Opinion
Civil No. 98-71808.
May 30, 2000.
MEMORANDUM OPINION AND ORDER
This civil action arises from a failed business venture. The court has jurisdiction of plaintiffs' federal question claim, 25 U.S.C. § 1331, as well as of their state law claims, as the parties are of diverse citizenship, 28 U.S.C. § 1332.
Plaintiffs Wheeling, Inc., Alan Huffman, Damon Huffman, Kevin Huffman, and Carol Bence have presented claims against all defendants pursuant to the Michigan Uniform Securities Act ("MSA"), M.C.L.A. § 451.501, et seq., the Michigan Consumer Protection Act ("MCPA"), M.C.L.A. § 445.901 et seq., the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962, as well as Michigan commonlaw claims of fraud, breach of contract, breach of fiduciary duty, and conversion.
This memorandum constitutes the findings of fact and conclusions of law of the court following a bench trial in this matter. For the reasons discussed below, the court concludes that plaintiff Wheeling, Inc., as well as individuals Alan, Damon, and Kevin Huffman, must prevail on their claim of breach of contract against defendant Rotary Motor Corporation. Also, as discussed below, plaintiffs Alan, Damon, and Kevin Huffman must prevail on their claims of commonlaw fraud and pursuant to the Michigan Uniform Securities Act against defendants Stelle and Hess. Otherwise, plaintiffs' claims must be dismissed.
In 1993, the Huffman family was engaged in farming in Genesee County, Michigan, and had formed a corporation entitled "Tire Recovery, Inc." for the planned recycling of their large collection of used auto tires. Alan Huffman served as president of Tire Recovery, Inc. Damon Huffman also practiced law and conducted other business ventures, one of which was a home for the disabled, with plaintiff Carol Bence.
In early 1994, Leroy Camel and his company, Resource Recovery Corporation, were retained as agents of Hess and his corporation, Rotary Motor Corporation, to assist in the sale of certain engine generator sets. Camel and Resource Recovery Corporation were initially named defendants in this action but have been dismissed for lack of service. Camel had visited plaintiffs' farm on earlier occasions to advise them of used tires available elsewhere in the state, but during this spring visit Camel broached the subject of the great opportunities soon to be presented by the proposed legislative deregulation of the electric power industry in Michigan. He explained that plaintiffs, if they had the proper engines, could become major suppliers of electric power in Michigan by use of gas from their neighbors' wells, and might well even become suppliers of electricity to Consumers' Power Company and other large customers, statewide.
Subsequently, defendants Russell Stelle and Wally Hess visited the farm. Each of those defendants described meeting plaintiffs Alan, Damon, and Kevin Huffman at their parents' home, and sitting around the parents' kitchen table with the Huffman family. They, like Camel, discussed the large opportunities soon to be presented by the forthcoming deregulation of the electric power industry and the attractiveness of the motor sold by Rotary Motor Corporation for producing electric power on a large scale.
Plaintiff's testified quite uniformly and credibly that the motor presented by defendants appeared to be a revolutionary, innovative mechanism. It was called the "Rotary Vee" Engine. The "Rotary Vee" unlike all prior engines, had no movable parts, could be disassembled and rebuilt within an hour, and operated 10 times longer than any conventional engine. The family became convinced that use of the "Rotary Vee" would indeed make generation of electricity on a large scale, across the state of Michigan, feasible and highly profitable. Defendant Stelle showed, and gave to the Huffman family, a videotape demonstrating the "Rotary Vee" Engine in action. The family was overwhelmed, and anxious to proceed.
Hess and Stelle failed, however, to mention a number key facts. First, among those was the fact that they were not owners of the videotape shown or of any rights whatsoever to the "Rotary Vee" Engine. Second, that Hess was being sued in Kane County, Illinois, by Scott v. Spencer, the owner of R VEC, Inc. and the true owner of all rights to the "Rotary Vee" Engine, for theft of 15 videotapes and the corporate minute books of R VEC, Inc. Third, they failed to tell plaintiffs about the criminal indictment which had been filed against Stelle in Kane County, Illinois, for the alleged theft described above. That indictment had been dismissed on grounds of improper venue, but Judge Timothy Sheldon of Kane County had also stated on the record that he believed the alleged theft to be ongoing. Finally, defendants failed to mention the fact that this engine did not even exist. At trial, Hess testified that the "Rotary Vee" Engine is still under development at Northwestern University.
