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CONTRACT 21: Plaintiffs alleged defendant engaged in fraud and misrepresentation.

Plaintiff was the sole owner of Modern, and co-owner of Livingston. In 2017, plaintiff’s business partner and Livingston’s other co-owner, agreed to sell his 50% ownership interest in Livingston to plaintiff.

Bank Loan

Accordingly, in August 2017, Plaintiff engaged with defendant (bank) to fund the buyout of Livingston and refinance the debt of Modern. After a series of loan proposals, Plaintiff and defendant agreed on two loans: the Livingston loan, to buy out ownership interest, and the Modern loan, to refinance Modern’s debts.

The Livingston loan consisted of two promissory notes. The payment terms for this loan required equal monthly installments of principal and interest. The parties closed on the Livingston loan in December 2017. The Modern loan consisted of one SBA loan. The parties closed on the Modern loan in January 2019.

Change in Loan Terms

After closing the Livingston loan, Plaintiff objected to the changes in the amount of the notes and the payment terms of the Modern loan from the initial September 2017 proposal. At the closing of the Modern loan, Plaintiff also objected to the proposed distribution and cash flow terms. It is disputed whether defendant promised Plaintiff it would modify the loan documents accordingly if Plaintiff proceeded with closing the Modern loan.

After closing the Modern loan, several meetings were held to reconstruct the loans however it was impossible to accomplish. As a result, Plaintiff sought refinancing with another lender and repaid the loans to defendant in November 2018.

Negligence Claim

Plaintiffs thereafter filed a complaint against defendant, alleging defendant negligently engaged in self-dealing and unilaterally changed the terms of the loans contrary to the parties’ agreement. Plaintiffs also alleged defendant breached its fiduciary duty to plaintiffs by failing to properly distribute the Modern loan proceeds to plaintiffs, rather than itself. Further, plaintiffs alleged defendant engaged in constructive fraud and misrepresentation by waiting to disclose unilateral changes to the final loan documents until plaintiffs had no choice but to close on the loans.

To establish a negligence claim, a plaintiff must show: (1) that the defendant owed a duty to the plaintiff, (2) that the defendant breached the duty, (3) that the defendant’s breach of the duty caused the plaintiff injuries, and (4) that the plaintiff suffered damages. The record here indicates that plaintiffs alleged defendant was a negligent lending institution, failing to comply with the terms of the loans and distribute the loan proceeds accordingly.

Court Decision

Despite their speculative argument, plaintiffs fail to identify the nature of any duty that existed separately and distinctly from the contractual relationship they had with defendant. Rather, any duty owed to plaintiffs arose exclusively from the contractual relationship because no relationship, outside of the lender-borrower relationship, existed between the parties. As a result, the trial court properly found that plaintiffs failed to establish any duty arising outside of defendant’s contractual relationship with plaintiffs.

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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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