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Archive for November, 2016

Big Bank Troubles and Trending Towards Community Banking or Fintech?

November 17, 2016 2 comments

“The so-called Sons and Daughters Program was nothing more than bribery by another name,”

-Assistant Attorney General Caldwell.

Today the Department of Justice issued a Press Release – JP Morgan’s Investment Bank in Hong Kong has agreed to pay a $72 Million Penalty for Corrupt Hiring S2015-11-26-13-04-02cheme in China.

Yikes.

A couple of thoughts:

1. The Department of Justice is out there holding Big Banks Accountable. 

Someone has to. It’s not going to be the average consumer, (Wells Fargo appears to be an exception). It’s also not going to be the small business owner taking out a construction loan. Big Banks have the leverage.

2. Local Community Banks are More Appealing Than Big Banks.

Consumers and businesses alike are looking for banks they can trust. From my perspective, as a lawyer and an adviser to business owners – I am only interested in referring my clients to professionals that I trust.

Looking at the news headlines, an average individual or small business owner might conclude that they need a local banking relationship they can trust.

In West Michigan there are a lot of good local community banks. I know good commercial lenders who care about their business clients.

Does this mean that big banks are going away? Nope.

As its been said – some of the largest banks are simply able t
o offer better deals at lower risks.

Regardless, the headlines certainly give you pause to think.

On the Topic of the value of Community Banks…

Last year Thomas J. Curry, Comptroller of the Currency gave remarks before the ABA Mutual Community Bank Conference in Washington D.C. You can read the remarks here

Mr. Curry had this to say in favor of community-based banks:

“These community-based institutions extend credit to farms and families and local businesses in towns and cities across America, and they serve their customers in a way that large banks just can’t match. They are small enough to be able to know their customers, and they work with them in good times and bad. But they are also large enough to provide the services communities need. Mutual savings associations fit firmly in that tradition”

In further support:

“You are free to do what is best for your customers, and that means you provide services and price those services in a way that puts people first – ahead of quarterly profit targets and ahead of investor interests.”

Those are pretty glowing remarks for community-based lenders.

They are certainly attributes I like to see when I am referring any of my business clients to a commercial lender – particularly a start-up entrepreneurial type client.

Mr. Curry also commented that “big banks”:

“offer a variety of important services to companies and consumers, from commercial loans to credit cards, and they present a number of challenges from a supervisory perspective.” 

I’d say the “supervisory challenge” was an understatement.

 

FinTech Poses Challenges to Community Banking…

[UPDATED] Just today, November 18, Mr. Curry gave remarks before the 11th Annual Community Bank Symposium.  You can read the remarks here.

Mr. Curry notes: “One particular issue testing banks’ strategic risk today is the tectonic shift underway regarding innovation and financial technology.

fintechs have emerged to provide financial products and services through alternative platforms and delivery channels. As of 2015, the number of fintech companies in just the United States and United Kingdom alone had reached 4,000.

Mr. Curry notes:

“One factor in the growth of fintech companies is the 85 million millennials entering the financial marketplace who have demonstrated more willingness than earlier generations to change financial service providers or use multiple providers to meet their needs.”

It’s interesting to note the Trend away from Big Banks – and now to Fintech.

Certainly, millennials will continue to play a large role in the growth of fintech companies like Prosper Loans. Coupled this with the fact that millennials are increasingly attracted to business that does social good – fintech appears to have an advantage with millennials.

Questions? Comments? 

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Questions? Comments? 

email: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Business Legislation Update: Business Owners: Bill Would Restrict Non-Competition Agreements with Employees.

November 15, 2016 1 comment

On November 9, 2016 House Bill 6017 was introduced in the Michigan House of Representatives. If passed it would limit the enforceability of a non-competition agreement signed between an employer and an employee.

I have spent several articles discussing the legal consequences/enforceability issues of non-competes.

