Opinion
Case No. 2D16-4008
03-04-2020
George HOCK, Appellant, v. TRIAD GUARANTY INSURANCE CORPORATION, Appellee.
Jordan T. Isringhaus (withdrew after briefing); Ian R. Leavengood, St. Petersburg, for Appellant. Walter L. Sanders of Walter L. Sanders, P.A., North Venice, and Corey M. Ackerman of Ackerman Law Associates, P.A., Pompano Beach, for Appellee.
Jordan T. Isringhaus (withdrew after briefing); Ian R. Leavengood, St. Petersburg, for Appellant.
Walter L. Sanders of Walter L. Sanders, P.A., North Venice, and Corey M. Ackerman of Ackerman Law Associates, P.A., Pompano Beach, for Appellee.
EN BANC
NORTHCUTT, Judge.
George Hock appeals a final summary judgment rendered in favor of Triad Guaranty Insurance in the latter's action on a promissory note. Hock contended below and argues here that Triad was statutorily precluded from suing because it had been administratively dissolved for failing to file its annual report with the Florida Department of State. We conclude that Triad was permitted to pursue the action as part of its winding up process. Therefore, we affirm the judgment, and in so doing, we resolve an inconsistency in this court's prior decisions.
Florida Rule of Appellate Procedure 9.331(a) authorizes a district court of appeal to hear or rehear a case en banc if "the case or issue is of exceptional importance" or en banc consideration is "necessary to maintain uniformity in the court's decisions."
Section 607.1405(1), Florida Statutes (2016), a part of the Florida Business Corporation Act, provides that a dissolved corporation "may not carry on any business except that appropriate to wind up and liquidate its business and affairs." Thus, a dissolved corporation is entitled to collect its assets and do "every ... act necessary to wind up and liquidate its business and affairs." § 607.1405(1)(a), (e). More specifically, corporate dissolution does not "[p]revent commencement of a proceeding by or against the corporation in its corporate name" or "[a]bate or suspend a proceeding pending by or against the corporation on the effective date of dissolution." § 607.1405(2)(e), (f).
Notably, this right to wind up applies equally to corporations that are voluntarily dissolved and to corporations that are administratively dissolved. Section 607.1421(3) states that "[a] corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs under s. 607.1405 and notify claimants under s. 607.1406."
As part of a revision of the Corporation Act, the legislature has repealed section 607.1421 effective January 1, 2020. Ch. 2019-90, § 186, Laws of Fla. The revised Act retains the ability of an administratively dissolved corporation to "wind up its activities and affairs, liquidate and distribute its assets, and notify claimants under ss. 607.1405, 607.1406, and 607.1407" in section 607.1420(5) as amended. Ch. 2019-90, § 185, Laws of Fla.
Notwithstanding those statutes, Hock contends that because Triad was administratively dissolved for failing to file an annual report, another provision in the Corporation Act, section 607.1622(8), barred it from commencing or participating in the action below. That section states:
Hock did not raise this issue in his answer or affirmative defenses filed in response to Triad's complaint, but he later unsuccessfully moved to dismiss the action on this ground, and he asserted it in opposition to Triad's motion for summary judgment. The parties disagree about the effect of this scenario. Triad contends that the ban set forth in section 607.1622(8) is an affirmative defense that was waived when Hock did not timely plead it, whereas Hock argues that the provision is akin to a jurisdictional statute of nonclaim that may be raised at any time. Because we conclude that the statute did not prohibit Triad's suit, we need not reach this issue.
Any corporation failing to file an annual report which complies with the requirements of this section shall not be permitted to maintain or defend any action in any court of this state until such report is filed and all fees and taxes due under this act are paid and shall be subject to dissolution or cancellation of its certificate of authority to do business as provided in this act.[ ]
In the Corporation Act revision effective January 1, 2020, a rephrased version of this provision is set forth at section 607.1622(6). The new language provides that a corporation that fails to file its annual report "may not prosecute or maintain" an action until the failure is cured "and shall be subject to dissolution or cancellation of its certificate of authority to transact business as provided in this chapter." Ch. 2019-90, § 225, Laws of Fla.
