Mark S. Yaralli, etc. v. American Reprographics Company, LLC

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
MARK S. YARALLI, individually and as 50% shareholder of Digiplot,
Inc.,
Appellant,
v.
AMERICAN REPROGRAPHICS COMPANY, LLC, a Florida limited
liability company,
Appellee.
No. 4D13-3684
[May 27, 2015]
Appeal from the Circuit Court for the Seventeenth Judicial Circuit,
Broward County; Michael L. Gates, Judge; L.T. Case No. 09-57502 (12).
Alan G. Geffin and Christopher Perez-Gurri of GPG Law, Fort
Lauderdale, for appellant.
Brigid A. Merenda, Amy L. Drushal and Stephanie S. Leuthauser of
Trenam, Kemker, Scharf, Barkin, Frye, O’Neill & Mullis, P.A., Tampa, for
appellee.
STEVENSON, J.
Mark S. Yaralli appeals the summary final judgment entered against
him and in favor of American Reprographics Company, LLC (“ARC”), on
Counts VII and IX of his fourth-amended complaint. Finding there remain
genuine issues of material fact, we reverse.
Facts
Yaralli owned substantial shares in Digiplot, a company that provided
reprographic services and reproduction copying services. The remaining
shares of Digiplot were held by Carol and Hamid Shariff. The three
shareholders had a falling out, and Yaralli left Digiplot. The Shariffs later
dissolved Digiplot.
In his fourth-amended complaint, Yaralli alleged the Shariffs
transferred all of Digiplot’s assets to ARC and also obtained employment
with ARC or a wholly-owned subsidiary. The assets which Yaralli claimed
were transferred from Digiplot to ARC included Digiplot’s clients, tangible
assets, goodwill, business contacts “and the like.”
Yaralli filed suit against the Shariffs, Digiplot and ARC. The two counts
brought against ARC were Counts VII and IX. Count VII was for a
fraudulent transfer and Count IX a civil conspiracy. As it pertains to
Count VII, Yaralli alleged that he was a shareholder and creditor of
Digiplot, that the Shariffs improperly transferred the assets of Digiplot to
ARC and that ARC did not pay a reasonable equivalent value in exchange
for these assets.
ARC moved for summary judgment, raising numerous arguments in
support of its motion. First, it argued there was no evidence Mr. Shariff
made the alleged transfers with the actual intent to hinder, delay, or
defraud Yaralli, and there was no evidence that any of Digiplot’s assets
were transferred to ARC. Next, it argued Yaralli was not a creditor for
purposes of the fraudulent transfer statute, as any money he paid to
Digiplot was in the form of equity. ARC further asserted that Yaralli did
not have standing to bring Count VII because he incorrectly brought suit
as an individual as opposed to filing a derivative suit. Finally, it submitted
that any injury suffered by Yaralli was not separate and distinct from that
of the Shariffs, as all the shareholders would have been harmed if Digiplot
did not receive a fair value for its assets.
Agreeing with ARC, the trial court granted its motion for summary
judgment and later entered final judgment in favor of ARC on both counts.
Analysis
“‘The applicable standard of review on orders granting summary
judgment is de novo. Summary judgment is appropriate only where there
are no genuine issues of material fact and the movant is entitled to
judgment as a matter of law. Additionally, all inferences must be made in
favor of the non-moving party.’” O’Malley v. Ranger Constr. Indus., Inc.,
133 So. 3d 1053, 1055 (Fla. 4th DCA 2014) (quoting Cohen v. Arvin, 878
So. 2d 403, 405 (Fla. 4th DCA 2004)).
We first find Yaralli was a creditor for purposes of the fraudulent
transfer statute.1 In Yaralli’s affidavit in support of his opposition to ARC’s
1 Section 726.105(1), Florida Statutes (2012), provides:
(1) A transfer made or obligation incurred by a debtor is fraudulent
as to a creditor, whether the creditor’s claim arose before or after
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motion, he classified his contributions as loans. Under Chapter 726, a
“creditor” is defined as “a person who has a claim.” § 726.102(5), Fla. Stat.
(2012). A “claim” is defined as “a right to payment, whether or not the
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured.” § 726.102(4). Yaralli’s assertion that the money he gave
Digiplot was a loan, and not equity, is sufficient to fall within the definition
of a “claim” under Chapter 726, thereby making him a creditor.
Since Yaralli can be considered a creditor, we disagree with the trial
court’s conclusion that he needed to bring a derivative action as opposed
to a direct action. To proceed under section 726.105, one need be only a
creditor, and a creditor can be someone who is not a shareholder. Cf.
Karten v. Woltin, 23 So. 3d 839, 841 (Fla. 4th DCA 2009) (finding a
shareholder must file a derivative action because allegations of “excessive
payment and other examples of mismanagement and waste. . . . would
affect the relative value of all the shares owned by all the shareholders, of
which the [shareholder] is only a 25% owner”). Thus, based on his status
as a creditor, Yaralli could bring a direct action.
