Batur v. SIGNATURE PROPS. OF NORTHWEST FLA.

• Decision Date: 19 May 2005
• Docket Number: No. 1D04-1358.,1D04-1358.
• Citation: 903 So.2d 985
• Parties: Kenneth E. BATUR, Appellant, v. SIGNATURE PROPERTIES OF NORTHWEST FLORIDA, INCORPORATED, a Florida Corporation, William H. Smith, South Walton Properties, LLC, a Florida Limited Liability Company, and Sandpiper Ventures, LLC, a Florida Limited Liability Company, Appellees.
• Court: Florida District Court of Appeals

903 So.2d 985

Kenneth E. BATUR, Appellant, v. SIGNATURE PROPERTIES OF NORTHWEST FLORIDA, INCORPORATED, a Florida Corporation, William H. Smith, South Walton Properties, LLC, a Florida Limited Liability Company, and Sandpiper Ventures, LLC, a Florida Limited Liability Company, Appellees.

No. 1D04-1358.

District Court of Appeal of Florida, First District.

May 19, 2005.

David A. Higley, Esquire of Higley & Barfield, P.A., Altamonte Springs, and J. Andrew Talbert, Esquire and Larry A. Matthews, Esquire of Bozeman, Jenkins & Matthews, P.A., Pensacola, for Appellant.

Stephen H. Grimes, Esquire and Susan L. Kelsey, Esquire of Holland & Knight, LLP, Tallahassee, and Charles L. Hoffman, Jr., Esquire of Shell, Fleming, Davis & Menge, Pensacola, for Appellee Signature Properties of Northwest Florida, Inc.

Lawrence Keefe, Esquire of Anchors, Foster, McInnis & Keefe, P.A., Ft. Walton Beach, for Appellee William H. Smith.

Amy A. Perry, Esquire of Pleat and Perry, P.A., Destin, for Appellee South Walton Properties, LLC and Sandpiper Ventures, LLC.

BENTON, J.

Kenneth E. Batur appeals a circuit court order insofar as it dismisses with prejudice, under section 607.07401, Florida Statutes (2002), the derivative claims he filed, as a shareholder of Signature Properties of Northwest Florida, Inc. (Signature), against South Walton Properties, L.L.C. (South Walton) and Sandpiper Ventures, L.L.C. (Sandpiper).¹ We have jurisdiction² to the extent the order finally dismisses all claims against South Walton, Sandpiper, and First National Bank & Trust (First National),³see Fla. R.App. P. 9.110(k)(2005), even though claims filed by and against William H. Smith, Mr. Batur's former business associate, remain pending in the trial court. To the extent the circuit court's order is a partial, final judgment dismissing South Walton and Sandpiper, we reverse and remand for further proceedings.

I.

Incorporated in Florida in 1998, Signature engaged in various real estate ventures in south Walton County. Messrs. Smith and Batur, who each own half of Signature's stock, are its only directors and officers: Mr. Batur is Signature's president and treasurer, Mr. Smith its vice president and secretary. Pursuant to section 607.1435, Florida Statutes (2002), Mr. Smith petitioned for appointment of a provisional corporate director, alleging he had to bear "the financial and time burdens associated with the management and operation of the Company as a result of Batur's de facto abandonment of the Company."

A week later, Mr. Batur sued in turn. In addition to moving for appointment of a custodian for Signature pendente lite, under section 607.1431(3), Florida Statutes (2002), and seeking an inspection of Signature's records, under section 607.1604, Florida Statutes (2002), Mr. Batur sought an accounting and dissolution of the corporation pursuant to subsections 607.1430(2) and (3), Florida Statutes (2002), alleging that Mr. Smith had breached fiduciary duties in converting corporate property to his own use. The trial court consolidated the cases, appointed a custodian pendente lite, and ordered the custodian to make all corporate records available to Mr. Batur.

In due course, Mr. Batur filed a verified, corrected, third amended complaint (complaint) that included a demand for corporate action under section 607.07401(2), Florida Statutes (2002), and stated various derivative claims. In particular,⁴ the complaint alleges that Signature was the rightful owner of a penthouse condominium, Unit B-1107 at the Majestic Sun Condominiums in Destin, but that Mr. Smith executed a deed on December 26, 2001, conveying title to Unit B-1107, then worth $1,100,000.00, to Coastal Builders of NW Florida, Inc., (Coastal), the very day Coastal conveyed Unit B-1107 to appellee South Walton, a limited liability company of which Mr. Smith is the managing member. In this way, Count VI alleges, Mr. Smith converted the penthouse to his own use in "knowing, willful, [and] intentional. . . disregard" of Signature's rights, and the rights of Mr. Batur.

