SUPREME COURT OF FLORIDA CHARLES MASON, ) S. Ct. Case No.: SC03-778 ) 4DCA Case No. 4D01-3122 Petitioner, ) L.T. Case Nos. 91-42 CA ) 98-549 CA v. ) 98-561 CA ) E. SPEER & ASSOCIATES, INC., et al., ) ) Respondent. ) ) AMENDED BRIEF ON JURISDICTION ON APPLICATION FOR DISCRETIONARY REVIEW OF A DECISION OF THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FOURTH DISTRICT Leif J. Grazi, Esq. Florida Bar No. 296041 Grazi & Gianino 217 E. Ocean Boulevard Stuart, FL 34994 Tel: (561) 286-0200 - and - Steven M. Goldsmith, Esq. Florida Bar No. 324655 Steven M. Goldsmith, P.A. 5355 Town Center Road, Suite 801 Boca Raton, FL 33486 Tel: (561) 391-4900
TABLE OF CONTENTS Page STATEMENT OF CASE AND FACTS... 1 STATEMENT OF JURISDICTION... 3 SUMMARY OF ARGUMENT... 4 ARGUMENT I. IS AN ENFORCEABLE CONTRACT NECESSARY FOR A CUSTOMER TO BE AN ASSET WHICH CAN BE TRANSFERRED?... 5 II. III. IV. IS A BUSINESS RELATIONSHIP AN INTEREST WHICH CAN BE TRANSFERRED ABSENT A CONTRACT?... 5 IS TRANSFER OF ASSETS AN ELEMENT OF MERE CONTINUATION OF BUSINESS LIABILITY?... 6 IS DISSOLUTION FIVE MONTHS AFTER INCORPORATION OF THE SUCCESSOR CORPORATION PROPER?... 7 V. IS SPEER LIABLE FOR THE DEBTS OF ESA GEORGIA S ITS ALTER-EGO?... 9 VI. CAN AN INTEREST IN AN ASSET BE AVOIDED?... 9 VII. PUBLIC POLICY SUPPORTS REVIEW... 9 CONCLUSION... 10 -i-
TABLE OF CONTENTS (continued) Page CERTIFICATE OF SERVICE... 11 CERTIFICATE OF COMPLIANCE... 12 -ii-
TABLE OF CITATIONS Case Page In re Atchison, 101 BR 556 (D.C. Ill. 1989)... 9 Arab Termite and Pest Control of Florida, Inc. v. Jenkins, 409 So. 2d 1039 (Fla. 1982)... 4 Charles Wallace Co. v. Alternative Copier Concepts, Inc., 583 So. 2d 396 (Fla. 2d DCA 1991)... 6 Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114 (Fla. 1984)... 8 Estudios Proyectos e Inversiones de Centro America, S.A. (EPICA) v. Swiss Bank Corp. (Overseas) S.A., 507 So. 2d 1119 (Fla. 3d DCA 1987), rev. denied, 518 So. 2d 1274 (Fla. 1988)... 8 Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d 812 (Fla. 1994)... 6 Ford Motor Co. v. Kikis, 401 So. 2d 1341 (Fla. 1981)... 4 Laboratory Corp. of America v. Professional Recovery Network, 813 So. 2d 266 (Fla. 5 th DCA 2002)... passim Landry v. Hornstein, 462 So. 2d 844 (Fla. 3d DCA 1985)... 6 -iii-
Case TABLE OF CITATIONS (continued) Page Mason v. E. Speer & Associates, 2003 WL 24933 (Fla. 4 th DCA 2003)... 1, 7 Munim, M.D. v. Azar, M.D., 648 So. 2d 145 (Fla. 4 th DCA 1994)... passim Ocala Breeders Sales Co. v. Hialeah, Inc., 735 So. 2d 542 (Fla. 3d DCA 1999), rev. denied, 749 So. 2d 502 (Fla. 2000)... 8, 9 Orlando Light Bulb Serv., Inc. v. Laser Lighting & Elect. Supply, Inc., 523 So. 2d 740 (Fla. 5 th DCA 1988)... 7 Persaud v. State, 838 So. 2d 529 (Fla. 2003)... 4 Southern Life Insurance & Trust Co. v. Lanier, 5 Fla. 110 58 Am.Dec. 448 (1953)... 7 United Yacht Brokers, Inc. v. Gillespi, 377 So. 2d 668 (Fla. 1979)... 6 Statutes Art. V, 3(b)(3), Fla. Const.; Rule 9.030(a)(2)(A)(iv), Fla. R. App. P. 4 11 U.S.C. 548(a)(1) (2002)... 4, 9 726.06, Florida Statutes (2003)... 6 -iv-
STATEMENT OF CASE AND FACTS In 1991, petitioner Charles Mason ( Mason ) filed suit against respondent E. Speer & Associates, Inc., a Georgia corporation ( ESA Georgia ), to recover compensation owed to him under a profit participation plan. 1 See Mason v. E. Speer & Associates, Inc., - - - So. 2d. - - -, 2003 WL 24933 (Fla. 4th DCA 2003). Respondent Erling Speer, individually, was the sole owner and managing agent of ESA Georgia. Id. at 1. In November, 1996, Mason obtained a judgment against ESA Georgia. The same month that judgment was entered, November, 1996, Speer incorporated E. Speer & Associates, Inc., a Florida corporation (ESA Florida). Speer was also sole owner and controlling agent of ESA Florida. 2 Both ESA Georgia and ESA Florida provided the same real estate management services out of the same office using the same personnel. Id. at 2. At the time Mason obtained judgment against ESA Georgia, ESA Georgia had a management contract with Wintergreen to provide services through 1 This statement is drawn entirely from the decision of the Fourth District Court of Appeal. This decision is the sole document in the Appendix ( App. 1") which is being filed simultaneously with this jurisdictional brief. 2 Speer at the same time changed the name of ESA Georgia to C.V. Holdings, Inc. ( ESA Georgia ). Id. at n.1. 1
