Case Title: Amanda Smith, individually and on behalf of National Life & Annuity, LLC v. Peter M. Neil, Susan Neil and Beth Allen

Citation: 

Docket Number: 1080092

State: alabama

Court: Alabama Supreme Court

Date: 2009-04-17T00:00:00Z

Document:
REL: 04/17/2009
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
 OCTOBER TERM, 2008-2009
_________________________
1080092
_________________________
Amanda Smith, individually and on behalf of 
National Life & Annuity, LLC
v.
Peter M. Neil, Susan Neil, and Beth Allen
Appeal from Morgan Circuit Court
(CV-08-900027)
LYONS, Justice.
I.  Facts and Procedural History
On January 30, 2008, Amanda Smith sued Peter M. Neil,
Susan Neil, Beth Allen, and several fictitiously named
1080092
No parties were ever substituted for the fictitiously
1
named defendants.
2
defendants.   Smith sued in her individual capacity and
1
purportedly on behalf of National Life & Annuity, LLC
("National Life").  The complaint alleged that Smith had been
employed by National Life and that she had been "promised that
she would have an option to purchase a portion of National
Life after one year of service."  The complaint stated: 
"9.  In August 2003, the principals of National
Life ... decided to sell National Life to Amanda
Smith. An agreement was reached with Smith whereby
National Life was to be conveyed to Smith for her
agreement to assume all debts of National Life.
Pursuant to that agreement, Peter Neil [an attorney
licensed to practice law in Alabama] was directed to
draft the appropriate paperwork to complete the
sale.
"10.  Peter Neil represented to Amanda Smith
that he had taken all of the steps to transfer
National Life to her.
"....
"14.  Susan Neil [who worked for National Life]
suppressed from Smith and National Life the status
of the ownership of National Life."
According to the complaint, Allen subsequently purchased
National Life from Peter Neil in December 2007, and Peter Neil
told Smith that "he was selling his business, not hers."  The
1080092
3
complaint alleged that Allen thereafter excluded Smith from
the operations of National Life.
The complaint stated claims against Allen alleging
tortious interference with contract, trespass to personal
property, conversion, trespass to real property, civil
conspiracy, and the tort of outrage.   Against Peter Neil, the
complaint alleged claims of tortious interference with
contract, trespass to personal property, conversion, fraud,
and a claim under the Alabama Legal Services Liability Act
("ALSLA"), § 6-5-570 et seq., Ala. Code 1975.  The complaint
also stated claims against both Peter Neil and Susan Neil
alleging breach of fiduciary duty, civil conspiracy, and
fraudulent suppression.  Smith sought an unspecified amount of
compensatory and punitive damages and a judgment declaring
that she was the sole owner of National Life.
The ALSLA claim against Peter Neil alleged that he
"failed to take all necessary and proper steps to record the
transfer of the full ownership interest of National Life in
Smith."  The fraud claim against Peter Neil alleged that he
"fraudulently represented to Smith and National Life that he
would take all actions necessary to convey all ownership
interests in National Life to Smith."  The fraudulent-
1080092
4
suppression claim against Peter Neil and Susan Neil alleged
that they "fraudulently suppressed and concealed from Smith
and National Life that [Peter Neil] had not taken all actions
necessary to convey all ownership interests in National Life
to Smith."
Peter Neil and Susan Neil answered the complaint, and on
February 7, 2008, Allen moved to dismiss the complaint.  She
argued that Smith did not own National Life and that she
therefore did not have standing to sue on its behalf.  Allen
also argued that the claims Smith asserted against Allen in
Smith's individual capacity were based on the premise that
Smith owned National Life, and she did not.  On these bases,
Allen argued that the claims against her should be dismissed
for lack of subject-matter jurisdiction pursuant to Rule
12(b)(1), Ala. R. Civ. P.  Alternatively, Allen argued that
the complaint failed to state a claim upon which relief could
be granted and should be dismissed pursuant to Rule 12(b)(6),
Ala. R. Civ. P.
The parties exchanged limited discovery and submitted
evidence to the trial court.  Regarding Smith's individual
claims against Allen, at a hearing on May 30, 2008, on
discovery matters, Smith's counsel conceded: "I would agree
1080092
5
with [the argument of Allen's counsel], that if [Smith] never
purchased National Life, she has no claim against Beth Allen."
On September 15, 2008, the trial court conducted a hearing on
Allen's motion to dismiss.  At the hearing, the trial court
received ore tenus evidence from Peter Neil.  On October 6,
2008, the trial court determined that Smith lacked standing to
assert claims against Allen and the Neils.  It therefore
granted Allen's motion to dismiss for lack of subject-matter