Based upon study of the videotape and defendants' representations, plaintiffs asked for and were promised the exclusive right to a "Wheel of 500 electrical generators covering the state of Michigan." Defendants had explained to them that 500 generators would be necessary to cover the state, and that defendants would assure their exclusive right to the territory. They were instructed by defendants to form a corporation. On March 25, 1995, plaintiffs formed Wheeling, Inc. and named Damon Huffman its president. On January 30, 1995, Tire Recovery, Inc., through its president, Alan Huffman, issued to Rotary Motor Corporation a purchase order for 500 generator sets at $14,000 each and gave a promissory note for $500,000. The $500,000 promissory note was to serve as a deposit of $1,000 per generator set. "The 500 generators were to be delivered on a set schedule and would be used by plaintiffs to comprise the Michigan `Wheel.' The $500,000 promissory note, which has never been paid, is the subject of the counterclaim in this suit. On April 17, 1995, Tire Recovery, Inc. and its president, Alan Huffman, assigned the $500,000 note to the newly created Wheeling, Inc. and its president, Damon Huffman.
Delivery of the generator sets was to commence with 2 sets on April 17, 1995, and continue with 4 sets in May of 1995, 12 sets in June of 1995, 25 sets in July of 1995 and further deliveries until the order was completed.
In December of 1995, Hess and Camel asked Damon Huffman to loan $12,000 to Rotary Motor Corporation to assist in the incorporation and listing of a new corporation to be called International Accord, Inc., on the Canadian Stock Exchange. Defendants represented to Damon Huffman that such action would expedite delivery of the engines ordered. Damon Huffman forthwith wired $12,000 to Rotary Motor Corporation. He had charged the $12,000 to a personal credit card at an interest rate of 15.9%. Hess admitted that he did indeed agree, on behalf of Rotary Motor Corporation, to repay the loan with interest, costs, and stock options in the new company.
In January of 1996, Hess and Camel, his agent, requested a second loan of $55,000 from Damon Huffman. They explained that the $55,000 had become necessary because the Canadian law firm which had successfully incorporated International Accord, Inc. had refused to release the stock for placement or the Canadian Stock Exchange until their fees were paid. Damon Huffman then collected funds from fellow plaintiffs Alan Huffman, Kevin Huffman, and Carole Bence, added those to his own and wired the $55,000 to Total Resource Corporation in Las Vegas, Nevada, which then undisputedly delivered the funds to Rotary Motor Corporation. Defendants do not contest their receipt of the $12,000 or $55,000 wire transfers or that Rotary Motor Corporation is indebted for this loan.
Promissory notes were generated for each transaction. On December 6, 1995, Damon Huffman drafted a note for $12,000. The $12,000 note entered into evidence recites defendants' promise to pay Damon Huffman $12,000 with 15.9% interest per annum by January 6, 1996. Attached to this note is a faxed copy of the signature page showing Lee Camel's signature. Damon Huffman testified at trial that he had lost the original of the note.
On January 24, 1996, Damon Huffman drafted a second promissory note, for $55,000. It recites defendants' promise to pay Damon Huffman $55,000 with 15.9% interest per annum on the "first day stock is released by firm." Damon Huffman entered three versions of this note into evidence. One version is a faxed copy bearing Walter Hess' signature. Some versions of the note, as defendants claim, appear to be altered to promise stock options, although defendants Stelle and Hess have admitted that the $67,000 lent was indeed to be repaid in full, with interest costs and stock options. They simply maintained at final that the promise was made only on behalf of Rotary Motor Corporation.
After their purchase order for 500 "Rotary Vee" Engines, Alan and Damon Huffman were extremely disappointed upon the eventual arrival of one conventional 10 kilowatt, V8 engine with the usual innumerable moving parts. According to their testimony, such a standard engine could easily have been purchased more cheaply at Home Depot, K Mart, or the local feed store. Alan Huffman testified that he would never have ordered 500 ordinary 10K engines in the expectation of conducting a `Master Wheel' across the State of Michigan. The engine delivered pursuant to the purchase order simply was not a "Rotary Vee" Engine as had been shown in the videotape and described by defendants.