Hock's argument is supported by this court's decision in Trans Health Management, Inc. v. Nunziata, 159 So. 3d 850 (Fla. 2d DCA 2014). In that case, the plaintiff sued Trans Health for damages arising from the death of a nursing home resident. Id. at 854. On the morning of trial, the circuit court granted the plaintiff's motion to strike Trans Health's pleadings on grounds that it had been dissolved and was therefore barred by section 607.1622(8) from defending against the action. Id. at 855. The court precluded Trans Health from participating in the trial, and it rendered a final judgment for damages for the plaintiff. Id.
When Trans Health appealed the judgment, the plaintiff again moved to dismiss pursuant to section 607.1622(8). Id. After the parties stipulated that Trans Health had been administratively dissolved for failing to file an annual report, this court dismissed its appeal, reasoning as follows:
While administratively dissolved corporations are generally permitted to wind up their affairs, see § 607.1421(3), and while administrative dissolution does not generally "[p]revent commencement of a proceeding by or against the corporation in its corporate name," § 607.1405(2)(e), these general rules do not apply to the specific circumstance of a corporation administratively dissolved for failing to file its annual report. Instead, for those corporations, the specific provisions of section 607.1622(8) control over the more general provisions of section 607.1405(2)(e).
Id. (alteration in original) (emphasis added).
That holding was inconsistent with this court's earlier decision in PBF of Fort Myers, Inc. v. D & K Partnership, 890 So. 2d 384 (Fla. 2d DCA 2004). In PBF, we held that section 607.1622(8) did not prohibit a corporation that was dissolved for failing to file its annual report from prosecuting or defending an action. Id. at 386. In fact, PBF opined that this statute was entirely inapplicable because "section 607.1622(8) pertains only to existing corporations which have failed to file annual reports, not corporations which have been dissolved." Id. (quoting Nat'l Judgment Recovery Agency, Inc. v. Harris, 826 So. 2d 1034, 1035 (Fla. 4th DCA 2002) (en banc)). PBF thus aligned this court with the holdings of our sister courts in Cygnet Homes, Inc. v. Kaleny Ltd. of Florida, Inc., 681 So. 2d 826 (Fla. 5th DCA 1996), and National Judgment, 826 So. 2d 1034.
We conclude that PBF correctly interpreted section 607.1622(8). The statutory construction principle employed in Trans Health—by which the specific is held to prevail over the general—is applicable only when necessary to resolve a conflict between statutory provisions. See, e.g., Mendenhall v. State, 48 So. 3d 740, 748 (Fla. 2010) (explaining that statute relating to particular part of general subject operates as exception to or qualification of the more comprehensive statute to the extent only of the repugnancy); Murray v. Mariner Health, 994 So. 2d 1051, 1061 (Fla. 2008) (noting that where two statutory provisions are in conflict, the specific provision controls the general provision), superseded by statute on other grounds as stated in Castellanos v. Next Door Co., 192 So. 3d 431 (Fla. 2016) ; Cricket Props., LLC v. Nassau Pointe at Heritage Isles Homeowners Ass'n, 124 So. 3d 302, 307 (Fla. 2d DCA 2013) (stating that if statutes at issue were in conflict, the more specific statute would control). But when in Trans Health we perceived a conflict among the statutes at issue here, we focused only on section 607.1622(8)'s prohibition against maintaining or defending legal actions. Our decision did not account for the other aspect of the section, which is key to interpreting the statute in harmony with the other provisions of the Corporation Act. See Larimore v. State, 2 So. 3d 101, 106 (Fla. 2008) ("[A] ‘statute should be interpreted to give effect to every clause in it, and to accord meaning and harmony to all of its parts.’ " (quoting Jones v. ETS of New Orleans, Inc., 793 So. 2d 912, 914–15 (Fla. 2001) )).
Recall that section 607.1622(8) prescribes two consequences of a corporation's failure to file its annual report: It "shall not be permitted to maintain or defend any action in any court of this state," and it "shall be subject to dissolution or cancellation of its certificate of authority to do business as provided in this act." Id. Manifestly, and consistent with PBF's interpretation of the statute, a corporation that is already dissolved cannot be "subject to dissolution." See Murray, 994 So. 2d at 1061 ("[A] statutory provision will not be construed in such a way that it renders meaningless or absurd any other statutory provision."). Beyond that, the statute's reference to dissolution "as provided in this act" underscores the necessity of construing this provision in light of the wider statutory scheme set forth in the Corporation Act. Statutes related to the same subject matter must be read in pari materia. Hill v. Davis, 70 So. 3d 572, 577 (Fla. 2011). "Where, as here, the Florida Legislature has provided a unified and comprehensive statutory scheme, this [c]ourt will ‘attempt to follow the requirements that it has set forth.’ " Id. (quoting E.A.R. v. State, 4 So. 3d 614, 629 (Fla. 2009) ).
