Court Opinion

ID: 2735194
Source: CourtListenerOpinion
Date Created: 2014-09-20 01:08:11.81245+00
Date Added: 2024-06-11T10:03:31.640723
License: Public Domain

Rel: 09/19/2014

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
                              SPECIAL TERM, 2014
                             ____________________

                                    1130659
                             ____________________

                                 CAG MLG, L.L.C.

                                           v.

      Bart Smelley and Smelley Family Investments, L.L.C.

                  Appeal from Tuscaloosa Circuit Court
                             (CV-13-900565)

PARKER, Justice.

      CAG MLG, L.L.C. ("CAG"), appeals the Tuscaloosa Circuit

Court's dismissal of its action against Bart Smelley and

Smelley Family Investments, L.L.C. (hereinafter collectively

referred to as "Smelley").               We reverse and remand.
1130659

                     Facts and Procedural History

     On May 10, 2013, CAG sued Smelley, alleging six counts of

misrepresentation and/or fraud and a single count of unjust

enrichment.        On June 18, 2013, Smelley filed a motion to

dismiss.     In the motion to dismiss, Smelley alleged that CAG

was a foreign limited-liability company formed and organized

in   the   State    of   Florida    in      2010   and   that   it    was   "not

registered    or qualified         to    do   business    in    the   State   of

Alabama."    Smelley also alleged that CAG had domesticated in

Wyoming as Oceans, LLC, in March 2011 and that CAG was

subsequently dissolved as a Florida entity in April 2011.

Smelley argued that CAG "failed to state the jurisdictional

element establishing its ability to maintain an action in its

initial pleading."        Accordingly, Smelley argued, the circuit

court lacked "subject matter jurisdiction and/or personal

jurisdiction over the matters contained in the [c]omplaint."

Additionally, Smelley argued that "[t]his lack of standing

requires immediate dismissal of this action until [CAG] can

demonstrate the legal capacity to pursue the same."                           In

support of the motion to dismiss, Smelley attached a printout

from the Alabama Secretary of State's Web site showing that

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CAG is not listed as being registered with the State of

Alabama and a printout from the Wyoming Secretary of State's

Web site indicating that CAG was organized in Florida in 2010

and had domesticated in Wyoming as Oceans, LLC, in 2011.

     On July 24, 2013, CAG amended its complaint to add an

eighth count requesting      that the circuit court issue an

injunction preventing Smelley from selling a piece of real

property.   On August 16, 2013, Smelley amended the motion to

dismiss to include the additional claim.              On August 19, 2013,

CAG filed a motion to strike the paragraphs of Smelley's

motion to dismiss that alleged that CAG was a foreign entity

that was not registered to transact business in Alabama and

the exhibits attached in support thereof.

     Also on August 19, 2013, the circuit court held a hearing

on the motions.        On the following day, the circuit court

issued an order granting CAG's motion to strike the objected-

to   paragraphs   of    Smelley's       motion   to    dismiss   and   the

supporting exhibits, dismissing the request for an injunction

as moot, and instructing the parties to file briefs regarding

the remainder of Smelley's motion to dismiss, which included

                                    3
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an allegation that CAG could not maintain an action in Alabama

because it was not registered to transact business in Alabama.

    On August 26, 2013, Smelley filed a brief in support of

the motion to dismiss and argued that CAG's complaint was due

to be dismissed pursuant to former §§ 10A-2-15.01 and 10A-2-

15.02, Ala. Code 1975.1    Former § 10A-2-15.01 stated, in

relevant part:

         "(a) A foreign corporation may not transact
    business in this state until it registers with the
    Secretary of State as required under Section 10A-1-
    7.01."

Former § 10A-2-15.02 stated, in relevant part:

         "(a) A foreign corporation transacting business
    in this state without registering as required under
    Section 10A-1-7.01 or without complying with Chapter
    14A of Title 40 may not maintain a proceeding in
    this state without so registering and complying.
    All contracts or agreements made or entered into in
    this state by foreign corporations prior to
    registering to transact business in this state shall
    be held void at the action of the foreign
    corporation or by any person claiming through or
    under the foreign corporation by virtue of the
    contract or agreement; but nothing in this section
    shall abrogate the equitable rule that he who seeks
    equity must do equity."2

    1
     Sections 10A-2-15.01 and 10A-2-15.02, Ala. Code 1975,
were repealed effective January 1, 2014, by Act No. 2012-304,
Ala. Acts 2012.
    2
     As indicated by the plain language of the statutes,
former  §§   10A-2-15.01(a) and   10A-2-15.02(a) applied
                              4
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    On August 29, 2013, CAG filed a brief and argued that,

under Florida law, the dissolution of a limited-liability

company does not "[p]revent commencement of a proceeding by or

against the limited liability company in its name."      Fla.

