is no longer feasible for MBW to carry on the business. Case 6: Arizona Tile, LL
ID: 2746853 • Letter: I
Question
is no longer feasible for MBW to carry on the business. Case 6: Arizona Tile, LLC s. Berger, 223 Ariz. 491 (Ariz. Ct. App. 445-446) eia ie, LL.C. Berger, 223 Ariz. 491 (Ariz. Ct. App 2010) (Cross 8h Ed.p iduals, Ho Arizona Tile filed s ward uit account to Designer Surfaces, Inc., an Arizona corporation. Designer Surfaces' board of directors consisted of only two imdi Berger and John McCarthy. After Designer Surfaces failed to pay it, Arizona against Designer Surfaces, Berger and McCarthy. ich was in the s such as Costco or Berger and McCarthy were officers and the sole directors of Designer Surfaces, wh business of supplying countertops to homeowners who shopped at retail stores such as Lowe's. The homeowners contracted with and made payment to the retailer, who in turn subcontracted the work to and paid Designer Surfaces for fabricating and installing the countertops. Here, Designer Surfaces purchased the necessary materials from Arizona The Arizona Tile did not enter into a contract with the homeowners. After Designer Surfaces became insolvent, it stopped paying Arizona Tile for materials it had purchased on behalf of various homeowners and for which it had been paid by the retailers. Arizona Tile filed suit against Designer Surfaces for breach of a credit agreement and unjust enrichment. Arizona Tile later obtained a default judgment against Designer Surfacers. Arizona Tile's complaint also alleged a breach of fiduciary duty against Berger and McCarthy personally based on Arizona Revised Statutes C"A.R.S)section 33-1005 (2007) A.R.S .33-1005 provides: Monies paid by or for an owner-occupant to a contractor as payment for labor, professional services, materials, machinery, fixtures or tools for which a lien is not provided in this article shall be deemed for all purposes to be paid in trust and shall be held by the contractor for the benefit of the person or persons furnishing such labor, professional services, materials, machinery, fixtures or tools. Such monies shall neither be diverted nor used for any purposeExplanation / Answer
1. The given statement is true since as directors of Designer Surfaces they owe fiduciary duty of loyalty to Designer Surfaces and they cannot put their personal interests ahead of those of Designer Surfaces.
2. The given statement is true since according to law pertaining to Fiduciary duty of Loyalty, Berger and McCarthy have violated their fiduciary duties to Designer Surfaces by holding the payments to their suppliers.
3. The given statement is false since they have authorized the wrongful actions of Berger and McCarthy, they will not be able to proceed with a lawsuit.
4. The given statement is false. Since directors are not expected to involve in self Interest according to the Business Judgment Rule. Though they have acted in Good faith they have failed to pay the outstanding dues to their immediate vendors and suppliers.
5. The given statement is false since be sole shareholders they have utmost duty of loyalty towards the company and they will not be able to avoid liability to Arizona Tile.
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