                          STATE OF MICHIGAN

                           COURT OF APPEALS



WORLD O WORLD CORPORATION,                                          UNPUBLISHED
                                                                    February 21, 2017
               Plaintiff-Appellee,

v                                                                   No. 329512
                                                                    Oakland Circuit Court
MARINA SAFRONIY and YURIY SAFRONIY,                                 LC No. 2014-142903-CK

               Defendants-Appellants.


Before: GLEICHER, P.J., and MURRAY and FORT HOOD, JJ.

PER CURIAM.

        Plaintiff filed suit to collect a secured debt five years after the debtors stopped paying.
One debtor failed to respond and the other admitted her breach. The circuit court rightly entered
a default against the first and summarily resolved the claims against the other. However, the
court erred in ignoring that part of plaintiff’s damages claim that was barred by the applicable
statute of limitations. And the court should have set aside the default and entered an amended
judgment after plaintiff significantly reduced the rate at which the due was calculated. We
affirm in part, reverse in part, and remand for further proceedings.

                                        I. BACKGROUND

       In 2005, Yuriy and Marina Safroniy, husband and wife, borrowed $13,500 from plaintiff
to purchase property in Florida. The Safroniys gave plaintiff a mortgage over the property and
executed a promissory note, providing a 15-year repayment plan at 11.75% interest. The
promissory note and the mortgage each contained an acceleration clause. The mortgage’s clause
provided:

               If any sum of money herein referred to be not promptly paid within
       THIRTY (30) days next after the same becomes due . . . then the entire sum
       mentioned in said note, and this mortgage, or the entire unpaid balance thereon,
       shall forthwith or thereafter, at the option of the mortgagee, become and be due
       and payable . . . . Failure by the mortgagee to exercise any of the rights or options
       herein provided shall not constitute a waiver. . . .

The promissory note similarly stated:



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                If default be made in the payment of any of the sums or interest mentioned
       herein or in said mortgage . . . then the entire principal sum and accrued interest
       shall at the option of the holder hereof become at once due and collectible without
       notice, time being of the essence, and said principal sum and accrued interest shall
       both bear interest from such time until paid at the highest rate allowable under the
       laws of the State of Florida. Failure to exercise this option shall not constitute a
       waiver of the right to exercise the same in the event of any subsequent default.

“[T]he highest rate allowable under” Florida law is 18% simple interest.

       The Safroniys last made a loan payment on August 1, 2009, and have been in default ever
since. Even so, plaintiff waited more than five years to seek payment. Plaintiff did so by filing
suit on September 12, 2014, requesting $29,448.17—the remaining principal balance plus
compound interest calculated at 18%. Plaintiff served the Safroniys on October 30, 2014. This
was the Safroniys’ first notice that plaintiff intended to accelerate the loan.

       Despite that Yuriy and Marina are married and were both personally served with the
complaint, their attorney filed an answer in Marina’s name only. This led to a default being
entered against Yuriy in the amount of $29,448.17, the amount sought in plaintiff’s complaint.
Yuriy later sought to set the default aside, but the circuit court denied his motion.

       Thereafter, Marina and plaintiff filed cross motions for summary disposition. In one
motion, Marina cited Florida statute of limitations precedent in support of dismissing any claim
for missed payments due more than five years before the complaint was served. In another,
Marina argued that plaintiff’s attempt to collect compound interest calculated at 18% was
usurious and that Florida law therefore prohibited plaintiff from collecting any interest on the
debt.

       Plaintiff’s summary disposition motion was based on Marina’s admission that she had not
made required loan payments since 2009. In an affidavit accompanying its motion, plaintiff
changed its position to request only 11.75% simple interest, reducing the amount of damages
sought to $20,307.97. While plaintiff offered no explanation for this change at the time, it later
claimed that the amount requested in the complaint was calculated in error.

       The circuit court rejected both the usury and statute of limitations arguments raised by
Marina, but granted plaintiff’s motion to collect contract damages of $20,307.97. This resolved
all remaining issues in the lawsuit. The Safroniys appeal.

                                 II. SUMMARY DISPOSITION

       Marina Safroniy challenges the circuit court’s denial of her summary disposition motions.
We review de novo a circuit court’s denial of summary disposition. Dillard v Schlussel, 308
Mich App 429, 442; 865 NW2d 648 (2014). “Summary disposition may be granted under MCR
2.116(C)(7) when a claim is barred by the statute of limitations.” Id.

       “When reviewing a motion under MCR 2.116(C)(7), this Court must accept all
       well-pleaded factual allegations as true and construe them in favor of the plaintiff,
       unless other evidence contradicts them. If any affidavits, depositions, admissions,

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       or other documentary evidence are submitted, the court must consider them to
       determine whether there is a genuine issue of material fact. If no facts are in
       dispute, and if reasonable minds could not differ regarding the legal effect of
       those facts, the question whether the claim is barred is an issue of law for the
       court. However, if a question of fact exists to the extent that factual development
       could provide a basis for recovery, dismissal is inappropriate.” [Id. at 442-443,
       quoting Dextrom v Wexford Co, 287 Mich App 406, 428-429; 789 NW2d 211
       (2010) (citations omitted).]

