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. Pourgol held an unclear amount of shares in the close corporation as no ratio or no amount of major rights are mentioned in the question, so unclear amount of shares is assumed.

3) NO. As a shareholder in a closely held corporation has the responsibility to take care of the fellow shareholder with regards to the law. When promise to fix the buyer's home was made aware then he followed the rule.

4)

YES. As the contention is against law, the amount spend for the renovation and is guaranteed according to the settlement agreement is recovered.