December 1, 1996. Id. at 2. The same day that the ESA Georgia-Wintergreen contract expired, ESA Florida and Wintergreen continued the same management services pursuant to a new agreement. 3 Id. at 2 & n.3. The Fourth District found that the following facts were essentially undisputed. ESA Florida and ESA Georgia: Id. at 2. were wholly owned by Speer, both provided the same real estate management services to clients, Speer opened ESA Florida only days after Mason obtained a judgment against ESA Georgia, and ESA Florida used the same office, telephone, stationary, and part-time personnel that ESA Georgia had used. In April, 1997, three months after ESA Florida had continued the Wintergreen management contract, ESA Georgia, its predecessor, declared bankruptcy. Id. at 1 n.1. In 1998, Mason filed an Impleader Complaint against Speer under section 56.29, Florida Statutes. Mason also filed a creditors bill against ESA Florida and Speer, individually. Id. Finally, Mason, as assignee of the bankruptcy trustee, 4 sued Speer for misappropriating the assets of ESA Georgia. Id. at 1. 3 The agreement was entered into on January 1, 1997, but made retroactive to December 1, 1996. Mason at 8 n.3. 4 Mason had purchased all claims of the bankruptcy trustee of ESA Georgia at auction. 2
A single judgment was entered in these three proceedings, which had been consolidated for trial before the court. Id. Distinguishing Munim, M.D. v. Azar, M.D., 648 So. 2d 145 (Fla. 4th DCA 1994) (Pariente, Anstead, and Hershey, JJ), the Fourth District affirmed the lower court judgment and ruled that: (1) ESA Florida should not be considered a mere continuation of ESA Florida since the asset that ESA Georgia allegedly transferred to ESA Georgia expired by its own terms on the date it was continued by ESA Florida; (2) Speer took proper steps to dissolve ESA Georgia through bankruptcy and he is not prevented from incorporating ESA Florida as a means through which to provide his consulting services. ; (3) the corporate veil should not be pierced and Speer personally held liable for Mason s unsatisfied judgment against ESA Georgia; and (4) Mason, assignee of the bankruptcy trustee, could not avoid a transfer under under 11 U.S.C. 548(a)(1) since ESA Georgia did not have a sufficient interest in the management contract with Wintergreen to transfer it to ESA Georgia. STATEMENT OF JURISDICTION Discretionary jurisdiction exists in this Court to review a decision of the Fourth District which expressly and directly conflicts with decisions of this Court and other district courts of appeal on the same questions of law. See Art. V, 3
3(b)(3), Fla. Const.; Rule 9.030(a)(2)(A)(iv), Fla. R. App. P. Decisional conflict may be created by a conflict in legal principles which appear on the face of the decision, see Ford Motor Co. v. Kikis, 401 So. 2d 1341, 1342 (Fla. 1981), by misapplication of a holding announced by this Court or by another district court of appeal, see Arab Termite and Pest Control of Florida, Inc. v. Jenkins, 409 So. 2d 1039, 1041 (Fla. 1982), or by a statement in the opinion which establishes conflicting points of law. See Persaud v. State, 838 So. 2d 529, 532 (Fla. 2003). SUMMARY OF ARGUMENT The opinion below conflicts with decisions that hold that a customer which does not have a binding contract can be an asset which can be fraudulently transferred. A corporation retains an interest in a business relationship when that relationship would have continued without the actions of the third party. The opinion further conflicts with decisions that hold that a transfer of assets is not necessary to liability under the mere continuation theory. A successor corporation which is incorporated contemporaneously with entry of a judgment against its predecessor is liable when it simply continues the business of its predecessor without any change in substance. The opinion below conflicts with Florida decisions which hold that the sole officer, director, or shareholder of an insolvent corporation is a trustee for creditors and cannot act to his benefit to avoid the judgment of a creditor. The sole 4
