On November 10, 2025, Justice Walsh of the Westchester County Commercial Division issued a decision in Blue Elephant Specialty Fin. Fund, LP v. Gaspard & Menon Constr., LLC, 2025 NY Slip Op. 52131(U), holding that a guaranty did not waive a usury defense, explaining:
Where the defense of usury is asserted in opposition to a motion for summary judgment, the party asserting the validity of the loan bears the burden of demonstrating, as a matter of law, that the transaction between the parties was not usurious. If there exists a triable issue of fact as to the applicability of the defense of usury, a motion for summary judgment should not be granted. In this case, the parties agree that because this was a commercial transaction, Menon can only assert a defense of criminal usury and not civil usury (i.e., the loan at issue charged an interest rate in excess of 25% a year in violation of Penal Law § 190.40). A usurious contract is void and relieves the plaintiff of the obligation to repay principal and interest thereon.
The rudimentary element of usury is the existence of a loan or forbearance of money, and where there is no loan, there can be no usury. To determine whether a transaction constitutes a usurious loan, it 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. The court must examine whether the plaintiff is absolutely entitled to repayment under all circumstances. Unless a principal sum advanced is repayable absolutely, the transaction is not a loan. The factors to be reviewed in determining whether repayment is absolute or contingent include: (1) whether there is a reconciliation provision in the agreement; (2) whether the agreement has a finite term; and (3) whether there is any recourse should the merchant declare bankruptcy. Whether a transaction constitutes a cover for usury is a question of fact. It must appear that the real purpose of the transaction was, on the one side, to lend money at usurious interest reserved in some form by the contract and, on the other side, to borrow upon the usurious terms.
As an initial matter, the Court does not agree that, based on the terms of the Guaranty, Menon waived his right to assert a criminal usury defense. First, the waiver language in the Guaranty does not mirror the waiver language found by the Court of Appeals to be sufficient to waive such a defense. Here, the Guaranty states that Menon, unconditionally and irrevocably guarantees and promises to pay to Lender all amounts due under the Loan and the Loan Documents. The Guaranty also provides that the
Guarantor waives: (a) any defense based upon any legal disability or other defense of Borrower, any other guarantor or other person, or by reason of the cessation or limitation of the liability of Borrower from any cause other than full payment of all sums payable under the Restated Note or any of the other Loan Documents; (b) any defense based upon any lack of authority of the shareholders, members, managers, officers, directors, partners or agents acting or purporting to act on behalf of Guarantor or of Borrower or any principal of Borrower or any defect in the formation of Borrower or any principal of Borrower, if Borrower is an entity; (c) any defense based upon the application by Borrower of the proceeds of the Loan for purposes other than the purposes represented by Borrower to Lender or intended or understood by Lender or Guarantor; (d) any and all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against the principal by the operation of New York law or otherwise; (e) any defense based upon Lender’s failure to disclose to Guarantor any information concerning Borrower’s financial condition or any other circumstances bearing on Borrower’s ability to pay all sums payable under the Restated Note or any of the other Loan Documents; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (g) any defense based upon Lender’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section IIII (b)(2) of the Federal Bankruptcy Code or any successor statute; (h) any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code; (i) any right of subrogation, any right to enforce any remedy which Lender may have against Borrower and any right to participate in, or benefit from, any security for the Restated Note or the other Loan Documents now or hereafter held by Lender; (j) the benefit of any statute of limitations affecting the liability of Guarantor hereunder or the enforcement hereof; and (k) presentment, demand, protest and notice of any kind. Guarantor further waives any and all rights and defenses that Guarantor may have because Borrower’s debt is secured by real or personal property; this means, among other things, that Lender may collect from Guarantor without first [*10]foreclosing on any real or personal property collateral pledged by Guarantor or Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrower’s debt is secured by real or personal property. Without limiting the generality of the foregoing or any other provision hereof, Guarantor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Guarantor under New York law. Finally, Guarantor agrees that the performance of any act or any payment which tolls any statute of limitations applicable to the Restated Note or any of the other Loan Documents shall similarly operate to toll the statute of limitations applicable to Guarantor’s liability hereunder.
A review of the specific defenses that Menon waived does not include an agreement to waive a criminal usury defense or even a general defense concerning the lack of validity or enforceability of the Note. And even if Menon did explicitly waive a usury defense, it is unlikely that such a waiver would be effective as the Court of Appeals has made clear that any transaction tainted by criminal usury is void ab initio. Plaintiff has not provided any authority to support that the waiver language found in the Guaranty is sufficient for a finding that Menon waived his right to assert a criminal usury defense.
(Internal quotations and citations omitted).