jurisdiction pursuant to Rule 12(b)(1) and, sua sponte,
ordered that the remaining claims in the  action be dismissed,
thereby dismissing Smith's claims against the Neils who had
not filed a motion to dismiss.  Smith, individually and
purportedly on behalf of National Life, appealed.
II.  Standard of Review
"In Newman v. Savas, 878 So. 2d 1147 (Ala.
2003), this Court set out the standard of review of
a ruling on a motion to dismiss for lack of
subject-matter jurisdiction:
"'A ruling on a motion to dismiss is
reviewed 
without 
a 
presumption 
of
correctness. Nance v. Matthews, 622 So. 2d
297, 299 (Ala. 1993). This Court must
accept the allegations of the complaint as
true. Creola Land Dev., Inc. v. Bentbrooke
Housing, L.L.C., 828 So. 2d 285, 288 (Ala.
2002).  Furthermore, in reviewing a ruling
on a motion to dismiss we will not consider
whether the pleader will ultimately prevail
1080092
"Federal cases construing the Federal Rules of Civil
2
Procedure are persuasive authority in construing the Alabama
Rules of Civil Procedure, which were patterned after the
Federal Rules of Civil Procedure." Hilb, Rogal & Hamilton Co.
v. Beiersdoerfer, 989 So. 2d 1045, 1056 n.3 (Ala. 2007).
6
but whether the pleader may possibly
prevail. Nance, 622 So. 2d at 299.'
"878 So. 2d at 1148-49."
Pontius v. State Farm Mut. Auto. Ins. Co., 915 So. 2d 557, 563
(Ala. 2005).  See also Ex parte Alabama Dep't of Transp., 978
So. 2d 17, 21 (Ala. 2007).
III.  Analysis
Allen postures her challenge to Smith's complaint under
Rule 12(b)(1), Ala. R. Civ. P., as a factual challenge rather
than a facial challenge.  This Court recently discussed the
difference between a facial challenge and a factual challenge
in Ex parte Safeway Insurance Co. of Alabama, Inc., 990 So. 2d
344 (Ala. 2008).   Quoting Lindsey v. United States, 448 F.
Supp. 2d 37, 42-43 (D.D.C. 2006),  this Court explained:
2
"'Once a defendant has moved to dismiss a case
pursuant to Rule 12(b)(1), "the plaintiff bears the
burden of establishing the factual predicates of
jurisdiction by a preponderance of the evidence."
Erby v. United States, 424 F. Supp. 2d 180, 182
(D.D.C. 
2006) 
(citing 
Lujan 
v. 
Defenders 
of
Wildlife, 504 U.S. 555, 561, 112 S. Ct. 2130, 119 L.
Ed. 2d 351 (1992)) .... "The [C]ourt, in turn, has
1080092
7
an affirmative obligation to ensure that it is
acting within the scope of its jurisdictional
authority." Abu Ali v. Gonzales, 387 F. Supp. 2d 16,
17 (D.D.C. 2005) (internal quotations omitted).
"'....
"'Facial challenges, such as motions to dismiss
for lack of standing at the pleading stage,
"attack[] the factual allegations of the complaint
that are contained on the face of the complaint."
Al-Owhali [v. Ashcroft], 279 F. Supp. 2d [13,] 20
[(D.D.C. 
2003)](internal 
quotation 
marks 
and
citation omitted). "If a defendant mounts a 'facial'
challenge 
to 
the 
legal 
sufficiency 
of 
the
plaintiff's jurisdictional allegations, the court
must accept as true the allegations in the complaint
and 
consider 
the 
factual 
allegations 
of 
the
complaint in the light most favorable to the
non-moving party." Erby, 424 F. Supp. 2d at 181 ....
The court may look beyond the allegations contained
in the complaint to decide a facial challenge, "as
long as it still accepts the factual allegations in
the complaint as true." Abu Ali, 387 F. Supp. 2d at
18 ....
"'Factual 
challenges, 
by 
contrast, 
are
"addressed to the underlying facts contained in the
complaint." Al-Owhali, 279 F. Supp. 2d at 20. ...
[A] court deciding a Rule 12(b)(1) motion asserting
a factual challenge "must go beyond the pleadings
and resolve any disputed issues of fact the
resolution of which is necessary to a ruling upon
the motion to dismiss." [Phoenix Consulting, Inc. v.
Republic of Angola, 216 F.3d 36, 40 (D.C. Cir.
2000).]'"
Safeway, 990 So. 2d at 349-50.  In Safeway, this Court
concluded that the complaint was facially sufficient, and it
1080092
"This Court may affirm a trial court's judgment on 'any
3
valid legal ground presented by the record ....'"  General
Motors Corp. v. Stokes Chevrolet, Inc., 885 So. 2d 119, 124
(Ala. 2003) (quoting Liberty Nat'l Life Ins. Co. v. University
of Alabama Health Servs. Found., P.C., 881 So. 2d 1013, 1020
(Ala. 2003)).
8
reviewed the defendant's factual challenge to the trial
court's subject-matter jurisdiction.
Turning to this case, Allen characterizes her Rule
12(b)(1) challenge to Smith's complaint as a factual
challenge.  Therefore, she says, under the rules stated in
Safeway regarding factual challenges, the trial court properly
considered ore tenus and documentary evidence at the September
15, 2008, hearing.  Smith contends that the trial court erred
in considering this evidence and, alternatively, argues that
the trial court should have allowed her additional discovery
before dismissing the action.  Because we conclude that the
trial court's judgment regarding the claims asserted on behalf
of National Life may be affirmed for a lack of subject-matter
