Jesson, Inc. v. Sutton Hill Associates, Inc.

789 So. 2d 1064, 2001 Fla. App. LEXIS 8044, 2001 WL 649659
CourtDistrict Court of Appeal of Florida
DecidedJune 13, 2001
DocketNos. 4D99-811, 4D99-1298
StatusPublished

This text of 789 So. 2d 1064 (Jesson, Inc. v. Sutton Hill Associates, Inc.) is published on Counsel Stack Legal Research, covering District Court of Appeal of Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jesson, Inc. v. Sutton Hill Associates, Inc., 789 So. 2d 1064, 2001 Fla. App. LEXIS 8044, 2001 WL 649659 (Fla. Ct. App. 2001).

Opinion

DELL, J.

Jesson, Inc., a dissolved Florida corporation (Jesson), and Donald Schupak (Schupak) and Barry Florescue (Flores-cue), as Last Directors and Trustees of Jesson, Inc., timely appeal a final judg[1065]*1065ment for $719,559.24 in favor of Sutton Hill Associates, Inc. (Sutton Hill). The trial court found that Jesson, a nominal defendant in this case, by way of its board of directors, “fraudulently divested itself of its assets in order to hinder and delay its creditors, including [Sutton Hill], from the collection of just debts owed by the corporation to these creditors.” The alleged fraudulent transfer of all of Jesson’s assets to its three shareholders, which included Floreseue and Schupak, rendered Jesson’s guaranty of a 1977 lease useless when Jesson’s sub-corporation breached the lease. Sutton Hill cross-appeals the trial court’s decision not to hold Schupak and Floreseue individually liable for the judgment.

Jesson was administratively dissolved on November 4, 1988, for failure to file its annual report. In 1991, during the time that Jesson was dissolved, Sutton Hill filed a one-count complaint against Jesson, and against Floreseue and Schupak as last directors and trustees of Jesson, to enforce the guaranty. On July 28, 1993, documents were filed to reinstate Jesson as a corporation. However, the trial court found that Sutton Hill failed to prove that Jesson had been reinstated as an active corporation. Sutton Hill filed an amended complaint in September, 1994, after it learned of Jesson’s complete liquidation. It added a second count against the same parties, alleging that “[t]he stripping of the assets of Jesson constituted a fraudulent transaction as it was a transfer of assets to its shareholders that was made with the actual intent to hinder, delay or defraud Sutton Hill with respect to the obligations of Jesson under the guaranty.”

In 1994, Sutton Hill obtained a final judgment against Schupak based on a clerk’s default. In Schupak v. Sutton Hill Assocs., 710 So.2d 707 (Fla. 4th DCA 1998), this court reversed the judgment, concluding that the trial court did not have personal jurisdiction over Schupak because service of process was not proper under section 48.031(1), Florida Statutes (1993). This court declined to decide the issue of whether Schupak was subject to the trial court’s jurisdiction as a trustee by virtue of uncontested service of process on Flo-rescue and, assuming he was, whether Flo-rescue’s responsive pleading as trustee would suffice as Schupak’s responsive pleading. The court also declined to decide whether Sutton properly amended its complaint without having served the complaint on Schupak. Id. at 709.1 On December 5, 1996, Sutton Hill filed a second amended complaint naming Floreseue and Schupak individually. Schupak has not been served individually or as a last director of Jesson.

After holding a bench trial on appellee’s Second Amended Complaint, the trial court issued a Final Judgment in favor of Sutton Hill and against “Jesson Incorporated [as a nominal defendant]; Barry Flo-rescue, not individually but as last trustee and director of Jesson, Inc.; and Donald Schupak, not individually but as last trustee and director of Jesson, Inc.,” for $719,599.24. The trial court found that it had jurisdiction over Jesson, and Flores-cue and Schupak, as last directors and [1066]*1066trustees of Jesson, by virtue of service of process in that representative capacity upon Florescue, pursuant to section 48.101, Florida Statutes (1991).

