Fore v. RJ Golf

• Court: Superior Court of Maine
• Decided: July 9, 2009
• Docket: CUMcv-07-147andre-07-72
• Status: Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. CIVIL ACTION Docket Nos. CV-07-147 and RE-07-72 ~ r' FORE LLC,

Plaintiff,

v.

RJ GOLF LLC, et al.,

Defendants,

ORDER

JRC GOLF LLC,

Plaintiff, STATE OF fv'iNNE Cumberland. (;";G;Cd\'~; Office v. ~;UPEP',~):'·: ':~::C IJi'iT

FORE LLC, et aI., j:~,i_ 0 .; L009

Defendants. t:'"l r\'~ E'~ C-" E-,.. ni. J' c. D I \1 ~~

Before the court in these consolidated actions are four motions for summary

judgment: (1) a motion by Fore LLC et al. to dismiss the complaint in RE-07-72 because

the predecessor in interest of JRC Golf LLC was not authorized to do business in Maine

at the time the complaint was filed; (2) a motion by defendants Robert and Judith Adam

to dismiss JRC Golf's complaint seeking to hold them personally liable; (3) a motion by

Hooded Merganser LLC and Eider Inc. to dismiss JRC Golf's claim that they were

parties to a fraudulent transfer; and (4) a motion by JRC Golf LLC and Anthony and

Justin Caron seeking judgment on their foreclosure claim against Fore LLC et al., and dismissing the fraud and misrepresentation claims and defenses asserted by Fore LLC,

et al. I

Review of these motions was interrupted when Fore LLC filed a motion for

sanctions seeking to have the court disregard a certain document that was attached to

JRC Golf's opposition papers and that had not been produced in discovery. That

motion was finally resolved with an order dated May 14, 2009 that excluded the

document in question for purposes of summary judgment.

1. Summary Iudgment Standard

Summary judgment should be granted if there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law. In considering a

motion for summary judgment, the court is required to consider only the portions of the

record referred to and the material facts set forth in the parties' Rule 56(h) statements.

E.g., Johnson v. McNeil, 2002 ME 991 8, 800 A.2d 702, 704. The facts must be considered

in the light most favorable to the non-moving party. Id. Thus, for purposes of

summary judgment, any factual disputes must be resolved against the movant.

Nevertheless, when the facts offered by a party in opposition to summary judgment

would not, if offered at trial, be sufficient to withstand a motion for judgment as a

matter of law, summary judgment should be granted. Rodrigue v. Rodrigue, 1997 ME 99

err 8, 694 A.2d 924, 926.

I Because many of the parties who are defendants in RE-07-72 are plaintiffs in CV-07-147 and

vice versa, the court will designate those parties by name rather than by "plaintiff" or " defendant."

2 2. Fore LLC's Motion Challenging Standing

As far as the court can tell, it is undisputed that the foreclosure action in RE-07-72

against Fore LLC, Hooded Merganser LLC, Robert Adam, Judith Adam (collectively

"Fore LLC et a1.") and certain parties in interest was commenced by an entity called RJ

Golf LLC on March 20, 2007. At that time RJ Golf, a foreign LLC which at one time had

been authorized to do business in Maine, was no longer authorized to do business in

Maine. RJ Golf LLC's authorization to do business in Maine was revoked on August 20,

2001 for failure to file an annual report. Nevertheless, there is evidence that RJ Golf

continued to operate a golf course in Maine until November 2003.

After filing the complaint and after unsuccessfully seeking to have its authority

to do business in Maine reinstated (an effort frustrated by actions of Robert Adam

discussed below), RJ Golf LLC assigned its rights to JRC Golf LLC, a Maine limited

liability company, and moved to amend the complaint to substitute JRC Golf LLC as the

plaintiff on the claims against Fore LLC et a1. That motion was granted by the court on

January 9, 2008 (Cole, J.).2

Fore LLC et a1. have now renewed their contention that RJ Golf was not

authorized at the time it commenced suit (which is not disputed, see JRC Golf SMF

dated November 7, 2008 9[<[ 2, 14) and that therefore JRC's claims should be dismissed

and this action should proceed solely on Fore LLC's claims against RJ Golf. This issue

requires the court to consider the meaning of 31 M.R.S. §§ 712 and 718, the law of the

2 Fore LLC et al. opposed the motion to substitute on the ground that JRC Golf's predecessor in interest had not been authorized to do business at the time this suit was filed. Justice Cole's January 9,2008 order relied on the fact that the record before him did not establish that RJ Golf lacked authority to do business at the time the suit was filed.

3 case doctrine, and the action taken by Robert Adam, the principal of Fore LLC, to block

RJ Golf from being able to reinstate its authority to do business?

