Michigan Business Corporation Act and probate law

This first case involved a plaintiff who simultaneously acquired a 25% interest in the defendant-corporation, and also became president and CEO through an employment agreement the parties also signed. The defendant was also required to redeem plaintiff’s shares at fair market value upon termination of his employment. Specific performance was also provided for in the event of a breach by either party. In 1992 plaintiff’s employment was terminated. It was unclear whether he is still a shareholder, as plaintiff alleged his shares were never redeemed since defendant was prohibited by the Michigan Business Corporation Act to do so. Defendant argued that the shares were automatically redeemed, because they were worthless. The statute of limitations under MCL 600.5827 (six years) began to run when the wrong occurred, not the resulting damage. Declaratory relief cannot be used to avoid the period of limitations for substantive relief, but there is no time period in which to bring claims for declaratory relief. The Michigan Court of Appeals found there were two actual controversies in this case – (1) defendant’s alleged past violations of the MBCA and (2) future violations that will allegedly occur absent a declaratory judgment. The plaintiff was barred from obtaining substantive relief for the past violations, but could obtain injunctive relief to prevent future violations (if he is still a shareholder). The case was remanded to the trial court to determine whether the plaintiff was still a shareholder. Turner v. J & J Slavik, Inc.

In this case from the Michigan Court of Appeals, the court upheld summary disposition in favor of the respondents, G and D. A dispute arose challenging the validity of two deeds that the decedent, R, executed before his death.  R and his wife, D, purchased 40 acres of land in 1943. D died in 1977. R married his second wife, C. In 1978, R and C executed a quitclaim deed for the 40 acres of property to R’s only son (also now deceased), reserving a power of appointment. In 1982, R and C executed a quitclaim deed for 2 of the 40 acres to R’s granddaughter, D, on which D built a home. In 1995 D married G and transferred ownership of these two acres to herself and G. C died in 2002. In 2007, R executed a warranty deed transferring 23 of the acres to the Davises (Which adjoined D’s two acres). In 2009, R executed a quitclaim deed for the remaining 15 acres to the Davises. R died intestate (without a will) in 2009. The PR, Carol, argued a deed that conveyed the property without reference to a previous power of appointment was invalid to divest the original grantee. The court noted it would be preferable to specifically reference the power of appointment in later conveyances that invoke the power, but it was not required by law. The trial court agreed with the Davises that the 1978 deed was a “Lady Bird” deed.  Michigan Land Title Standards 9.3, titled, Life Estate with Power to Convey Fee, confirms that, in Michigan, a donee may transfer a fee interest in the subject property. “The holder of a life estate, coupled with an absolute power to dispose of the fee estate by inter vivos conveyance, can convey a fee simple estate during the lifetime of the holder. If the power is not exercised, the gift over becomes effective.” The power was not referred to in the 1982, 2007 or 2009 deeds. However, R “manifested an intent to exercise the 1978 power of appointment in those instruments because they ‘purport[ed] to transfer an interest in the appointive property that [R] would have no power to transfer except by virtue of the power[.]‘” Without reference to the power of appointment, the 1978 deed transferred R’s complete fee interest to R. “However, the power of appointment language was included, and it was ‘by virtue of [that] power’ that [R] retained his right to ‘transfer an interest in the appointive property[.]‘” Thus, “the power was not required to be ‘recited or referred to’ in the later deeds.” In re Tobias Estates.

