Leveris v. Fitts

STATE OF MAINE SUPERIOR COURT

CUMBERLAND, ss . ‘CIVIL ACTION -

_ DOCKET NO. CV-99-675

ARTHUR J. LEVERIS, ooh » 3 toad Mi}- 2A ~ é]2 1 lz CLO

Plaintiff

Vv. ORDER ON DEFENDANTS'

MOTION TO DISMISS AND/OR

ELAINE FITTS and FOR SUMMARY JUDGMENT

LOLA LEVERIS,

Defendants

The defendants move to dismiss the plaintiff's complaint and/or for a

summary judgment on all counts of the plaintiff's complaint. M.R. Civ. P. 12(b)(6)

& 56. The defendants also seek an award of attorneys’ fees and costs. Finally, the

defendants move to strike the affidavit of the plaintiff and to strike paragraphs 25-31

of the plaintiff’s statement of facts.

MOTION TO STRIKE

The defendants move to strike the plaintiff’s affidavit to the extent it is not

based on personal knowledge, paragraphs 25-31 of the plaintiff’s statement of

material facts, and most of paragraph three of the plaintiff's memorandum in

opposition to the defendants’ motion. See Defs.’ Reply Mem.., p. 1, n.2.

Plaintiff's Affidavit

The defendants move to strike the portions of the plaintiff's affidavit that are

not based on personal knowledge and relies on inadmissable hearsay. The jurat of

the plaintiff's 16-page affidavit states that it is made on the plaintiff’s knowledge,

information, and belief. Rule 56 requires affidavits to be made on personal

knowledge and set forth facts which would be admissible in evidence. MLR. Civ. P.

56(e). Giving the benefit of the doubt to the plaintiff regarding matters he may have

personal knowledge about, possible exceptions to excluding hearsay, and matters

which possibly are not hearsay, the following paragraphs of the plaintiff's statement

of facts are stricken:

1. Paragraph 3: paragraph 2.

2. Paragraph 4: paragraph 2, sentences 5 and 6; paragraph 3; paragraph 4;

paragraph 5.

3. Paragraph 5: paragraph 2, sentences 6-7; paragraph 3.

4. Paragraph 11: sentences 4, 6.

5. Paragraph 12: paragraph 4, sentence 2.

6. Paragraph 13, paragraph 3, sentences 4, 5; paragraph 4, sentence 4;

paragraph 5, sentence 1, 9; paragraph 8, sentences 5, 6.

7. Paragraph 14: paragraph 1: sentence 1 (“nor has my attorney”); sentence 2:

(regarding his attorney); sentence 4; paragraph 2: sentences 1-4; paragraph 3;

paragraph 6, sentences 2, 3.

8. Paragraph 15: paragraph 2.

9. Paragraph 18.

10. Paragraph 19.

11. Paragraph 20.

12. Paragraph 21.

13. Paragraph 22.

In addition to the above objections and the plaintiff’s legal conclusions in his

statement of facts, the plaintiff's statement of facts is confusing and not responsive

to the defendants’ statement. See, e.g., Plaintiff's SDMF, 1{ 4-8, 14, 18, 20-24. See

Steeves v. Bernstein, Shur, Sawyer & Nelson, 1998 ME 210, J 10, n.9, 718 A.2d 186,

190.

Paragraphs 25-31

The non-moving party’s failure to controvert specific paragraphs of the

moving party’s statement of material facts results in those facts being deemed

admitted. See Prescott v. Sate Tax Assessor, 1998 ME 250, ¥ 6, 721 A.2d 169, 172; M.R.

Civ. P. 7(d)(2) (“separate, short and concise statement of the material facts, supported

by appropriate record references, as to which it is contended that there exists a

genuine issue to be tried”). The non-moving party may include additional facts.

See Prescott, 1998 ME 250, 9 6, 721 A.2d at 172. The court considers paragraphs 25-31

to be additional facts and not facts specifically controverting the defendants’

statement of material facts.

Plaintiff’s Memorandum

For the purpose of a motion for summary judgment, whether there is a

genuine issue of fact for trial is determined by a comparison of the parties’

statements of facts and the record references. See Corey v. Norman, Hanson &

DeTroy, 1999 ME 196, 4 8, 742 A.2d 933, 938. Any discussion of the facts in the

parties’ memoranda which differs from, or is in addition to, material contained in

the statements of facts is not considered.

MOTION TO DISMISS/FOR SUMMARY JUDGMENT

Count I: Failure to Disclose

The plaintiff and defendant Elaine Fitts are equal owners of stock in 519-521

Cumberland Ave., Inc. (the corporation). The parties are the directors of the

corporation.

In count I, the plaintiff alleges that the defendants failed to permit him to

review the books and other papers of the corporation. Complaint, ¢ 34. The

plaintiff has raised an issue of fact with regard to access to the corporate checking

account. See Defs.’ SUMF, { 22; Pl.’.s SDMF, 7q 14.

