Custom Midget Club, Inc. et al. v. Joe Ferreira et al. (2011)

MEMORANDUM OF DECISION

The defendants move to dismiss this action brought by Custom Midget Club, Inc. and the putative officers and directors of that corporation for lack of subject matter jurisdiction based on the absence of standing.   Also, the defendant, denominated as “d/b/a/ Alias Custom Midget Club, moves to dismiss the action against it for lack of personal jurisdiction based on improper service of process.   On July 26, 2011, the court held an evidentiary hearing on this motion.

As one might suspect by the identity of names of the entities mentioned above, this case arises because two sets of officers and directors both claim to be the rightful officials of the same corporation and club.   In their complaint, the plaintiffs allege that the persons named as individual defendants were elected to such positions, but, on January 14, 2011, they were removed from office and replaced by the individual plaintiffs;  that the former officials refuse to recognize their removal;  and that they are usurping these positions by illegally attempting to continue to act on behalf of the corporation in the positions from which they were ousted.   The movants, on the other hand, assert that the removal process was flawed and ineffective to deprive them of the powers of their corporate positions.

Subject Matter Jurisdiction

The movants argue that the plaintiffs lack standing to maintain this lawsuit because it is the plaintiffs who are the interlopers and have no lawful authority to conduct the corporation's affairs.   It is valid representative capacity which confers standing to bring suit on behalf of a corporation, and the burden is on the plaintiffs to prove that they possess that capacity.   Fink v. Golenbock, 238 Conn. 183, 199 (1996).

In ruling on a motion to dismiss, the court assumes that the allegations of the complaint are true;  Windels v. Environmental Protection Commission, 284 Conn. 268, 290 (2007);  unless the facts essential to decide the motion are in dispute.   If such factual disputes exist, the court must conduct a trial-like, evidentiary hearing to resolve those factual controversies.  Paragon Construction Co. v. Dept. of Public Works, 130 Conn.App. 211, 220 (2011).   In the present case, the defendants proffered the testimony of one of the defendants, Eileen Gross, who claims to be the secretary of the corporation, and put certain of the plaintiffs' allegations into dispute.

She avers that the removal vote of January 14, 2001, failed to support the defendants' ouster from their positions because only eighteen votes favored removal while thirty-three such votes were necessary for removal under the corporation bylaws.   She was absent from that meeting and forms her opinion from a reading of the minutes of the January 14, 2011 meeting.

It is undisputed that Article VI, § 8 of the bylaws allows removal of corporate officials upon a vote in favor of removal by two-thirds “of all the voting membership.”   She contends that the minutes disclose that only twenty-five of forty-nine voting members attended that meeting.   Therefore, it was impossible for two-thirds of the forty-nine total voting members, i.e. thirty-three, to have voted for removal of any corporate official.

Both sides agree that simply being a member of the club fails to confer voting rights on that member.   Article IX, § 3 restricts the right to vote to a single member of a family and to those members who “have attended 50% of the current calendar year's club meetings ․” The plaintiffs contend that the statement in the minutes of the January 14, 2011 meeting, viz., that “25 voting members of 49 present” means that of the forty-nine members present at the meeting, twenty-five were eligible to vote.   Under this interpretation of the minutes, the eighteen votes for removal exceeded the two-thirds minimum requirement of Article VI, § 8.

Neither side called the author of the minutes to testify nor did they produce the testimony of anyone present at the January 14, 2011 meeting.   Without such clarifying evidence, the court finds both interpretations reasonable.   The language of the minutes is ambiguous on this point.   The plaintiffs need only demonstrate the possibility, as opposed to a certainty, that some legally protected interest has been adversely affected in order to have standing to sue to vindicate that interest.  West Farms Mall, LLC v. West Hartford, 279 Conn. 1, 25 (2006).   Every presumption favoring jurisdiction ought to be indulged.  Conboy v. State, 292 Conn. 642 (2009).

Applying these principles to the evidence in this case, the court determines that the plaintiffs have met their burden of establishing standing to pursue their claims and that the court has subject matter jurisdiction to adjudicate those claims.

Personal Jurisdiction

The entity which the plaintiffs identify as the “alias” corporate defendant, asserts that personal jurisdiction over it was never acquired because the plaintiffs served process on April 1, 2011, on a former agent for process for the corporation which the defendant officials had replaced.   On March 24, 2001, Dale Gross, who the defendants maintain was still president of the club despite the removal vote, filed with the Secretary of State's office a change of registered agent from Betty Sherman to Donald Hoenig.

The marshal served Sherman with the process rather than Hoenig.   The plaintiffs submit that any action by Dale Gross to act as a corporate officer after his removal from office on January 14, 2011, was a nullity, and, therefore, Sherman remained as the corporation's agent for process.

In their briefs and oral arguments the parties focus on the statutory methods for acquiring personal jurisdiction over corporations and whether the appropriate service was accomplished.   The court, however, sees a more fundamental issue.

It is difficult to discern why the plaintiffs seek to make the “alias” club a defendant when the “real” corporation is already a party-plaintiff.   Under the plaintiffs' own allegations and legal theory, the corporate officials who were removed from their positions lack any authority to perform any corporate acts.   The plaintiffs refuse to recognize the legitimacy of the rump club over which the defendants, in the plaintiffs' view, pretend to exercise power.   That is, the plaintiffs specifically allege that no such corporate entity exists.

Not every entity or organization is sui juris.   For example, a business operating under a trade name cannot sue under that trade name.  America's Wholesale Lender v. Pagano, 87 Conn.App. 474 (2005).   Similarly, a decedent's estate has no legal power to bring suit but instead must act through a fiduciary.  Isaac v. Mount Sinai Hospital, 3 Conn.App. 589, 600 (1985), cert. denied, 196 Conn. 806 (1985).

The plaintiffs cannot simultaneously aver that any “alias” club run by the defendant is not a legal corporation and yet acquire personal jurisdiction of that entity by utilizing methods of service of process designed to acquire such jurisdiction over corporations.   Consequently, it is of no moment whether Sherman was or was not the agent of process for the corporation because the plaintiffs are not attempting to sue the corporation.

The court dismisses the action against the defendant denominated by the plaintiffs as an entity d/b/a Alias Custom Midget Club, Inc.

Sferrazza, J.

Sferrazza, Samuel J., J.