It appears the Legislature is wrestling with the question posed by Nick Manes of MIBiz in an article a few years back: “Are noncompetes a barrier to growth?

Check out the text of the bill here

The Bill was referred to the committee on commerce and trade.

The Bill is rather short – and has only two key components to it:

1. Require Employers to follow a Specific Procedure prior to enforcing a non-compete.

The Bill would only permit Employers to enforce a non-competition agreement if the Employer followed a procedure, including:

(A) INFORMED THE PROSPECTIVE EMPLOYEE IN WRITING OF THE REQUIREMENT AT OR BEFORE THE TIME OF THE INITIAL OFFER OF EMPLOYMENT.

(B) IN ANY POSTING OR ADVERTISEMENT FOR THE EMPLOYMENT, GIVEN NOTICE THAT ACCEPTANCE OF THE AGREEMENT OR COVENANT IS A CONDITION 1 OF EMPLOYMENT.

2. Non-Compete only Enforceable if the Employee voluntarily resigns.

Further, under the Bill an employer can only enforce the non-compete if, among other things, the employee has voluntarily resigned. Stated another, way, a non-compete would be unenforceable if the Employer terminated the employee.

A Bill was introduced back in February that somewhat mirrors this Bill, but has other restrictions. That Bill never came back from the committee on Trade and Commerce.

We will see if HB 6017 is able to gain any more traction – since it is now also sitting in the committee on Trade and Commerce.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka

http://www.dwlawpc.com

Real Estate Law Update: A Holdover after Foreclosure Sale Is Not a Tenant.

November 11, 2016 1 comment

Happy Friday!

 

Today I am posting about a Court of Appeals case decided on November 1st – Seymore v Adams Realty, et al

Foreclosed Property = high risk/high reward.

Real estate investors are always wary of the many pitfalls when purchasing property at foreclosure.

The Adams Realty Case provides an example of what happens when someone is still occupying the Property after foreclosure.

Should you just change the locks?  

Should you take matters into your own hands?

 

FACTS:

  • Plaintiff, Seymore was allegedly locked out of a house located in Detroit after Adams Realty and Michael Regan allegedly changed the locks on or about October 9 or 10, 2014.
  • Defendant Michael Regan purchased the house on or about October 2, 2014, from Bank of America.
  • Bank Of America purchased the property on December 19, 2013, by way of a sheriff’s sale.
  • Seymore sued Regan and Adams Realty claiming that by changing the locks Regan violated the “Anti-Lockout Statute” MCL 600.2918.

 

Anti-Lockout Statute – MCL 600.2918 

Any landlord who has gone through the process of evicting a tenant knows that, in the residential leasing context, there are heightened duties of landlords, and heightened rights of tenants.  Tenants have the right not to have their possessory interest in the property interfered with, without the proper court procedure being complied with (Summary Proceeding Action in District Court).

 

Here, Seymore claimed that she was in possession of the Property after foreclosure and by changing the locks, the purchaser had unlawfully interfered with her right to possess the Property.

 

The Anti-Lockout statute provides damages for forcible ejectment from property or unlawful interference with a possessory interest in property.

 

Subsection (1) (forcible ejection) applies to any person. 

Subsection (2) (unlawful interference) applies to any tenant in possession.

Violating the statute can cause a property owner/landlord to be liable for statutory damages (3 times the amount of actual damages or $200.00 whichever is greater.)

In this case…

Seymore claimed that she was was basically a “hold over tenant” after foreclosure and had rights under the anti-lockout statute.

The Court of Appeals said – no. The Anti-Lockout statute applies to “tenants”. Seymore did not not show any facts that would say she was a tenant. The anti-lockout statute does not apply.

“MCL 600.2918(2) does not provide relief for a person, such as [Seymore] who remained in possession of property after a foreclosure but who had no contractual relationship with the owner of the property.” Seymore, id at Page 3, citing Nelson v Grays, 209 Mich App 661  (1995).

