Bordine v. Bordine

1

COREY C. BORDINE, KIMBERLY BORDINE REYNOLDS, and PHILIP J. REYNOLDS, Plaintiffs-Appellants, v. KARL BORDINE, ALBERT BORDINE, and CALVIN BORDINE, Defendants-Appellees.

No. 363655

Court of Appeals of Michigan

November 30, 2023

UNPUBLISHED

Oakland Circuit Court LC No. 2021-191794-CZ

Before: MURRAY, P.J., and CAMERON and PATEL, JJ.

PER CURIAM.

In this dispute among shareholders of a corporation, plaintiffs appeal as of right the trial court's order granting summary disposition to defendants. We affirm in part and reverse in part the trial court's opinion and order, and remand for further proceedings consistent with this opinion.

I. FACTS

Bordine Investment Co., Ltd. (BIC), is a Michigan corporation, which has five shareholders: Albert Bordine and his four children Kimberly Bordine Reynolds,^[1] Corey Bordine, Karl Bordine, and Calvin Bordine. Albert and Karl are also directors of BIC. According to plaintiffs' complaint, plaintiffs own 50% of BIC's "Class B" shares and 36.7% of BIC's "Class A" shares. BIC owns real estate in Rochester Hills Springfield Township, Mundy Township, and Genoa Township, and leases that real estate to Bordine Nursery, Ltd. (Bordine Nursery) under a Lease Agreement. At the time of the 2001 Lease Agreement, Kimberly, Corey, Karl, Calvin, and Albert were all shareholders in both BIC and Bordine Nursery. At present, Calvin, through his trust, is the sole owner of Bordine Nursery. According to plaintiffs, the rent paid by Bordine Nursery is BIC's only source of income except for a small amount of rental income related to a cell phone tower and perhaps a billboard lease.

On December 28, 2021, plaintiffs filed a notice of assignment to the Oakland County Business Court and a complaint against defendants, alleging: (1) as of June 2013, only Calvin and Albert remained Bordine Nursery shareholders, (2) in December 2014, at a meeting Calvin chose not to attend, BIC approved a rent increase of 3.5%, rather than the 5% allowed by the Lease Agreement, (3) at a December 7, 2016 shareholder meeting, Calvin voted against plaintiffs' requested rent increase, and Albert concurred, (4) Calvin and Albert refused to attend the December 20, 2019 shareholder meeting to prevent a vote on rent increase, and abstained from voting on rental increases on January 23, 2020, and June 24, 2021, a meeting Karl refused to attend, (5) Albert and Calvin boycotted an October 15, 2021 shareholder meeting, (6) "on October 26, 2021, Karl and Albert, as directors, increased the rent-not 5% or more as allowed by the lease-but rather by only 3% and only then, beginning January 1, 2022, even though the Metro Detroit CPI [Consumer Price Index] had increased 5.5% from a year ago," and (7) the fair market rent for the premises is four times the amount BIC charges Bordine Nursery. Further, plaintiffs allege Bordine Nursery, without authorization by BIC, has renovated and constructed new facilities on the properties, in violation of law and ordinance, and this is likely to invalidate any fire insurance for the property.

With these allegations, in Count 1 plaintiffs claim shareholder oppression in violation of MCL 450.1489, asserting defendants, as directors and persons in control of BIC, have substantially interfered with their interests as shareholders for several reasons, including failing to increase rent, terminate the lease, accept plaintiffs' buy-out offer, and attend shareholder meetings. In Count 2, plaintiffs claim defendants breached their fiduciary duties. And, in Count 3, plaintiffs claim Calvin aided and abetted by substantially assisting Karl and Albert in their breach of fiduciary duties.

Calvin filed his second motion for summary disposition of plaintiffs' complaint under MCR 2.116(C)(5) and (C)(8), asserting plaintiffs lack standing because their claims are based on alleged harm to BIC, and plaintiffs did not comply with the statutory requirements for filing derivative claims. Albert and Karl joined in the motion. Plaintiffs responded to the second motion for summary disposition, asserting: (1) their claim of shareholder oppression under MCL 450.1489 in Count 1 is direct, not derivative, and (2) the facts alleged in Counts 2 and 3 show direct injury to plaintiffs as shareholders of BIC.

Ultimately, the trial court granted defendants' second motion for summary disposition in a written opinion and order, stating, in pertinent part:

Here, the Court agrees with Defendants. The acts alleged to interfere with Plaintiffs interests as shareholders primarily concern the lease that Plaintiffs are not a party to. Plaintiffs oppression claim (Count I) is based on the lease between BIC and the Nursery and the day-to-day management decisions of BIC. Injuries based on violation of the lease or for insufficient rent increases, permit violations, or insurance violations are injuries to BIC not Plaintiffs.

As to Counts II and III, the only breaches of fiduciary duty alleged are again based on the lease between BIC and the Nursery. Plaintiffs cannot prevail on claims based on the lease without showing injury to BIC because BIC is the only party to the lease.

