STATE OF MICHIGAN CIRCUIT COURT FOR THE COUNTY OF INGHAM

G3 PROPERTIES, LLC, STEVEN SAMUEL GLANDER, JOHN IANNUCCI FAMILY TRUST Dtd. 10/17/2000, JOHN IANNUCCI, TTEE, ANGELO IANNUCCI, THE KENNETH A. & DEBBIE A. KEFALAS FAMILY TRUST Dtd. 5/31/2006, KENNETH A. & DEBBIE A. KEFALAS, TTEES, BENJAMIN W. POST, JR., SEIFMAN FAMILY TRUST Dtd. 5/12/1994, BILL & SARA SEIFMAN, TTEES, HENRY B. SOLOWAY 1991 IRREVOCABLE FAMILY TRUST Dtd. 1/22/91, ALBERT L. BARDIER, TTEE, and CAPITOL DEVELOPMENT BANCORP LIMITED VIII, a Michigan Corporation, Plaintiffs, V. CAPITOL BANCORP LTD., CRISTIN K. REID, JOSEPH D. REID, and L. DOUGLAS JOHNS, Defendants.

Case No. 11-39-CZ Hon. Clinton Canady, III

Jeffrey G. Muth (P65041) Scott R. Murphy (P68015) BARNES & THORNBURG LLP 171 Monroe Ave NW, Ste 1000 Grand Rapids, Michigan 49503 (616) 742-3930 Attorneys for Plaintiffs

Raymond W. Henney (P35860) Michael P. Hindelang (P62900) HONIGMAN MILLER SCHWARTZ AND COHN LLP 660 Woodward Ave, Ste 2290 Detroit, Michigan 48226 (313) 465-7412 Attorneys for Defendants

PLAINTIFFS' MEMORANDUM OF LAW IN SUPPORT OF MOTION TO REMOVE DIRECTORS OF CAPITOL DEVELOPMENT BANCORP LIMITED VIII, DISSOLVE AND WIND UP ITS AFFAIRS AND APPOINT RECEIVER

TABLE OF CONTENTS
TABLE OF AUTHORITIES INTRODUCTION STATEMENT OF FACTS I. The Individual Defendants are Directors of Both CDBL VIII and CBC, the Entity Which Committed Acts of Minority Oppression II. The Directors Authorized a Sham Loan Transaction Without the Required Shareholder and Disinterested Director Approval. III. CDBL VIII Has Never Received a Payment on the CBC Note PROCEDURAL BACKGROUND I. Defendants Instruct Mr. Johnson not to Issue a Report on Whether Derivative Claims are Proper on Behalf of CDBL VIII. II. Derivative Claims Proceed and Defendants File Second Motion to Dismiss III. This Court Already Found that the Controlling Shareholder Breached its Fiduciary Duty to CBDL VIII and Committed Acts of Minority Oppression. IV. A Majority of Those Shareholders Entitled to Vote Have Approved the Removal of the Directors, Dissolution of CDBL VIII and the Appointment of a Receiver. ARGUMENT iii 1 2 3 5 6 6 7 7 8 8 10

I. The Articles and Bylaws of CDBL VIII Authorize the Dissolution, Wind Up and 10 Liquidation of CDBL VIII' s Assets II. The MBCA Authorizes the Removal of the Directors. 11 III. The Appointment of a Receiver to Preserve and Protect the Assets of CDBL VIII During its Dissolution, Wind Up and Liquidation is "Allowed by Law" Under 12 Michigan's General Receivership Statute CONCLUSION 14

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TABLE OF AUTHORITIES
Cases Band v Livonia Associates, 176 Mich App 95; 439 NW2d 285 (1989) Franchino v Franchino, 263 Mich App 172; 687 NW2d 620 (2004) Petitpren v Taylor School District, 104 Mich App 283; 304 NW2d 553 (1981) Rytkonen v Butler, 305 Mich 580; 9 NW2d 849 (1943) Weathervane Windows, Inc v White Lake Construction Co, 192 Mich App 316; 480 NW2d 337 (1992) Statutes MCL § 450.1489(1)(b) MCL § 450.1489(3) MCL § 450.1495 MCL § 450.1514 MCL § 600.2926 MCL § 600.3505 Rules MCR 2.116(C)(8) MCR 2.116(C)(10) 8 8 1 11 7 1, 11, 12 12 13 13,14 12 1, 13 13 13

