Padron Warehouse v. Realty Associates Fund III

• Decision Date: 14 July 2005
• Docket Number: No. 02-20181-CIV-JORDAN.,02-20181-CIV-JORDAN.
• Citation: 377 F.Supp.2d 1259
• Parties: PADRON WAREHOUSE CORP., a Florida corporation, Plaintiff, v. THE REALTY ASSOCIATES FUND III, L.P., doing business in Florida as the Realty Associates Fund III, Limited Partnership, a Delaware limited partnership, and Cecilio J. Padron, an individual, Defendants.
• Court: U.S. District Court — Southern District of Florida

377 F.Supp.2d 1259

PADRON WAREHOUSE CORP., a Florida corporation, Plaintiff, v. THE REALTY ASSOCIATES FUND III, L.P., doing business in Florida as the Realty Associates Fund III, Limited Partnership, a Delaware limited partnership, and Cecilio J. Padron, an individual, Defendants.

No. 02-20181-CIV-JORDAN.

United States District Court, S.D. Florida, Miami Division.

July 14, 2005.

COPYRIGHT MATERIAL OMITTED

Alexander Kapetanak is for plaintiff.

Christopher S. Carver and Scott B. Cosgrove for defendant The Realty Associates Find III. L.P.

ORDER ON MOTIONS FOR SUMMARY JUDGMENT AND DEFAULT JUDGMENT

JORDAN, District Judge.

Padron Warehouse Corporation ("PWC") initiated the instant suit against defendants Cecilio Padron and The Realty Associates Fund III ("Realty") for the return of what was formerly PWC's sole asset — a 207,000 square-foot warehouse and real property located at 5501 N.W. 72nd Street, Miami, Florida ("the warehouse"). Amended Complaint at ¶¶ 1, 28. [D.E. 38]. PWC generally alleges that Mr. Padron and Realty conspired to sell the property without informing PWC's minority shareholders, and without obtaining the necessary consent of his then-wife and PWC shareholder, Mary Angel Padron, so that Mr. Padron could personally retain all profits from the sale and so that Realty could buy the warehouse at a below-market price. Id. at ¶ 27.

Realty now moves for summary judgment on all of PWC's claims. It also moves for summary judgment on liability on its breach of contract counterclaim, arguing that, should it prevail in this suit, it is entitled to indemnification from PWC for attorneys' fees and costs in this action and a prior action brought by Ms. Padron. For its part, PWC moves for default judgment against Mr. Padron, who was served with the initial complaint but not the amended complaint.

For the reasons set forth below, Realty's motion for summary judgment [D.E. 84] on PWC's claims is GRANTED. With respect to Realty's motion for summary judgment on liability on its breach of contract counterclaim, that motion [D.E. 127] is GRANTED in part and DENIED in part. Realty is entitled to recover its reasonable attorneys' fees and costs from PWC in this case, but not in the prior action brought by Ms. Padron. PWC's motion for default judgment against Mr. Padron [D.E. 156] is DENIED, because Mr. Padron was never served with the amended complaint, as required by Eleventh Circuit precedent and because the only relief requested against Mr. Padron — the return of the warehouse — is relief that cannot be awarded against Mr. Padron, as he is not in possession and does not hold title.

I. SUMMARY JUDGMENT STANDARD

Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A material fact is one that might affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Where the non-moving party fails to prove an essential element of its case for which it has the burden of proof at trial, summary judgment is appropriate. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Hilburn v. Murata Electronics North America, Inc., 181 F.3d 1220, 1225 (11th Cir.1999). Thus, the task is to determine whether, considering the evidence in the light most favorable to PWC, the non-moving party, there is evidence on which a trier of fact could reasonably find a verdict in its favor. See Hilburn, 181 F.3d at 1225; Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997).

II. RELEVANT FACTS

The facts are taken from the parties' statements of material facts, the depositions filed by the parties, and the exhibits in the record. Where there is a genuine dispute, I credit PWC's version, and note Realty's position. I say genuine dispute because, as indicated below, some of the critical facts relied upon by PWC are not supported by the evidence in the record¹ or are based on inadmissible hearsay.² I discuss them, however, to explain why they are deficient.

PWC. PWC was incorporated in late 1992. The articles of incorporation provided, in relevant part, as follows: (1) voting power "for the election of directors and for all other purposes shall be vested exclusively in the holder of the outstanding common shares;" (2) the initial and sole director for PWC was Cecilio Padron; (3) special meetings could be called only by shareholders owning "not less than 10% of the capital stock;" (4) 51% of the shares entitled to vote, represented in person or by proxy, constituted a quorum; and (5) if a quorum was present, the affirmative vote of 51% of the shares represented at the meeting and entitled to vote would be the act of the shareholders. See Realty Statement of Facts, Tab C.

