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STATE OF MICHIGAN
COURT OF APPEALS


LAETHEM EQUIPMENT COMPANY, LAETHEM FARM SERVICE COMPANY, MICHAEL T. LAETHEM, and MARK E. LAETHEM, Plaintiffs-Appellants, v CURRIE KENDALL, P.L.C., Defendant-Appellee.

UNPUBLISHED November 20, 2007

No. 272170 Saginaw Circuit Court LC No. 05-055440-NM

Before: Talbot, P.J., and Fitzgerald and Kelly, JJ. PER CURIAM. Plaintiffs appeal by delayed application for leave the grant of summary disposition in favor of defendant law firm for lack of subject-matter jurisdiction, pursuant to MCR 2.116(C)(4). Plaintiffs assert the trial court erred in determining that their claims of legal malpractice and breach of fiduciary duty arose out of the administration of their father's trust and, therefore, were within the exclusive jurisdiction of the probate court. We reverse and remand. The factual background of this case is lengthy, encompasses multiple lawsuits1 and involves a fairly complex dispute among family members regarding two John Deere farm implement businesses, Laethem Equipment Company and Laethem Farm Service Company, which were owned by the Laethem family through a family trust.2 Francis Laethem was the

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Laethem Equip Co v Deere & Co, filed in the United States District Court, Eastern District of Michigan (Case No. 1:05CV10113); Laethem v Laethem, filed in the Tuscola Circuit Court (Case Nos. 03-21644-CZ and 93-27374-SE); Laethem Equip Co v J & D Implement, Inc, filed in the Tuscola Circuit Court (Case No. 05-022863-CK); Laethem Equip Co v J & D Implement, Inc, unpublished opinion per curiam of the Court of Appeals, issued July 19, 2007 (Docket No. 266648).

Laethem Equipment Company is a Michigan corporation with its principal place of business located in Caro, Michigan. Until January 15, 2003, the Company was a John Deere dealer and operated a retail farm implement and equipment business. Laethem Farm Service Company is
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father of plaintiffs, Michael and Mark Laethem, and Kathryn Laethem. Francis established the Francis M. Laethem Trust and assigned all of his personal property, assets and interest in the two plaintiff companies to the Trust.3 All three siblings were named as trustees, with Mark and Michael operating the Laethem companies and Kathryn acting as the accountant. Anne Laethem, the wife of Francis, was designated as the primary trust beneficiary and was to receive the trust income during her lifetime. Following the death of their father, Michael and Mark continued operating the Laethem companies. Purportedly, concerns arose regarding their management of the companies and wrongful attempts to transfer stock in the businesses to themselves for less than fair market value. Anne also asserted that she was not being paid income from the trust in accordance with the profits of the Laethem businesses. As a result, Kathryn retained defendant law firm on or about July 26, 2001. Defendant contends, by way of an affidavit, that it was retained by Kathryn solely to advise her in her capacity as a trustee of the Laethem Trust. Reportedly, defendant assisted Kathryn in negotiations with her siblings in July of 2001, in an attempt to reach an agreement regarding purchase of the Laethem businesses by Michael and Mark. However, an agreement was never reached regarding the price to be paid to acquire the companies.4 Following defendant's advice, on October 15, 2001, Anne removed Michael and Mark as trustees of the trust. Defendant then became involved in the representation of the companies. Shortly thereafter, defendant advised Kathryn to remove Michael and Mark as directors and officers of the companies and to install herself as the sole officer and director, but the brothers continued working for the companies. Plaintiffs contend that these actions led to the failure of the companies. We would note, however, that during this time period John Deere conducted a detailed audit of the companies, which revealed retail and warranty note irregularities and fraud in the operation of the companies resulting in substantial chargebacks, totaling thousands of dollars, being issued. Through defendant, Kathryn engaged in negotiations with John Deere to identify a buyer for the Laethem companies. Although defendant contends this work was done solely as a representative of Kathryn, in her capacity as a trustee, in related litigation5 defendant acknowledged under oath having an attorney/client relationship with Laethem Equipment Company. In addition, defendant sought payment of fees incurred in its capacity as the attorney for the legal representative of Laethem Equipment Company. On January 28, 2003, Michael and Mark, through their attorney, presented a new offer to purchase the companies. Plaintiffs allege that while conducting negotiations with defendant to purchase the company, defendant was
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also a Michigan corporation with its principal place of business located in Fairgrove, Michigan. Until January 15, 2003, this company operated as a satellite John Deere dealership in conjunction with Laethem Equipment Company's dealership agreement with John Deere.
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Francis died on January 4, 1993.