When viewed in this manner, it can be seen that section 607.1622(8) does not conflict with other provisions of the Corporation Act. Rather, its purpose and effect is consistent with the Act's comprehensive scheme. Under the Act, a corporation that has not filed its annual report and paid the required fees by May 1 may be administratively dissolved if the failure is not corrected by the third Friday in September of that year. See §§ 607.1420(1)(a), .1421(1), .1622(2). In this interim, section 607.1622(8) precludes the corporation from maintaining or defending an action in court, but the corporation may continue doing business. If the corporation does not rectify the failure by the end of this period, however, it may be administratively dissolved. Id. As an administratively dissolved corporation, it no longer may carry on any business "except that necessary to wind up and liquidate its business and affairs under s. 607.1405." § 607.1421(3). As previously mentioned, under section 607.1405 a dissolved corporation may collect its assets and do "every other act necessary to wind up and liquidate its business and affairs." § 607.1405(1)(a), (e). Moreover, that statute expressly provides that dissolution does not "[p]revent commencement of a proceeding by or against the corporation in its corporate name." § 607.1405(2)(e).
Based on this analysis, we recede from the interpretation of section 607.1622(8) in Trans Health and hold that the statute does not preclude a corporation that has been administratively dissolved for failing to file an annual report from prosecuting or defending against an action in order to wind up its business and affairs.
Affirmed.
KHOUZAM, C.J., and CASANUEVA, SILBERMAN, KELLY, LaROSE, MORRIS, BLACK, SLEET, LUCAS, SALARIO, BADALAMENTI, ROTHSTEIN-YOUAKIM, and SMITH, JJ., Concur.
VILLANTI, J., Dissents with opinion.
ATKINSON, J., Dissents with opinion in which VILLANTI, J., Concurs.
VILLANTI, Judge, Dissenting.
I disagree with the majority's position that receding from this court's decision in Trans Health is proper. Instead, to my reading of the applicable statutes, this court should recede from PBF of Fort Myers, Inc. v. D & K Partnership, 890 So. 2d 384, 385 (Fla. 2d DCA 2004), certify conflict with National Judgment Recovery Agency, Inc. v. Harris, 826 So. 2d 1034 (Fla. 4th DCA 2002) (en banc), and Cygnet Homes, Inc. v. Kaleny Ltd. of Florida, Inc., 681 So. 2d 826 (Fla. 5th DCA 1996), reverse the summary judgment in favor of Triad, and remand for further proceedings. The Corporations Act contains provisions that set forth the procedure for the orderly dissolution of a corporation that no longer seeks to do business in Florida. See §§ 607.1401, .1402, .1403, Fla. Stat. (2016). Once a corporation elects to dissolve, it continues its corporate existence, but it may carry on only such business as is "appropriate to wind up and liquidate its business and affairs." § 607.1405(1). To that end, as it relates to litigation, section 607.1405(2)(e) provides that dissolution of a corporation does not "[p]revent commencement of a proceeding by or against the corporation in its corporate name," and section 607.1405(2)(f) provides that dissolution does not "[a]bate or suspend a proceeding pending by or against the corporation on the effective date of dissolution." Hence, dissolution—in and of itself—does not affect a corporation's ability to litigate to conclusion actions necessary to its winding up.
Notably, however, the Corporations Act also provides a procedure for administrative dissolution of those corporations that fail to comply with five specified requirements of the Act. See § 607.1420. Like any other dissolved corporation, an administratively dissolved corporation continues its corporate existence and may carry on the business "necessary to wind up and liquidate its business and affairs under s. 607.1405 and notify claimants under s. 607.1406." § 607.1421(3). However, one subset of administratively dissolved corporations is subject to a separate statute. For a corporation administratively dissolved for failing to file its annual report and pay the required fees and taxes, section 607.1622(8) carves out an exception to the general rule concerning litigation by and against dissolved corporations:
Any corporation failing to file an annual report which complies with the requirements of this section shall not be permitted to maintain or defend any action in any court of this state until such report is filed and all fees and taxes due under this act are paid and shall be subject to dissolution or cancellation of its certificate of authority to do business as provided in this act.
