NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
HOME TITLE COMPANY OF MARYLAND, )
INC., a Maryland corporation, )
)
Appellant/Cross-Appellee, )
)
v. ) Case No. 2D17-998
)
MICHAEL J. LASALLA, )
)
Appellee/Cross-Appellant. )
)
Opinion filed November 16, 2018.
Appeal from the Circuit Court for Pinellas
County; Pamela A.M. Campbell, Judge, and
Kathleen T. Hessinger, Acting Circuit Court
Judge.
W. Todd Boyd and Yvette R. Lavelle of
Boyd Richards Parker & Colonnelli, P.L.,
Miami, for Appellant/Cross-Appellee.
Courtney L. Fernald and Leonard S.
Englander of Englander Fischer, St.
Petersburg, for Appellee/Cross-Appellant.
MORRIS, Judge.
Home Title Company of Maryland, Inc. (Home Title), appeals a final
judgment entered in favor of Michael J. LaSalla in the amount of $60,382 after a bench
trial on LaSalla's complaint against Home Title for breach of fiduciary duty. LaSalla
cross appeals. Both parties raise numerous issues on appeal. We find merit in Home
Title's challenge to LaSalla's standing as an individual to bring an action based solely on
an injury to an LLC of which he is a member. We reverse the judgment on this basis,
and because this issue is dispositive of the case, we decline to reach the other issues
raised.
I. Background
In 2003, George Mullin asked his friend LaSalla for a loan to purchase four
undeveloped tracts of land in Maryland. LaSalla agreed to loan Mullin the money with
the condition that they form an LLC for the purpose of purchasing the property. They
formed Florida-Maryland Properties, LLC (the LLC), in Florida, with Mullin and LaSalla
being the only members. LaSalla loaned $290,000 to the LLC to purchase the land,
and the loan was secured by a mortgage.
In 2006, LaSalla and Mullin agreed to sell lot 4 for $315,000 to satisfy
LaSalla's loan to the LLC. They also discussed conveying lot 2 to a new LLC created
by LaSalla, of which LaSalla was the sole member. The closing occurred in October
2006, and the parties retained Home Title, a Maryland-based company, to serve as
escrow agent for the sale of lot 4. Lot 4 was conveyed to the new owners, and
LaSalla's loan to the LLC was satisfied. However, Mullin and LaSalla could not agree to
other terms, and lot 2 was never conveyed to LaSalla's newly-formed LLC. LaSalla
corresponded with Home Title over the course of the next three years, but nothing was
resolved as to lot 2.
In 2012, Mullin approached Home Title and asked it to convey lots 1, 2,
and 3 to him and his wife. He misrepresented that he and his wife were the only
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members of the LLC and that they wished to dissolve the LLC. Home Title conveyed
lots 1, 2, and 3 to the Mullins.
In 2013, LaSalla filed suit in Florida against Home Title, the Mullins, and
the LLC. He also filed suit against the Mullins in Maryland to quiet title to lot 2. In 2015,
LaSalla and the Mullins entered into a mediated settlement agreement whereby
LaSalla's claims against the Mullins were satisfied in exchange for $100,000. In 2016,
LaSalla filed the operative complaint in Florida, alleging a count for breach of fiduciary
duty against Home Title based on Home Title's failure to transfer lot 2 to LaSalla or his
new LLC in 2006 and Home Title's transfer of lots 1, 2, and 3 to the Mullins in 2012.
LaSalla sought special damages from Home Title under the wrongful act doctrine for
fees and costs LaSalla incurred in the litigation against the Mullins.
Home Title filed a motion to dismiss LaSalla's complaint for lack of
personal jurisdiction, which the trial court denied. Home Title also moved for summary
judgment, arguing that any claim based on the 2006 events was barred by the statute of
limitations. The trial court agreed, concluding that the 2006 dispute "as to Home Title's
alleged failure to transfer [l]ot 2" was "barred by the four[-]year statute of limitations"
because the action was not filed until December 6, 2013. Thus, the trial focused only
on the 2012 transfer of lots 1, 2, and 3 to the Mullins. After LaSalla presented his case,
Home Title moved for an involuntary dismissal arguing that LaSalla's claim was purely
derivative of the harm to the LLC and that, therefore, only the LLC could sue for
damages. The trial court denied Home Title's motion. Home Title raised the issue
again during closing argument, asserting that the claim based on the 2012 transaction
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was derivative and belonged to the LLC, which owned lots 1, 2, and 3 at the time of the
2012 transaction.
