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Owens Loan when it refinanced the property on March 4, 1988. At
that time, the principal balance of the loan was $86,181.50.
Petitioner issued another obligation against the property in
1988 to settle a shareholder derivative suit (the McMahon
Litigation). On August 17, 1984, McMahon, a minority
shareholder, instituted a suit against petitioner, all other
shareholders, and Byrne. McMahon alleged, among other things,
that Byrne unilaterally appointed his own family as officers and
directors, that the Byrne family caused NII to purchase three
subsidiary corporations without informing McMahon, that the
family diverted money from petitioner to the subsidiaries for the
purpose of paying salaries and stipends to the family, and that
the family's behavior generally constituted self-dealing and
breach of fiduciary duty. The parties pursued the litigation
from August 1984 through March 1988.
The litigation essentially ended on October 29, 1987, when
Judge Thomas Smith imposed sanctions after several attempts by
McMahon's lawyer, Jones, to enjoin the corporation from carrying
on its business. Judge Smith explained the sanctions, stating:
It appears to the court that your conduct and your
client's conduct in this case, Mr. Jones, is reprehensible,
to say the least.
* * * * * * *
There is no factual basis; there is no legal basis for
your continuing to proceed in this case. What you're doing
is, quite simply, harassing the other side and I'm tired of
it, and if you won't stop doing it on your own account, then
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