Masters Group v. Comerica Bank
2021 MT 161
| Mont. | 2021Background
- Masters Group borrowed ~$10.5 million from Comerica (loan documents specified Michigan law). After defaults in 2008, Comerica offered a written Forbearance Agreement dated December 17, 2008 (signed by Comerica VP Norton) that required timely, written, hand-delivered acceptance and various cash/security injections from guarantors (Pratt, Vlahos) by late-December 2008.
- Masters and Pratt delivered late electronic signatures; Vlahos was abroad and could not sign until Jan. 2, 2009. Comerica communicated with Masters and issued entitlement orders to liquidate Vlahos’s assets, but on December 31, 2008 Comerica swept/seized nearly $10.6 million from Masters’ and guarantors’ accounts, collapsing Masters’ U.S. operations.
- Masters sued Comerica for breach of the Forbearance Agreement. This was a remand from Masters I (2015 MT 192) directing a new trial applying Michigan law. After a 2017 bench trial the District Court found Comerica breached, awarded Masters $10,595,514.16 in damages (seized funds), $8,067,405.60 prejudgment interest (Michigan law), $176,063.19 in taxable costs (Montana law), and $7,535,593.18 in attorney fees (Montana law), totaling ~$26.4M.
- Comerica and Masters cross‑appealed multiple rulings. Key contested issues on appeal included contract formation and waiver of Forbearance conditions, whether Comerica could offset the loan balance against damages, choice‑of‑law for interest and fees, entitlement to prejudgment interest, recoverable lost profits/UK business value, and recoverable costs.
- Montana Supreme Court affirmed liability and damages for the seized funds, affirmed the prejudgment interest award under Michigan law, affirmed denial of lost‑profits and UK‑value recovery, affirmed award of taxable costs under Montana law, but reversed the District Court’s award of attorney fees (holding Michigan law governs the contract and the fee clause is non‑reciprocal).
Issues
| Issue | Plaintiff's Argument (Masters) | Defendant's Argument (Comerica) | Held |
|---|---|---|---|
| 1. Formation/waiver of Forbearance Agreement and breach | Forbearance was a binding written contract (signed by Comerica) and Comerica waived conditions by conduct, so its Dec. 31 seizure breached the contract | Agreement never formed (Vlahos didn’t sign/conditions unmet); statute of frauds for financial institutions bars enforcement; no waiver | Court: Agreement valid under Masters I law‑of‑the‑case; substantial evidence (clear & convincing under Mich. law) that Comerica waived conditions by conduct; breach affirmed and damages for seized funds ($10,595,514.16) affirmed |
| 2. Setoff/recoupment (netting damages by loan balance) | N/A (Masters seeks full return of seized funds) | Damages should be reduced/netted by the $10.5M loan balance | Court: Comerica never pleaded or proved setoff/recoupment and expressly disclaimed it; District Court correct to refuse netting; Comerica barred from raising post‑trial |
| 3. Prejudgment interest (choice of law and rate) | Michigan law applies; interest under applicable Michigan subsection (favoring plaintiff) | Comerica disputed correct subsection/rate; argued other calculation | Court: Michigan law governs interest; applied MCL §600.6013(7) and awarded $8,067,405.60; rate calculation using contract‑specified rates (highest of rates shown) affirmed |
| 4. Attorney fees (choice of law and reciprocity) | Contract allows recovery of Bank’s costs/fees — Masters is prevailing party and should recover fees (argued reciprocity under Montana law) | Fee clause is non‑reciprocal; Montana reciprocal statute shouldn’t apply because contract specifies Michigan law | Court: Masters I established Michigan law governs disputes under the contract; Michigan has no reciprocity statute; Forbearance does not permit Masters to recover fees; District Court’s award of $7.5M reversed |
| 5. Lost profits / value of UK business | Masters sought lost profits and lost value of U.K. subsidiary as damages | Comerica argued those claims were speculative and not causally shown | Court: District Court did not err — lost‑profits speculative and North American business was unprofitable; causal link to U.K. collapse not proved; awards denied |
| 6. Recoverable costs (taxable vs. all costs) | Masters sought all taxable and non‑taxable costs under contract wording | Comerica argued only statutory (taxable) costs recoverable; Michigan law as to contract interpretation | Court: Choice‑of‑law analysis applied Montana law to costs; District Court properly awarded only statutory taxable costs ($176,063.19) and rejected non‑taxable cost recovery under contract |
Key Cases Cited
- Masters Grp. Int’l, Inc. v. Comerica Bank, 380 Mont. 1 (Mont. 2015) (Masters I) (remand to apply Michigan law and law‑of‑the‑case on formation/waiver issues)
- Quality Prods. & Concepts Co. v. Nagel Precision, Inc., 666 N.W.2d 251 (Mich. 2003) (course of conduct can constitute waiver; waiver issues are factual)
- Wyandotte Elec. Supply Co. v. Elec. Tech. Sys., 881 N.W.2d 95 (Mich. 2016) (elements for applying MCL §600.6013(7) prejudgment interest provision)
- Kewin v. Mass. Mut. Life Ins. Co., 295 N.W.2d 50 (Mich. 1980) (contract damages measure: those that arise naturally or were in parties’ contemplation)
- Crown Tech. Park v. D&N Bank, F.S.B., 619 N.W.2d 66 (Mich. Ct. App. 2000) (Michigan statute of frauds for financial institutions bars actions enforcing oral bank commitments)
- Lawton v. Gorman Furniture Corp., 282 N.W.2d 797 (Mich. Ct. App. 1979) (lost profits damages are based on net profits and require reasonable certainty)