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Where the defendants in a suit over a loan have moved for judgment on the pleadings, that motion should be denied despite the defendants’ contention that the rate of interest charged exceeds the maximum rate permitted by Michigan’s criminal usury statute.
“Plaintiff Private Financing Alternatives, LLC, brings this action to recover money loaned to Defendant Walloon Lake Holdings, LLC (‘Walloon Holdings’). Defendants Matthew Borisch, Jonathan Borisch, Mary Borisch, and the Matthew Allen Borisch Trust (‘Trust’) allegedly agreed to guarantee repayment of the loan. Defendants JLB Restaurant Holdings, LLC (‘JLB’) and Hotel Walloon, LLC (‘Hotel Walloon’) are tenants on properties owned or controlled by Walloon Holdings. Before the Court is Defendants’ motion for judgment on the pleadings (ECF No. 29), Plaintiff’s motion to strike affirmative defenses to the complaint (ECF No. 20), Plaintiff’s motion for leave to file an amended complaint (ECF No. 37), and Plaintiff’s motion to appoint a receiver (ECF No. 42). For the reasons herein, the Court will deny the motion for judgment on the pleadings, deny Plaintiff’s motion to strike, allow Plaintiff to amend its complaint, and deny Plaintiff’s motion to appoint a receiver.
“In their motion, Defendants argue that they are entitled to judgment because the Note is not enforceable. In particular, Defendants contend that the rate of interest the Note charged exceeds the maximum rate permitted by Michigan’s criminal usury statute, Mich. Comp. Laws §438.41. The latter provides that charging interest ‘at a rate exceeding 25% at simple interest per annum’ is ‘criminal usury’ when ‘not … authorized or permitted by law.’
“In response, Plaintiff relies on an exception to the criminal usury rate, which applies to ‘indebtedness of $100,000.00 or more,’ where ‘the bona fide primary security … is a lien against real property other than a single family residence.’ Mich. Comp. Laws §438.31c(11).
“The Court cannot tell from the pleadings alone whether any security interest Plaintiff possessed in single-family residences was the ‘primary’ security for Defendants’ debt to Plaintiff. Even if Plaintiff possessed a security interest in some single-family residences, §438.31c(11) might still apply if real property other than single-family residences was the ‘primary’ security for the debt. To determine what property was the primary security, the Court needs more information about the property that secured the loan.
“In short, Defendants’ arguments are not persuasive. Accordingly, the Court will deny Defendants’ motion for judgment on the pleadings.
“For the reasons herein, the Court will deny Defendants’ motion for judgment on the pleadings, deny Plaintiff’s motion to strike, grant Plaintiff’s motion for leave to amend the complaint, and deny Plaintiff’s motion to appoint a receiver. In addition, the Court will require Plaintiff to show cause why the Court should not dismiss the case for lack of subject matter jurisdiction.”