Title 31 M.R.S. § 712 provides that before "doing business" in the State, a foreign

limited liability company must obtain authority from the Secretary of State. However, a

foreign LLC is not considered under that statute to be doing business in the state solely

by reason of carrying on in this state one of the following activities:

A. Maintaining or defending any action ...

* * * * * * * * * "k

H. Securing or collecting debts or enforcing any rights in properly securing the same.

31 M.R.S. § 712(l)(A), (H). Merely by "maintaining" an action, therefore, a foreign LLC

is not doing business and is not required to register.

A subsequent provision, 31 M.R.S. § 718(1), provides as follows:

1. Prohibition against bringing an action, suit or proceeding. A foreign limited liability doing business in this state may not maintain any action, suit or proceeding in this state until it is granted authority to do business in this state and pays all fees and penalties for the years or parts of years during which it did business in this state without having been granted the authority to do business.

The wording of these statutes is somewhat problematic. Assuming that

"maintaining" an action should be interpreted to include "instituting" an action as well

as continuing it, there remains a question whether the statute is applicable. On its face,

§ 718(1) applies to foreign LLCs "doing business in this state." Worded in the present

tense, § 718(1) does not address what should happen in the case of a foreign LLC that

used to do business in the state but is no longer doing business in the state at the time it

3 After he learned that RJ Golf's authority to do business in Maine had been revoked, Adam formed a new company, "RJ Golf LLC" and registered it with the Secretary of State. This had the effect of preventing the original RJ Golf from reinstating its authority to do business in Maine when it tried to do so in 2007.

4 commences an action. The evidence in the record is that this was the situation with

respect to RJ Golf at the time it filed suit. See Noucas affidavit sworn to November 7,

2008

Since 31 M.R.S. § 718(1) is in derogation of the constitutional right to seek access

to the courts, it should be narrowly construed. Accordingly, the court does not find that

RJ Golf was disqualified from initiating suit 1m 2007 and therefore does not have to

consider whether, even if it was disqualified, it has cured the problem by assigning its

rights to JRC Golf.

The court acknowledges that this result would appear to allow RJ Golf to avoid

any fees and penalties it should have paid for the years 2001-03 (when it was doing

business). However, the statute does not address this problem. Moreover, even

assuming that the statute should be broadly interpreted to require foreign LLCs to pay

any fees and penalties they owe to the Secretary of State before proceeding with a

lawsuit (whether or not they are doing business at the time suit was instituted), Fore

LLC's objection to standing should not be upheld in this case. In this instance RJ Golf

attempted to reinstate its authority to do business in 2007 but was blocked because

4 Specifically the Noucas affidavit states that the only business conducted by RJ Golf from at least June 2006 through the time it filed its complaint involved the enforcement of its promissory note and mortgage. Under 31 M.R.S. § 712(1)(H) those activities would not constitute doing business for purposes of §§ 712 and 718. Fore LLC et a1. dispute the Noucas affidavit, arguing that RJ Golf admitted in its answer that it was doing business in Maine. Answer in CV-07-147 404 A.2d 587, 589 (Me. 1979). Justice Cole allowed the substitution of JRC Golf over the objections of Fore LLC et a1. The law of the case doctrine does not bar the court from reconsidering statutory language that was discussed in a prior order when the court is not reconsidering or overruling the prior order itself.

5 Adam (for no discernable business reason that appears in the record other than the

tactical purpose of frustrating RJ Golf's ability to obtain reinstatement) had registered

the same corporate name in the interim. In the court's view, if the purpose of the

statute is to require a foreign LLC to pay any authorization fees that are owing, Adam's

actions - by preventing RJ Golf from reinstating its authorization, which would entail

paying any past fees owed - have had the effect of frustrating the statutory purpose (as

well as RJ Golf's ability to litigate its claims).5 Such gamesmanship should not be

rewarded.

The motion for summary judgment by Fore LLC, et al., to dismiss JRC Gol f's

foreclosure action for lack of standing is denied.

3. Personal Liability of Robert and Judith Adam

Neither Robert nor Judith Adam personally signed the note or guarantee that

form the basis for JRC Golf's claims. JRC Golf, however, argues that it should be

allowed to pierce the corporate veil and hold the Adams personall y liable.

In order to pierce the corporate veil, a party must show that (1) a defendant

abused the privilege of a separate corporate identity and (2) an unjust or inequitable

resul t would occur if the court did not disregard the separate corporate existence.