shareholder of a corporation cannot incorporate a successor corporation which continues the business of its predecessor for the express purpose of avoiding a judgment against the predecessor. The Court should exercise its discretionary jurisdiction to review this decision since it creates broad exception to existing debtor-creditor law and will result in substantial litigation. ARGUMENT I. IS AN ENFORCEABLE CONTRACT NECESSARY FOR A CUSTOMER TO BE AN ASSET WHICH CAN BE TRANSFERRED? The Fourth District rejected all theories of liability on the ground that the Wintergreen contract with ESA Georgia had expired and, therefore, was not an asset which could be transferred to ESA Florida. This ruling directly conflicts with the Fifth District decision in Laboratory Corp. of America v. Professional Recovery Network, 813 So. 2d 266, 270 (Fla. 5th DCA 2002). In Laboratory Corp., the Fifth District expressly rejected the identical argument accepted here by the Fourth District and held that an enforceable contract is not necessary for a customer to be considered an asset which may be transferred fraudulently. Id. II. IS A BUSINESS RELATIONSHIP AN INTEREST WHICH CAN BE TRANSFERRED ABSENT A CONTRACT? 5
Under section 726.06, Florida Statutes, a judgment debtor s interest in an asset can be fraudulently transferred. See 726.06, Fla. Stat. (2003). The decision below directly conflicts with decisions of this Court and other district courts of appeal which state that an enforceable contract is not necessary for a party to retain an interest in a business relationship which gives it legal rights. See, e.g., Ethan Allen, Inc. v. Georgetown Manor, Inc., 647 So. 2d 812, 813 (Fla. 1994); Landry v. Hornstein, 462 So. 2d 844, 846 (Fla. 3d DCA 1985). It also conflicts with cases that hold that an interest is retained when a business relationship would have continued absent the actions of the defendant. See, e.g., United Yacht Brokers, Inc. v. Gillespi, 377 So. 2d 668, 672 (Fla. 1979). In Laboratory Corp., the Fifth District held that such an interest in a business relationship may be fraudulently transferred. Laboratory Corp., 813 So. 2d at 270. III. IS A TRANSFER OF ASSETS AN ELEMENT OF MERE CONTINUATION OF BUSINESS LIABILITY? Mason ruled that ESA Florida was not a mere continuation of ESA Georgia since there was no transfer of assets between them. Mason, at 2. However, a transfer of assets is not an element of this theory of liability. The test for determining whether there has been a mere continuation of business is whether the successor corporation continues the business of its predecessor without any real change. A successor corporation is a continuation of its predecessor where there 6
is a continuity of the selling corporation evidenced by such things as management, personnel, assets, location and stockholders.... Orlando Light Bulb Serv., Inc. v. Laser Lighting & Elect. Supply, Inc., 523 So. 2d 740, 742 n.1 (Fla. 5th DCA 1988). The opinion below holding that ESA Florida was not a mere continuation of ESA Georgia despite complete continuity misapplied the test for this theory of liability. See Orlando Light, 523 So. 2d at 742 n.1; see also Munim, 648 So. 2d at 154. IV. IS DISSOLUTION FIVE MONTHS AFTER INCORPORATION OF THE SUCCESSOR CORPORATION PROPER? The Fourth District stated that Speer took the proper steps to dissolve ESA Georgia through bankruptcy and he is not prevented from incorporating ESA Florida as a means through which to provide his consulting services. Mason, at 2. This expressly conflicts with decisions of this court and other district courts of appeal that the sole officer, director and shareholder of an insolvent corporation is a trustee for creditors and cannot take acts for his benefit to avoid the judgment of a creditor. See Southern Life Insurance & Trust Co. v. Lanier, 5 Fla. 110, 58 Am.Dec. 448 (1853). The proper steps taken by Speer in this case amount to the very evil then- Judge Pariente cautioned against in Munim. Proper dissolution would not allow a professional association to: 7
simply cast off one corporate identity in favor of another in order to evade the effect of a previously existing judgment.... A professional would then be able to take advantage of the P.A. to shield him or her from personal liability and subsequently shed the old corporate identity in favor of the new one without concern for the debts of the old P.A. This would lead to an improper interference with collection remedies.... See Munim, 648 So. 2d 155 n.4. V. IS SPEER LIABLE FOR THE DEBTS OF ESA GEORGIA AS ITS ALTER-EGO? The court rejected Mason s claim that Speer s contemporaneous abandonment of ESA Georgia and formation of ESA Florida to continue the Wintergreen contract the day it expired in order to avoid Mason s judgment rendered Speer its alter-ego. Florida law is settled that the evidence to pierce the