Webster Industries, Inc. v. Northwood Doors, Inc.
| Decision Date | 14 November 2002 |
| Docket Number | No. C 02-3068-MWB.,C 02-3068-MWB. |
| Citation | 234 F.Supp.2d 981 |
| Parties | WEBSTER INDUSTRIES, INC., a Minnesota Corporation; Kretz Lumber Co., Inc., a Wisconsin Corporation; Woodline Manufacturing, Inc., a Minnesota Corporation; Wycombe Wood Products, Inc., a Wisconsin Corporation; and Hart Tie & Lumber, Inc., a Wisconsin Corporation, Plaintiffs, v. NORTHWOOD DOORS, INC., an Iowa Corporation; Partridge River Superior, Inc., a Wisconsin Corporation; Partridge River, Inc., a Minnesota Corporation; Partridge River Holdings, Inc., a Minnesota Corporation; Superior Dimension and Doors, L.L.C., a Minnesota Limited Liability Company; China Hardwood Import Products, L.L.C., a Minnesota Limited Liability Company; Andrew Richey; and Michael Miner, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Ryan Patrick Tang, Litow Law Office, PC, Cedar Rapids, IA, for Plaintiffs.
John Werner, Donna Renae Miller, Des Moines, IA, for Defendants.
I. INTRODUCTION ....................................................................984
A. The Original Petition .......................................................984
B. The Removal And Amendment Of The Petition ...................................986
C. The Answers And The Motion To Dismiss .......................................986
D. The "Special Appearance" By China Hardwood Imports ..........................987
II. LEGAL ANALYSIS .................................................................988
A. The "Special Appearance" by China Hardwood Imports ..........................988
B. The Motion To Dismiss .......................................................988
1. Partial withdrawal of the motion .........................................988
2. Standards for the defendants' motion to dismiss ..........................989
a. Timeliness of the motion ..............................................989
b. Failure to state a claim ..............................................990
3. The "Quantum Valebant" claims ............................................991
a. A note on nomenclature ................................................991
b. Pleading versus recovery ..............................................992
i. The Giese Construction decision ...................................992
ii. Other authorities .................................................992
iii. Proper formulation of the rule ....................................994
c. Summary ...............................................................994
4. The claims of "Misappropriation of Corporate Opportunity/Breach
of Fiduciary Duty/Breach of Duty of Good Faith and Fair
Dealing" .............................................................................994
a. Actions by creditors against corporate officers and directors .........995
b. The "fraud exception" ..................................................996
c. The "insolvency" exception ............................................997
d. Summary ...............................................................998
III. CONCLUSION ....................................................................998
In this lawsuit, which was removed by one of the defendants from the Iowa District Court for Worth County, the plaintiffs assert forty claims, under a variety of theories, against allegedly related defendants arising primarily from the failure of insolvent defendant Northwood Doors, Inc., to pay for goods and services that the plaintiffs provided to that defendant. This matter comes before the court pursuant to defendant Michael Miner's October 7, 2002, motion to dismiss certain counts of the plaintiffs' complaint. On October 16, 2002, defendant Northwood Doors, Inc., joined in part in defendant Miner's motion to dismiss. The plaintiffs resisted the motion to dismiss on October 17, 2002, and thereafter, on October 23, 2002, the moving defendants filed a partial withdrawal of their motion to dismiss. This matter also comes before the court on the October 16, 2002, "Special Appearance" by defendant China Hardwood Import Products, in which that defendant asks the Clerk and Judges of this court to refuse to enter a default judgment against that defendant. The plaintiffs have filed no response to the "Special Appearance."
On June 13, 2002, the various plaintiffs captioned above filed a "Petition at Law" in the Iowa District Court for Worth County asserting numerous claims on various theories against the named defendants. The individual defendants, Andrew Richey and Michael Miner, are alleged to be responsible for the day-to-day operations of the defendant companies. The petition also alleges that defendant Northwood Doors, Inc., is insolvent. However, the petition alleges that, at all pertinent times, there existed a unity of interest and ownership among the various defendants, such that the individuality or separateness of each corporation or individual should be disregarded, and that to fail to do so would sanction a fraud and/or promote injustice.