       The circuit court denied Marina’s motion based on plaintiff’s alleged usury under MCR
2.116(C)(10).

               A motion under MCR 2.116(C)(10) “tests the factual support of a
       plaintiff’s claim.” Walsh v Taylor, 263 Mich App 618, 621; 689 NW2d 506
       (2004). “Summary disposition is appropriate under MCR 2.116(C)(10) if there is
       no genuine issue regarding any material fact and the moving party is entitled to
       judgment as a matter of law.” West v Gen Motors Corp, 469 Mich 177, 183; 665
       NW2d 468 (2003). “In reviewing a motion under MCR 2.116(C)(10), this Court
       considers the pleadings, admissions, affidavits, and other relevant documentary
       evidence of record in the light most favorable to the nonmoving party to
       determine whether any genuine issue of material fact exists to warrant a trial.”
       Walsh, 263 Mich App at 621. “A genuine issue of material fact exists when the
       record, giving the benefit of reasonable doubt to the opposing party, leaves open
       an issue upon which reasonable minds might differ.” West, 469 Mich at 183.
       [Zaher v Miotke, 300 Mich App 132, 139-140; 832 NW2d 266 (2013).]

       The circuit court erred, in part, in denying Marina’s statute-of-limitations based motion.

        It is undisputed that the statute of limitations applicable to this claim is five years,
pursuant to Fla Stat 95.11(2)(b). See also Greene v Bursey, 733 So2d 1111, 1114 (Fla Ct App,
1999). The limitations period begins to run when the cause of action accrues. Id., citing Fl Stat
95.031. It has long been the rule in Florida that the statute of limitations for the breach of an
installment payment contract begins to run separately with each missed payment. Access Ins
Planners, Inc v Gee, 175 So3d 921, 924 (Fla Ct App, 2015), citing Isaacs v Deutsch, 80 So2d
657 (Fla, 1955). See also Greene, 733 So2d at 1114 (holding that the statutory limitations period
ordinarily begins to run on installment contracts “on the date each installment becomes due”).
Accordingly, in any given case, the limitations period may run on some installments, but not on
others. Id.

        When a lender accelerates loan repayment, however, the total debt becomes due. The
date of acceleration becomes the last installment due date. See id. at 1115. Under Florida law,
the lender must demand the total balance due in order to actually accelerate the debt. Snow v
Wells Fargo Bank, NA, 156 So3d 538, 541 (Fla Ct App, 2015). A statement that the full amount
of principal and interest is immediately due suffices. Id. at 542. Provisions permitting a lender
to accelerate repayment without notice merely allow the lender to accelerate a loan without
giving the borrower an opportunity to remedy the shortfall; demanding full payment is distinct
from notice and is the required trigger for acceleration.

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        Here, plaintiff demanded repayment by serving its complaint on the Safroniys on October
30, 2014. Accordingly, plaintiff did not accelerate loan repayment until October 30, 2014.
Plaintiff appears to have attempted (mistakenly or otherwise) to accelerate the debt retroactively
to August 1, 2009, the date of the Safroniys’ last payment. Under Florida caselaw, however,
such an attempt could have no legal effect on the running of the statute of limitations. Greene,
733 So2d at 1115; Snow, 156 So3d at 542.

        Because this was an installment contract, and plaintiff did not accelerate the debt until
service was effectuated, the statute of limitations ran on each payment as it became due.
Therefore, plaintiff could only recover outstanding payments due on or after October 30, 2009.
Plaintiff’s claim for payments due September 1 and October 1, 2009, as well as for interest
associated with those payments, was time-barred. Accordingly, the circuit court should have
summarily dismissed plaintiff’s claim in that regard. On remand, the circuit court must calculate
a corrected judgment amount less these principal payments and associated interest.

         The circuit court did not err, however, in denying Marina’s motion for summary
disposition to preclude plaintiff’s collection of any interest based on plaintiff’s alleged violation
of Florida’s usury laws. Chapter 687 of the Florida Statutes was enacted “to protect borrowers
from paying unfair and excessive interest to overreaching creditors.” Jersey Palm-Gross, Inc v
Paper, 658 So2d 531, 534 (Fla, 1995). Usury is defined as “to reserve, charge, or take for any
loan . . . a rate of interest greater than the equivalent of 18[%] per annum simple interest, either
directly or indirectly . . . .” Fla Stat 687.03(1).