As to the trial court’s conclusion that Yaralli sued the wrong entity,2 we
find Yaralli’s complaint was not premised on there being an agency
relationship between ARC and Ridgeway, but was instead premised on his
contention that ARC—not Ridgeway—fraudulently received Digiplot’s
assets. Thus, Yaralli was not required to prove, as part of his fraudulent
transfer count, an agency relationship between ARC and Ridgeway.
The final basis for the trial court’s order centers on its determination
that there was undisputed record evidence demonstrating there was no
the transfer was made or the obligation was incurred, if the debtor
made the transfer or incurred the obligation:
(a) With actual intent to hinder, delay, or defraud any creditor of
the debtor; or
(b) Without receiving a reasonably equivalent value in exchange for
the transfer or obligation, and the debtor:
1. Was engaged or was about to engage in a business or a
transaction for which the remaining assets of the debtor were
unreasonably small in relation to the business or transaction; or
2. Intended to incur, or believed or reasonably should have
believed that he or she would incur, debts beyond his or her ability
to pay as they became due.
2ARC argued Yaralli should have sued Ridgeway (one of its subsidiaries) because
Mr. Shariff went to work for Ridgeway, not ARC.
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intent to hinder, delay, or defraud Yaralli. “Because the determination of
actual fraudulent intent can be difficult, courts look to certain ‘badges of
fraud’ to determine whether the transfer was made with the intent to
defraud creditors.” Gen. Elec. Co. v. Chuly Int’l, LLC, 118 So. 3d 325, 327
(Fla. 3d DCA 2013) (citing Beal Bank, SSB v. Almand & Assocs., 780 So.
2d 45, 60 (Fla. 2001)). Section 726.105(2), Fla. Stat. (2012), outlines these
badges of fraud:
(2) In determining actual intent under paragraph (1)(a),
consideration may be given, among other factors, to whether:
(a) The transfer or obligation was to an insider.
(b) The debtor retained possession or control of the property
transferred after the transfer.
(c) The transfer or obligation was disclosed or concealed.
(d) Before the transfer was made or obligation was incurred,
the debtor had been sued or threatened with suit.
(e) The transfer was of substantially all the debtor’s assets.
(f) The debtor absconded.
(g) The debtor removed or concealed assets.
(h) The value of the consideration received by the debtor was
reasonably equivalent to the value of the asset transferred or
the amount of the obligation incurred.
(i) The debtor was insolvent or became insolvent shortly after
the transfer was made or the obligation was incurred.
(j) The transfer occurred shortly before or shortly after a
substantial debt was incurred.
(k) The debtor transferred the essential assets of the business
to a lienor who transferred the assets to an insider of the
debtor.
“While a single badge of fraud may amount only to a suspicious
circumstance, a combination of badges will justify a finding of fraud.”
Mejia v. Ruiz, 985 So. 2d 1109, 1113 (Fla. 3d DCA 2008). We find that
there remain genuine issues of material fact as to two of the badges of
fraud: (1) whether the transfer was “of substantially all the debtor’s
assets,” and (2) whether the “value of the consideration received by the
debtor was reasonably equivalent to the value of the asset transferred.” §
726.105(2)(e), (h). Although ARC presented some evidence that certain
assets were not transferred to it (e.g., physical equipment and clients), it
did not refute Yaralli’s contention that other assets, such as goodwill and
customer data files, were. See Amjad Munim, M.D., P.A. v. Azar, 648 So.
2d 145, 153 (Fla. 4th DCA 1994) (holding goodwill can be considered an
asset for purposes of a fraudulent transfer). Because there remain
questions as to whether any assets were transferred to ARC, it is
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impossible at this stage to determine whether Digiplot received reasonable
consideration for these assets that were possibly transferred. Additionally,
it is undisputed that another badge—Yaralli’s threat of a lawsuit—was
present.
Accordingly, we reverse the entry of summary final judgment as to
Count VII. See Lab. Corp. of Am. v. Prof’l Recovery Network, 813 So. 2d
266, 271 (Fla. 5th DCA 2002) (“‘Ordinarily, the issue of fraud is not a
proper subject of a summary judgment. Fraud is a subtle thing, requiring
a full explanation of the facts and circumstances of the alleged wrong to
determine if they collectively constitute a fraud.’” (quoting Rosen v. Zoberg,
680 So. 2d 1050, 1052 (Fla. 3d DCA 1996))). As it relates to Count IX,
because a cause of action for civil conspiracy “requires an actionable
underlying tort or wrong,” and because we find summary judgment was
improperly granted as to Count VII (the underlying wrong), we reverse the
entry of summary judgment as to Count IX as well. Raimi v. Furlong, 702
So. 2d 1273, 1284 (Fla. 3d DCA 1997).
Reversed.
TAYLOR and CIKLIN, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
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