Mills v. Pesetsky

M. E. Kobza, J.

(dissenting). I oppose the view of the majority. There is no legal citation to support the decision, which takes liberties with the statute that prohibits usurious interest rates. I would affirm the judgment of the trial court.

The facts are simple and not in dispute. They are accurately set forth in the majority opinion. Plaintiff claimed that the trial court ignored the fact that all three contracts emanated from one transaction and that all three should be considered as one. Then, in a fanciful flight, followed by my brother and sister of this Court, plaintiff requests us to "merge” the interest rates of two of the three documents, one rate admitted by all to be usurious, twelve percent, and the other legal, eight percent.

Plaintiff urges this by analogy to other cases integrating different contracts on the basis that the contracts were related, connected, and intertwined. There was nothing in any of those cases *195suggesting the path selected here, that if the terms of one contract are illegal and the terms of another legal, we can mesh them to make them both legal. It is this suggestion that distinguishes this case from those cases. Plaintiffs request to merge legal and illegal contract terms to come up with a "legal” rate of interest is not supported by case law, and such merger should not be allowed.

One case, Bebee v Grettenberger, 82 Mich App 416; 266 NW2d 829 (1978), spoke of a situation that was factually different but analogous to our situation. A legal contract with an eight percent (legal) rate of interest was replaced with a second mortgage with an eight percent interest rate, illegal for second mortgages. The Bebee Court held that it was not a lawful rate.

First, the trial court did consider all three contracts. No one disputes the remainder of the purchase price, $20,000, was replaced by the note, although nothing says so in the note, and neither the land contract nor the addendum refers specifically to that fact. Even one of the co-signers, William Fugate, is not a signatory of the land contract or the addendum.

However, to not consider that replacement as a part of the transaction could lead to an inequitable result, that is, a remaining balance due on or before May 1, 1995, as provided in the addendum, and an additional $20,000 due under the promissory note. Not only would that lead to an inequitable result, but no one is disputing that the $20,000 obligation was, in fact, the balance of the purchase price, after the first part of the purchase price, with its usurious rate, was paid. Even if we consider all three documents as part of one transaction, we still are not required to merge the interest rates of two of those documents to make the transaction legal. The documents themselves do *196not even refer to the process engaged in by plaintiff and the majority.

Second, the trial court not only granted the stay requested by defendant, but it also denied the plaintiffs two motions for summary disposition. Such action is similar in effect to the operation of MCR 2.116(I)(2), where, if the moving party is not entitled to relief but the nonmoving party is, the court may grant the relief to the nonmoving party. Here, the award of relief to defendant, by its mutual exclusivity, resulted in denial of the opposite form of relief. In essence, only one side can be right on the issue.

Third, I subscribe to the reasoning of the trial court in its dispositive opinion, but I would add that it is unnecessary to consider the three documents as separate transactions to reach the same conclusion. Each document should stand the test of a lawful contract with respect to its terms when they are clear and unambiguous and should be given their plain meaning. The plain meaning and effect of the words of the addendum is that, while payments are being made during that period of time, the rate will be usurious. Suppose we follow the course of the majority, in a hypothetical setting, where a default occurs in the first stage. The majority opinion could be used to require a trial court to enforce the usurious rate of the first portion of the contract and terminate the entire transaction, with the potential in a summary proceeding to have the purchase returned or a foreclosure with a deficiency determined, in part, on the basis of an illegal interest rate. In fact, contracts could deliberately set an extremely high usurious rate of say twenty-two percent on the first half of the money, with no interest on the second half. Fraud potentially would be easier, requiring par*197ties to understand the total effect of different rates on different balances paid over different periods.

Fourth, the last point leads to separate consideration of the basic purposes of usury statutes. The Legislature has determined it to be public policy that people not be free to set any rate they want. Nor does the statute allow a rate higher than that allowed on one portion with a lower rate on a different portion. Many people and financial institutions follow the allowed rate without exception. Now, the majority opinion does violence to the spirit and letter of our usury laws, and it represents a singular precedential departure from our body of case law interpreting those statutes, a rogue if you will. Certainty and clarity are required to insure the smooth flow of debt instruments of this nature in the stream of commerce. The waters may become roiled now that exceptions of this nature are allowed.

Fifth, no other case in Michigan history deals specifically with the issue in this case. Any conclusion by this Court, therefore, should attempt to adhere closely to the letter of the statute when interpreting contracts, so as to give the statute its intended effect and accomplish its public purpose. This is especially true when the language of the addendum contract clearly states a usurious rate.

Therefore, I know of no authority to support any conclusion to invalidate the illegal interest provision; no case, statute, or public policy justifies this Court’s reformation of the two separately enforceable legal documents involved in the transaction in this case. Each document should contain valid terms for each period to which each rate applies, because the contract terms may require enforcement without reference to the other document. The trial court in its opinion, accurately and correctly stated the law of this state. I would affirm.