Kleanthous v. First of Chelsea Corp.

Connor, J. Plaintiff appeals as of right from the trial court’s judgment entered after a series of rulings on motions for summary disposition. We reverse and remand for further proceedings. At issue on appeal are the interest rates in two demand notes defendant made in 1980. In the notes, defendant promised to pay eighteen percent interest a year on a total of $95,000 in principal. There is no dispute that plaintiff is the holder of the notes to whom any principal and interest owed would be payable. Plaintiff filed this action in 1988. He alleges that in 1985 the parties agreed to reduce the interest rate on the 1980 notes to fifteen percent. His complaint sought payment of interest owed on the notes and return of the principal lent. Defendant raised a defense of usury. In a series of rulings on motions for summary disposition, the trial court decided that the notes were usurious, and, therefore, defendant owed no interest on the notes. Because the amount of interest paid on the notes had already exceeded the principal, the trial court held that plaintiff was not entitled to return of the principal. MCL 450.1275; MSA 21.200(275) provides that a corporation may agree in writing to pay a rate of interest in excess of the legal rate and that the defense of usury is prohibited. MCL 438.61; MSA 19.15(71), effective March 31, 1983, made it lawful [442] to charge business entities, including corporations, interest at rates not exceeding fifteen percent a year. These statutes are not in conflict. One sets the legal interest rate at fifteen percent for a wide class of business entities. The other states that a particular class of business entities, corporations, can agree to pay interest at rates higher than the legal rate and they will be barred from raising usury as a defense. Changing the legal interest rate applicable to business entities from seven percent to fifteen percent did nothing to diminish the authority corporations have to agree to pay interest in excess of the legal limit and did nothing to diminish the prohibition on corporations from raising the defense of usury if they have agreed to pay interest in excess of the legal limit. We find that defendant is bound to pay the interest rate promised in writing and cannot raise the defense of usury. The judgment of the trial court on the two notes made in 1980 is reversed, and the case is remanded for further proceedings consistent with this opinion. Reversed and remanded. We do not retain jurisdiction.