 

Real property concerns

Last week, the Michigan Court of Appeals decided a few cases involving real property. In this first case, the trial court had granted summary disposition in favor of the defendant-bank regarding plaintiff’s claim of illegal violations of the statutory foreclosure procedure. The plaintiffs took out a mortgage on their home from the bank. In 2010, the loan was modified after plaintiffs admittedly defaulted. According to a payment letter dated 1/14/10, the loan was an interest-only home equity loan, and the payment was to vary from month to month “depending on number of days in the cycle, any principal reductions, or actual date of payment.” The bank instituted foreclosure proceedings in 1/11 due to a default. Plaintiffs filed the underlying action claiming they were not in default, and other various casus of action. The bank did not answer to complaint but moved for summary disposition and requested every count be dismissed. The trial court granted this motion. The plaintiffs appealed the summary disposition as to their claim of illegal violation of the statutory foreclosure process and stated it “was initiated based upon manufactured misrepresentations by defendant.” However, they could not cite to any authority or produce any evidence. They simply alleged a factual dispute as to whether they were in default. The defendants produced evidence that the plaintiffs skipped a payment and got behind on the loan. The Michigan Court of Appeals therefore upheld the trial court’s decision. Command v. Macatawa Bank.

The Michigan Court of Appeals also upheld another decision to deny plaintiff’s motion for a default judgment after the defendant-bank was not properly served. The plaintiff, in pro per, filed an action to quiet title. The complaint was served twice on “Chase” at a P.O. Box in Kentucky. The summons for the party she named as “Chase” expired on 10/25/10 and the plaintiff filed a motion for a default judgment. The trial court held a hearing, but found she failed to provide proof of filing a default before requesting the default judgment. The trial court denied this request and directed her to serve a resident agent on JPMorgan Chase Bank if this was the intended party. She served a copy, via express mail, of the original complaint, summons and request for default judgment.  The defendant filed a motion to dismiss based upon failure of the plaintiff to properly serve defendant. The trial court granted this motion. Plaintiff appealed, arguing her first request for a default judgment should have been granted. However, the “failure to properly serve JPMorgan Chase Bank before the expiration of the summons, and resultant failure to inform the bank of the action within the time provided by the court rules,” was sufficient to dismiss plaintiff’s case. Personal jurisdiction was never gained over defendant when plaintiff failed to properly serve them and notify them while the summons was still valid. Horton v. Chase. This shows the importance of understanding the court rules and this is certainly something that an attorney can assist you with.

Wills and Trusts

In this recent decision issued by the Michigan Court of Appeals, the Plaintiffs were the stepdaughter and her children of D (deceased), and sued the defendant over issues involved with D’s estate. The jury found D lacked the mental capacity to transfer his bank accounts and deed his home to defendant, or change his will to make defendant the beneficiary. The jury also found that the defendant engaged in fraud and undue influence to obtain these changes, as she converted D’s funds to her own use. The Court of Appeals rejected defendant’s argument that the trial court improperly instructed the jury, further, she waived this claim of error because she did not address this issue in the trial court or object to the instructions. Defendant also attempted to argue that the trial court denied her a fair trial, because they allowed the fraud claim to be tried without allowing her to present an adequate defense. However, because fraud is an “underlying theory” of undue influence, this was included as an issued to be tried and the defendant had sufficient notice of this. However, the Court of Appeals ruled that the fraud allegations were not sufficiently pleaded by the plaintiff and plaintiff failed to produce any evidence at trial to establish all elements of fraud. Reasonable minds could differ on whether the defendant engaged in fraud. Therefore, the trial court should have granted a directed verdict in favor of defendant on the issue of fraud. The Court of Appeals concluded that reasonable minds could differ on the issue of undue influence and mental capacity to change the bank accounts, deed, and will. Therefore since the jury found plaintiff established these claims, a verdict in plaintiffs’ favor was properly awarded in regards to undue influence and lack of mental capacity. In re Doman Estate. 

 

Foreclosures and MERS

This first new case from the Michigan Court of Appeals involved a foreclosure. The plaintiff defaulted on a mortgage loan and Defendant commenced foreclosure proceedings. The property was sold, and the Plaintiff failed to redeem within the redemption period. The court held that because the sale took place on 5/26/10, Plaintiff had only until 11/26/10 to redeem. Plaintiff did not redeem but filed a lawsuit on 11/8/10 to set aside the foreclosure sale within the redemption period. The issue was “whether the filing of her suit tolled or avoided the redemption requirement.” The Court of Appeals affirmed the trial court’s decision that her filing suit did not toll the redemption period. Although she filed the suit before the redemption period expired, she did not make an attempt to get a stay and when the redemption period expired, she no longer had a legal cause of action to establish standing to further challenge the sale. Awad v. General Motors Acceptance Corp.