jurisdiction under Rule 12(b)(1) based solely on the face of
the complaint, we need not consider the rules stated in
Safeway 
regarding 
factual 
challenges 
to 
subject-matter
jurisdiction.3
1080092
9
All the allegations of Smith's complaint must be taken as
true, see Safeway, supra, and Newman v. Savas, 878 So. 2d 1147
(Ala. 2003); there is, however, no averment in the complaint
that ownership of National Life was ever transferred to Smith.
In her argument on appeal, Smith relies on the allegations in
paragraphs 9 and 10 of her complaint, quoted above, to show
that she alleged ownership of National Life in her complaint.
In those paragraphs, Smith averred that the owners of National
Life had agreed to sell the company to her and that Peter Neil
represented to her that he "had taken all of the steps to
transfer National Life to her."  The allegation of an
agreement to sell, even when taken as true, does not state
that the agreement to sell was consummated.  The allegation
concerning Peter Neil's representation that he had taken all
steps necessary to transfer National Life to Smith, even when
taken as true, also falls short of stating that the sale to
Smith was in fact consummated.  Because the complaint fails to
allege that Smith actually obtained any ownership interest in
National Life, it fails to aver facts, which, if taken as
true, are sufficient to establish Smith's standing to commence
an action on behalf of National Life.
1080092
10
Smith also alleges in her complaint that she "operated
National life as the sole owner of National Life."  She does
not, in her principal brief to this Court, rely on this
averment as indicia of ownership.  We therefore decline to
expand this allegation beyond an averment that Smith operated
National Life as if she were its owner. Indeed, the remaining
allegations of the complaint, particularly regarding Smith's
claims of fraud and suppression against Peter Neil and Susan
Neil, are consistent with the allegations in paragraphs 9 and
10 of her complaint as they allege that the company was not,
in fact, transferred to her.
Accordingly, even if all the allegations of the complaint
are assumed to be true, Smith has not alleged that she holds
any ownership interest in National Life and therefore has not
shown that she has standing to sue on its behalf.  See
Safeway, supra; cf. Shelton v. Thompson, 544 So. 2d 845, 848
(Ala. 1989) ("[W]here a stockholder sells his stock, either to
the corporation or to a third party, that stockholder,
generally speaking, can not claim standing to maintain a
derivative action on behalf of the corporation in which he no
longer owns an interest.").  Because the face of the complaint
shows that Smith lacks standing, the trial court lacked
1080092
11
subject-matter jurisdiction over the claims Smith asserted on
behalf of National Life.  On this basis, we affirm the trial
court's dismissal of those claims on behalf of National Life
pursuant to Rule 12(b)(1).  Of course, that dismissal is
without prejudice.  See Ex parte Capstone Dev. Corp., 779 So.
2d 1216 (Ala. 2000)(a dismissal for lack of subject-matter
jurisdiction is treated as a dismissal without prejudice to
the plaintiff's right to reinstitute the action).
Regarding the claims Smith asserted individually against
Allen, Smith's counsel admitted "that if [Smith] never
purchased National Life, she has no claim against Beth Allen."
(Emphasis added.)  Based on this concession, and on the lack
of any allegation in the complaint that Smith owned National
Life, we affirm the trial court's dismissal of Smith's
individual claims against Allen.  See, e.g., Clardy v.
Tri-Community Water Sys., 591 So. 2d 65 (Ala. 1991)(reversing
a summary judgment based, in part, on admissions by counsel
for the defendant at the summary-judgment hearing).
Regarding Smith's remaining claims against Peter Neil and
Susan Neil, in Smith's individual capacity alleging breach of
fiduciary duty, civil conspiracy, and fraudulent suppression,
and against Peter Neil, alleging tortious interference with
1080092
As previously noted, the trial court's dismissal of the
4
claims asserted on behalf of National Life is without
prejudice.  In the event discovery on remand establishes an
evidentiary basis on which Smith can allege ownership of
National Life, this Court's affirmance of that dismissal would
not preclude further proceedings based on that evidence.  
12
contract, trespass to personal property, conversion, fraud,
and a claim under the ALSLA, we find no basis in the
concession of counsel at the May 30, 2008, hearing that would
foreclose further proceedings against the Neils. The trial
court's sua sponte dismissal of Smith's claims against the
Neils without a pending motion to dismiss or a motion for a
summary judgment is reversed, and we remand the action for
further proceedings as to those claims.4
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
Cobb, C.J., and Stuart, Bolin, and Murdock, JJ., concur.