. v. Holness, 81 Misc 3d 133 (NY App. Term. 1st Dept. 2023), rejected the identical argument advanced here, concluding that a retail installment contract assigned to CAC remained precisely that, i.e., a retail installment contract, and that the customary commercial relationship between automobile dealers and financing agencies did not transform the underlying transaction into a direct loan.

In reaching the contrary conclusion, Ithaca City Court relied principally upon Ford Motor Credit Co. LLC v. Black, 27 Misc 3d 1211 (Richmond Cty. Civ. Ct. 2010) and Capitol Discount Corp. v. Rivera, 38 Misc 3d 1226 (Kings Cty. Civ. Ct. 2013). City Court's reliance upon Black and Rivera was misplaced. Neither case is binding upon this Court and more importantly, each adopts a construction of MVRISA that finds little support in either the statutory text or the longstanding distinction recognized under New York law between a retail credit sale and a loan of money. Both decisions effectively impose judicial limitations upon the relationship between automobile dealers and financing agencies that the Legislature itself declined to enact. They reason that where a finance company participates in approving credit before execution of the retail installment contract and accepts assignment immediately thereafter, the finance company should be viewed as the "true lender," thereby transforming the retail installment sale into a direct extension of credit subject to the criminal usury statutes. That reasoning cannot be reconciled with MVRISA itself. The Legislature expressly authorized financing agencies to purchase retail installment contracts from dealers "upon such terms and conditions and for such price as may be mutually agreed upon." Personal Property Law § 302(10). Nothing in the statute prohibits advance credit approval, preexisting dealer-finance company relationships, contemporaneous assignment, or the routine commercial practices that have characterized indirect automobile financing for decades. As the Federal District Court observed in Garcia v. Chrysler Capital LLC, supra., whatever additional restrictions might be desirable as a matter of public policy, courts are not free to engraft limitations onto a comprehensive statutory scheme that the Legislature deliberately chose not to impose. Courts interpret statutes; they do not rewrite them.

In short, City Court erred in concluding that the anticipated assignment of the contract altered the legal nature of the transaction or subjected it to New York's criminal usury statutes.

IV. The Contingent Late Charges Did Not Render the Agreement Criminally Usurious

City Court alternatively concluded that the agreement became criminally usurious because defendant incurred contingent late charges after defaulting upon the payment obligations. That conclusion is inconsistent with more than a century and a half of settled New York law. The retail installment contract provided that a late charge would be assessed only if an installment payment remained unpaid for more than ten days after its due date. Defendant successfully made numerous monthly payments before eventually defaulting under the agreement. Only after defendant failed to cure that default despite repeated notices were late charges assessed. Every challenged charge therefore arose solely because defendant failed to perform the contractual obligations. Defendant could have avoided each charge entirely through timely payment. That distinction has long been recognized as dispositive under New York's usury jurisprudence.

As early as Sumner v. People, 29 NY 337 (1864), the Court of Appeals held that a contractual obligation triggered only upon the debtor's default does not constitute interest because payment of the additional charge remains entirely within the debtor's control. The Third Department has consistently adhered to that principle. In Klapper v. Integrated Agricultural Management Co., Inc. 149 AD2d 765 (3rd Dept. 1989), the Court held that a higher rate applicable only after default did not render the underlying transaction usurious. Likewise, in Martell v. Drake, 124 AD3d 1200 (3rd Dept. 2015), the Third Department rejected the argument that contingent post-default charges should be included when calculating interest for purposes of New York's usury statutes.

Accordingly, the contingent late charges (i.e., late fees) assessed after defendant's default cannot properly be characterized as interest under New York's criminal usury statutes. City Court therefore erred in concluding that those charges transformed an otherwise valid retail installment contract into a criminally usurious loan.

V. Plaintiff Established Its Entitlement to a Default Judgment

Having concluded that the agreement constitutes a valid retail installment contract governed by MVRISA, the remaining question is whether plaintiff established its entitlement to a default judgment. This Court concludes that it did. CPLR § 3215 requires a plaintiff seeking a default judgment to submit proof of service, proof of the default, and proof of the facts constituting the claim. The burden imposed upon a plaintiff is intentionally modest. As the Court of Appeals explained in Woodson v. Mendon Leasing Corp., 100 NY2d 62, 71 (2003), a plaintiff need only present sufficient proof to enable the court to determine that a viable cause of action exists. The Appellate Division has similarly described that burden as "minimal" and "not stringent." Petty v. Law Office of Robert P. Santoriella, P.C., 200 AD3d 621 (1st Dept. 2021). CAC satisfied these requirements.