Counts III, V, VII: Self Dealing, Breach of Contract, and Breach of Fiduciary Duty

In counts III, V, and VII, the plaintiff alleges that (1) the defendants breached

their fiduciary duty to the plaintiff by contracting with E.L.F., Inc. and paying money

to that corporation; (2) the defendants breached their contract with the plaintiff

regarding how the funds of the corporation would be distributed and how the

corporation would be operated, by failing to pay money to the plaintiff, by the taking

of a salary by defendant Fitts, and by failing to pay the plaintiff for money he paid on

the corporation’s behalf; and (3) the defendants breached generally their fiduciary

duty to the plaintiff as a shareholder. See Complaint, 7 10-16, 37-38, 41-45, 48-49.

Maine law requires such agreements to be in writing to be enforceable. See

13-A M.R.S.A. § 618(1) (1981); Villar v. Kernan, 1997 ME 132, ¥ 7-10, 695 A.2d 1221,

1223-24; Defs.” SUMF, { 13; Pl.’s SDMF 13, 25; Complaint, 7] 10-19, 38, 42-45, 49. A

corporate resolution and promissory notes are not sufficient writings. See 13-A

M.R.S.A. §§ 618(1) & 710 (1981); Pl.s’ SDMF, 9J 13, 25. The fact that the cause of

action is labeled a breach of contract does not obviate the requirements of section 618

regarding agreements between shareholders. See Villar, 1997 ME 132, 4 5, 695 A.2d

at 1222 (breach of contract claim).

Directors and officers of a corporation must exercise their powers and

discharge their duties in good faith. See 13-A M.R.S.A. § 716 (Supp. 1999); Northeast

Harbor Golf Club, Inc. v. Harris, 1999 ME 38, ¥ 24, 725 A.2d 1018, 1025. The plaintiff

has raised an issue of fact regarding defendants’ breach of fiduciary duty to the

plaintiff. See Pl.’.s SDMF, { 4, 5, 17.

Counts IIL, V, VIL and VIII: Self-Dealing, Breach of Contract, Breach of Fiduciary

Duty, and Freeze Out/Squeeze Out

The plaintiff complains about action allegedly taken at a board of directors’

meeting held on 3/16/98. Complaint, 17 20-30. The defendants argue that because

the plaintiff did not attend the meeting and did not promptly object to the action in

writing, he has waived any objection to the board’s actions. 13-A M.R.S.A. §§ 709 &

712(2)-(4) (1981 & Supp. 1999). See Defs.’ SUME, {{ 17, 18, 20, 21, 24; Pl.s’ SDMEF, 94

17, 24, 27, 28. It is not disputed that proper notice was given for all meetings, that the

plaintiff did not attend the 3/16 meeting, and that he did not object in writing to the

action taken, except for the attorney fee issue. Pl.’s SDMF, { 17; Letter from Attorney

Hull. The letter from Attorney Robitzek is dated 10/30/98 and addresses the 11/3

meeting. Although the plaintiff states that he objected numerous times, he does not

identify the subject of those objections. See Pl.’s SDMF, 17. If action taken at a

meeting without required call or notice are ratified if a shareholder does not object

promptly after learning of the meeting and action taken, such ratification will occur

when a meeting is properly noticed and the shareholder does not attend or object.

See Webber v. Webber Oil Co., 495 A.2d 1215, 1220 (Me. 1985) (waiver of right to

object to inadequately noticed meeting).

In count VIII, in which the plaintiff requests equitable relief, the plaintiff has

raised an issue of fact regarding access to the corporate checking account and breach

of fiduciary duty. See Pl.’s SDMF, @ 4, 5, 14, 17.

Counts IL, III, V, and VI: Waste and Corporate Management, Self Dealing, Breach of

Contract, and Conversion

The defendant argues that these claims are derivative because the plaintiff as

a shareholder seeks legal redress for injuries to the corporation. See Moore v.

Industrial Services, Inc., 645 A.2d 626, 629 (Me. 1994). It is undisputed that no

written demand has been made on the corporation to commence a derivative

action. See 13-A M.R.S.A. §§ 628(1) & 630(1) (Supp. 1999); M.R. Civ. P. 23A; Defs.’

SUMF, 4 21; Driscoll Aff., 10; Pl.’s SDMF, { { 17.

An individual shareholder may sue on his own behalf if he suffers harm

separate and distinct from any harm suffered by other shareholders. See Moore, 645

A.2d at 630-31 quoting Forbes v. Wells Beach Casino, 307 A.2d 210, 221 (Me. 1973);

Dupuis v. Pierre’s School of Beauty Culture, 642 A.2d 854, 855 (Me. 1994). In count II,

the plaintiff alleges that the value of shares in the corporation has been affected by

the defendants’ mismanagement. In count III, the plaintiff alleges that money paid

to E.L.F., Inc. should have been paid to the shareholders. In count VI, the plaintiff

alleges that the defendants have misused corporate funds. See Complaint, 7{ 36, 38,

47-48. These allegations are derivative. See Moore, 645 A.2d at 630. In count V, the

plaintiff alleges that he has had to pay on a promissory note from his own funds and

that he has not been reimbursed for money he paid on behalf of the corporation.