 

Conclusion:

Just changing the locks after redemption has expired is not “unlawful interference with a possessory interest” under MCL 600.2918(2) if you, purchaser, do not have a contract with the occupier of the Property.

However, the anti-lockout statute enforces penalties against a property owner who takes “forcible actions” that, as the court in Shaw v Hoffman, 25 Mich 162 (1872) noted “in some way inspire terror or alarm in the person evicted.”

To avoid any unfounded claims by holdovers, it always makes sense after purchasing property at foreclosure, when there are any occupants present, to go through the lawful channels for a court proceeding to extinguish any possessory rights.

You don’t want to expose yourself to undue liability.

 

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Categories: Uncategorized

Another Court Lesson for Business Owners: Read Your Contracts Before You Sign.

November 7, 2016 Leave a comment

I recently read yet another court decision that provides a classic example for businesses owners of the consequences for not reviewing your contracts before signing.

The case: the October 6th, 2016 Michigan Court of Appeals decision of Earl Pegues, LLC v Izis General Contractors, LLC.

The dispute concerned a construction agreement.

The property owner, Pegues LLC engaged a contractor to construct a restaurant for the price of $1,050.000 in my hometown of Saginaw.

Pegues LLC claimed the contractor overbilled by approximately $123,000.

The main problem:

Pegues had signed off on the Contractor’s Sworn Statement and therefore authorized the title company to release the funds and therefore, unwittingly, agreed to the alleged overbilling.

Thereafter, Pegues sued for breach of contract and fraud.

During the lawsuit, Pegues admitted that he simply “did not look at the figures.” That he “did not understand the sworn statement when the bank gave it to [him] to sign.

Pegues admitted – “It was my oversight.”

The trial court dismissed all claims against the Contractor – Pegues appealed, and the Court of Appeals upheld the dismissal.

Law:

It is your responsibility to know what you are agreeing to before you sign a contract.

The Court of Appeals reasoned:

“It is well-settled that a person who signs a contract cannot have the contract set aside merely because he was negligent in failing to read the terms.” Citing Shay v Aldrich, 487 Mich 648, 680-681 (2010).

Further:

“[A] person who signs and executes an instrument without inquiring as to its contents cannot have the instrument set aside on the ground of ignorance of the contents.” Christensen v Christensen, 126 Mich App 640, 645 (1983).

Conclusion:

Small business owners often times are wearing many “hats”. They are working with limited cash flow and are forced to make many choices. Many of these choices are in areas outside of their expertise.

Oftentimes startups and small business owners will “cut corners” to be more efficient and cost-effective.

When it comes to signing a legally binding contract – it is simply not worth cutting corners on.

The cost of what you do not know can be significant.

Question? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Reminder to Michigan Limited Liability Companies: Maintain your Corporate Formalities and Keep up your Guard.

November 4, 2016 Leave a comment

Occasionally I will have a business client come in and I will ask – just to make sure – “is your business still in good standing?”

The common answer is “I think so.”

And of course, after I perform a quick internet check with the State of Michigan it is all too common that I discover that either the LLC is “not in good standing” or worse, the company has been dissolved automatically for failure to file annual statements.

This morning I received an e-mail reminder from the Michigan Department of Licensing and Regulatory Affairs (LARA)

LLC owners are reminded that 2016 annual statements are being mailed to resident agents.

A Word on Resident Agents:

This is that time of the year that my office is inundated with such statements. We are happy to provide our business clients with resident agent services. One of the benefits of an LLC is that it provides its owners a level of privacy protection.

Michigan law requires Limited Liability Companies to have appointed a Resident Agent.

MCL 450.4207(1)(b) requires an LLC to have a resident agent. A person, or business with a physical presence in the State of Michigan.

Michigan law does not require that an “owner” of the LLC be the resident agent.

“The resident agent appointed by a limited liability company is an agent of the company upon whom any process, notice, or demand required or permitted by law to be served upon the company may be served.” MCL 450.4207(1)(b).