        The defense of usury consists of four elements: “(1) an express or implied loan; (2) a
repayment requirement; (3) an agreement to pay interest in excess of the legal rate; and (4) a
corrupt intent to take more than the legal rate for the money loaned.” Oregrund Ltd Partnership
v Sheive, 873 So2d 451, 456-457 (Fla Ct App, 2004) (emphasis altered from original). “[T]he
usurious nature of a transaction is established at the inception of the transaction.” Id. at 458
(emphasis in original). See also Home Credit Co v Brown, 148 So 2d 257, 260 (Fla 1962)
(“[T]he vice of usury is one which inheres in the parties’ agreement itself.”). “The exception to
this rule is where an old contract is abandoned and a new one, which has been entered into free
from the vice of the old, occurs.” Oregrund, 873 So2d at 459;

        Marina’s usury defense could not possibly succeed, regardless of any factual
development. The alleged usury—plaintiff’s request for 18% compound interest—was not part
of the promissory note or mortgage. The parties’ agreement was not usurious at its inception.
Rather, plaintiff waited until its complaint to seek recovery of 18% compound interest. We
could locate no Florida precedent denying a plaintiff’s recovery of any interest because it
requested usurious interest in a court complaint. Indeed, denying recovery of interest at a legal
rate under the circumstances runs counter to the purpose of Florida’s usury laws. “The purpose
of the statute is to protect the needy borrower by penalizing the unconscionable lender.” Party
Yards, Inc v Templeton, 751 So 2d 121, 122-123 (Fla Dist Ct App, 2000). A defendant in a
lawsuit who must litigate over the amount of damages is in an entirely different, and less
vulnerable, position than a needy borrower seeking a loan from an overreaching lender.

       And in the end plaintiff amended its damages request. Plaintiff could have sought 18%
simple interest pursuant to the acceleration clause in the promissory note. Instead, plaintiff gave

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Marina the benefit of 11.75% simple interest.1 Marina admitted that she had not paid the loan
principal or interest due under the promissory note since August 2009. Accordingly, no factual
question remained for trial in this regard.

                                   III. DEFAULT JUDGMENT

        Yuriy Safroniy contends that the circuit court should have set aside the default judgment
against him because he established both a meritorious defense (usury and statute of limitations)
and good cause for failing to answer the complaint. We review the circuit court’s decision for an
abuse of discretion. Epps v 4 Quarters Restoration, LLC, 498 Mich 518, 555; 872 NW2d 412
(2015). To warrant such relief, a defaulted party must establish good cause and present a
meritorious defense. MCR 2.603(D). Yuriy presented a meritorious defense, albeit marginally.
The usury defense was unavailing in this matter but the statute of limitations defense eliminated
recovery of two payments.

       However, Yuriy did not establish good cause. Good cause is established “by showing (1)
a procedural irregularity or defect, or (2) a reasonable excuse for failure to comply with the
requirements that created the default.” Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich
219, 229, 233; 600 NW2d 638 (1999). Plaintiff personally served Yuriy with a copy of the
complaint and Yuriy signed the receipt of service. Although Yuriy alleges that Marina actually
opened the envelope and took the complaint to their attorney, Yuriy’s acceptance of process
reveals his awareness that he was a named defendant. Indeed, Yuriy does not deny his
awareness of this fact. And Yuriy provides no excuse for the attorney’s failure to respond in his
name. “ ‘The carelessness or neglect of either the litigant or his attorney is not normally grounds
for granting a belated application to set aside a default regularly entered.’ ” Epps, 498 Mich at
554, quoting White v Sadler, 350 Mich 511, 522; 87 NW2d 192 (1957).

        Although the circuit court did not abuse its discretion at the time it denied Yuriy’s motion
to set aside the default judgment, it should have set it aside and entered an amended judgment
after plaintiff admitted on the record that it was entitled only to simple interest at 11.75%, not
compound interest at 18%.

       “Under some circumstances, a default may be set aside, even when it was initially
properly entered.” Huntington Nat’l Bank v Ristich, 292 Mich App 376, 389; 808 NW2d 511
(2011). MCR 2.612(C)(1)(e) allows a courts to set a judgment aside when “it is no longer
equitable that the judgment should have prospective application.” After the default judgment
entered, plaintiff admitted that it was not entitled to 18% compound interest and resigned itself to
11.75% simple interest as provided in the parties’ promissory note. Moreover, Marina and
Yuriy, as a married couple with a single joint debt, were only indebted for one single amount.


1
   Marina contends that plaintiff’s reduction of the interest rate following her summary
disposition motion evidenced that plaintiff had acted with ill intent in requesting 18% compound
interest in its complaint. The record does not necessarily support this conclusion. And
plaintiff’s intent in the complaint is irrelevant as the usurious interest rate was not part of the
parties’ loan agreement.


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As it now stands, this married couple is indebted to plaintiff for two separate judgments of
different amounts. Equitable principles require that the default judgment against Yuriy be set
aside and he be held jointly and severally liable with Marina for a corrected judgment amount to
be determined on remand, as noted previously.

       We affirm in part, reverse in part, and remand for further proceedings consistent with this
opinion. We do not retain jurisdiction. As neither party prevailed in full, we decline to tax costs.
MCR 7.219.




                                                             /s/ Elizabeth L. Gleicher
                                                             /s/ Christopher M. Murray
                                                             /s/ Karen M. Fort Hood




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