The first fifteen counts of the petition are closely related. Counts I through V of the petition allege "Actions on Account" by each of the plaintiffs in turn against defendant Northwood Doors, Inc., for failure to pay for goods and services delivered to Northwood Doors. Thus, Count I seeks to recover $177,230.88 on account for plaintiff Webster; Count II seeks to recover $76,539.03 on account for plaintiff Kretz; Count III seeks to recover $99,154.91 on account for plaintiff Woodline; Count IV seeks to recover $62,575.70 on account for plaintiff Wycombe; and Count V seeks to recover $83,708.57 on account for plaintiff Hart. Each "action on account" also seeks pre- and post-petition interest, costs, and attorneys' fees. Counts VI through X seek to recover the same sums on behalf of the same plaintiffs, respectively, on a theory of "Quantum Meruit." Counts XI through XV again seek to recover the same sums on behalf of the same plaintiffs, respectively, on a theory of "Account Stated," in that each count alleges that a statement of account reflecting the transactional history of the parties was intended as a final rendering of the status of the account, that defendant Northwood Doors never objected to the accuracy of such accounts, within a reasonable time after receipt, prior to commencement of this litigation, and at least implies that Northwood Doors has nevertheless failed to pay the stated accounts.
Counts XVI through XX again seek to recover the same sums on behalf of the same plaintiffs, respectively, but on a considerably different theory, a theory of "Fraudulent Transfer." Somewhat more specifically, each of these counts alleges that Northwood Doors transferred and conveyed assets to defendants Partridge River Superior, Inc., Partridge River, Inc., and Partridge River Holdings, Inc., which the court will refer to collectively as the "Partridge Defendants," including inventory, machinery, equipment, and personnel, but that the Partridge Defendants later conveyed some or all of those same assets to defendant China Hardwood Import Products and defendant Superior Dimension and Doors, while the defendants were all "insiders" within the meaning of the Uniform Fraudulent Transfer Act, and while defendant Northwood Doors was insolvent. These counts allege, further, that the transfers were made with the actual intent to hinder, delay, or defraud creditors by (1) not receiving reasonably equivalent value in exchange; (2) making the transfers when Northwood Doors was insolvent or shortly before Northwood Doors became insolvent; and (3) making the transfers after Northwood Doors had been threatened with suit. These counts also allege that subsequent transfers among the defendants were made while the Partridge Defendants were insolvent, also with the actual intent to hinder, delay, or defraud creditors in the same ways alleged for the transfers from Northwood Doors to the Partridge Defendants. Finally, each "fraudulent transfer" count alleges that individual defendants Andrew Richey and Michael Miner directed the fraudulent transfers and that they have owned and/or operated the defendant companies in such a manner that, when considered under the totality of the circumstances, they should be held individually liable and the corporate or limited liability entities should be disregarded.
Counts XXI through XXV again seek to recover the same sums on behalf of the same plaintiffs, respectively, but on a theory of "Unjust Enrichment." These counts are premised on allegations that if the defendants are allowed to retain the property transferred as alleged in prior counts and not required to pay the original creditors, they will receive the benefits of the plaintiffs' labors, efforts, investments, and property, to their benefit and at the plaintiffs' expense.
Counts XXVI through XXX again seek to recover the same sums on behalf of the same plaintiffs, respectively, but on a theory denominated "Misappropriation of Corporate Opportunity/Breach of Fiduciary Duty/Breach of Duty of Good Faith and Fair Dealing." These counts allege that individual defendants Andrew Richey and Michael Miner held corporate fiduciary duties to one or more of the defendant companies, but appropriated business opportunities in relation to dealings between the plaintiffs and defendant Northwood Doors that, in fairness, belonged to defendant Northwood Doors, that were in line with the normal business activities of Northwood Doors, and in...
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