Defendants, on the other hand, contend that no "Rotary Vee" Engine was ever promised by the literal terms of the purchase order, which designated only "engine generator sets." Although defendants' testimony was uniformly incredible, inconsistent and indeed changed from hour to hour, they did introduce a letter dated September 6, 1996, signed by Alan Huffman, president of Tire Recovery, Inc. The letter stated that two engines had been received, were satisfactory, and paid for at $14,000 each Mr. Camel testified that he had drafted a number of documents, including this, for the Huffmans' signature. These documents appear to have been used by defendants to demonstrate to others that Rotary Motor Corporation was succeeding in its endeavors.
It appears that, at some point, Damon Huffman became part of the defendants' scheme to dupe others, and that his role in that effort was not helpful to the Huffman Group. For example, Damon Huffman testified that long prior to the issuance of the purchase order for 500 "Rotary Vee" Engines, the $500,000 promissory note, or the $12,000 and $55,000 transactions, he had been made President of RR Capitol, Inc., a company owned by Lee Camel, which had been formed for the sole purpose of raising money for Rotary Motor Corporation and the manufacture of the purported "Rotary Vee" Engines. Damon Huffman nevertheless denies knowledge that Rotary Motor Corporation was unfunded, and testified that he did not know RR, Inc. was a subscriber of Rotary Motor Corporation until after the $12,000 and $55,000 transactions were completed. Damon Huffman further testified quite candidly that Alan Huffman only signed the September 6, 1996 letter, stating that the engines received were satisfactory, because Lee Camel had drafted it for use by Rotary Motor Corporation to prove to the Canadian Stock Exchange that it was a functioning corporation capable of filling orders for "Rotary Vee" Engines. Also, Damon Huffman testified that he, Stelle and Camel visited three different banks in 1995, for the purpose of "using his good name" to obtain a one million dollar line of credit for Rotary Motor Corporation to prove to the Canadian Stock Exchange that it was a functioning and viable corporation. Defendants disagree and contend that the bank visits were to assist Damon Huffman in finding funding for the $500,000 promissory note due from the Huffmans to Rotary Motor Corporation on January 30, 1996. It appears to the court that Damon Huffman became involved in some scheme of defendants to delude the Canadian Stock Exchange, and/or others. In the meanwhile, 43 "Rotary Vee" Engines had been scheduled for delivery to the Huffmans by July, 1995 and none had been delivered.
On January 30, 1996, plaintiffs' note for $500,000 fell due, and that same month Hess, Stelle, Lee Camel and others were sued by Cole Taylor Bank of Chicago, IL for failure to pay a $500,000 note which had been due since May 3, 1995. In February of 2000, a judgment was entered finding Hess, Stelle and Lee Camel liable for the unpaid note and interest. Defendants allege that plaintiffs failure to pay the $500,000 promissory note due on January 30, 1996, had made delivery of any engines impossible, had caused their default since the previous May to the Chicago Bank, and had caused Northwestern University to cease developmental work on the new "Rotary Vee" Engine.
On November 8, 1996, plaintiffs commenced two actions in Genesee County, Michigan which were removed to this Court, and have been consolidated.
Breach of Contract
Plaintiffs claim that defendants breached the express contract embodied in the promissory notes for $12,000 due January 6, 1995 and $55,000 due on the first day the Canadian stock was released, with interest, costs and stock options. Stelle testified that the Canadian stock was, indeed, released for a brief period. Defendants Stelle and Hess admit the liability of Rotary Motor Corporation, on whose behalf they signed, on those notes. Accordingly, the court finds that plaintiffs' claim for breach of contract against Rotary Motor Corporation is meritorious.
However, plaintiffs' claim against defendants Stelle and Hess as individuals must fail, as this claim would require the court to pierce the corporate veil of Rotary Motor Corporation. Under Michigan law, before piercing the corporate veil, a plaintiff must prove that: (i) the corporate entity is a mere instrumentality of another entity or individual; (ii) the corporate entity is being used to commit a fraud or wrong; and (iii) there must have been an unjust loss or injury to the plaintiff. In re: RCS Engineered Products Co., Inc., 102 F.3d 223, 225 (6th Cir. 1996). See also St. Clair Intermediate School District v. Michigan Education Special Services Association, 458 Mich. 540, 578 (Mich. 1998). Plaintiffs have not made such a showing. They have provided no evidence that defendants Stelle and Hess used Rotary Motor Corporation as a mere instrumentality of another entity or as an alter-ego. Moreover, Stelle testified that he is not an employee of Rotary Motor Corporation but serves as a consultant. Although defendant Hess is undisputedly founder and president of Rotary Motor Corporation, plaintiffs submitted no evidence showing that any portion of the $67,000, or any other corporate funds had been transferred to him personally or that he used any of plaintiffs' funds for any other purpose than for placing International Accord, Inc. stock on the Canadian Stock Exchange as he had stated. Defendant Hess had contracted with plaintiffs for repayment of the $67,000 on behalf of Rotary Motor Corporation and not in his individual capacity.