In this next case, the Court of Appeals affirmed the trial court’s decision to grant a judgment of possession in favor of the Plaintiff. The Defendants held a mortgage on their house, which provided MERS was the mortgagee. After Defendants defaulted, MERS foreclosed by advertisement and purchased the property. MERS quitclaimed the property to Plaintiff. After the redemption period expired, Plaintiff brought an action to evict Defendants. Defendants argued the foreclosure was void because MERS lacked standing to foreclose by advertisement. Defendants relied on Saurman I in support of their argument, in which the Court of Appeals held that MERS, as a mortgagee, did not own an interest in the indebtedness and could not foreclose by advertisement. However, the Michigan Supreme Court reversed Saurman I. The facts of this case were similar to Saurman I and thus the Court of Appeals held MERS was authorized to foreclose by advertisement. Wells Fargo Bank NA Trustee v. Craig.

In another Court of Appeals case involving MERS, the court ruled MERS, as a record holder of the mortgage, owned an interest in the indebtedness secured by the mortgage and was therefore authorized to foreclose by advertisement. Plaintiffs’ residential property was secured by a mortgage designating MERS as the mortgagee. Plaintiffs defaulted on their loan, and MERS assigned their interest to defendant-Aurora Loan, who the court determined stood in the shoes of MERS and had the same authority to foreclose. Plaintiffs filed this lawsuit to set aside the foreclosure sale based upon the allegation that defendant did not own and/or have an interest in the indebtedness secured by the mortgage. A similar issue was decided in Residential Funding. The Supreme Court ruled that MERS, as mortgagee, owned an interest in the indebtedness secured by the mortgage and could foreclose by advertisement. MERS owned a security lien and defendant, as the assignee, was allowed to foreclose as well. Fawaz v. Aurora Loan Servs., LLC.

 

Tax Assessment Challenges

This week, the Michigan Court of Appeals released a published decision involving a tax appeal, affirming the Michigan Tax Tribunal’s decision to decline to include royalty income in the petitioners’ sales and gross receipts for the tax years at issue. The petitioners are a group of affiliated companies, which develop trademarks, trade names, and know-how for the creation of corporate identities and procedures. The companies share these ideas via licensure, and the petitioners receive royalties from the licensing. The respondent (Department of Treasury) audited petitioners and issued petitioner-A a Bill of Taxes Due for $290,675, plus interest in the amount of $68,681.05, alleging the royalties should have been included in sales and gross receipts. Petitioner-B received a Bill of Taxes Due in the amount of $49,727, plus $21,966.80 in interest for the same reason. The Michigan Tax Tribunal (“MTT”) determined that these royalties did not need to be included in “sales” and “gross receipts” under the Single Business Tax Act prior to 2001. It was undisputed this income was from royalties, not any type of service. The Court of Appeals affirmed the MTT’s decision. Royalty income is not derived from renting or leasing anything. “In order to be properly classified as sales receipts under the SBTA during the years at issue, royalty income must arise from a transaction where the royalty income was consideration for the transfer of title to, or possession of, property.” Therefore, “if no transfer of title or possession is involved in the transaction giving rise to the royalty income, then no further analysis is needed and the royalty income cannot be classified as sales receipts.” Again, it was undisputed no title was transferred; therefore the court had to consider whether there was a transfer of possession of property. It was ruled that royalty income is the right to use property, not the transfer of possession. Royalty payments are the right to use something and the licensor retains ownership and control of the intangible property. Transfer of possession is the transfer of absolute ownership. Thus the royalty income did not arise from the transfer of possession and did not need to be included in sales and gross receipts. Thus the respondent’s taxes were improper and petitioners successfully challenged the assessments. Kelly Servs., Inc. v. Department of Treasury.