The files of the Florida Department of State do not contain any amendments to the initial articles of incorporation. They also do not contain any bylaws or shareholders' agreements. See id.

Mr. Padron reinstated PWC in September of 1994. Ms. Padron reinstated PWC again in 2001. See id.

The Postnuptial Agreement. Cecilio Padron and Mary Angel Padron were married in 1992. Sometime in 1994, Ms. Padron filed for divorce. When she filed for divorce, Ms. Padron was not a shareholder in PWC. Padron Depo. at 33-40.

On November 4, 1994, after Ms. Padron filed for divorce, Mr. Padron and Ms. Padron, as part of an attempt towards reconciliation, entered into a postnuptial agreement that retitled the stock in PWC. Padron Depo. at 36. The sole asset of PWC was the warehouse which is the subject of this litigation.

The postnuptial agreement allotted 68% of the company's stock to Mr. Padron, 30% to Ms. Padron, and 2% to a third party, Felix Padron (Mr. Padron's brother). Amended Complaint, Ex. A at 3. The postnuptial agreement covered the fate of the Padrons' shares in the event of death or divorce but specified nothing else about the shareholders' respective powers and responsibilities within the company. See id. The postnuptial agreement did, however, contain a clause preventing either of the spouses from alienating PWC's warehouse without the other's consent: "Neither party shall, without the written consent of the other, enter into any contracts regarding the sale, transfer, gift, etc., of [PWC's warehouse]." Id. at 4.

The Alleged Shareholders' Agreement. PWC alleges in its amended complaint that the postnuptial agreement is evidence of a prior shareholders' agreement that took effect sometime in 1994. Amended Complaint at ¶ 6. Under the agreement, PWC alleges, the company's shares were divided as represented in the postnuptial agreement. Id. PWC further alleges that the agreement stated that neither Ms. Padron nor Mr. Padron had authority to bind PWC to the sale of all its assets without the other's consent. Id. Significantly, however, the evidence in the record concerning the substance of the shareholders' agreement is not the same as what is alleged by PWC in the amended complaint.

In her deposition, Ms. Padron did not testify about the substance of the shareholders' agreement, save to say that the "postnuptial agreement evidences that there was a shareholders' agreement," and that the shareholders' agreement was "identified in the minutes of PWC's books and was made a part of the bylaws." Padron Depo. at 161, 162. She also testified that she did not have the originals, or copies, of the shareholders' agreement or the company's books (including the bylaws and minutes). Id. at 164-66. She testified that Mr. Padron told her that he lost those documents. Id. at 167.

Based on Ms. Padron's inability to produce documentation of the shareholders' agreement, Realty contends in its motion for summary judgment that no such agreement existed. Realty Statement of Facts at 6-7. Furthermore, Realty contends that, absent such an agreement, Ms. Padron lacked the authority to reinstate PWC in 2001. Id. at 7.

Ms. Padron's Conflicting Affidavits. On August 19, 2003, about six months after her deposition was taken, and days before PWC responded to Realty's motion for summary judgment, Ms. Padron filed a stand-alone, three-paragraph affidavit that was executed on August 8, 2005 [D.E. 116]. I will refer to this as the first affidavit. In this first affidavit, Ms. Padron stated, among other things, the following:

The document [the shareholders' agreement] gave me authority, in Cecilio's absence, to exercise full corporate powers and to manage the business and affairs of [PWC] is all respects with only one exception. Written approval of both Cecilio Padron and Mary Angel Padron was required to sell or encumber the warehouse real property.

Padron Aff. I at ¶ 1 (emphasis added).

On August 22, 2003, in conjunction with its response to Realty's motion for summary judgment, PWC filed several documents, including another affidavit (this one executed August 21, 2003) by Ms. Padron [D.E. 118]. In this second affidavit, which added three substantive paragraphs and corrected one of the dates in the first paragraph, Ms. Padron said something different about the shareholders' agreement:

The document gave me the authority, in Cecilio Padron's absence, to exercise full corporate powers and to manage the business and affairs of [PWC] in all respects with a few exceptions, including selling or encumbering the property and transferring shares.

Padron Aff. II at ¶ 1.

The second affidavit, in contrast to the first, does not state that the shareholders' agreement required the written consent of both Mr. and Ms. Padron for sale of the warehouse. Rather, what the second affidavit says is that Ms. Padron, under the shareholders' agreement, could manage the company in Mr. Padron's absence and take all necessary action with the exception of...