Masters Grp. Int'l, Inc. v. Comerica Bank
Citation | 2021 MT 161,491 P.3d 675 |
Decision Date | 06 July 2021 |
Docket Number | DA 20-0362 |
Court | United States State Supreme Court of Montana |
Parties | MASTERS GROUP INTERNATIONAL, INC., Third-Party Plaintiff, Appellee, and Cross-Appellant, v. COMERICA BANK, Third-Party Defendant, Appellant, and Cross-Appellee. |
For Appellant and Cross-Appellee: James H. Goetz, Goetz, Baldwin & Geddes, P.C., Bozeman, Montana David M. Wagner, Jeffrey R. Kuchel, Crowley Fleck PLLP, Missoula, Montana Joseph J. Shannon, Jane Derse Quasarano, Bodman PLC, Detroit, Michigan
For Appellee and Cross-Appellant: L. Randall Bishop, Attorney at Law, Kalispell, Montana Timothy B. Strauch, Strauch Law Firm, PLLC, Missoula, Montana Ward E. "Mick" Taleff, Taleff & Murphy, P.C., Great Falls, Montana
For Amicus Curiae Montana Bankers Association and Montana Independent Bankers Association: Randy J. Cox, Boone Karlberg P.C., Missoula, Montana
¶1 Masters Group International, Inc. (Masters), and Comerica Bank (Comerica) cross-appeal from the November 8, 2019 Decision, Findings of Fact & Conclusions of Law, the June 12, 2020 Decision & Order on Costs, Interest & Attorney Fees, and the accompanying June 17, 2020 Judgment issued by the Second Judicial District Court, Butte-Silver Bow County, following a January 9-19, 2017 bench trial.
¶2 We restate the issues on appeal as follows:
¶3 We affirm in part, reverse in part, and remand this matter to the District Court.
¶4 This is the second appeal between these two parties regarding a $10.5 million loan from Comerica to Masters and Masters’ eventual default on that loan. In 2015, this Court issued its opinion in Masters Group Int'l, Inc. v. Comerica Bank , 2015 MT 192, 380 Mont. 1, 352 P.3d 1101 ( Masters I ), which, in relevant part, reversed a jury verdict in favor of Masters and against Comerica in the amount of $52,037,593 and remanded the matter to the District Court to hold a new trial applying Michigan law. Masters I , ¶ 108. The Masters I opinion summarized the history of the case through the first trial and that background need not be repeated in full here. See Masters I , ¶¶ 3-31.
¶5 Masters was created by a group of investors who sought to acquire an existing office products business based in the United Kingdom and expand its operations into North America. On July 11, 2006, Masters obtained a $9 million loan from Comerica to accomplish this purpose. Both Masters and Comerica were represented by counsel in negotiating the loan. The language of the loan provided it would "be governed by and construed and enforced in accordance with the laws of the State of Michigan." One of Masters’ investors, Larry Pratt (Pratt) and the Larry F. Pratt Living Trust, guaranteed Masters’ loan by pledging $9 million worth of marketable securities. The loan was due to be repaid on or before July 11, 2008. With the money from the loan, Masters was able to acquire the U.K. company.
¶6 Masters sought to establish a new world headquarters in Butte and entered into a $200,000 loan agreement with the Butte Local Development Corporation (BLDC) in December 2006, to help finance start-up expenses for moving to Butte. In 2007, Masters leased warehouse space in Reno, Nevada, after it determined the proposed Butte facility was not feasible. Masters also amended its loan agreement with Comerica twice in 2007 for two $500,000 principal increases in the loan, bringing the total to $10 million. Masters provided Comerica with a $500,000 letter of credit from investors Matthew and Lilian Nolan (collectively Nolan) and a personal pledge of $500,000 from the Wachovia Bank control account of investor Dr. Michael Vlahos (Vlahos). Both 2007 amendments again provided the loan was to be governed by Michigan law and neither changed the July 11, 2008 maturity date.
¶7 In early 2008, the stock market began to crash, and the value of Pratt's pledged marketable securities decreased. Comerica sent Masters a Notice of Default on April 28, 2008, which explained Masters was in default because it was no longer in compliance with the borrowing formula after the decrease in value of Pratt's securities. Masters did not repay the $10 million loan by the maturity date of July 11, 2008. Comerica sent Masters another Notice of Default on July 30, 2008. On August 1, 2008, Comerica sent Masters a letter noting it was declining to extend the loan's maturity date and would forbear only from "day to day." Masters began to seek out a new lender. On August 27, 2008, Comerica loaned Masters another $500,000 and extended the now-$10.5 million loan's maturity date to November 1, 2008, based on a $500,000 letter of credit from investor Gerry Taylor (Taylor). Once again, the amendments to the loan stipulated that the agreements would be governed by Michigan law.
¶8 Masters did not repay the loan by November 1, 2008. On November 25, 2008, Comerica sent Masters another notice it was still out of compliance with the borrowing formula, noted it was again forbearing from "day to day," and demanded payment in full by December 5, 2008. Masters, which had been continuing to seek alternative financing since the August letter from Comerica, received an initial term sheet from Wells Fargo on December 2, 2008, and a modified term sheet on December 17, 2008, both of which were disclosed to Comerica. The term sheets, which were not binding, contemplated a $13 million loan from Wells Fargo to Masters, which would allow Masters to both pay off the $10.5 million Comerica loan and also finance its day-to-day operations of the business.
¶9 On December 17, 2008, Comerica sent Masters an offer to forbear on the loan until February 16, 2009 (the Forbearance Agreement). The Forbearance Agreement, like the loan, contained a provision that the agreement was to be governed by Michigan law. The Forbearance Agreement was signed by Karl Norton (Norton), a Vice President of Comerica's Special Assets Group. As we explained in Masters I :
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