Question

Mark Burnett and Kamran Pourgol were the only shareholders in a corporation that built and sold a house. When the buyers discovered that the house exceeded the amount of square footage allowed by the building permit, Pourgol agreed to renovate the house to conform to the permit. No work was done, however, and Burnett filed a suit against Pourgol. Burnett claimed that, without his knowledge, Pourgol had submitted incorrect plans to obtain the building permit, misrepresented the extent of the renovation, and failed to fix the house.

1. Pourgol held a (majority, minority, unclear) amount of shares in the close corporation.

2. Is a court likely to find Pourgol liable for his actions? (Yes, No)

3. Assume that Pourgol and Burnett agreed to the plans submitted to the town and Burnett and was made aware beforehand of the promise to fix the buyer's home. Would Pourgol most likely be held liable in this instance? (Yes, No)

4. Would the buyers still be able to recover the costs of renovation to conform the house allowed by the building permit? (Yes, No)

Answer 1

1. The Close Corporation is independent of its members. The members are not liable for the debt of the Close Corporation unless the member(s) has(ve) signed surety for the debt of the Close Corporation.? So, the Pourgal is not liable for his actions as no surety has been signed by the members.

2. No. because members are not mutually agreed upon.

3. Yes, because there is clear uncut agreement between the both members and surety has been signed.

4. Yes, but can only have right against the assets of Close Corporation and not the members.