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BUSINESS LAW 17: Business dispute between family members.

This case arises out of a business dispute between family members. Each of the four men invested $200,000 for the purchase of a hotel in Michigan. The cost of the hotel was approximately $1,900,000 and the rest of the financing was obtained from Comerica Bank (Comerica). Plaintiff successfully operated other hotels and indicated that he would manage the hotel.

Financial Problems

Although the hotel was profitable its first year, the hotel subsequently did not earn a profit in light of the economic downturn. Two attempts were made to sell the hotel, but the transactions were not completed. Ultimately, the business defaulted on its obligations to repay the Comerica notes. Eventually, plaintiff negotiated a resolution. Plaintiff purchased the nearly $850,000 in notes at a discounted rate of $700,000 by relying on a certificate of deposit (CD) that he had with Comerica. However, because the CD governed other collateral, plaintiff was required to sign the note back to Comerica. The hotel eventually closed, and the shareholders agreed with Comerica that the hotel should be demolished with the shareholders paying for the demolition.

Shareholders Breach of Payment

Ultimately, plaintiff filed suit against the other shareholders and guarantors for their breach of payment regarding the notes, mortgage, and personal guarantees. Defendants filed a countercomplaint essentially alleging that plaintiff mismanaged the assets of the business, breached fiduciary duties, misappropriated corporate assets, misrepresented, or fraudulently purchased the Comerica notes in plaintiff’s name only to the detriment of the other shareholders.

Summary Disposition

Summary disposition is appropriate where there is no genuine issue as to any material fact, and the moving party is entitled to judgment or partial judgment as a matter of law.

Plaintiff filed his motion for summary disposition alleging that his complaint presented a simple collection action. In support of his motion, he submitted documentation to demonstrate the Comerica notes, his purchase of the notes, an affidavit claiming nonpayment. Defendants did not submit any evidence of a writing that plaintiff would not seek to collect on defendants’ liabilities that he purchased from Comerica.

The trial court granted summary disposition in favor of plaintiff pertaining to his complaint for defendants’ failure to pay in accordance with the Comerica agreements. The court concluded that defendants did not prove their causes of action. The defendants did not prove that plaintiff engaged in fraud and breached fiduciary duties to the other shareholders.

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FAMILY LAW 88: The trial court found that the children did not have an established custodial environment with defendant because, before the separation, he did not have a large role in the children’s lives.

The trial court credited plaintiff’s testimony that, before the parties’ separation, defendant spent minimal time helping to care for the children, so its finding that the children would not have looked to defendant for guidance, discipline, the necessities of life, and parental comfort during that time was not against the great weight of the evidence.

REAL ESTATE 89: RM had not included any language in the deed providing that the property was a joint tenancy with full rights of survivorship, the property instead became a tenancy in common.

RM drafted the deed without seeking counsel and mistakenly believed that, if either she or FK died, the property would fully pass to the surviving tenant. FK’s will provided that if his wife predeceased him—which she did—the personal representative of his estate should sell any residual property that he owned and divide the cash proceeds equally among his surviving children.

FAMILY LAW 83: A trial court can terminate a parent’s rights and permit a stepparent to adopt a child.

A trial court has discretion to terminate a parent’s rights and permit a stepparent to adopt a child when the conditions of MCL 710.51(6) are met. MCL 710.51(6)(b) requires the petitioner to establish that the other parent had the ability to visit, contact, or communicate with the children, and substantially failed or neglected to do so for a period of two years.

PROBATE 53: The trust agreement included an Incontestability Provision.

A settlor’s intent is to be carried out as nearly as possible. Generally, in terrorem clauses are valid and enforceable. However, a provision in a trust that purports to penalize an interested person for contesting the trust or instituting another proceeding relating to the trust shall not be given effect if probable cause exists for instituting a proceeding contesting the trust or another proceeding relating to the trust.

FAMILY LAW 82: Court stated it would terminate the personal protection order (PPO) after the parties present documentation of the initiation of the divorce proceedings.

However, the trial court concluded that these matters should, in fact, be in the province and the jurisdiction of the Family Division and in that respect, having issued a personal protection order, the Court stated it would terminate the personal protection order after the parties present documentation of the initiation of the divorce proceedings.

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