Note: Flagstar Bank (Issuer) issued a standby LC for approximately USD 29 million to secure adjustable rate notes sold by Greenstone Investments LLC (Developer) to fund a property development. Issuer required a reimbursement agreement, a first position mortgage, and payment guarantees. Two of these payment guarantees ("the Guarantees") were provided by Peter J. Cubba (deceased at the time of litigation) and Peter J. Cubba Revocable Living Trust (for which Peter J. Cubba was Trustee) (Guarantors).

When it was not reimbursed for drawings under the standby that were honored, Issuer sued Developer for failure to reimburse and Guarantors for breach of the Guarantees, and moved for summary judgment against Guarantors. The trial court granted Issuer's motion for summary judgment and assessed damages. Guarantors appealed, claiming both that a material factual dispute existed as to Trustee's capacity at the time of the contract and that there was insufficient evidence to support the amount of damages awarded. On appeal, the Court of Appeals of Michigan, Beckering, P.J., with Jansen and M. J. Kelly, JJ., affirmed.

Guarantors supported their defense that Trustee lacked the capacity to contract at the time the Guarantees were signed with statements from two of Trustee's children and statements from his nurse. Each of them averred generally that Trustee was suffering a variety of mental and physical ailments. However, the appellate court determined that the opinion of his children would be inadmissible because they lacked medical training and were not speaking to specific events, but general behavior. The court also determined that the nurse, though medically trained, did not have the specific medical training necessary to support her general opinions, and that her observations from the day the contract was signed did not indicate that Trustee would be unable to understand it. The court determined that Trustee "understood and appreciated the significance of his decision to execute the guaranty" and so concluded that summary judgment was proper.



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