These allegations state an injury separate from any injury suffered by other

shareholders. See id.; Complaint, 7] 43, 45.

Count IV: Accounting and Dissolution

In count IV, the plaintiff request an accounting and dissolution of the

corporation. The complaint does not comply with the statutory requirements for an

action for judicial dissolution of a corporation. See 13-A M.R.S.A. § 1116 (1981).

It is undisputed that the accounting requested by the plaintiff was mailed to

him by certified mail; he refused the letter. See Defs.’ SUMF, {| 8; Pl.s’ SDMF, Q 7, 8.

Accountings have been sent to the plaintiff's attorney. See Defs.’ SUMF, 7 14;

Clement Aff., | 6. The plaintiff's affidavit does not reveal that he has personal

knowledge regarding what his attorney received and there is no evidence from

Attorney Hull. See Pl.’s SDMF, 7 14. All corporate records have been available at

Attorney Driscoll’s office. See Defs.’ SUMF, { 14; Driscoll Aff., ¥ 11. The plaintiff

has, however, raised an issue of fact regarding his request for an accounting under

oath. See, e.g., Pl.s’ SDMF, ¥ 14.

REQUEST FOR AWARD OF FEES AND COSTS

_ The defendants’ request for an award of attorneys’ fees and costs will be

> addressed at the close of the case. See 13-A M.R.S.A. § 634(2) (Supp. 1999); Steeves,

1998 ME 210, { 10, n. 9, 718 A.2d at 190, n.9; Linscott v. Foy, 1998 ME 206, {| 16, 716

A.2d 1017, 1021.

The entry is

The following is ORDERED on the Defendants’ Motion to Dismiss:

Counts II, III and VI are DISMISSED with prejudice to the

Plaintiff individually.

The portion of Count IV pertaining to dissolution is

DISMISSED without prejudice.

The remainder of the Defendants’ Motion to Dismiss is

DENIED.

The following is ORDERED on the Defendants’ Motion for Summary

Judgment:

> Judgment is entered on Count I of the Plaintiff's

Complaint in favor of the Defendants and against the

Plaintiff on all issues except access to the corporate

checking account.

Judgment is entered in favor of the Defendants and

against the Plaintiff.on Count V of the Plaintiff's

Complaint.

The Defendants’ Motion for Summary Judgment is

DENIED on Counts IV (accounting), VII and VIII of the

Plaintiff's Complaint.

The Defendants’ Request for Award of Fee and Costs is reserved for

. lbsuued |

Date: June 24, 2000 Vi

Neficy LU.

Justice, Superior cofy/ r

. | Date Filed__11-23-99 CUMBERLAND Docket No, _CV_99-675

. County

Action ____ DAMAGES -

ARTHUR J. LEVERIS ELAINE FITTS

LOLA LEVERIS

vs.

Plaintiff’s Attorney Defendant’s Attorney

WILLIAM D. ROBITZEK, ESQ 784-3576 andrew ‘ nd Sn Esq. "Glain Fitts)

PO BOX 961, LEWISTON ME 04243-0961 me rortian . e

, Portland, Me. 04112-0586

Daniel Mitchell, Esq. (Lola Leveris)

Date of

Entry

1999

Nov. 24 Received 11-23-99:

Complaint Summary Sheet filed.

" " Complaint filéd.

> Dec. 03 Received 12/02/09:

Summons filed.

Deferdant Lola Leveris served in hard on 11/26/99.

Jan. 25 Received 01/25/00:

Affidavit and Motion in Support of Altemate Method Service filed.

Jan. 26 On 01/26/00:

As to Affidavit and Motion in Support of Alternate Method Service,

GRANTED, upon condition that plaintiff also serve defendant Fitts, 1.

by regular mail and 2. by certified mail, return receipt requested and

that Fitts also be served with a copy of this Order. (Warren, J.)

On 01/26/00: Copy mailed to William Robitzek, Esq.

Feb. 03 |Received 02/02/00:

Plaintiff's copy of Complaint, Summons and Affidavit and Motion in Support

of Alternate Method Service filed.

March 01 Received 03/01/00:

Scheduling Order filed. (Mills, J.)

The entry shall be: " Scheduling Order filed. Discovery deadline

is 11/01/00.

On 03/01/00 copy mailed to William Robitzek, Esq. Elaine Fitts, Pro

Se. at RR 1 Box 311, Cornish, Me 04020 and Lola Leveris, Pro Se. at

> 72 Roberts Street, Portland Me 04012

Mar. 03 Received on 03-03-00:

Plaintiff's Notification of Discovery Service filed.

Deposition Duces Tecum of Elaine Fitts served on Paul F. Driscoll on

Q3-01-00.