Commercial Division Blog

Posted: November 2, 2018 / Category Usury

Defendants Estopped From Raising Usury Defense

On October 17, 2018, Justice Ash of the Kings County Commercial Division issued a decision in Sasidharan v. Piverger, 2018 NY Slip Op. 32669(U), holding that defendants that arranged the terms of an investment were estopped from asserting a usury defense, explaining:

Upon consideration of the foregoing, the Court finds that the Assoumou Defendants are estopped from raising usury as a defense as a matter of law. New York recognizes that a borrower may be estopped from interposing a usury defense when, through a special relationship with the lender, the borrower induces reliance on the legality of the transaction. Thus, where defendant attorney induced the plaintiff's reliance, arranged the terms of the investment, and drafted the promissory note sued upon, defendant was estopped from asserting the defense of usury.

Here, it is undisputed that Assoumou approached Plaintiffs for the loan, the Assoumou Defendants' representative, Njoku, drafted the Note and personal guaranties, and the Assoumou Defendants' counsel provided Plaintiffs with the Enforceability Opinion, the express purpose of which was to induce reliance on the validity of the loan transaction. The Assoumou Defendants' contention that Plaintiffs dictated the terms of the Note is conclusory and without any evidentiary support. Based upon this undisputed evidence, Plaintiffs are entitled to summary judgment against the Assoumou Defendants on their first cause of action. However, Plaintiffs are only entitled to recover the loan amount at a legal rate of interest.

(Internal citations omitted).

New York's usury laws are subject to many limitations (this case discusses one). Still, there are circumstances where the interest rate in an agreement is so high that a court will not enforce it. Contact Schlam Stone & Dolan partner John Lundin at if you or a client have a question regarding whether the interest rate in an agreement or note is legal.