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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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