Plaintiffs' claim against Total Resources Corporation must also fail. Total Resources Corporation was never a party to the promissory notes in question.
Michigan Commonlaw Fraud
Under Michigan law, the elements of actionable fraud are that: defendant made a material representation; it was false when made and he knew that it was false; or he made it recklessly, without any knowledge of its truth, and as a positive assertion; he made it with the intention that it should be acted upon by plaintiff; and plaintiff acted in reliance upon it, to his injury. Kassab v. Michigan Basic Property Insurance Association, 441 Mich. 433, 443 (Mich. 1992) quoting Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330, 336 (Mich. 1976).
Stelle, Hess, and their agent Lee Camel, clearly made several material misrepresentations, as discussed above. Reliance and injury also have been proved by clear and convincing evidence. Accordingly, the court finds that Stelle, Hess, and agent Camel did defraud plaintiffs Alan, Damon and Kevin Huffman, all of whom viewed the videotape played by Stelle and Lee Camel and participated in discussions with defendants. However, as plaintiff Carol Bence never viewed the videotape nor met with Stelle or Hess, her claim for commonlaw fraud must fail.
Moreover, plaintiffs have made no showing that either Rotary Motor Corporation or Total Resources Corporation have defrauded them. Accordingly, this court must dismiss the claim of commonlaw fraud as to defendants Rotary Motor Corporation and Total Resources Corporation.
Michigan Uniform Securities Act
Plaintiff's claim that defendants' fraudulent acts are in violation of M.C.L.A. § 451.501 which states, in pertinent part, that:
[I]t is unlawful for any person, in connection with the offer, sale or purchase of any security or commodity contract, directly or indirectly to: (1) employ any device, scheme, or artifice to defraud; (2) make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading; and (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. . . . A person who fraudulently offers or sells a security or commodity contract is liable to the person baying the security or commodity contract for the consideration paid for the security or commodity contract, together with interest at 6% per year front the date of payment, costs and reasonable attorney fees, less the amount of any income received on the security or commodity contract. M.C.L.A. §§ 451.510, 451.810 .
"The act was designed to protect the public from fraud and deception in the issuance, sale, exchange, or disposition of securities within this state. . . ." People v. Dempster, 396 Mich. 700, 704 (Mich. 1976). The act should be broadly construed to effectuate its purposes. Dempster, 396 Mich. 700, 704 (Mich. 1976).
As discussed above, Stelle, Hess and agent Camel did indeed make material misrepresentations to Alan, Damon, and Kevin Huffman. Accordingly, the MSA was violated because the $67,000 loan was undisputedly given in exchange for the promise of a security, i.e. stock options in a company fraudulently claimed to manufacture "Rotary Vee" Engines. Defendants have admitted that the $12,000 and $55,000 transactions were made with the promise of repayment, with interest and stock options. Options fall within the definition of a security under the statute. M.C.L.A § 451.801 § 401(o). Defendants are bound by their admission and it exposes them to liability under the MSA.
Plaintiffs have made no showing that either Total Resources Corporation or Rotary Motor Corporation promised stock options or in any other way violated the MSA. Accordingly, plaintiffs' claim as to Total Resources Corporation and Rotary Motor Corporation is dismissed.
Michigan Consumer Protection Act
The MCPA prohibits the use of unfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce and defines the term `trade or commerce' as "the conduct of a business providing goods, property, or service primarily for personal, family, or household purposes. . . ." M.C.L.A. § 445.902(d). The MCPA does not apply to "a transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States. M.C.L.A. § 445.904(1)(a).
In Smith v. Globe Life Insurance, Co., 460 Mich. 446 (Mich. 1999), the Michigan Supreme Court held that § 445.904(1)(a) generally exempts the sale of credit life insurance from the provisions of the MCPA, because such a "transaction or conduct" is "specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States."Smith v. Globe Life Co., 460 Mich. 446, 465-466 (Mich. 1999).