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INTRODUCTION
On September 12, 2012, this Court correctly found, as a matter of law, that Defendant Capitol Bancorp, LTD ("CBC") breached its fiduciary duty and committed acts of oppression against Plaintiffs as minority shareholders of Capitol Development Bancorp Limited VIII ("CDBL VIII"). In reaching its opinion, this Court found that Plaintiffs were deprived of their statutory and contractual right to vote on a sham loan transaction whereby CDBL VIII transferred nearly all of its assets to its majority and controlling shareholder, CBC. As a result, an Order was entered on September 20, 2012, granting summary disposition to Plaintiffs on their fiduciary duty and minority oppression claims. Plaintiffs now seek to remove those bad actors in charge of CDBL VIII to ensure that any remaining assets of the corporation are preserved and protected for the benefit of its shareholders. To accomplish this task, Plaintiffs are moving this Court to (i) remove the Directors of CDBL VIII who authorized the "sham loan" transaction in accordance with MCL § 450.1514, (ii) dissolve and wind-up the affairs of CDBL VIII in accordance with MCL § 450.1489(1)(b), and (iii) appoint a receiver to manage the affairs of CDBL VIII during its dissolution and windup. In accordance with the By-Laws of CDBL VIII, Plaintiffs have already obtained the written consent from a clear majority of its shareholders to remove the Directors, dissolve and wind up the affairs of CDBL VIII, and appoint a receiver to oversee the orderly liquidation of the corporation. Michigan Courts have appointed receivers under circumstances much less egregious than those presented here. Indeed, this Court has the discretion to appoint a receiver "where the facts and circumstances render the appointment of a receiver an appropriate exercise of the circuit court's equitable jurisdiction." Petitpren v Taylor School District, 104 Mich App 283, 294; 304 NW2d 553, 557 (1981). Clearly such discretion is warranted here where a majority of 1

shareholders have agreed to remove the directors and dissolve the corporation and are requesting that a receiver be appointed to preserve and protect CDBL VIII's remaining assets.

STATEMENT OF FACTS
In November 2007, CBC formed CDBL VIII and filed its Articles of Incorporation (the "Articles") with the Michigan Department of Labor and Economic Growth. A copy of the Articles is attached as Exhibit A. CDBL VIII issued its Offering Memorandum shortly after the Articles were filed for a proposed bank holding company and summarized the offering and the amounts it expected to receive. A copy of the Offering Memorandum is attached as Exhibit B. Initially the offering was only to remain open until December 21, 2007, but Defendants extended the offering until February 15, 2008. The Offering Memorandum describes CDBL VIII as an investment vehicle to "fund the start-up or acquisition of controlling interests in new community banks within the United States." Id. at p.1. Although the Offering Memorandum contemplated raising $20,000,000.00, only 6,025 shares of Class B Stock were sold for a total investment of $6,025,000.00. Rather than return this money to the investors, Defendants accepted the cash, issued shares to the investors, and purported to operate CDBL VIII pursuant to the terms and conditions of the Offering Memorandum. A significant investment was made by Plaintiffs G3 and the Seifman Family Trust, which each purchased 2000 shares at an aggregate price of $2,000,000 pursuant to their Subscription Agreement(s). The Subscription Agreement(s) stated that the shares were sold "pursuant to the terms and conditions of the Offering Memorandum," as well as the Articles and Bylaws of the Company. A copy of the Bylaws of CDBL VIII is attached as Exhibit C. The terms and conditions of the Offering Memorandum clearly and unambiguously established that proceeds derived therefrom would be utilized to purchase majority interests in community banks. See