§ 607.1622(8) (emphasis added). As written, this statute plainly indicates that a corporation that fails to file an annual report and pay the required fees is subject to two separate penalties: (1) it "shall not be permitted to maintain or defend any action in any court of this state until such report is filed and all fees and taxes due under this act are paid," and (2) it "shall be subject to dissolution or cancellation of its certificate of authority to do business as provided in this act." Id. (emphasis added). If the privilege of doing business in Florida and using the Florida court system to enforce business agreements is the carrot envisioned by the Florida Legislature, then section 607.1622(8) is the proverbial stick enacted to ensure compliance with the statutory annual reporting—and more importantly, fee payment—requirement. Hence, corporations that elect to neither properly dissolve using the statutory procedures nor file their annual report and pay the required taxes are barred from using the court system to further corporate business.
In my view, the majority has ignored the statutory distinctions between corporate dissolutions in general and one single subtype of administrative dissolution. When faced with statutory provisions that appear to conflict, this court is tasked with "constru[ing] the text ‘reasonably, to contain all that it fairly means.’ " Smith v. Smith, 224 So. 3d 740, 751 (Fla. 2017) (Lawson, J., concurring) (quoting Antonin Scalia, A Matter of Interpretation: Federal Courts and the Law, 23 (Amy Gutmann ed., 1997)). Here, there are general statutes dealing with dissolved corporations and a specific statute dealing with corporations that are administratively dissolved for failing to file their annual reports. To construe these statutes so as to contain all that they mean, we generally apply the maxim that the specific statute will apply over the general statute. See, e.g., Cricket Props., LLC v. Nassau Pointe at Heritage Isles Homeowners Ass'n, 124 So. 3d 302, 307 (Fla. 2d DCA 2013) ("[A] more specific statute covering a particular subject is controlling over one covering the same subject in general terms." (citing Mendenhall v. State, 48 So. 3d 740, 748 (Fla. 2010) )); see also Lunohah Invs., LLC v. Gaskell, 158 So. 3d 619, 621 (Fla. 5th DCA 2013) ("Under basic statutory principles, when two statutes embrace the same subject and produce contradictory results, we are compelled to construe the statutes so that the specific statute is given effect and the general statute is given effect only to the extent that it does not contradict the specific statute."). This rule of statutory construction recognizes that the legislature may intend for different rules to apply in different situations, and it provides that the statute that most specifically applies to a given situation should prevail over the more general rule applicable to all. See Mendenhall, 48 So. 3d at 748 ("[I]t is a well settled rule of statutory construction ... that a special statute covering a particular subject matter is controlling over a general statutory provision covering the same and other subjects in general terms. In this situation ‘the statute relating to the particular part of the general subject will operate as an exception to or qualification of the general terms of the more comprehensive statute to the extent only of the repugnancy, if any.’ " (alteration in original) (quoting McDonald v. State, 957 So. 2d 605, 610 (Fla. 2007) )). And this is the rule that led to this court's decision in Trans Health, in which we held that the specific statute prohibiting a corporation that had been administratively dissolved for failing to file its annual report from litigating until it filed the report and paid the fees controlled over the general statutes that would permit any other dissolved corporation to continue to litigate.
I note that there are reasons for administrative dissolution other than failing to file an annual report and pay the required fees. See § 607.1420(1)(b)-(e). Hence, a corporation that has been administratively dissolved has not necessarily failed to file its annual report and so is not necessarily subject to the litigation disability of section 607.1622(8).
The majority does not disagree with this proposition of law in general but simply argues that the proposition does not apply because the two statutory provisions can be harmonized. Where I disagree with the majority is in how to harmonize them. The majority's interpretation of section 607.1622(8) results in a situation in which a corporation that fails to file its annual report and pay the required fees on May 1 is precluded from maintaining or defending any actions in any Florida court; its claims and defenses are dead as of that date. However, on the third Friday of September when the corporation is administratively dissolved by operation of law, the corporation may rise zombie-like to resume litigating, its previously dead claims and defenses magically revived. Because I see nothing in the language of section 607.1622(8) that provides that the penalty of administrative dissolution once imposed somehow cures the litigation disability, I simply do not see this as a reasonable interpretation of the statutory language.