corporate veil must show that the sole shareholder formed or used a corporation to mislead or defraud creditors. See, e.g., Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114, 1120-21 (Fla. 1984). The decision below directly conflicts in its application of this principle with Dania Jai-Alai and its progeny. See, e.g., Ocala Breeders Sales Co. v. Hialeah, Inc., 735 So. 2d 542, 543 (Fla. 3d DCA 1999), rev. denied, 749 So. 2d 502 (Fla. 2000); Estudios Proyectos e Inversiones de Centro America, S.A. (EPICA) v. Swiss Bank Corp. (Overseas) S.A., 507 So. 2d 1119, 1121 (Fla. 3d DCA 1987); rev. denied, 518 So. 2d 1274 (Fla. 1988). In Estudios Proyectos, 813 So. 2d at 270, for example, the Third District ruled that the 8
corporate veil could be pierced where a controlling shareholder created a corporation and transferred ownership of an asset for the purpose of avoiding creditors. Id. 1121; see also Ocala Breeders, 735 So. 2d at 543 (parent corporation was ater-ego of its subsidiary when they operated out of same facility, were performing contracts using same employees, and subsidiary was never capitalized and had no bank account). VI. CAN AN INTEREST IN AN ASSET BE AVOIDED? The Fourth District held that Mason, as assignee of the bankruptcy trustee, could not avoid any transfer of an interest of ESA Georgia in property under 11 U.S.C. 548(a)(1) since ESA Georgia did not have a sufficient interest in the management contract with Wintergreen. Since the bankruptcy code does not define an interest of the debtor in property, state law determines the existence and nature of any such interest. See, e.g., In re Atchison, 101 BR 556 (D.C. Ill. 1989). The decision below directly conflicts with the Fifth District holding in Laboratory Corp. that a corporation s customers who were not contractually bound were assets within the meaning of the UFTA that could be transferred fraudulently. See Laboratory Corp., 813 So. 2d at 270.\ VII. PUBLIC POLICY SUPPORTS REVIEW Simply stated, the Fourth District decision creates an unprecedented 9
exception to settled law which will allow debtors to easily avoid a judgment, obligation or debt. Debtors throughout Florida will cite to Mason in a myriad of circumstances to authorize the evasion of a judgment, debt or obligation. For example, a professional practicing through a professional association could simply change the name on the door for his new professional association without changing anything else and avoid a judgment or valid debt. But see Munim, 648 So. 2d at 154 & n.4. Further, the sole owner and operator of a corporation could, like here, simply change the name on the door, continue the non-contractually based business of his wholly-owned and operated predecessor corporation, and assume the benefits of the new corporation with impunity. Certainly, such an interference with well-established creditor remedies throughout Florida will spawn a large amount of litigation and is contrary to public policy. Discretionary conflict jurisdiction should be exercised to clarify what had been clear rules of law prior to this case and, as a result, to stem the tide of litigation and resultant burdens on the judicial system which will result from it. CONCLUSION Accordingly, Mason submits that a conflict exists between Mason and decisions of the Supreme Court and other district courts of appeal on the same questions of law and respectfully requests that the Court accepts discretionary jurisdiction to resolve this conflict. 10
Respectfully submitted, Leif J. Grazi, Esq. Florida Bar No. 296041 Grazi & Gianino 217 E. Ocean Boulevard Stuart, FL 34994 Tel: (561) 286-0200 - and - Steven M. Goldsmith, Esq. Florida Bar No. 324655 Steven M. Goldsmith, P.A. 5355 Town Center Road, Suite 801 Boca Raton, FL 33486 Tel: (561) 391-4900 CERTIFICATE OF SERVICE By: Steven M. Goldsmith I HEREBY CERTIFY that a true and correct copy of the foregoing was furnished by U.S. Mail this 2nd day of June, 2003, to: Leif J. Grazi, Esq., Grazi & Gianino, 217 E. Ocean Boulevard, Stuart, FL 34994; Kenneth S. Rappaport Esq., Ste. 203, Squires Building, 1300 N. Federal Highway, Boca Raton, FL 33432; and Edward A. Marod, Esq., P.O. Box 3606, West Palm Beach, FL 33402-3606. By: Steven M. Goldsmith 11
CERTIFICATE OF COMPLIANCE Pursuant to Rule 9.210(a)(2), Fla.R.App.P., the undersigned hereby attests that this Brief on Jurisdiction is being submitted in Times New Roman 14 point font. Dated: June 2, 2003 By: 12