In another tax case from the Michigan Court of Appeals, the court determined that the “highest and best use” is an appropriate consideration to determine true cash value. The petitioner alleged that the MTT was erroneous in considering the highest and best use of his property to determine the value. This case involved residential property in the respondent-city. There are traditionally three methods of determining true cash value (fair market value) accepted by the MTT and the courts – (1) the cost-less-depreciation approach, (2) the sales-comparison or market approach, and (3) the capitalization-of-income approach. When using the cost approach, real property is presumed to be devoted to its highest and best use. “It recognizes that the use to which a prospective buyer would put the property will influence the price which the buyer would be willing to pay. Land is appropriately valued as if available for development to its highest and best use, that most likely legal use which will yield the highest present worth.” The petitioner had presented general information about the collapse of the real estate market and nearby home listings, he did not present any evidence to support one of the three approved methods for determining true cash value. Therefore, the Court of Appeals affirmed the Tax Tribunal’s denial of petitioner’s request to reduce his assessed property value. Holland v. City of Taylor.

Family law

This past week, the Michigan Court of Appeals rendered a decision involving child custody. The trial court had awarded the plaintiff-father physical custody, based upon the fact that his work allowed him to be home after the children’s school and during the evenings to take care of them. Defendant filed a motion for an evidentiary hearing attempting to reopen the issue of custody. Defendant alleged that a change in plaintiff’s work schedule to second shift, and thus the need for in-home child care, was a change in circumstances. The trial court disagreed, stating that not just any change can warrant modification of a custody order. Change in a parent’s work schedule is normal, and occurs frequently during children’s lives. The change did affect the specific hours in the day plaintiff could interact with the children, but did not affect the overall amount of time plaintiff could spend with them. The decision to hire a live-in childcare provider was also not a change in circumstances. This, again, is a normal life change and does not warrant revisiting the issue of custody. The defendant could not establish that any of these things would have a significant effect on the well-being of the children, and there was no material change since the last custody order. The Michigan Court of Appeals upheld this decision. Solis v. Solis.

The parties in this next action were divorced, and the plaintiff filed a motion to show cause, why defendant should not be held in contempt, alleging defendant refused to allow plaintiff access to their child on several occasions, and that defendant removed the child from school. The trial court found defendant in contempt, and sentenced her to 30 days in jail. Defendant appealed, arguing that the trial court held a show cause hearing on a civil matter yet held her in criminal contempt. The Michigan Court of Appeals reversed the decision to hold defendant in criminal contempt for violating the trial court’s order regarding schooling and denying plaintiff parenting time. The appellate court noted there “is a fine line between civil contempt and criminal contempt, because both can result in jail time for failure to abide by a court order.” One distinction “is whether the trial court is punishing the defendant for violating the court’s order, or is instead holding the defendant until the defendant complies with the order.” When a trial court punishes a defendant for past misconduct connected to a trial court’s order, they are exercising criminal contempt power. This is important “because ‘a criminal contempt proceeding requires some, but not all, of the due process safeguards of an ordinary criminal trial.’” Contempt must be proven beyond a reasonable doubt, and given the opportunity to prepare a defense and secure assistance of counsel. In this situation, the defendant had consistently disobeyed and blatantly disrespected the court’s order. The trial court told defendant the punishment imposed was appropriate to “get [her] attention,” and imposed a jail sentence. The appellate court stated “[t]his sanction could not coerce defendant to perform an act that would have put her in compliance with the court’s previous orders. Further, the sentence was a definite one, rather than an indefinite one.” The trial court was exercising criminal contempt power by imposing jail time. Defendant argued she was not informed about the criminal nature of the proceedings, so the court denied her right against self-incrimination, and the Court of Appeals agreed. The show cause order did not specify the nature of the proceedings, and it was not stated at the beginning of the hearing. Further, the trial court ordered defendant to answer certain questions asked by plaintiff’s attorney and this constituted compelling her to testify against herself. Defendant mother was denied the due process safeguards required for criminal contempt proceedings, and the trial court’s sanctions were reversed. Jackson v. Jackson.