In this case, plaintiffs claim that defendants committed securities fraud. In Michigan, the sale of securities is regulated by the Michigan Uniform Securities Act which is administered by the Corporation and Securities Bureau of the Michigan Department of Commerce. See M.C.L.A. § 451.806(a) . Accordingly, like the sale of insurance, the sale of securities and claims of security fraud are exempt from the MCPA. Moreover, plaintiffs were purchasing "Rotary Vee" Engines for the business purpose of operating a `Master Wheel' of electric power for commercial sale across the state of Michigan and not "primarily for personal, family or household purposes."M.C.L.A. § 445.902(d). Accordingly, plaintiffs' claim under this statute must fail and is dismissed as to all defendants.
Civil RICO
Plaintiff's claim that defendants violated RICO by committing mail, wire, and securities fraud under 18 U.S.C. § 1961 (1)(d). RICO makes it unlawful for "a person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt."18 U.S.C. § 1962(c). To establish a claim under this statute, plaintiffs must show conduct of an enterprise, in interstate commerce, through a pattern of racketeering activity. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 495-96 (1955). In addition, the Supreme Court has held that a plaintiff must show that a defendant not only participated in the scheme, but also participated in the operation or management of the enterprise itself, See Reves v. Ernst Young, 507 U.S. 170, 183 (1993). Finally, a plaintiff must then demonstrate that a causal nexus exists between his injury and the predicate acts proved. Otherwise, he has no standing to sue under section 1964(c). Kramer v. Bachan Aerospace Corporation, 912 E.2d 151, 154 (6th Cir. 1990).
An enterprise is proven by showing: that the associated persons formed an ongoing organization, formal or informal; that they functioned as a continuing unit; and that the organization was separate from the pattern of racketeering activity in which it engaged. See Frank v. D'Amrosi, 4 F.3d 1378, 1386 (6th Cir. 1993). Plaintiffs have not shown that defendants functioned as a continuing organization apart from the securities and wire fraud alleged here, and have only proven that Lee Camel served as Hess' agent and Stelle served as Rotary Motor Corporations s consultant for the purpose of promoting the "Rotary Vee" Engine. Such a showing does not rise to the level of an enterprise. The record is barren as to either the activities or status of either Rotary Motor Corporation or Total Resources Corporation.
To show a "pattern of racketeering activity, a plaintiff must prove certain predicate acts. To constitute a pattern there must be two or more such acts having sufficient "continuity and relationship" to constitute a pattern. H.J., Inc. v. Northwestern Bell Telephone, 492 U.S. 229 (1989). Plaintiff's claim that defendants committed the predicate acts of securities, mail and wire fraud. First, securities fraud is not a predicate act under § 1964 of RICO. See Private Securities Litigation Reform Act of 1995, 109 Stat, 737 (1995).
Second, as described above, Stelle and Hess did indeed defraud plaintiffs Alan, Damon, and Kevin Huffman of the funds transferred by wire and plaintiffs have proven injury from the predicate act of wire fraud. However, no mail fraud has been shown and therefore plaintiffs have only proven one predicate act. This single act does not constitute a pattern of racketeering activity. Further, plaintiffs have made no showing that defendants participated in the management of an alleged enterprise or that a causal nexus existed between their injury and two or more predicate acts. Without such a showing, plaintiffs have no standing to bring a RICO claim. We know no more of defendant's activities than has been discussed above. Accordingly, plaintiffs' RICO claim must be dismissed.
Conversion
Plaintiffs claim that defendants converted the $67,000 transmitted to Rotary Motor Corporation via wire transfer to their own use by depositing it in their bank account. Under Michigan law, conversion is a distinct act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein. Foremost Insurance Company v. Allstate Insurance Company, 439 Mich. 378, 391 (Mich. 1992). See also Thoma v. Tracy Motor Sales, 360 Mich. 434 (Mich. 1960).
This court dismissed plaintiffs conversion claim in Case No. 97-76267 on April 20, 1998 in an Order for Partial Dismissal and in Case No. 98-78108 at the end of plaintiffs' proofs at trial. All evidence in the record supports the fact that plaintiffs wire transferred $67,000 to Rotary Motor Corporation. Corporate receipt of the funds was admitted. There is no showing that those specific funds were later applied in any manner inconsistent with plaintiffs' intentions or rights, or that defendants wrongfully exerted dominion over that specific money. The debt simply remains unpaid. Accordingly, the conversion claim is hereby dismissed.