Johnson v. Exclusive Properties Unlimited, 1998 ME 244 <]I 6, 720 A.2d 568, 571. Typically, a

more stringent standard is applied in a contract case, like the case at bar, than in a tort

case because parties seeking relief in contract cases are presumed to have voluntarily

5 In this connection, it should be noted that when a foreign corporation that is doing business within the meaning of §§ 712 and 718 but is not authorized commences a lawsuit, it usually is allowed to proceed as soon as it has obtained authorization. Such corporations have not ordinarily been required to drop their existing lawsuit and then reinstitute a second suit, and the court is not aware of any authority for the proposition that the initial lawsuit is void ab initio.

6 and knowingly entered into an agreement with a corporate entity. Theberge v. Darbro

Inc., 684 A.2d 1298, 1301 (Me. 1996). By way of example, if JRC Golf had wanted to hold

Robert and Judith Adam personally liable at the time of the original transaction, it had

the option of seeking personal guarantees.

In appropriate circumstances, corporate veils can be pierced even in contract

cases. However, the undisputed facts demonstrate that JRC Golf's personal liability

claim is unavailing in this case. First, persons are entitled to use corporate entities for

tax and personal liability purposes. Such actions do not constitute an abuse of the

corporate form. Nor is it an abuse of the corporate form for Robert Adam and his wife

to control the corporate entities of which they are the sole owners. Second, JRC Golf has

submitted no evidence that assets were improperly commingled or that corporate

formalities were not observed. 6 JRC vigorously argues that a parcel of land adjacent to

the golf course (the "Condominium Real Estate") was transferred by Hooded

Merganser LLC to Eider Inc. for no consideration, but, as discussed below, any

infirmities in that transaction may form a basis for relief under the uniform fraudulent

transfer statute.

Even if JRC Golf were found to have raised a disputed issue for trial as to

whether the corporate forms of Fore LLC and Hooded Merganser LLC were abused,

JRC Golf has not demonstrated that there are disputed issues for trial on the second

requirement necessary to pierce the corporate veil - that an unjust or inequitable result

would occur if the court did not disregard the corporate form. Johnson, 1998 ME 244 <]I

6 IRC Golf has offered evidence that the Adams may have purchased a condominium property from Eider Inc. (another Adam owned company) for less than the sale price of comparable properties. It is unclear if this would constitute an abuse of Eider Inc.' s corporate form. In any event, the corporate entities whose veil IRC Golf wants to pierce are Hooded Merganser LLC and Fore LLC (not Eider Inc.) and there is no evidence that the corporate forms of Hooded Merganser or Fore were abused.

7 6, 720 A.2d at 571. In this case JRC Golf has not disputed that Fore LLC has sufficient

assets to secure any debt claimed by JRC Golf. See SMF of Fore LLC et al. dated August

22,2008128; JRC Golf SMF dated September 12,2008128.

Under these circumstances, Robert and Judith Adam are entitled to summary

judgment dismissing JRC Golf's attempts to hold them personally liable in this action.

See Advanced Construction Corp. v. Pilecki, 2006 ME 84112,901 A.2d 189, 195.

4. Fraudulent Transfer

It is undisputed that, after the November 2003 purchase by Fore LLC of the golf

course property and the simultaneous purchase by Hooded Merganser LLC of the

condominium property, Hooded Merganser subsequently transferred the condominium

property to Eider Inc. for no consideration. Eider Inc. therefore obtained financing for

the condominium development from Gorham Savings Bank and secured that financing

by granting a mortgage on the condomini um property to Gorham Savings Bank.

JRC Golf, noting that this transfer appears to have left Hooded Merganser

insolvent, contends that the transfer of the condominium property to Eider Inc. was a

fraudulent transfer entitling JRC to relief under 14 M.R.S. §§ 3575-76.

To the extent that JRC Golf is seeking relief under § 3575(l)(A), it has not raised

any disputed issues for trial as to whether Hooded Merganser LLC had actual intent to

hinder, delay or defraud creditors. Indeed, JRC Golf did not submit any facts to refute

evidence offered by Adam and Hooded Merganser that the transfer to Eider Inc. was

completed solely for the purpose of obtaining tax advantages and that, at the time of the

transfer, Hooded Merganser intended that any remaining debt to JRC Golf or its

predecessor in interest would be paid by Fore LLC. See SMF of Fore LLC, et al., dated

August 22, 2008 11 8, 11; JRC Golf SMF dated September 12, 200811 8, 11.

8 However, that leaves open the possibility of relief under 14 M.R.S. §§

3575(l)(B)(l) or 3576(1). Those sections only require that a transfer be made without

receiving reasonably equivalent value and that the remaining assets of the debtor, after

the transfer, be "unreasonably small" or that the debtor be rendered insolvent as a

result of the transfer. JRC Golf has raised disputed issues for trial on this prong of the

fraudulent conveyance statute?

