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LR5-A L.P. v. Meadow
Creek, LLC, 2008 WL 698471
(Mass. Super. Feb. 29, 2008) (Gants, J.). |
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A real estate developer needed
substantial bridge financing and borrowed $6.7 million
from the Plaintiff, LR5-A Limited Partnership. The
interest rate exceeded the usury rate of 20% per year.
The applicable Massachusetts statute, M.G.L. ch. 271, §
49, provides that such a loan is a crime, unless the
lender notifies the Massachusetts Attorney General of
the loan. The lender sent the notice to the Attorney
General ten days before it organized as a Massachusetts
limited partnership.
The developer contended that the notice
was accordingly ineffective. It further filed
third-party complaints against all the investors in the
limited partnership which provided the funds for the
loan, contending that they were also obligated to notify
the Attorney General of the loan. The Court disagreed.
“The purpose of the usury statute is to allow |
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the Attorney General to monitor the
issuance of usurious loans, and that purpose can be
frustrated by too much information as by too little.”
Notice by the general partner is sufficient to serve the
purpose of the statute. Accordingly, the Court dismissed
the third-party claims for violation of M.G.L. ch. 93A.
The Court declined, however, to dismiss
the third-party claims against the limited partners for
constructive trust. These claims asserted that to the
extent the Plaintiff proved it had suffered losses as a
result of wrongful conduct by the lender, but the lender
had already disbursed the profits to the limited
partners, those limited partners should be liable, even
if they engaged in no wrongdoing. The Court agreed, but
stayed any discovery against the limited partners unless
and until the Plaintiff prevails against the lender, and
the lender is unable to pay the judgment.
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