Breach of Fiduciary Duty
Plaintiffs finally claim that defendants breached their fiduciary duty to plaintiffs because, as potential partners, each defendant stood in a fiduciary relationship of trust to plaintiffs. Not only was no evidence presented as to any potential partnership, but the term "fiduciary" implies a relationship imposed by law when confidence, trust, and reliance may rightfully be placed by one upon the advice of another. See Porter v. Chamberlin, 344 Mich. 399 (Mich. 1950). A person in a fiduciary relation to another is under a legal duty to act for the benefit of the other with regard to matters within the scope of the relationship. Teadt v. Lutheran Church Missouri Synod and Michigan District Lutheran Church Missouri, 237 Mich. App. 567, 580 (Mich.App. 2000). These parties dealt at arms length in a business relationship. Plaintiffs independently chose to involve themselves in business matters with defendants and at no time were even invited to become partners with Stelle, Hess, Rotary Motor Corporation or Total Resources Corporation. Accordingly, at the close of plaintiffs' proofs at trial, this court dismissed plaintiffs' claim of breach of fiduciary duty as to all defendants.
Counterclaim
Rotary Motor Corporation has asserted a counterclaim against plaintiff Wheeling, Inc. for payment of a $500,000 note which matured on January 30, 1996 and which plaintiffs have yet to pay. Defendant Rotary Motor Corporation claims it is now due $498,000 plus interest and attorney fees. The note was given, we must recall, as deposit for the 500 "Rotary Vee" Engines which Hess testified at trial do not exist, and are still under development.
Under Michigan law, to form a contract there must be a meeting of the minds regarding the "essential particulars" of a transaction.Zurcher v. Herveat, 238 Mich. App. 267, 278 (Mich.App. 2000) citing Henry v. Rouse, 345 Mich, 86, 92 (Mich. 1956). In this case, when making the purchase order, plaintiffs believed they were ordering "Rotary Vee" Engines. Defendants knew that fulfillment of such an order was impossible and that the order had been fraudulently induced. They never intended to deliver the engines demonstrated by video. Stelle testified that, when the purchase order was made and to this day, the "Rotary Vee" Engine was still in research and development at Northwestern University. Therefore, there was no `meeting of the minds' when plaintiffs and defendants contracted for the purchase of engines. Accordingly, the purchase order is not a valid contract, the counterclaim must fail, and it is hereby dismissed.
Attorney's Fees
Plaintiffs seek the imposition of attorney fees against defendants pursuant to the Michigan Uniform Securities Act which allows the court to assess payment of reasonable attorney's fees. See M.C.L.A. § 451.810 . The court finds that plaintiffs are indeed entitled to such relief. At trail, however, no testimony or evidence was submitted regarding the reasonableness of plaintiffs' attorney's fees. Accordingly, such a determination will be made on motion in post-trial proceedings.
Conclusion
For the foregoing reasons, the court finds that defendant Rotary Motor Corporation never had either the rights or the ability to produce the "Rotary Vee" Engines it promised to plaintiffs and that such a promise was fraudulently made by Hess, Stelle, and agent Camel. The court further finds that Rotary Motor Corporation breached the contract it entered to repay plaintiffs $67,000, with costs and interest. Also, the court finds the individual defendants Hess and Stelle in violation of and liable under the Michigan Uniform Securities Act.
Therefore, Alan, Damon, and Kevin Huffman prevail on the claims of breach of contract, common law fraud and violation of the Michigan Uniform Securities Act. Plaintiffs' RICO, MCPA, conversion, and breach of fiduciary duty claims must fail and are hereby dismissed. Also, the counterclaim is completely lacking in merit and is dismissed.
Accordingly, it is the conclusion of the court that plaintiffs Alan, Damon, and Kevin Huffman are entitled to repayment of $67,000 from defendants Rotary Motor Corporation, Stelle, and Hess along with costs of 15.9% interest and statutory interest at the rate of 6% per year. The individual defendants Stelle and Hess are also responsible for reasonable attorney's fees, pursuant to the Michigan Uniform Securities Act.
IT IS SO ORDERED.