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Offering Memorandum, passim. For example, the Offering Memorandum on page 11, describes "use of proceeds" as follows: CBDL VIII intends to use the net proceeds from the sale of shares offered to purchase a majority interest in community banks. The remainder of the offering proceeds will be used for general corporate purposes and for potential future investment in de novo or other banks. Id. at p. 11. The Offering Memorandum also explains that CDBL VIII "was formed for the purpose of serving as a bank development arm of CBC to fund the start-up and/or acquisition of a controlling interest in new community banks within the United States." Id. at p. 14. Contrary to the expressly stated purpose of the Offering Memorandum, Defendants admit that CDBL VIII never obtained any ownership interest in any bank. See Interrogatory Responses of C.Reid at If 17, a copy of which is attached as Exhibit D. Indeed, CDBL VIII was never registered as a bank holding company thereby precluding it from holding an ownership interest in any bank. Instead, CBC "loaned" all of CDBL VIII's assets to itself in what can only be described as a "sham loan" transaction. I. The Individual Defendants are Directors of Both CDBL VIII and CBC, the Entity Which Committed Acts of Minority Oppression. The individual Defendants are all Directors and Officers of both CBC and CDBL VIII. A chart reflecting their positions at CBC and CDBL VIII is below: CDBL VIII Cristin K. Reid Joseph D. Reid L. Douglas Johns President, Chairperson, CEO, Director Secretary, Director Vice President, Treasurer, Director CBC President, Director Chairman, Director Director

See Off. Memo., Ex. B at p. 17. For the purposes of this Brief, the individual defendants are collectively referred to as the "Directors".

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CDBL VIII had two class of common stock — Class A Common Stock (voting) and Class B Common Stock (non-voting). See Off. Memo., Ex. B at pp. 32-33. CBC retained 100% ownership of CDBL VIII' s Class A Common Stock and could vote on all matters that came before CDBL VIII in the ordinary course of business unless presented with a conflict of interest. Id. (emphasis added). By contrast, Shareholders of Class B Common Stock were only entitled to vote on certain transactions that had a significant impact on the business affairs of CDBL VIII. See Articles, Ex. A at Art. VIII, B.3; Off. Memo., Ex. B at pp. 32-33. The Articles identify certain transactions that require the approval by a majority vote of all shareholders, including Class B shareholders. Those transactions include: (i) (ii) the merger or share exchange with another corporation or entity; the sale, assignment, lease exchange or other transfer or disposition of all or a major portion (equal to or exceeding the lesser of $2,000,000 or 20%) of the Corporation's assets; and the dissolution, liquidation or winding up of the corporation.

(iii)

Articles, Ex. A at VIII, B.3; see also Off. Memo., Ex. B. at pp. 32-33 (emphasis added). In addition, the Offering Memorandum disclosed the possibility of related party transactions and provided assurances that CDBL VIII investors would be protected from such transactions. Under the section titled "Related Party Transactions," the Offering Memorandum states: Off transactions between us or an Affiliate Bank and any of our organizers, directors or executive officers occur, the transaction . . . will be approved by a majority of the directors who do not have an interest in the transaction. Id. at 18. Accordingly, any transaction between CDBL VIII and CBC needed approval by a majority of directors who did not have an interest in the transaction.

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II.

The Directors Authorized a Sham Loan Transaction Without the Required Shareholder and Disinterested Director Approval.

On or about December 31, 2008, the Directors authorized a purported loan from CDBL VIII to CBC in the amount of $6,000,000.00, thereby transferring nearly all of CDBL VIII's assets to CBC, CDBL VIII' s Class A and controlling shareholder. A copy of the Note is attached at Exhibit E. The Note is signed by C.Reid in her capacity as Corporate President of CBC and directed to "Capitol Development Bancorp Limited VIII" where C.Reid also holds the position of Chairperson, President, Chief Executive Officer and Director. See Note, Ex. E; Off. Memo.,

Ex. B at p. 17. The Note is unsecured and due on demand but has no maturity date. At the time of the Note's issuance, CBC's stock value had plummeted nearly 70% in a three (3) month period.' According to C.Reid, the Note was authorized by the CDBL VIII Board of Directors; namely herself, and the other Individual Defendants. See Interrogatories, Ex. D at

11 21. As all

the Individual Defendants are Officers and/or Directors of CBC, none of them qualify as "disinterested." Moreover, the Directors of CDBL VIII never sought shareholder approval for the purported "loan" as the Class B shareholders were not afforded an opportunity to vote on the transaction. Id. at ¶IJ 24, 25. In fact, the Class B shareholders (i.e., the Plaintiffs), were never informed of the transaction and did not learn of the transaction until approximately a year after the Note was issued. Finally, a significant portion of the funds had already been transferred from CDBL VIII to CBC even before the Note was issued. On June 30, 2008, the Directors of CDBL VIII authorized the transfer of $2,000,000.00 to CBC in exchange for an undocumented "Assignment of Note" with Muskegon Community Bank. A copy of CDBL VIII's check register is attached

I On September 24, 2008, CBC's stock closed at $23.26 per share. By December 30, 2008, CBC's stock closed at $7.30 per share.