As Justice Lawson recently pointed out when interpreting a different statute, "[o]bviously, this is a difficult case. Both the dissent and the majority strive to apply the plain language of this statute, but read the statute differently." Smith, 224 So. 3d at 751 (Lawson, J., concurring). In that case, Justice Lawson agreed with the majority because its reading of the applicable statute gave "effect to all words in the statute, without adding to them." Id. Here, reading section 607.1622(8) to impose a penalty on those corporations that fail to comply with Florida law by failing to file an annual report and pay the required fees until such time as the report is filed and fees are paid does just that—gives effect to all of the words in the statute without adding to them. And it does so without unleashing the parade of horribles envisioned by the majority because trial courts are encouraged to give an administratively dissolved corporation the opportunity to cure the litigation disability by holding the proceedings in abeyance until the late report and delinquent fees are filed. See, e.g., Chakra 5, Inc. v. City of Miami Beach, 254 So. 3d 1056, 1062-63 (Fla. 3d DCA 2018) ("[W]hen the issue of an entity's status with the Florida Secretary of State is raised, the appropriate course by a trial court is to abate the action for a brief period of time to permit compliance with the statute; only after a failure to comply within a reasonable time may sanctions such as dismissal be considered."); cf. 1385 Starkey, LLC v. Superior Fence & Rail of Pinellas Cty., Inc., 44 Fla. L. Weekly D251, D252, ––– So. 3d ––––, ––––, 2019 WL 254907 (Fla. 2d DCA Jan. 18, 2019) ("[T]he trial court should have granted Starkey's request for a brief continuance on the morning of trial to allow Starkey the opportunity to reinstate itself so that Starkey would have been able to fully participate in the trial rather than suffer a judgment from an uncontested trial."). Hence, my interpretation allows the "pay to play" provision enacted by the legislature to be honored as written while permitting those corporations that comply with the normal dissolution procedures to continue to wind up their affairs.
For all of these reasons, I would reverse the final summary judgment in favor of Triad and remand for further proceedings. I would also recede from PBF of Fort Myers and certify conflict with National Judgment Recovery Agency and Cygnet Homes.
ATKINSON, Judge, Dissenting.
I respectfully dissent from the majority opinion that, as a dissolved corporation, Triad was authorized to prosecute its claims against Hock in order to wind up its business and affairs. The trial court erred by failing to preclude Triad from prosecuting its action because, consistent with our decision in Trans Health Management, Inc. v. Nunziata, 159 So. 3d 850 (Fla. 2d DCA 2014), the corporation was statutorily prohibited from doing so.
Section 607.1622(8), Florida Statutes (2016), provides that
[a]ny corporation failing to file an annual report which complies with the requirements of this section shall not be permitted to maintain or defend any action in any court of this state until such report is filed and all fees and taxes due under this act are paid and shall be subject to dissolution or cancellation of its certificate of authority to do business as provided in this act.
Contrary to the conclusion reached by the majority, the prohibition on maintaining or defending actions is not contingent on whether a corporation has or has not been dissolved. It depends solely on whether the corporation has filed its annual report.
The majority opinion relies on a false dilemma between dissolution and failure to file an annual report to reach its conclusion that, once a corporation that has failed to file its annual report is administratively dissolved, it can once again maintain and defend actions for the purpose of winding up. But being a dissolved corporation and being a corporation that has failed to file its annual report are not mutually exclusive. After administrative dissolution for failure to file an annual report, the dissolved corporation is still a corporation that has failed to file an annual report. As such, it remains within the ambit of section 607.1622(8), which applies to corporations that have "fail[ed] to file an annual report," until such time as "the report is filed and all fees and taxes due under this act are paid."
