Summary
holding shareholder lacked standing to assert claim for conversion of assets owned by corporation
Summary of this case from Green v. All Wheels Fin. Inc.Opinion
No. 4:95CV00473 GFG
August 15, 1995.
Robert R. Hutchings, St. Louis, MO, pro se.
Michael Waxenberg, Susman and Schermer, St. Louis, MO, for Manchester Life and Cas. Management Corp., Susman, Schermer, Rimmel Shifrin, James B. Hutchings, Catherine Hutchings, J. William McNellis, Alex Chackes, Harry Shapiro, Jack Copelevitz, Dell Goldenhersh and Michael Waxenberg.
David S. Slavkin, David M. Fedder, Bryan Cave, St. Louis, MO, for Boatmen's Trust Co.
ORDER
This matter is before the Court on various motions. Plaintiff, pro se, filed suit against Manchester Life and Casualty Management Corporation ("Manchester Life"), Boatmen's Trust Company ("Boatmen's"), the law firm of Susman, Schermer, Rimmel Shifrin, L.L.C. ("Susman"), Michael Waxenberg of the Susman firm, James B. Hutchings, Catherine Hutchings, and five individuals who are allegedly the directors of Manchester Life (collectively the "Directors"). The amended complaint recites various state law claims. Count I is for conversion against Manchester Life, Catherine Hutchings, and James Hutchings. Counts II and IV are levelled against the Directors and Waxenberg respectively, and Count III is against Boatmen's and Susman; all three counts state claims for breach of fiduciary duty. The Court appears to have diversity jurisdiction over this case pursuant to 28 U.S.C § 1332.
James B. Hutchings died on June 19, 1995. A suggestion of death was filed on June 26, 1995.
Boatmen's has filed a cross-claim against Manchester Life for indemnification and contribution. Defendants Manchester Life, Susman, Waxenberg, Catherine Hutchings, and the Directors have filed a motion to dismiss. Plaintiff opposes that motion.
When ruling on a motion to dismiss, this Court must take the allegations of the complaint as true, construing the complaint and all reasonable inferences therefrom in a light most favorable to the plaintiff. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986). Therefore, "a motion to dismiss a complaint should not be granted unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him to relief." Id.
The amended complaint alleges the following facts. In 1988, James Hutchings, as president of Manchester Life, wrote a letter to Boatmen's in which he represented that Catherine Hutchings, as the heir of her husband Ralph Hutchings, was the sole shareholder of a Missouri corporation called United States Central Underwriters Agency, Inc. ("USCUA"). However, plaintiff contends that James and Catherine Hutchings knew at the time that plaintiff was the sole shareholder of USCUA after he had purchased the outstanding shares of common stock in 1981.
Although not alleged in the complaint, defendants explain that Ralph Hutchings was the father of plaintiff and James Hutchings.
Plaintiff filed this lawsuit while incarcerated in a federal penitentiary. Plaintiff was convicted on five counts of mail fraud, six counts of wire fraud, and three counts of transporting checks in interstate commerce knowing them to have been taken by fraud. United States v. Hutchings, 751 F.2d 230, 233 (8th Cir. 1984). His convictions arose out of his conduct while president of USCUA. Id.
James Hutchings explained to Boatmen's in his 1988 letter that shares owned by USCUA in Manchester Life rightfully belonged to Catherine Hutchings. He claimed that the stock certificates were lost. Boatmen's reissued the shares without requiring a lost securities bond from Catherine Hutchings and sent them to James and Catherine Hutchings. The two endorsed the certificates and had Boatmen's change the name on them to one not known by plaintiff.
Those defendants moving for dismissal argue that plaintiff's claims are barred by the applicable statute of limitations, that plaintiff was a Missouri resident at the time this suit was filed therefore destroying diversity jurisdiction, and that plaintiff's amended complaint is frivolous under 28 U.S.C. § 1915(d).
Plaintiff filed suit from a federal prison in New Jersey. He claims that he lived in Florida prior to his incarceration and that he plans to return to Florida. Since his recent release, plaintiff is residing in Missouri; however, he explains that he is not living in Missouri by choice but by order of the federal Board of Probation and Parole. Plaintiff asserts that when he is given permission by the Board, he will return to Florida. Defendants have not provided the Court with any evidence to rebut plaintiff's allegations.
The Court need not reach the issues raised by defendants in their motions to dismiss. The Court finds that the amended complaint does not contain sufficient allegations supporting plaintiff's standing to sue.
In his claim for conversion, plaintiff admits that the property at issue is not owned by plaintiff personally but is owned by USCUA. Therefore, the cause of action for conversion belongs to the corporation USCUA and not plaintiff. Plaintiff explains that he is the sole shareholder of USCUA. However, a shareholder is without standing to sue in his individual capacity for damages to the corporation. Around the World Importing v. Mercantile Trust Co., 795 S.W.2d 85, 91 (Mo.Ct.App. 1990); Jones v. Rennie, 690 S.W.2d 164, 167 (Mo.Ct.App. 1985). Furthermore, under Missouri law, "[a] shareholder — even one who holds all the shares — does not have legal ownership of the corporation property. The title remains in the corporation." Penn v. Penn, 655 S.W.2d 631, 632 (Mo.Ct.App. 1983). See also Levesque v. Levesque, 773 S.W.2d 220, 222 (Mo.Ct.App. 1989). Additionally, "the earnings and profits of a corporation remain its property of the corporation until severed from other corporate assets and distributed as dividends." Hoffmann v. Hoffmann, 676 S.W.2d 817, 827 (Mo. 1984) (citing St. Charles Building Loan Ass'n v. Webb, 229 S.W.2d 577, 581 (Mo. 1950)).
Plaintiff further alleges that USCUA forfeited its charter in 1983. This allegation does not cure plaintiff's standing problem. Under Missouri law, when a corporation forfeits its charter, "the directors and officers in office when the forfeiture occurs shall be the trustees of the corporation." Mo.Rev.Stat. 351.525. The trustees are responsible for winding up the corporation's business and affairs, selling and liquidating its property and assets, paying its debts and obligations, and distributing the net assets among the shareholders. Id. Because the corporation's status as a legal entity is destroyed, the corporation no longer has the capacity to sue or be sued; the only proper parties to litigation are the statutory trustees. Mark Twain Elec., Inc. v. Yalem, 825 S.W.2d 366, 368-69 (Mo.Ct.App. 1992). The amended complaint contains no allegation that plaintiff is the statutory trustee for USCUA.
Plaintiff's claims against Boatmen's, Susman, Waxenberg, and the Directors similarly fail because they are for breach of fiduciary duties owed to plaintiff as a shareholder of Manchester Life. However, plaintiff admits that USCUA owned the shares in Manchester Life and not plaintiff individually. Therefore, again, plaintiff is trying to assert claims which belong to USCUA and which only the statutory trustees of USCUA have the capacity to pursue in a lawsuit.
For the reasons outlined above, the Court will grant defendant's motion to dismiss and dismiss plaintiff's entire complaint for lack of standing.
The Court notes its concern that in this case Susman and Waxenberg are representing themselves as well as defendants Catherine Hutchings, James Hutchings, the Directors, and Manchester Life. The conflict of interest provisions of Rule 4-1.7(b) of Missouri's Rules of Professional Conduct can be involved by such representation. Accordingly,
IT IS HEREBY ORDERED that defendant's motion to dismiss (Doc. No. 27) is granted.
IT IS FURTHER ORDERED that plaintiff's complaint is dismissed as to all defendants for lack of standing.
IT IS FURTHER ORDERED that all other pending motions are denied as moot.