 

Contract interpretation

The Michigan Court of Appeals also decided a case involving contract interpretation. The plaintiff (H) owns property on which there is a Wendy’s. Defendant (S) owned a neighboring parcel of property and wanted to build a Taco Bell there, however, the property had a use restriction stating it “shall not be used for a restaurant use, the primary business of which is the sale of hamburgers, hamburger products or chicken sandwiches (or any combination thereof).” H argued that putting a Taco Bell there would violate the use restriction. The trial court determined the term “hamburger products” was ambiguous and could not be enforced, and S could build a Taco Bell. Plaintiffs appealed, and the Michigan Court of Appeals reversed the trial court’s decision. “The presence of undefined terms in the restrictive covenant does not render it ambiguous.” Also, “a term is not considered ambiguous merely because it has multiple dictionary definitions or understandings.” The use restriction did not define the term hamburger products. S admitted it is commonly understood as “’1. ground beef 2. fried, broiled, or baked patty of such meat 3. a sandwich made with such a patty, usually in a round bun.’” A “product” is commonly understood to be “’1. something produced by nature or made by human industry or art 2. result.’” The court determined the term “hamburger” refers to items made of ground beef, whether it was in the form of a patty or sandwich. Hobwen, Inc. v. Sisbro Mgmt., L.L.C.

In another contracts case, the Michigan Court of Appeals upheld a trial court’s determination that plaintiff brought a frivolous case of action, and did not err in awarding defendant sanctions, including lost proceeds from a failed liquor license sale, attorney fees and costs. Plaintiff, defendant, and a non-party (G) entered into a contract, wherein plaintiff would transfer to G 50% of his interest in G for $242,000. Plaintiff took a security interest in the ownership he transferred. Defendant, the other 50% owner of G, transferred a 1% interest in G to plaintiff in case plaintiff enforced his security interest in the shares transferred. Defendant gave plaintiff a security interest in that 1% interest. G failed to make any of the payments to plaintiff, and plaintiff sued defendant seeking $242,000 in damages and transfer of the 51% interest. G was not joined as a defendant. Defendant moved for summary disposition, arguing nothing in the contract created personal liability except to convey a 1% interest. Plaintiff requested declaratory and injunctive relief, and requested the court determine defendant breached the security agreement, defendant’s membership interest was extinguished, and plaintiff owns 51% of G. The court determined the contract did not require defendant to convey plaintiff a 50% interest. Plaintiff conveyed his 50% interest to G, not defendant, and G gave plaintiff a security interest. Defendant was not in a position to convey the 50% interest back to plaintiff. Before defendant was to convey a 1% interest, “plaintiff was required to enforce against [G] his security interest in the ownership interest that he conveyed to [G].” Plaintiff claimed he did perfect his security interest by filing a financing statement. “The ‘[p]erfection of a security interest,’ however, refers to ‘the process whereby a security interest is protected, as far as the law permits, against competing claims to the collateral . . . .’” “The perfection of a security interest is not the same as the enforcement of a security interest.” Plaintiff did not enforce his security interest, so defendant did not have to convey a 1% interest. Martin v. Butler.