Because the Court finds that Plaintiffs claims are derivative, Plaintiffs were required to comply with the statutory requirements of MCL 450.1492a and MCL 450.1493a. Plaintiffs do not allege that they have met those requirements. Plaintiffs therefore lack standing to pursue this action and summary disposition is warranted.

II. ANALYSIS

A. STANDING AND MCR 2.116(C)(5)

Plaintiffs first assert that the trial court erred in using MCR 2.116(C)(5) to grant summary disposition because defendants offered no evidence that plaintiffs lacked the capacity to sue. The interpretation of court rules is reviewed de novo. AFP Specialties, Inc v Vereyken, 303 Mich.App. 497, 504; 844 N.W.2d 470 (2014), citing Henry v Dow Chem Co, 484 Mich. 483, 495; 772 N.W.2d 301 (2009).

MCR 2.116(C)(5) allows for summary disposition when "[t]he party asserting the claim lacks the legal capacity to sue." MCR 2.116(C)(5). Although defendants moved for summary disposition under both MCR 2.116(C)(5) and (C)(8), and the trial court cited both in its opinion and order granting summary disposition, the trial court based its decision on lack of standing, never specifically finding plaintiffs lacked the legal capacity to sue.

Legal capacity to sue involves the ability to initiate any lawsuit. In contrast, "[a] motion for summary disposition asserting as its basis the doctrine of standing invokes a prudential doctrine that focuses on whether a litigant is a proper party to request adjudication of a particular issue and not whether the issue itself is justiciable." Pontiac Police & Fire Retiree Prefunded Group Health & Ins Trust Bd of Trustees v Pontiac No 2, 309 Mich.App. 611, 620-621; 873 N.W.2d 783 (2015), quoting Lansing Sch Educ Ass'n v Lansing Bd of Educ, 487 Mich. 349, 355; 792 N.W.2d 686 (2010) (quotation marks and citation omitted). Motions for summary disposition asserting lack of standing are appropriately reviewed under MCR 2.116(C)(8) or (C)(10). See Pontiac Police, 309 Mich.App. at 620-621.

Nevertheless, this Court has reviewed motions for summary disposition asserting lack of standing under MCR 2.116(C)(5). Aichele v Hodge, 259 Mich.App. 146, 152 n 2, 165; 673 N.W.2d 452 (2003); Int'l Union UAW v Central Mich. Univ Trustees, 295 Mich.App. 486, 492-493; 815 N.W.2d 132 (2012). And, regardless, even" '[i]f summary disposition is granted under one subpart of the court rule when it was actually appropriate under another, the defect is not fatal and does not preclude appellate review as long as the record permits review under the correct subpart.'" Bodnar v St John Providence, Inc, 327 Mich.App. 203, 211-212; 933 N.W.2d 363 (2019), quoting Detroit News, Inc v Policemen & Firemen Retirement Sys of the City of Detroit, 252 Mich.App. 59, 66; 651 N.W.2d 127 (2002) (quotation marks and citation omitted). The pleadings permit us to review the parties' standing arguments under MCR 2.116(C)(8). Thus, if the trial court erred, the error was harmless.

B. SHAREHOLDER OPPRESSION

Next, plaintiffs assert they have properly stated a claim for shareholder oppression under MCL 450.1489, and that claim is direct, not derivative. We agree with that assertion, at least in part.

A trial court's grant of summary disposition is reviewed de novo. Int'l Union UAW, 295 Mich.App. at 493. "In reviewing a motion for summary disposition pursuant to MCR 2.116(C)(5), this Court must consider the pleadings, depositions, admissions, affidavits, and other documentary evidence submitted by the parties." Id. at 493 (quotation marks and citations omitted). Further, standing is a question of law reviewed de novo. Pontiac Police, 309 Mich.App. at 621.

We also review de novo a trial court's grant of summary disposition under MCR 2.116(C)(8) "to determine whether the opposing party failed to state a claim upon which relief can be granted." Charter Twp of Pittsfield v Washtenaw Co Treasurer, 338 Mich.App. 440, 448; 980 N.W.2d 119 (2021), citing Dalley v Dykema Gossett PLLC, 287 Mich.App. 296, 304; 788 N.W.2d 679 (2010). As stated in Dalley, 287 Mich.App. at 304-305:

A court may grant summary disposition under MCR 2.116(C)(8) if "[t]he opposing party has failed to state a claim on which relief can be granted." A motion brought under subrule (C)(8) tests the legal sufficiency of the complaint solely on the basis of the pleadings. Corley v Detroit Bd of Educ, 470 Mich. 274, 277; 681 N.W.2d 342 (2004). When deciding a motion under (C)(8), this Court accepts all well-pleaded factual allegations as true and construes them in the light most favorable to the nonmoving party. Maiden v Rozwood, 461 Mich. 109, 119; 597 N.W.2d 817 (1999). A party may not

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