After trial, the trial court entered a final judgment in favor of LaSalla in the
amount of $60,382. The trial court found that Home Title owed a fiduciary duty to
LaSalla and that Home Title breached the duty by transferring lots 1, 2, and 3 to the
Mullins in 2012. The trial court awarded the $60,382 as damages under the wrongful
act doctrine, after a reduction for LaSalla's comparative fault. The trial court rejected
LaSalla's claim for damages for property asset losses, concluding that there was no
evidence to support the amount of loss.
II. Analysis
On appeal, Home Title argues that LaSalla lacks standing to assert a
claim against Home Title, and to recover damages from Home Title, based on a direct
injury to the LLC. Home Title contends that LaSalla suffered only an indirect injury as a
member of the LLC. As part of its argument, Home Title claims that the trial court erred
when it ruled that Home Title owed a duty to LaSalla, individually, in 2012. We agree.
We review de novo the trial court's ruling on Home Title's motion for
involuntary dismissal on the basis that LaSalla lacked standing. See Purificato v.
Nationstar Mortg., LLC, 182 So. 3d 821, 823 (Fla. 4th DCA 2016). Generally, a
shareholder of a corporation or a member of an LLC may not maintain an action in his
or her own right if the cause of action is derived from the right of the corporation or the
LLC to bring the action. See Alario v. Miller, 354 So. 2d 925, 926 (Fla. 2d DCA 1978);
Dinuro Invests., LLC v. Camacho, 141 So. 3d 731, 738-40 (Fla. 3d DCA 2014). In other
words, if "the injury is primarily against the corporation, or the [share]holders generally,
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then the cause of action is in the corporation and the individual's right to bring it is
derived from the corporation." Alario, 354 So. 2d at 926 (quoting Citizens Nat'l Bank v.
Peters, 175 So. 2d 54, 56 (Fla. 2d DCA 1965)).
Two different transactions formed the basis of LaSalla's claim, one that
occurred (or, more accurately, failed to occur) in 2006 and a second that occurred in
2012. LaSalla first claimed that Home Title breached its duty by failing to convey lot 2
from the LLC to him or his newly-formed LLC in 2006. However, the trial court correctly
ruled that that portion of LaSalla's claim was barred by the statute of limitations because
the complaint was not filed until December 2013.1 See § 95.11(3)(o), Fla. Stat. (2006);
Goodwin v. Sphatt, 114 So. 3d 1092, 1094 (Fla. 2d DCA 2013) ("[A] claim for breach of
fiduciary duty is subject to the four-year statute of limitations for intentional torts." (first
citing § 95.11(3)(o); and then citing Halkey-Roberts Corp. v. Mackal, 641 So. 2d 445,
447 (Fla. 2d DCA 1994))). Thus, the only transaction that remained at issue was the
2012 transaction in which lots 1, 2, and 3 were conveyed from the LLC to the Mullins.
There was no dispute that the three lots belonged to the LLC. See § 608.425(1), Fla.
Stat. (2012) ("All property originally contributed to the limited liability company or
subsequently acquired by a limited liability company by purchase or otherwise is limited
liability company.").2 Therefore, the LLC suffered the injury as a result of the 2012
1The trial court found that LaSalla's claim that was based on Home Title's
failure to convey lot 2 accrued at the latest in September 2009, when LaSalla sent
Home Title a letter demanding that Home Title convey lot 2 or face litigation.
2Section 608.425 was repealed and replaced with section 605.0110 of the
Florida Revised Limited Liability Company Act, which became effective in 2014. Ch.
2013-180, §§ 2, 5 & ch. 2015-148, § 11, Laws of Fla. Section 605.0110 provides that
"[a]ll property originally contributed to the limited liability company or subsequently
acquired by a limited liability company by purchase or other method is limited liability
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transfer of the property from the LLC to the Mullins, and any claim based on this event
should have been brought by the LLC or as a derivative claim on behalf of the LLC.