The record contains proof of service establishing defendant's default together with the executed retail installment contract, sworn affidavits from individuals with personal knowledge, certified business records, payment histories, repossession notices, notices of disposition, documentation establishing the commercial reasonableness of the sale of the collateral, valuation materials, and documentary proof establishing the calculation of the resulting deficiency balance. Collectively, those submissions established every element of plaintiff's claim. Once City Court determined that defendant was in default, defendant was deemed to have admitted liability. D D & P Realty, Inc. v. Robustiano, 68 AD3d 1496 (3rd Dept. 2009). The remaining inquiry therefore was a narrow one, i.e., whether plaintiff's submissions established a prima facie cause of action and the amount of damages recoverable. The uncontroverted documentary evidence established the existence of a valid retail installment contract, defendant's breach through nonpayment, lawful repossession of the collateral following default, commercially reasonable disposition of the vehicle, and a resulting contractual deficiency of $4,476.80. Under these circumstances, plaintiff established its entitlement to judgment as a matter of law.

VI. Procedural Fairness Required Notice and an Opportunity to Be Heard Before Dismissal Upon an Unpleaded Theory

Equally significant is the procedural posture of this case. Defendant never answered the complaint, never appeared in Ithaca City Court, never opposed plaintiff's motion for a default judgment, never asserted civil usury, criminal usury, unconscionability, fraud, or any other affirmative defense, and has not appeared upon this appeal. Nevertheless, City Court denied plaintiff's motion and dismissed the complaint upon a dispositive legal theory that originated entirely from the court, sua sponte, rather than either litigant. This conclusion cannot be reconciled with the fundamental principles underlying New York's and this nation's adversarial system.

The Appellate Term's recent decision in Credit Acceptance Corp. v. Holness, 2023 NY Slip Op 51376(U), reinforces this conclusion. There, the court held that the trial court erred in searching the record and granting summary judgment based upon a usury defense that had neither been pleaded nor argued by the defendant, emphasizing that plaintiff had received neither notice of the issue nor a meaningful opportunity to respond before judgment was entered.

Nothing in this opinion should be understood as limiting a court's authority to decline enforcement of contracts that are genuinely illegal. Rather, this case illustrates why that authority must remain anchored both to the governing statutory framework and to the fundamental procedural fairness that underlies our adversarial system. Where, as here, the Legislature has enacted a comprehensive statutory scheme expressly governing the challenged transaction, and the parties have never litigated the issue upon which dismissal ultimately rests, reversal is warranted.

CONCLUSION

City Court erred in recharacterizing that transaction as a criminally usurious loan based upon the anticipated assignment of the contract and the assessment of contingent post-default charges. The court further erred in dismissing plaintiff's complaint upon a dispositive legal theory never raised by defendant and without affording plaintiff a meaningful opportunity to address the legal issues upon which dismissal ultimately rested. Because the agreement falls squarely within MVRISA, because the challenged post-default charges do not constitute interest under New York's usury jurisprudence, because plaintiff satisfied each requirement for entry of a default judgment under CPLR § 3215, the Decision and Order of Ithaca City Court must be reversed.

Accordingly, it is hereby

ORDERED that the Decision and Order of Ithaca City Court entered November 26, 2025, is REVERSED, on the law; and it is further

ORDERED that plaintiff-appellant Credit Acceptance Corporation's motion for a default judgment pursuant to CPLR § 3215 is GRANTED; and it is further

ORDERED that the Clerk of Ithaca City Court shall enter judgment in favor of plaintiff-appellant Credit Acceptance Corporation and against Defendant-Respondent Yenny Holguin in the principal sum of $4,476.80, together with statutory interest, costs, and disbursements as provided by law.

This constitutes the Decision and Order of the Court.

ENTER.

July 7, 2026

Ithaca, New York

Hon. Scott A. Miller

Tompkins County Court

Scott A. Miller, J.