5. IRC's Motion for Summary Iudgment

The court concludes that, on JRC's motion to obtain summary judgment on its

judicial foreclosure claim and to dismiss the fraud and misrepresentation claims and

defenses of Fore LLC, there are disputed issues for trial.

The entry shall be:

The motion by Fore LLC, et al., defendants in RE-07-72, for summary judgment

dismissing the claims of JRC Golf pursuant to 31 M.R.S. § 718 is denied. The motion by

Robert and Judith Adam, defendants in RE-07-72, for summary judgment dismissing

the claims asserted against them in their personal capacity is granted. The motion by

Hooded Merganser and Eider Inc. for summary judgment dismissing JRC Golf's

fraudulent transfer claim against them is denied. The motion by JRC Golf for summary

judgment on its foreclosure claim and for summary judgment dismissing the fraud and

misrepresentation claims brought by Fore LLC et al. is denied.

7 In this connection, however, the court notes that the relief sought by JRe Golf is to have the condominium property conveyed to Eider Inc. by Hooded Merganser be transferred back "without encumbrance." However, if Gorham Savings Bank qualifies as a good faith transferee or obligee, it would be entitled to retain its mortgage on the condominium property. 14 M.R.S. § 3579(4).

9 The clerk is directed to incorporate this order in the docket by reference pursuant

to Rule 79(a).

DATED: July 1" ,2009 -~ Thomas D. Warren Justice, Superior Court

10 07/10/2009 MAINE JUDICIAL INFORMATION SYSTEM grnerri tt CUMBERLAND COUNTY SUPERIOR COURT mjxxi013 PAGE A - ATTORNEY BY CASE VIEW FORE LLC VS RJ GOLF LLC ET ALS CONS. W/RE07-72 ALL DOCK. IN CV07-147 UTN:AOCSsr -2007-0028823 CASE #:PORSC-CV-2007-00147

SEL VD REPRESENTATION TYPE DATE 01 0000003142 ATTORNEY:HALLETT, THOMAS F ADDR:75 MARKET STREET SUITE 502 PO BOX 7508 PORTLAND ME 04112 F FOR:FORE LLC PL RTND 03/16/2007 F FOR:HOODED MERGANSER LLC PL RTND 01/18/2008 F FOR:ROBERT L ADAM RE07-72 DEF RTND 01/18/2008 F FOR:JUDITH WADAM RE07-72 DEF RTND 01/18/2008

*More Attorneys* Enter Option: A=Add, B+Sel=Browse, 1~=More, R+Sel=RltnEdit:M

Select the EXIT KEY for page selection line. 07/10/2009 MAINE JUDICIAL INFORMATION SYSTEM gmerritt CUMBERLAND COUNTY SUPERIOR COURT mjxxi013 PAGE A - ATTORNEY BY CASE VIEW FORE LLC VS RJ GOLF LLC ET ALS CONS. W/RE07-72 ALL DOCK. IN CV07-147 UTN:AOCSsr -2007-0028823 CASE #:PORSC-CV-2007-00147

SEL VD REPRESENTATION TYPE DATE 03 0000001106 ATTORNEY: MAZZIOTTI , JOSEPH R ADDR:602 BRIGHTON AVENUE PO BOX 1319 PORTLAND ME 04104 F FOR:GORHAM SAVINGS BANK (RE07-72) PII RTND 07/09/2008

04 0000002196 ATTORNEY: NOUCAS , JAMES ADDR:500 MARKET STREET SUITE 8 PORTSMOUTH NH 03801 F FOR:RJ GOLF LLC DEF RTND 04/26/2007 F FOR:ANTHONY J CARON DEF RTND 04/26/2007 F FOR:JUSTIN R CARON DEF RTND 04/26/2007

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Select the EXIT KEY for page selection line. 07/10/2009 MAINE JUDICIAL INFORMATION SYSTEM gmerritt CUMBERLAND COUNTY SUPERIOR COURT mjxxi013 PAGE A - ATTORNEY BY CASE VIEW FORE LLC VS RJ GOLF LLC ET ALS CONS. W/RE07-72 ALL DOCK. IN CV07-147 UTN:AOCSsr -2007-0028823 CASE #:PORSC-CV-2007-00147

REPRESENTATION TYPE DATE

RT~ 01/16/~8 riND 01/02008

06 0000004035 ATTORNEY:WEYRENS, DAVID ADDR:75 MARKET STREET SUITE 502 PO BOX 7508 PORTLAND ME 04112 F FOR:FORE LLC PL RTND 05/01/2007 F FOR:HOODED MERGANSER LLC PL RTND 05/01/2007

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