Insurance considerations

The defendant in this insurance lawsuit (K) was plaintiffs’ insurance agent. The plaintiffs’ insured a diamond engagement ring, and alleged the parties had an agreement wherein defendants were to insure the ring for its replacement value. The ring was lost, and at this time plaintiffs discovered that their policy covered only $36,776, however, the ring’s appraised value was $107,000. The court found evidence that plaintiffs’ “insurance agent misrepresented the nature or extent of the coverage offered or provided,” specifically that K represented it was insured for the replacement value. There was also evidence that this representation was false. K admitted in a deposition that guaranteed replacement coverage for jewelry is not available. Thus, “plaintiffs presented evidence that Kenneth misrepresented the nature or extent of the coverage offered or provided,” and this established a special relationship between the parties. K’s testimony suggested that “plaintiffs’ request [to carry insurance for the full replacement value] required clarification that yearly appraisals were required to update the value of the ring.” Further, “an inquiry was made that may have required advice and that Kenneth gave advice that was inaccurate.” There was further evidence “that defendants assumed an additional duty by either express agreement with or promise to plaintiffs.” The court held that defendants owed a duty to advise plaintiffs as to the adequacy of their insurance coverage. The Michigan Court of Appeals affirmed the judgment in plaintiffs’ favor in the amount of $169,370.39 (including case evaluation sanctions). Lemberg v. Korotkin-Schlesinger & Assocs., Inc.

In another case involving fire insurance, the Michigan Court of Appeals affirmed a decision to grant summary disposition in favor of the defendants (the insurer). When a fire destroyed the subject property, defendants paid proceeds under the fire insurance policy to B (the insured). The plaintiff (builder) argued that the insurer had notice of plaintiff’s contract with B and should have received the proceeds. The court found that the plaintiffs were not owed any money and thus were not entitled to the proceeds. The plaintiff further attempted to argue that B converted plaintiff’s property by keeping the proceeds. However, since the insurer was not obligated to pay the proceeds to plaintiff, it could not be considered their property for purposes of conversion. Sparkle Builders I, Ltd. v. Boines.

 

Cases involving contract interpretation

This past week, the Michigan Court of Appeals decided a case involving a rental unit at defendant’s facility. The agreement stated plaintiff stored property in the facility at her own risk, and defendant was not responsible for any damage to property in the unit. Plaintiff viewed the unit before renting it and had found it satisfactory. The contract also stated defendant disclaimed any warranties, representations, or guarantees not specifically in the agreement. The plaintiff sued defendant, alleging the unit was defective as the door did not close completely, and this caused damage to her property. The trial court determined plaintiff failed to create an issue of fact in regards to her breach of contract claim. She then amended the complaint and alleged defendant did not repair the left side of the unit after she complained, did not repair the other side of the unit after a large snow plow damaged it, and did not tell her that her property was exposed to the elements. As to the left side of the unit, there was uncontroverted evidence the defendant attempted to repair it. Plaintiff was told to leave a key so the manager had access to the unit to make repairs, and plaintiff refused. Defendant further offered plaintiff a different unit; an offer which she refused to accept. As to the right side, plaintiff provided no evidence that the defendant knew of the damage. Plaintiff did not report the problem. Plaintiff also alleged defendant failed to tell her that her property was exposed to the elements and this breached the rental agreement. Defendant had a right to remove locks when necessary to make repairs, but was not required to under the agreement. Therefore, the contract was not breached. Further, Michigan does not recognize a common law cause of action for breach of an implied covenant of good faith and fair dealing without a valid underlying claim for breach of contract. The Court of Appeals affirmed the trial court’s decision that plaintiff failed to create an issue of fact. Daniel v. Public Storage, Inc.