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as Exhibit F. The remaining $4,000,000.00 was transferred to CBC on December 31, 2008, whereupon the Note was issued in the amount of $6,000,000.00, presumably to cover both transactions. Notably, neither the $2,000,000.00 transfer nor the $4,000,000.00 transfer were ever disclosed to the Class B shareholders nor was a vote ever taken to approve the transfers.

CDBL VIII Has Never Received a Payment on the CBC Note.
CDBL VIII has never received any payments from CBC on the Note. Rather, CBC has credited losses from its failed bank development efforts, all of which commenced prior to the formation of CDBL VIII, against the balance of the loan. See CBC 01272, a copy of which is attached hereto as Exhibit G. In fact, after the Note was executed, CBC unilaterally reversed interest payments on the Note, and systematically assigned losses from prior failed banks to CDBL VIII, despite the fact that CDBL VIII never owned any of the banks, and none of the banks were capable of being owned by CDBL VIII because they were no longer going concerns. CBC's only motive in assigning these losses to CDBL VIII was to wipe out its liability under the note, as if it was never entered into. See CBC 00542 — 00546, a copy of which is attached hereto as Exhibit H. In essence, CBC was able to force nearly $6MM of its liabilities upon CDBL VIII while at the same time receiving the full benefit of all of CDBL VIII' s monetary assets, resulting in a $12MM windfall to CBC. All the while, the Individual Defendants, as fiduciaries of CDBL VIII, accepted these "payments" from CBC, which had the effect of raiding nearly all of CDBL VIII' s assets and rendering CDBL VIII nothing more than an empty shell.
PROCEDURAL BACKGROUND

Plaintiffs filed suit against CBC and the Individual Defendants asserting, among other things, derivative claims on behalf of CDBL VIII for breach of fiduciary duty and conversion and individual claims on behalf of Plaintiffs for breach of fiduciary duty and minority oppression. Defendants initially moved to dismiss Plaintiffs' derivative claims as premature 6

because the statutory notice required to investigate the merits of the claims had not been provided to CDBL VIII. As a result, the Court dismissed the derivative claims without prejudice in order to afford Defendants the full benefit of the statutory notice requirement under MCL 450.1492(A). In addition, the statute of limitations on Plaintiffs' derivative claims was tolled pending the results of CDBL VIII's investigation. Nearly two months passed before Defendants finally selected Mr. William Johnson ("Mr. Johnson") to serve as the Independent Person to investigate the merits of the derivative claims and the Court appointed him to serve in that capacity pursuant to the stipulation of the parties.

I.

Defendants Instruct Mr. Johnson not to Issue a Report on Whether Derivative Claims are Proper on Behalf of CDBL VIII. Mr. Johnson spent the better part of four (4) months investigating the merits of the

derivative claims, reviewing thousands of pages of documents and interviewing multiple witnesses. In early March of 2012, Mr. Johnson was in the process of finalizing his report and recommendation as to the merits of asserting derivative claims when he was instructed by Defendants not to finish his report. As a result, CDBL VIII did not receive any recommendation from Mr. Johnson as to whether derivative claims were proper despite an exhaustive six month investigation. Presumably, had Mr. Johnson determined that derivative claims were not in the best interest of CDBL VIII, Defendants would have utilized his findings to support a motion to dismiss.2 Derivative Claims Proceed and Defendants File Second Motion to Dismiss. Shortly after Mr. Johnson was instructed not to issue a report, Plaintiffs re-filed their derivative claims on behalf of CDBL VIII. Importantly, the derivative claims are supported by
MCL § 450.1495 requires the court to dismiss a derivative action, upon motion of the corporation providing that a disinterested person had conducted a reasonable investigation and concluded that the maintenance of the derivative proceeding is not in the best interest of the corporation. A plaintiff's only defense to such a motion is to establish that the determination was not made in good faith, or that the investigation was unreasonable.
2