Jesson, Florescue and Schupak raise the following issues in this appeal: Whether the trial court erred when it entered judgment against Jesson; when it entered judgment against Florescue, as last trustee and director of Jesson; when it entered judgment against Schupak, as last trustee and director of Jesson, pursuant to section 48.101, Florida Statutes; whether competent substantial evidence supported Sutton Hill’s claim for fraudulent transfer, the amount of damages awarded by the trial court, and that Sutton Hill was both the assignee and owner of Jesson’s guaranty; whether the trial court erred in determining that Sutton Hill was entitled to attorney’s fees and costs; and whether the trial court erred in denying Jesson’s, Flores-cue’s and Sehupak’s motion for involuntary dismissal at the close of Sutton Hill’s case. On cross-appeal, Sutton Hill challenges the trial court’s finding that Jesson’s directors were not individually liable for actions taken in their capacity as directors of the corporation.

We have considered the issues on appeal and cross-appeal and, with the exception of one issue on appeal, conclude that the parties have failed to demonstrate reversible error. As to the remaining issue, we hold that the trial court erred when it entered final judgment against Schupak as a last director of Jesson, pursuant to section 48.101, Florida Statutes (1991).

At trial, Sutton Hill showed that in March of 1986, Schupak and Florescue adopted a plan to liquidate Jesson’s assets and file for dissolution, pursuant to chapter 607, Florida Statutes, the Florida General Corporation Act. Florescue, as Jes-son’s president, filed with the Internal Revenue Service, a Corporate Dissolution form with the plan of liquidation attached. Florescue indicated that Jesson was “to be dissolved or liquidated” and that a sufficient amount of cash would be reserved in good faith to pay the corporation’s liabilities and expenses. However, Jesson did not formally dissolve, which would have required it to formally notify its creditors and reserve certain monies for its debts. See § 607.261(2)-(3), Fla. Stat. (1985). Instead, Jesson administratively dissolved two years later in 1988, and no assets were retained.

The trial court found that Jesson fraudulently divested itself of its assets by way of its directors, to the detriment of its creditors. The final judgment states, in pertinent part:

At the time that Jesson Incorporated liquidated its assets it failed to reserve sufficient assets to cover its contingent liability under its guarantee [sic] to Plaintiff. At the time of its liquidation of its assets it was well aware through Mr. Florescue of the condition of the lessee since Mr. Florescue was also the president of the lessee corporation. The condition of the lessee corporation was such that even though it was current in its rent at the time that the guarantor liquidated its assets, the plan of liquidation having been adopted in March, 1986, Jesson Incorporated should have retained sufficient assets to meet the liability under the guarantee [sic] which is the subject of this action. By February 28, 1987, no assets were retained to pay liabilities. The complete liquidation of all assets was done with a fraudulent intent to hinder contingent creditors from the collection of future foreseeable debts incurred by the corporation, thereby constituting a fraud on creditors ... Therefore the Court finds that Jesson, Inc. fraudulently divested itself of its assets to the detriment of one of its [1067]*1067creditors, Plaintiff, Sutton Hill Associates.

The legislature, in section 607.144(l)(c), Florida Statutes (1985), and later in section 607.0834, Florida Statutes (1990), provided that directors can be held personally liable to the corporation’s creditors for their actions taken while directors. See, e.g., Fearick v. Smugglers Cove, Inc., 379 So.2d 400 (Fla.

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Related

Gerald H. Gould v. Albert Brick
358 F.2d 437 (Fifth Circuit, 1966)
American National Bank v. Jennings Development, Inc.
432 F. Supp. 151 (M.D. Florida, 1977)
Fearick v. Smugglers Cove, Inc.
379 So. 2d 400 (District Court of Appeal of Florida, 1980)
Schupak v. Sutton Hill Associates
710 So. 2d 707 (District Court of Appeal of Florida, 1998)
Arnowitz v. Equitable Life Assurance Society of the United States
539 So. 2d 605 (District Court of Appeal of Florida, 1989)

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Bluebook (online)
789 So. 2d 1064, 2001 Fla. App. LEXIS 8044, 2001 WL 649659, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jesson-inc-v-sutton-hill-associates-inc-fladistctapp-2001.