Mas Associates, LLC v. Korotk

2018 WL 2258972 (2018)

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Nature of the Case

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Facts

P sought to initiate a merger with the mortgage lending company he owned, Savings First Mortgage, LLC ('Savings First'), and two other licensed mortgage entities: Greentree Mortgage Corporation and MAS Associates (D). The three companies were to operate as one, with D absorbing Greentree and Savings First, to become the surviving entity. It would have been impossible to combine the businesses without some interim steps for the purposes of licensing. An 'Interim Agreement' was drafted which included arrangements, obligations, and structure of the business during the Interim-period. The Interim period consisted of the time between signing the pre-merger documents and the completion of regulatory requirements. The approval period, which was slated to last for three years or more, was intended to provide time for each of the states in which D operated, to accept the change in ownership, and to act as a limitations period to insulate D from potential creditors. The approval period was to commence on November 30, 2009. By November 30, 2009, all three had deposited their share of the contribution funds into the new D operating account. Despite not signing the Agreement, Ds began to follow the Agreement 'in principle' and merged their operations. The new business began to generate assets and P suggested that the three of them should start receiving a salary of $10,000.00 per month, to which they agreed. They agreed to not move forward with any other business decisions unless they all consented. On December 15, 2010, the three men divided D's profits among themselves, each receiving $120,000.00. That next week, on December 22, 2010, they each made an additional capital contribution of $125,000.00. Then, on December 30, 2010, they received a second profit distribution, this time each drawing $64,500.00. Ds also pledged their personal resources as collateral to secure a line of credit. P refused, explaining that ownership was not sensible for him because he had more assets than the other executives. On March 10, 2011, P notified Ds of his decision to quit for medical reasons. P claimed that he was entitled to a disability-related buyout. Ds refused, and P filed a Complaint. Korotki (P) sued Greentree Mortgage Corporation, Wax Properties, LLC, MAS Associates, LLC,(D) and the partnership between Joe Wax and Mark Greenberg (Ds). P sought repayment of two loans that he contributed as capital to the proposed merged business, MAS Associates, LLC (D). P claimed a breach of contract and sought a declaratory judgment under the Revised Uniform Partnership Act (RUPA). Ds brought a breach of contract claim against P as a result of an unsigned interim agreement that outlined the duties of the parties during the period between pre and post-merger. The circuit court found P, dismissing the breach of contract claim and finding that there existed a partnership among P and Ds and that P was entitled to an apportionment of his interest in the partnership. Ds were ordered to pay P $1,970,866.00. Ds appealed.