Gonzalez v. Fairgale Properties Co., N. V., CIV. CCB-02-CV357.

• Decision Date: 11 December 2002
• Docket Number: No. CIV. CCB-02-CV357.,CIV. CCB-02-CV357.
• Citation: 241 F.Supp.2d 512
• Parties: Angela GONZALEZ v. FAIRGALE PROPERTIES COMPANY, N.V, et al.
• Court: U.S. District Court — District of Maryland

241 F.Supp.2d 512

Angela GONZALEZ v. FAIRGALE PROPERTIES COMPANY, N.V, et al.

No. CIV. CCB-02-CV357.

United States District Court, D. Maryland.

December 11, 2002.

COPYRIGHT MATERIAL OMITTED

Curtis C. Coon, Law Office of Curtis C Coon LLC, Towson, MD, for Plaintiff.

R. Stewart Barroll, Cookeerly and Barroll LLC, Chestertown, MD, James Manly Parks Duane Morris LLP, Philadelphia, PA, for Defendants.

MEMORANDUM

BLAKE, District Judge.

Now pending before the Court are motions to dismiss by Defendants, Herman E. Hill, Jr. and C. Breckenridge Debnam. Specifically, Hill and Debnam move to dismiss the complaint for failure to comply with the requirements of Fed.R.Civ.P. 23.1 and for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). The motions have been fully briefed and oral argument was held on August 2, 2002. For the reasons that follow, the Court will grant the Defendants' motions.

I.

This case arises out of a challenge to the enforceability of a contract for sale of land between Defendant, Fairgale Properties Company, N.V. ("Fairgale"), and two buyers, Hill and Debnam, the latter a former Fairgale vice-president. Plaintiff, Angela 36 % of Fairgale's outstanding stock, contends that Fairgale was not authorized to sell its land to Hill and Debnam because the sale was not the subject of a stockholders' meeting and was not voted upon by the stockholders.

Fairgale is a family-owned corporation. Angela's father, Guillermo Gonzalez, is the president of Fairgale. Angela's brother, Andreas Gonzalez, is the secretary/treasurer of Fairgale and owns approximately 48.5 % of Fairgale's outstanding stock. Angela's mother, Clemencia Gonzalez, owns the remaining 15.5 % of Fairgale's outstanding stock.¹

Fairgale's assets are comprised entirely, or at least substantially, of two parcels of land. (Id. ¶¶ 7-9, 17.) The first parcel is 250.59 acres known as Lot I on Parcel 135 on the Kent County tax map number 26. (Id. ¶ 7.) The second parcel is approximately 57 acres described as a portion of Lot 30 of Parcel 123 on the Kent County tax map number 26. (Id. ¶ 8.)

On November 20, 2001, Andreas Gonzalez, on behalf of Fairgale, executed a document entitled "Contract of Sale" with Hill. (Id. 10.) On December 7, 2001, Guillermo Gonzalez, on behalf of Fairgale, executed a document entitled "Agreement" with Hill and Debnam. (Id, ¶ ¶) In the "Contract of Sale" and the "Agreement," Fairgale agreed to sell Lot I and its part of Lot 30 to Hill and Debnam. (Id. ¶ 12.) According to the "Contract of Sale," the consideration for the real estate is $1,100,000.00. (Id. ¶13.)

The sale of the two parcels of land by Fairgale was allegedly not the subject of a stockholders' meeting and was not voted upon by Fairgale's stockholders. Thus, Angela Gonzalez argues that the sale is not an authorized act of Fairgale and asks the court to issue a declaratory judgment stating that the "Contract of Sale" and "Agreement" are unenforceable instruments. (Id. ¶17.)²

In an alternative claim, Gonzalez argues that the owner of the remaining portion of Lot 30 is Clemencia Gonzalez, by virtue of a deed dated June 24, 1999. (Id. ¶14.) Clemencia Gonzalez' home is located on Lot 30. Until April 2001, Clemencia Gonzalez' home, and the acreage surrounding it, constituted all of Lot 30. In April 2001, an amendment was made to the lot line, consolidating Clemencia Gonzalez' property with Fairgale's 57 acres. No deed was recorded acknowledging the joinder of these two parcels of land. (Id) Based on these circumstances, Angela Gonzalez argues in her complaint that Fairgale cannot give good and merchantable title without the consent of Clemencia Gonzalez and that Hill and Debnam should, therefore, be refunded all monies in accordance with the "Contract of Sale." (Id. 115,18.)

II.

A.

As an initial matter, it must be noted that Gonzalez conceded during oral argument that she would voluntarily dismiss or, in the alternative, amend her complaint in order to remove her second claim relating to Clemencia Gonzalez's lack of consent to the sale. In order to completely discuss the complaint, however, the court will briefly address the merits of that claim.

Angela Gonzalez must meet the requirements of both Maryland law and federal law in order to establish standing for this diversity claim. See Wolfe v. Gilmour Mfg. Co., 143 F.3d 1122, 1126 (8th Cir. 1998) (citing Metropolitan Exp. Services, Inc. v. City of Kansas City, Mo., 23 F.3d 1367, 1369 (8th Cir.1994)). If Angela Gonzalez is attempting to assert the legal rights of Clemencia Gonzalez, she would not have standing because, generally, a plaintiff can only assert her own legal rights and cannot rest her claim on the legal rights or interests of third parties. See Warth v. Seldin, 422 U.S. 490, 499, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975); see also United Food and Commercial Workers v. Brown Group, 517 U.S. 544, 557, 116 S.Ct. 1529, 134 L.Ed.2d 758 (1996). Angela Gonzalez has presented no evidence that an exception to this general rule applies.