Although Kathryn contended the companies had not been sold to Michael and Mark, as the business accountant for the Trust, Kathryn allegedly filed tax returns reflecting the brothers' ownership, on an equal basis, of Laethem Equipment Company.
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Tuscola County Circuit Court Case Nos. 93-27374-SE and 03-21644-CZ.

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simultaneously negotiating for the sale of the companies and also represented competing John Deere dealerships operated by another family. Plaintiffs assert defendant was aware that John Deere was seeking to reduce the number of dealerships in their area and that defendant's actions resulted in the termination of the companies' dealership agreement with John Deere. On January 15, 2003, defendant reportedly instructed Kathryn to fire Michael and Mark. In addition, arrangements were made to sell assets from the companies to J & D Implement, Inc., an Ohio corporation. Plaintiffs allege the Laethem companies' assets were being sold "at fire sale prices." Michael and Mark initiated a lawsuit in the Tuscola County Circuit Court in an attempt to secure a temporary restraining order (TRO) to prevent liquidation of the companies' assets. Despite a TRO being in place, Kathryn proceeded with defendant to consummate the deal to transfer assets to J & D Implement, Inc. A hearing was conducted on March 11, 2003, to determine whether remaining company assets should be sold. Defendant appeared on behalf of both companies and plaintiffs allege defendant elicited knowingly false testimony from Kathryn to secure the lifting of the TRO. Plaintiffs contend the court lifted the TRO and permitted additional assets to be sold at auction based on this allegedly false testimony. Plaintiffs further assert that the auction was mishandled resulting in the sale of the companies' assets at a significant loss. Concurrently, Michael and Mark initiated a lawsuit in the circuit court against both the Trust and Kathryn, individually and as trustee and accountant for the Trust, alleging fraud, tortuous interference with business relationships, defamation and business disparagement, conversion, accountant malpractice, false light invasion of privacy and seeking specific performance of an alleged agreement to purchase Trust assets and promissory estoppel.6 Despite interim rulings that Michael and Mark only had an agreement to purchase the businesses at some future point, but that the details regarding price had not been determined, the circuit court entered an order on November 1, 2004, granting Michael and Mark a default judgment on their request for specific performance. The trial court order stated, in relevant part: This Court finds that Plaintiffs Mark and Michael Laethem are now and have been since January 4, 1993, the 50-50 shareholders of Laethem Equipment Company (LEC), Laethem Farm Service Co., (LFSC) and Canusa Equipment Company (Canusa), and in connection therewith, have had the right to the profits of, and the right to conduct the management of, and the right to hold themselves as owners of LEC, LFSC and Canusa since that date. This Court further finds since January 4,1993, Mark Laethem and Michael Laethem have each held 50% equitable ownership interests in all of the commercial property on which LEC operated in Caro, Michigan, and the real property known as the Buck Farm, and all parcels on which LFSC operated that were not titled to LFSC, and that pursuant to such interests, Mark Laethem and Michael Laethem had the right to control and manage all operations thereon.

Verified Complaint and Jury Demand filed in the Tuscola County Circuit Court, lower court case number 03-21644-CZ, Hon. Patrick R. Joslyn presiding.

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Approximately one month later, a formal settlement agreement and release was executed, which reflected the trial court's ruling regarding ownership of the companies and memorialized additional agreements between the siblings, the Trust and its beneficiaries. This appeal arises from a subsequent complaint filed by plaintiffs in the Saginaw Circuit Court against defendant alleging legal malpractice/professional negligence and breach of fiduciary duties, asserting that defendant acted adversely to the interests of its clients

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