At the time LaSalla's initial complaint was filed, section 608.601, titled
"Member's derivative actions," allowed a member of an LLC to "commence a
proceeding in the right" of the LLC after a demand was filed with the managers or
managing members. § 608.601, Fla. Stat. (2013). This section was repealed and
replaced by the Florida Revised Limited Liability Company Act. Ch. 2013-180, § 5, &
ch. 2015-148, § 11, Laws of Fla.; §§ 605.0101-605.1108, Fla. Stat. (2014). The Act
includes two separate statutes addressing derivative actions by members of LLCs and
the proper plaintiffs in such actions. §§ 605.0802, 605.0803. Even assuming that
LaSalla was permitted under the applicable statutes to file a derivative action on behalf
of the LLC against Home Title, LaSalla did not file such an action. He did not state that
he was filing a claim on behalf of the LLC, and he asserted an injury on his own behalf,
not on behalf of the LLC.
LaSalla claims that he was entitled to bring a suit in his individual capacity
because his injury was distinct from Mullin, the only other member of the LLC. He relies
on Dinuro Investments, 141 So. 3d at 735, in which the court recognized that it can be
difficult to draw a distinction between a derivative claim and an individual claim,
especially in the context of "closely held corporations and LLCs, which typically have
fewer individuals that possess an ownership interest." In such cases, "claims of
mismanagement or self-dealing become a zero-sum game in which one party profits
from the company's loss, while the other is harmed due to the company's reduced
property" and that "[a] member of a limited liability company has no interest in any
specific limited liability company property." § 605.0110(1), (4), Fla. Stat. (2014).
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value." Id. The Dinuro Investments court considered Florida precedent, as well as the
various tests used by other jurisdictions, and held the following:
[A]n action may be brought directly only if (1) there is a direct
harm to the shareholder or member such that the alleged
injury does not flow subsequently from an initial harm to the
company and (2) there is a special injury to the shareholder
or member that is separate and distinct from those sustained
by the other shareholders or members.
Id. at 739-40 (citations omitted) (holding that action was derivative and could not be
brought individually by a member of the LLC because the harm to the member was
indirect); see also Strazzulla v. Riverside Banking Co., 175 So. 3d 879 (Fla. 4th DCA
2015) (adopting the two-prong test in Dinuro Investments as being consistent with
Fourth District precedent). The court went on to recognize an exception to this rule:
A shareholder or member need not satisfy this two-prong
test when there is a separate duty owed by the defendant(s)
to the individual plaintiff under contractual or statutory
mandates. Thus, if the plaintiff has not satisfied the two-
prong test (direct harm and special injury) or demonstrated a
contractual or statutory exception, the action must be
maintained derivatively on behalf of the corporation or
company.
Dinuro Investments, 141 So. 3d at 740 (citation omitted).
Here, LaSalla does not meet the test set forth in Dinuro Investments
because the harm to LaSalla flowed from the harm to the LLC. The property belonged
to the LLC, and thus, the LLC suffered the direct harm when Home Title transferred the
property to the Mullins in 2012. Even though LaSalla is the only other member of the
LLC who suffered as a result of the transfer, the harm to him individually was indirect
and the result of the harm to the LLC.
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LaSalla further contends that even if he did not satisfy the two-prong test,
this case falls within the Dinuro Investments exception because Home Title owed a
separate contractual duty to LaSalla individually based on the escrow agreement
regarding lot 2 in 2006. But as discussed above, the statute of limitations barred
LaSalla's claim that Home Title had a duty to him regarding lot 2 in 2006.3 There was
no evidence that Home Title had a statutory or contractual duty to LaSalla individually
regarding the transfer of lots 1, 2, and 3 in 2012; Home Title's duty, if any, was to the
LLC, of which LaSalla is a member.
In conclusion, the trial court erred in entering judgment in favor of LaSalla
because he did not bring a derivative action against Home Title on behalf of the LLC for
breach of fiduciary duty based on the 2012 transaction. We reverse and remand with
directions for the trial court to enter an involuntary dismissal.
KELLY and ATKINSON, JJ., Concur.
3Further, we note that LaSalla testified that Home Title was supposed to
transfer lot 2 to his newly-formed LLC in 2006. Thus, even if the statute of limitations
did not bar the 2006 claim, it appears that LaSalla had only a derivative claim, on behalf
of his newly-formed LLC, against Home Title for its failure to convey lot 2 to his newly-
formed LLC in 2006. See Lincoln Oldsmobile, Inc. v. Branch, 574 So. 2d 1111, 1114
(Fla. 2d DCA 1990) (holding that where the injury is to the corporation, a stockholder
must bring the action in the name of the corporation, "even where the individual is the
sole stockholder of the corporation" (citing Schaffer v. Universal Rundle Corp., 397 F.2d
893 (5th Cir. 1968))).
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