Yet, the majority concludes that, because section 607.1622(8) provides another consequence for failure to file the report—being "subject to dissolution"—and because an already dissolved corporation cannot be one that is subject to dissolution, then the previous consequence no longer applies. But the prohibition on litigation and the subjection to dissolution in section 607.1622(8) are the effects of failure to file an annual report; they are not prerequisites to applicability of section 607.1622(8). In other words, the consequences of failing to file an annual report do not define those corporations that are subject to those consequences. Section 607.1622(8) states plainly what it applies to: corporations that "fail[ ] to file an annual report"; it does not qualify that applicability in terms of whether the corporation has been dissolved or in any other way.
Thus, accepting the majority's premise that subjection to dissolution cannot apply to a corporation that has already been dissolved, it still does not follow that because one of two enumerated consequences of failure to file an annual report no longer applies, that the other consequence must also cease to apply. To the contrary, the statute sets forth plainly the time at which it ceases to apply: when the delinquent report is filed and all fees and taxes are paid.
The majority asserts that section 607.1622(8) must be read in pari materia with the other provisions of chapter 607. Those other statutes can and should be read together harmoniously with section 607.1622(8), while giving effect to the plain language of the latter provision that imposes an unqualified prohibition on maintaining or defending actions—a prohibition that begins when a corporation fails to file an annual report and persists until that report is filed and all fees and taxes are paid. See Bank of New York Mellon v. Glenville, 252 So. 3d 1120, 1128 (Fla. 2018) (recognizing the principle that courts "give full effect to all statutory provisions and construe related statutory provisions in harmony with one another" (quoting Sch. Bd. of Palm Beach Cty. v. Survivors Charter Sch., Inc., 3 So. 3d 1220, 1234 (Fla. 2009) )). Dissolved corporations may indeed prosecute and defend actions as a part of the winding up of their business and affairs, but only if they have filed their delinquent annual reports. This harmonious reading is manifest when the distinctive language employed by the competing statutes is given effect. Section 607.1405(2) does not create an unqualified right for a dissolved corporation to litigate. That statute governs the "[e]ffects of dissolution," and merely provides that dissolution "does not" prevent or abate litigation. Section 607.1622(8), on the other hand, creates an explicit prohibition for corporations that have failed to file an annual report, providing they "shall not be permitted" to maintain or defend actions. Dissolution does not bar a corporation from litigating, but failure to file an annual report does.
This interpretation is also supported, as pointed out by Judge Villanti in his separate opinion, by the principle that the specific controls over the general. See Cricket Props., LLC v. Nassau Pointe at Heritage Isles Homeowners Ass'n, 124 So. 3d 302, 307 (Fla. 2d DCA 2013) ("[A] more specific statute covering a particular subject is controlling over one covering the same subject in general terms." (citing Mendenhall v. State, 48 So. 3d 740, 748 (Fla. 2010) )); Trans Health, 159 So. 3d at 855 ("[T]hese general rules do not apply to the specific circumstance of a corporation administratively dissolved for failing to file its annual report."). Sections 607.1421 and 607.1405 apply generally to dissolved corporations and allow litigation for the purpose of winding up. On the other hand, section 607.1622(8) applies specifically to corporations that have failed to file an annual report (which may include dissolved corporations) and prohibits them from maintaining or defending any action until the report is filed and all fees and taxes are paid. The more specific provision prohibiting the maintaining and defending of actions controls in cases such as this, where a corporation is both noncompliant with the annual report requirement and dissolved.
There may very well be what some might perceive to be adverse ramifications of forbidding dissolved corporations that have failed to file annual reports from participating in litigation that is necessary for winding up. However, the alternative—allowing those entities to regain their privilege to litigate in Florida courts before they file their delinquent annual reports—is not consistent with the language of section 607.1622(8). While, as a practical matter, a dissolved corporation could choose to wind up without filing its delinquent annual report, the inescapable consequence of that course of action is plainly set forth in section 607.1622(8) —the corporation cannot maintain or defend any actions in Florida courts.
Triad was a dissolved corporation at the time the trial court granted its motion for summary judgment. However, Triad was also a corporation that had failed to file an annual report it was required by statute to file. As such, the trial court erroneously failed to apply section 607.1622(8)'s prohibition on maintaining and defending actions. Having agreed to hear this case en banc, this court should recede from PBF of Fort Myers, Inc. v. D & K Partnership, 890 So. 2d 384 (Fla. 2d DCA 2004), and reverse the judgment of the trial court.
VILLANTI, J., Concurs.