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the same operative facts as Plaintiffs' individual claims and both sets of claims require nearly identical proofs. Despite the alignment of the direct and derivative claims, Defendants again moved to dismiss the Complaint. In so doing, Defendants rehashed several of the arguments they had raised nearly a year earlier, namely that the individual Plaintiffs could not assert derivative claims because their interests conflicted with those of CDBL VIII. This Court disagreed and again denied Defendants' Motion to Dismiss. III. This Court Already Found that the Controlling Shareholder Breached its Fiduciary Duty to CBDL VIII and Committed Acts of Minority Oppression. It is against this backdrop that Plaintiffs filed their Motion for Summary Disposition pursuant to MCR 2.116(C)(8) and (C)(10). Plaintiffs' motion was limited to one issue: whether Defendants violate the express language of CDBL VIII's Articles along with Michigan statutory and common law, by depriving Plaintiffs the right to vote on a transaction in which virtually all of CDBL VIII's assets were transferred to its majority and controlling shareholder, CBC. It is undisputed that C.Reid, as President of CDBL VIII, approved the transfer of $6MM to CBC, where she similarly holds the title of President. It is also undisputed that after the transfer was made, CDBL VIII had less than $300,000 in its account. It is further undisputed that Plaintiffs never received notice of the transaction and were deprived of their right to vote on this transaction in contravention of the Articles, Offering Memorandum, and Michigan law. Based on these undisputed facts, the Trial Court correctly found that CBC, as the controlling shareholder of CDBL VIII, breached its fiduciary duties and was liable for minority shareholder oppression by depriving Plaintiffs of their right to vote on the transaction. IV. A Majority of Those Shareholders Entitled to Vote Have Approved the Removal of the Directors, Dissolution of CDBL VIII and the Appointment of a Receiver. In accordance with Section 1.08 of the Bylaws, a majority of Class B Shareholders have voted by written consent to remove the Directors of CDBL VIII, dissolve and wind up the affairs 8

of CDBL VIII and to appoint a receiver to preserve and protect the assets of CDBL VIII during its orderly liquidation. Out of the 7,025 available Class A and Class B shares, Class B Shareholders representing 3,950 of those shares (56%) have voted by written consent to the relief sought by this Motion. Copies of the written consent forms executed by the Class B Shareholders are attached as Exhibit I. The named Plaintiffs as well as the following individuals and/or entities have provided their written consent. SHAREHOLDER G3 PROPERTIES, LLC STEVEN SAMUEL GLANDER JOHN IANNUCCI FAMILY TRUST Dtd. 10/17/2000 ANGELO IANNUCCI THE KENNETH A. & DEBBIE KAFALAS FAMILY TRUST Dtd. 5/31/2006 BENJAMIN W. POST, JR. SEIFMAN FAMILY TRUST Dtd., 5/12/1994 HENRY B. SOLOWAY 1991 IRREVOCABLE FAMILY TRUST Dtd. 1/22/91 THOMAS P. SOLOWAY REVOCABLE FAMILY TRUST, Dtd. 1/22/1991 THE LUCAS FAMILY TRUST, Dtd. 9/25/2002 ZORBA INVESTMENTS LIMITED TRUST, Dtd. 11/3/2003 ALBERT A. FLANGAS, REVOCABLE LIVING TRUST, Dtd. 7/22/2005 PARTAP INVESTMENTS FBO DR. JAS WINDER GROVER TIMOTHY R. MORSE, IRA ROLLOVER, PREMIER TRUST CUST SHARES 1,000 100 100 100 150 50 1,000 400 100 100 100 200 250 100

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BSE TRUST Dtd. 7/20/1995 MARCUS LAMB MORSE TRUST Dtd. 7/29/1996 TOTAL ARGUMENT I.

100 100 3,950

The Articles and Bylaws of CDBL VIII Authorize the Dissolution, Wind Up and Liquidation of CDBL VIII's Assets. As set forth above, the Articles and Offering Memorandum for CDBL VIII identify