In this next case, the defendant-Fund created a residential mortgage lending program for the benefit of its’ employees. Using employer contributions, the trustees created, funded, and invested in an account used for mortgages. The plaintiff was a mortgage lender under contract with the Fund. The trustees decided to terminate the contract with plaintiff and use another mortgage lender, defendant-DMI.  Plaintiff sued for breach of contract, promissory estoppel, and unjust enrichment, claiming compensation for mortgage servicing rights lost and transferred when the contract with the Fund was terminated. Plaintiff cited to the contract, industry practice, and the parties’ contract negotiation history in support of their position. The trial court found the contract did not give plaintiff any right to compensation when the Fund terminated the contract. “The [plaintiff’s] contractual rights and obligations could not exist outside of the contract.” Plaintiffs argued they still possessed servicing rights, but the court concluded these rights could not survive beyond the contract, and therefore they were not entitled to any compensation. The Fund had the right to terminate the contract with 30 days’ written notice. Industry practices were found to be irrelevant and could not supersede the specific language of the contract. During negotiations, the parties had explicitly removed language that would entitle plaintiff to compensation upon termination of the contract. The Michigan Court of Appeals upheld the decision to grant defendants summary disposition. AAA Mtg. Corp. v. Iron Workers Local No. 25 Pension Fund.

Contract issues

Last week, the Michigan Court of Appeals rendered an opinion affirming the trial court’s dismissal of a preliminary injunction in favor of plaintiff. The plaintiff-township attempted to charge a $6,200 fee to residents of other townships if they connected to plaintiff’s new water supply system. Plaintiff and other various townships were members of the defendant, “Water District No. 1” of Midland County. Defendant opposed plaintiff’s plan and argued they could not charge any connection fee, only defendant had the right to charge such a fee to cover direct costs of customer connections. Defendant refused to allow any additional connections to plaintiff’s system until the fee was removed. Plaintiff sued, and the trial court granted a temporary restraining order, requiring defendant to refrain from making connections without collecting the $6,200 fee. The trial court later concluded that under Michigan law, plaintiff was prohibited from imposing connections fees, but a permissible contract term between the parties allowed plaintiff to do so. However, the contract stated defendant had the exclusive right to control and operate the water system, including setting and collecting fees, not plaintiff. “Thus, plaintiff had no right to impose connection fees.” The court noted that “included in the specific and negotiated terms and conditions of the Agreement were the issues of customer rates and connection fees . . . .” Defendant therefore had the exclusive right to set and collect connection fees. Defendant never agreed to allow plaintiff to charge the fees. The Michigan Court of Appeals affirmed this decision. The parties had the right to enter into a contractual agreement to govern the water system, and pursuant to this agreement, defendant had the exclusive right to set and collect the fees. Township of Lee v. Water Dist. No. 1 of Midland Cnty.

The Michigan Court of Appeals also decided another contracts case this past week. L owns and operates the plaintiff-company. In 1997, L approached defendant’s primary owner, M, regarding defendant manufacturing a foam armrest. M agreed and paid L 5% commission on the armrests. M testified the commission was based upon L managing the account. There was no written contract, but this arrangement went on for a couple years until the purchaser-company went out of business. L approached M in 2005 to manufacture seat cushions for I, and paid L 5% commission on all sales to I. L testified that once production began on this project, his servicing was minimal. M asserted the commission was contingent upon managing the accounts and these responsibilities were significant. Defendant’s co-owner and general manager received a 2009 email from an I employee, stating I would no longer allow L to work with them. Therefore, defendant told L they were terminating their relationship. Plaintiff sued for breach of contract, arguing he was entitled to post-termination commission because he was the procuring cause of all sales to I. He also argued that at the time he was terminated, there was barely any work left that he would have done except a few minor tasks.  The court discussed that the “basic principle behind the procuring cause doctrine is the notion of fair dealing.” “It is unfair to allow a principal to terminate an agent and avoid paying commissions on sales that the agent procured.” However, I cancelled L’s authority, not defendant. Further, it was done in an effort to keep the customer, not an attempt to avoid paying L. The court further concluded that L was required to perform significant account servicing. L admitted he worked with I on pricing and was part of defendant’s negotiating team. At the time he was terminated, he visited I’s site approximately once a week. The court held that the evidence supported a finding that L “was required to perform significant servicing obligations in order to receive his five-percent commission.” KBD & Assocs., Inc. v. Great Lakes Foam Techs., Inc.