Alternatively, Gonzalez may be asserting her claim as a shareholder of Fairgale. The shareholder standing rule is "a longstanding equitable restriction that generally prohibits shareholders from initiating actions to enforce the rights of the corporation unless the corporation's management has refused to pursue the same action for reasons other than goodfaith business judgment." Franchise Tax Bd. v. Alcan Aluminium Ltd., 493 U.S. 331, 336, 110 S.Ct. 661, 107 L.Ed.2d 696 (1990). An exception to this rule "allowfs] a shareholder with a direct, personal interest in a cause of action to bring suit even if the corporation's rights are also implicated." Id. Gonzalez has presented no evidence that in her role as a shareholder, she has a direct, personal interest in whether good and merchantable title was conveyed to Hill and Debnam and, therefore, she does not have shareholder standing.

Finally, if Gonzalez were bringing this claim as a derivative suit, she has failed to comply with the requirements of Fed. R.Civ.P. 23.1. Accordingly, Angela Gonzalez's alternative claim regarding the lack of consent of Clemencia Gonzalez will be dismissed.

B.

Hill's first argument³ is that the claim set forth in paragraphs 15-18 of the complaint must be dismissed because it is a shareholder derivative suit that fails to comply with the requirements of Fed. R.Civ.P. 23.1. In order to determine whether the suit is a derivative or an individual action, the court must determine if Angela Gonzalez suffered a direct or "special" injury. See In re Tri-Star Pictures, Inc., Litig., 634 A.2d 319, 330 (Del. 1993) (citing Lipton v. News Int'l, Pic, 514 A.2d 1075, 1078 (Del.1986)); see also Moran v. Household Int'l, Inc., 490 A.2d 1059, 1070 (Del.Ch.1985), affd, 500 A.2d 1346 (Del.1985).⁴ If she did suffer a "special" injury, Gonzalez's suit will be considered an individual suit and she need not comply with the requirements of Rule 23.1. "A special injury is established where there is a wrong suffered by plaintiff that was not suffered by all stockholders generally or where the wrong involves a contractual right of the stockholders, such as the right to vote." Id. In determining the nature of the injury, the Court must look to "the `nature of the wrong alleged' and the relief, if any, which could result if plaintiff were to prevail." Kramer v. Western Pac. Indus., Inc., 546 A.2d 348, 352 (Del. 1988) (quoting Elster v. American Airlines, Inc., 100 A.2d 219, 221-23 (Del.Ch.1953)). Additionally, "a court must look to `the body of the complaint, not to the Plaintiffs designation or stated intention.'" Id. (quoting Lipton, 514 A.2d at 1078).

Gonzalez's claim in this case is that she was deprived of her right to vote on the sale of land to Hill and Debnam. Because this suit involves the contractual nature of Gonzalez's right to vote, it is a suit that can be brought individually. See In re Gaylord Container Corp. Shareholders Litig., 747 A.2d 71, 79 (Del.Ch.1999); see also Lipton, 514 A.2d at 1078 (stating that a plaintiff establishes an individual action where he alleges a "wrong involving a contractual right of a shareholder, such as the right to vote, ..., which exists independently of any right of the corporation"). Thus, Gonzalez was not required to comply with Fed.R.Civ.P. 23.1 when she initiated the suit.

C.

Hill's next argument is that Gonzalez's complaint must be dismissed for lack of subject matter jurisdiction. Although Gonzalez based her request for a declaratory judgment on the Federal Declaratory Judgment Act ("FDJA"), the FDJA does not confer jurisdiction upon the federal courts. A district court must have independent subject matter jurisdiction over the action, either diversity of citizenship or federal question. Aetna Cas. & Surety Co. v. Quarles, 92 F.2d 321, 323-24 (4th Cir.1937). It is undisputed that there is no federal question jurisdiction. Therefore, there must be diversity jurisdiction.

Hill argues that Gonzalez has not satisfied the "amount-in-controversy" requirement.⁵ The burden of establishing diversity jurisdiction rests with the party seeking to litigate in federal court, in this ease, Gonzalez. See Gwyn v. Wal-Mart Stores, Inc., 955 F.Supp. 44, 45 (M.D.N.C. 1996) (citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936)); see also, e.g., Spielman v. Genzyme Corp., 251 F.3d 1, 5 (1st Cir.2001); St. Paul Reinsurance Co., Ltd. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir.1998); 15 Moore's Federal Practice § 102.107(1) (3d ed.2002). Gonzalez must, therefore, establish that it does not appear to a legal certainty that the claim for relief is less than $75,000. See St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 288-89, 58 S.Ct. 586, 82 L.Ed. 845 (1938);15 Moore's Federal Practice §§ 102.106(1), 102.107(1) (3d ed.2002). Gonzalez is unable to meet this burden.

When a plaintiff seeks declaratory relief, "the amount in...