certain corporate acts that require the approval by a majority vote of both Class A and Class B shareholders. For the purposes of this Motion, the key provision is found in Article III, section (B)(iii) which, in relevant part, provides "the holders of the shares of the Class B Common Stock shall be entitled to vote on each of the following actions, which action shall not be permitted by the Corporation and shall be authorized only upon the receipt of the majority vote of all the issued and outstanding shares of Class A Common Stock and Class B Common Stock voting together as a single class . . . the dissolution, liquidation or winding up of the corporation." Articles, Ex. A at VIII, B.3; see also Off. Memo., Ex. B at pp. 32-33. Under Section 1.08 of the Bylaws, "any action required or permitted by the Michigan Business Corporation Act (the "MBCA") may be taken without a meeting, without prior notice and without a vote, if consents in writing, setting forth the action so taken, are signed by the holders of outstanding shares having not less than the minimum number entitled to vote on the action where presented and voted." See Bylaws, Ex. C at § 1.08. As discussed, supra, a clear majority of Class B Shareholders have voted by written consent to dissolve CDBL VIII and wind up its affairs. Accordingly, the necessary corporate approval to authorize the dissolution and wind up of CDBL VIII has been met by the shareholders of CDBL VIII. VIII, B.3. See Articles, Ex. A at

10

The MBCA Authorizes the Removal of the Directors. Aside from the fact that a clear majority of Class B Shareholders have voted to remove the Directors of CDBL VIII, this Court has the authority under MCL § 450.1514 to remove the Directors if the Court finds that they engaged in fraudulent, illegal, or dishonest conduct or grossly abused their authority or discretion and removal is in the best interest of the corporation. In pertinent part, MCL § 450.1514 provides: (1) The circuit court of the county in which the principal place of business or registered office of the corporation is located may remove a director of the corporation from office in a proceeding commenced either by the corporation or by its shareholders holding at least 10% of the outstanding shares of any class if the court finds that the director engaged in fraudulent, illegal, or dishonest conduct, or gross abuse of authority or discretion, with respect to the corporation, and removal is in the best interest of the corporation. (2) The court that removes a director may bar him or her from serving as a director of the corporation for a period prescribed by the court. (3) If shareholders commence a proceeding under subsection (1), they shall make the corporation a party defendant. The standard for removal under MCL § 450.1514 mimics the standard for establishing minority oppression under MCL § 450.1489 which, in relevant part, provides: (1) A shareholder may bring an action in the circuit court of the county in which the principal place of business or registered office of the corporation is located to establish that the acts of the directors or those in control of the corporation are illegal, fraudulent, or willfully unfair and oppressive to the corporation or to the shareholder. If the shareholder establishes grounds for relief, the circuit court may make an order or grant relief it considers appropriate, including, without limitation, an order providing for any of the following: (a) The dissolution and liquidation of the assets and business of the corporation. Both statutes require a showing that the Directors engaged in illegal, fraudulent and/or dishonest conduct. Willfully unfair and oppressive conduct is further defined in MCL § 450.1489 as "a continuing course of conduct or a significant action or series of actions that substantially interferes with the interests of the shareholder as a shareholder." MCL § 450.1489(3). The court

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in Franchino v Franchino, 263 Mich App 172; 687 NW2d 620 (2004) explained that "[s]hareholder's rights are typically considered to include voting at shareholder's meetings, electing directors, examining corporate books, and receiving corporate dividends." Id. at 184. In this case, this honorable Court has already found that the majority shareholder, CBC, substantially interfered with the "voting rights" of Plaintiffs as minority shareholders and committed acts of minority oppression. The Directors of CBDL VIII, and in particular C. Reid, authorized the illegal act in contravention of the Articles and Michigan law. Accordingly, this Court is well within its discretion to: (i) remove the Directors as a remedy under MCL § 450.1489 and MCL § 450.1514; (ii) and appoint a receiver to manage the affairs of CDBL VIII during its orderly dissolution, wind up and liquidation.
III. The Appointment of a Receiver to Preserve and Protect the Assets of CDBL VIII During its Dissolution, Wind Up and Liquidation is "Allowed by Law" Under Michigan's General Receivership Statute.