Many of my real estate investment clients will utilize my law firm as resident agent when filing their articles of organization with the State of Michigan.

Per LARA’s announcement:

“Annual statements and reports must be filed no later than February 15 of each year and can be filed online at www.michigan.gov/fileonline.”

Consequences for Failing to File:

if an LLC “fails to file its annual statement/report and filing fee for two years, the limited liability company will not be in good standing. The status of the limited liability company will be “active, but not in good standing.””

Further,

an LLC “not in good standing is not entitled to a certificate of good standing; its company name will be available for use by another entity, and no document will be filed on behalf of the company other than a certificate of restoration.”

By the Numbers:

“There are a total of 419,315 LLCs and 12,199 PLLCs that are receiving 2016 statements (LLCs) and statements and reports (PLLCs).”

In Conclusion:

Business owners, if you get these annual statements from the State of Michigan, or from your attorney – do not disregard them! Maintain your Corporate Formalities.

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

Real Estate Case Law: Tenants in Common v Tenants with Full Rights of Survivorship – A Potentially Costly Distinction.

November 3, 2016 Leave a comment

This morning I read a court of appeals decision that came out on October 18 – it provides a classic example of why you need to take care in drafting real estate documents.

 

The case: In Re Estate of Lyle Steiner

Facts are relatively straight forward:

  • In 2007, Tuscan Plaza Condominiums, LLC, conveyed a personal residence to Lyle F. Steiner and Steven Steiner.
  • Specifically, the deed provides that the property was conveyed: to LYLE F. STEINER, A SINGLE MAN AND STEVEN M. STEINER, A SINGLE MAN
  • Lyle passed away. Steven was appointed personal representative of Lyle’s estate.
  • DHHS filed a claim against the estate for unpaid Medicaid bills in the amount of $48,084.95.
  • Steven subsequently filed a petition to reform the deed to Lyle’s personal residence to indicate a joint tenancy with a right of survivorship.

What’s the significance?

Law: Distinction Between Tenants in Common and Joint Tenants with Full Rights of Survivorship

 

Under Michigan law, there are generally two ways to own real property – Tenants in Common and Joint Tenants with Full Rights of Survivorship. (A third way, not part of my discussion, but very interesting topic, being as husband and wife, or tenants by the entirety).

Tenants in Common

Holding property as Tenants in Common means that each owner holds the entire title along with the owners. . Each owner shares in possession of the entire property, and each is entitled to an undivided share of the whole. If an owner dies, his interest in the property is passed on to his heirs.

Joint Tenants with Full Rights of Survivorship

Conversely, in Joint Tenants with Full Rights of Survivorship, when an owner passes away, their remainder interest in the property passes to the remaining owners. Simply put, the last joint owner to die takes the entire property.

In the Steiner Estate Case:

The Deed indicated that Lyle and Steven owned the Property – there was no “survivorship language” – so the property was held as “tenants in common”.

 

When Lyle Steiner passed away – an undivided half interest in the Property was owned by the Estate – and therefore DHS had a, presumably, valid claim for its $48,084.95!

If the Property was held as Tenants with Full Rights of Survivorship – Lyle Steiner would have no Estate – his half of the Property would transfer automatically to Steven.

No Estate = No money to pay DHS.

Steve attempted to argue that the Deed should be “reformed” because Steve’s complete ownership upon Lyle’s death was intended.

The Court of Appeals was not convinced.

To paraphrase – the Deed is not ambiguous. It is plain in its meaning.

because it is plain in its meaning – you cannot look outside of the deed to other evidence that shows Lyle’s intent.

 

Conclusion:

Real Estate can be precise and complex. It is worth engaging legal counsel in any real estate matters.

 

http://www.dwlawpc.com

e-mail: Jeshua@dwlawpc.com

Twitter: @JeshuaTLauka