Count VIII alleges that "by actual or constructive fraud, misrepresentations, abuse of confidence, unconscionable conduct, artifice, concealment, deceit, sham conveyance, breach of fiduciary duties, theft, or other questionable means," Mr. Smith and South Walton obtained title to Unit B-1107 in the name of South Walton; that they continue inequitably to withhold the title from Signature; and that they will be unjustly enriched, if Signature does not recover title. Count VIII seeks imposition of a constructive trust, and a declaration that South Walton holds title to Unit B-1107 solely as trustee for Signature, possessing "no other right, title or interest thereto."

Count IX states Mr. Batur's shareholder derivative claim for quiet title as to Unit B-1107 against Mr. Smith, South Walton, Sandpiper and First National. Among other things, Count IX alleges, South Walton and Sandpiper once gave First National, without Signature's or Mr. Batur's consent, a million-dollar mortgage on Unit B-1107.⁵ Count IX proceeds on the theory that, by co-signing the mortgage, Sandpiper necessarily implied it had an interest of some kind in Unit B-1107. Count IX asks for a declaration that Sandpiper has, in fact, no interest in Unit B-1107, recorded or otherwise, and seeks to remove any cloud on the title attributable to First National's mortgage.

II.

Supplementing its initial order of appointment and conferring broad powers on the custodian, the trial court entered an order pursuant to section 607.1432, Florida Statutes (2002), that provided,⁶ in pertinent part:

2) The Custodian shall take all actions he deems reasonably necessary to preserve, protect, operate, manage and control the assets and property of Signature. The "assets and property of Signature" are defined to include all property rights of Signature at any time from on and after the date of incorporation of Signature. These powers shall be exercised in the place and stead of the Board of Directors of Signature and the exercise of said powers shall have the same force and effect as if done in the name of the Board of Directors and the President of Signature.

3) The Custodian shall have the power and authority to sell, lease, encumber or convey any or all assets, including real property, of Signature upon such terms as are reasonable, taking into consideration the value of said assets. . . .

. . . .

7) The Custodian shall complete his investigation with regard to the issues raised by the Respondent in his third amended complaint, and with regard to issues raised by the Petitioner. A written report with regard to the findings of the investigation by the Custodian and a recommended course of action shall be filed with the Court, with copies to all parties, on or before May 20, 2003.

On May 20, 2003, the custodian submitted an eight-page written report of his investigation "set[ting] forth the investigation undertaken and the decisions or lack of a decision reached by the Custodian at this time."

Although the original custodian's report explained (in a narrative written in the third person) that the custodian had not completed his investigation,⁷ the report recounted that he had looked into several of the derivative claims⁸ and, with respect to Unit B-1107 at the Majestic Sun Condominiums, specifically reported the following:

The Custodian reviewed the recorded documents relating to the transfer of this Unit. The Custodian talked with Smith, with his counsel, and with Frank Watson,⁹ the attorney who handled the transaction.

The transfer of condominium unit B-1107 was from Signature to Coastal Builders of N.W. Florida, Inc., a Florida corporation, who then transferred the property to South Walton Properties, L.L.C., a limited liability company of which Smith was a member. The consideration for the initial transfer was the completion of improvements to two other unfinished condominium units owned by Signature. The value of these improvements was initially estimated to be $300,000. Coastal Construction was to originally perform these improvements but stated they could not obtain the necessary financing to complete it. The properties were therefore transferred to South Walton Properties, L.L.C. [controlled by Mr. Smith].

.... Since no written consent¹⁰ to the transfer was obtained, however, and since the transfer was a conflict of interest for purposes of Section 607.0832, Florida Statutes, it is the Custodian's conclusion that Smith should account to Signature for the fair market value of the property conveyed to South Walton Properties, L.L.C. reduced by the [value of] improvements to the two units owned by Signature that were paid by Smith. Various appraisals on Unit B-1107 have been obtained and reviewed. This issue has not been resolved at this time.

The custodian requested, and was granted, an additional 30 days to complete his investigation, and submitted a two-page follow-up report, on July 8, 2003. He reported no further investigation, but did report that he had reached a "global" settlement with Mr. Smith on five issues:

Much time has been spent in negotiation with counsel for Mr. Smith to settle claims alleged by Mr. Batur against Mr. Smith. These claims have been presented to the Custodian by Mr. Batur's attorney, Mr. Higley. The Custodian has analyzed the claims, reviewed relevant documents, met with various individuals and has decided to settle all claims against Mr. Smith. Mr. Smith has already taken steps to resolve certain matters alleged against him by Mr. Batur prior to this report and settlement. To make Signature Properties whole regarding the issues alleged by Mr. Batur, the Custodian has agreed to a global settlement with Mr. Smith relating to the following matters:

1. Legacy Unit 104

2. Dune Allen House

3. Majestic Sun Unit B 1107

4. Amsouth Bank checks

5. Magnolia Dunes Subdivision, Lot 16.

In addition to prior actions taken by Mr. Smith to resolve these

...