Under Michigan law, the appointment of a receiver is permitted when such a remedy is "allowed by law" within the meaning of MCL § 600.2926. In relevant part, MCL § 600.2926 provides: Circuit court judges in the exercise of their equitable powers, may appoint receivers in all cases pending where appointment is allowed by law. This authority may be exercised in vacation, in chambers, and during sessions of the court. In all cases in which a receiver is appointed the court shall provide for bond and shall define the receiver's power and duties where they are not otherwise spelled out by law. Subject to limitations in the law or imposed by the court, the receiver shall be charged with all of the estate, real and personal debts of the debtor as trustee for the benefit of the debtor, creditors and others interested. The phrase, "allowed by law," has been interpreted by the Michigan Court of Appeals to refer to two types of cases: (i) cases where appointment of a receiver is provided by statute; and (ii) cases "where the facts and circumstances render the appointment of a receiver an appropriate exercise of the circuit court's equitable jurisdiction." Petitpren v Taylor School District, 104

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Mich App 283, 294; 304 NW2d 553, 557 (1981). In this case, not only do the facts and circumstances justify the appointment of a receiver, this Court is also vested with the statutory authority to appoint a receiver under MCL § 600.3505 and MCL § 450.1489. Under MCL § 600.3505, this Court has the discretion to appoint a receiver during the dissolution of the corporation and provides: If it appears to the court that the corporation is insolvent or that dissolution thereof would be beneficial to the stockholders and not injurious to the public, the court may dissolve the corporation and appoint a receiver of its estate and effects. Pending the hearing, the court may appoint a temporary receiver and prescribe his powers and duties. Here, the shareholders of CBDL VIII have voluntarily agreed to dissolve CDBL VIII and appoint a receiver to effectuate the orderly wind up of its affairs. Similarly, MCL § 450.1489 provides this Court with broad discretion to "make an order or grant relief it considers appropriate" where the Court finds that those in control of the corporation have engaged in illegal, fraudulent, or willfully unfair and oppressive acts toward the corporation or to the shareholders. Because this Court has already made such a finding, it is well within its discretion to order the dissolution of CBDL and appoint a receiver to oversee that process. See Rytkonen v

Butler, 305 Mich 580, 592; 9 NW2d 849 (1943) (holding that receiver should oversee dissolution and wind up of corporation where corporation expressed desire for receiver and dissention and conflict existed between shareholder interests). In addition to the statutory right to appoint a receiver, this Court is afforded the discretion under the general receivership statute to appoint a receiver where the facts and circumstances warrant such equitable relief Weathervane Windows, Inc v White Lake Construction Co, 192

Mich App 316, 322; 480 NW2d 337, 340 (1992). For example, in Band v Livonia Associates, 176 Mich App 95; 439 NW2d 285 (1989), the plaintiffs held limited partnership interests in the defendant partnership. The partnership had been formed to acquire, develop and manage 13

specific parcels of real property for investment purposes. Contrary to these stated intentions and subsequent to acquiring the property, the general partners embarked on a pattern of behavior that included the following: (i) failing to maintain the improvements located on the partnership's property; (ii) failing to pay real estate taxes; (iii) refusing to provide the limited partners access to the partnership records; (iv) failing to properly monitor and administer the capital contributions for each partner; (v) refusing to provide information regarding the rezoning of the land; (vi) and depositing the capital contributions into non-partnership accounts. In light of the general partners' oppressive acts, the trial court "recognized that serious, immediate and irreparable harm would occur if a receiver were not appointed." Id. at 105. The circumstances here are even more egregious than those before the Court in Band v Livonia Associates. Because this Court has already granted summary disposition to Plaintiffs on their claims of minority oppression and breach of fiduciary duty, the facts and circumstances certainly support the appointment of a receiver during the dissolution and wind up of CDBL VIII' s affairs.

CONCLUSION
In short, from the formation of CDBL VIII through present, every time the Defendants have been presented with the choice of acting in the best interests of CDBL VIII and its shareholders, or serving their own self-interests, they have chosen the latter. Moreover, this Court has already found that CBC, which is indistinguishable from the Individual Defendants, has breached its fiduciary duties owned to CDBL VIII and the Individual Plaintiffs, as well as oppressed the rights of the Individual Plaintiffs as shareholders. These facts mandate the removal of the Individual Defendants as Directors and the appointment of a receiver. For the foregoing reasons, the Plaintiffs respectfully request that this Court enter an order: (i) removing the Directors of CDBL VIII, (ii) authorizing the dissolution and wind-up of 14

CDBL VIII's affairs, (iii) appointing a receiver for CDBL VIII, and (iv) granting such other and further relief as may be just and proper under the circumstances of this civil action. Respectfully submitted, BARNES & THORNBURG LLP

Dated: February 25, 2013 Jeffrey G. uth (P65041) Scoh-Murphy (P68015) Attorneys for Plaintiffs

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