Stat. § 608.4431(2)(b).   CAG also admitted that it was not

registered with the State of Alabama to transact business;

however, CAG argued that, under Freeman Webb Investments, Inc.

v. Hale, 536 So. 2d 30 (Ala. 1988), former § 10A-2-15.02 did

not preclude its action because, CAG argued, former § 10A-2-

15.02 precludes only ex contractu3 claims, not ex delicto

claims4 such as those brought by CAG against Smelley.

    On September 3, 2013, Smelley responded to CAG's brief

and argued that former § 10A-2-15.02 precluded CAG's claims

and that Alabama law –- not Florida law –- governed whether

CAG lacked capacity to sue in Alabama courts.   In support of

this argument, Smelley quoted Rule 17(b), Ala. R. Civ. P.,

exclusively to corporations –- not limited-liability companies
such as CAG, which, as explained below, are governed by § 10A-
1-7.21, Ala. Code 1975.
    3
     "Ex contractu" is defined in Black's Law Dictionary 566
(6th ed. 1990) as "[f]rom or out of a contract."
    4
     "Ex delicto" is defined in Black's Law Dictionary 567
(6th ed. 1990) as "[f]rom a delict, tort, fault, crime, or
malfeasance."
                              5
1130659

which states: "The capacity of a party, including one acting

in a representative capacity, to sue or be sued shall be

determined by the law of this state."

    On December 30, 2013, the circuit court granted Smelley's

motion and dismissed the case pursuant to § 10A-1-7.21, Ala.

Code 1975.   The version of § 10A-1-7.21(a) then in effect

provided: "A foreign entity transacting business in this state

may not maintain any action, suit, or proceeding in any court

of this state until it has registered in this state."5

    On January 8, 2014, CAG filed a motion to alter, amend,

or vacate the circuit court's judgment of dismissal pursuant

to Rule 59, Ala. R. Civ. P.     In its motion, CAG argued that

Freeman Webb stood for the proposition that its ex delicto

claims    were   not   barred       by   §   10A-1-7.21.6   The

    5
     As set forth above, in its order dismissing this case,
the circuit court applied § 10A-1-7.21, Ala. Code 1975, which,
effective January 1, 2011, replaced former § 10-12-52, Ala.
Code 1975, which applied exclusively to limited-liability
companies. See Act No. 2009-513, Ala. Acts 2009. Act No.
2012-304, Ala. Acts 2012, effective January 1, 2014, in
addition to repealing former §§ 10A-2-15.01 and 10A-2-15.02,
amended § 10A-1-7.21(a) to include an exception that is
inapplicable to this case. See supra note 1.
    6
     Freeman Webb did not involve the application of § 10A-1-
7.21 or, as Smelley argued in support of the motion to
dismiss, former § 10A-2-15.02(a).      Rather, Freeman Webb
involved the application of former § 10-2A-247(a), Ala. Code
                                6
1130659

1975, which included significantly different language:

         "(a) All contracts or agreements made or entered
    into in this state by foreign corporations which
    have not obtained a certificate of authority to
    transact business in this state shall be held void
    at the action of such foreign corporation or any
    person claiming through or under such foreign
    corporation by virtue of said void contract or
    agreement; but nothing in this section shall
    abrogate the equitable rule that he who seeks equity
    must do equity."

     In 1994, § 10-2A-247, Ala. Code 1975, was repealed and
replaced by § 10-2B-15.02, Ala. Code 1975.     See Ala. Acts
1994, Act No. 94-245, p. 439.    In 1995, the then existing
version of § 10-2B-15.02 was repealed, and a new version of §
10-2B-15.02 was enacted. See Ala. Acts 1995, Act No. 95-663.
The version of § 10-2B-15.02(a) enacted in 1995 essentially
borrowed the language of former § 10-2A-247(a) quoted above
and added a sentence to the beginning of the borrowed
language.    By broadening the scope of the statute, the
additional sentence, emphasized below, is particularly
relevant to this appeal; that version of § 10-2B-15.02(a)
provided, in its entirety:

         "(a) A foreign corporation transacting business
    in this state without a certificate of authority or
    without complying with Sections 40-14-1 to 40-14-3,
    inclusive, 40-14-21, or 40-14-41, may not maintain
    a proceeding in this state without a certificate of
    authority.    All contracts or agreements made or
    entered into in this state by foreign corporations
    prior to obtaining a certificate of authority to
    transact business in this state shall be held void
    at the action of the foreign corporation or by any
    person claiming through or under the foreign
    corporation by virtue of the contract or agreement;
    but nothing in this section shall abrogate the
    equitable rule that he who seeks equity must do
    equity."
                             7
1130659

(Emphasis added.)

     Section 10-2B-15.02 was again amended in 1999. See Ala.
Acts 1999, Act No. 99-665, § 3. That amendment –- replacing
the reference to "Sections 40-14-1 to 40-14-3, inclusive, 40-
14-21, or 40-14-41" with a reference to "Chapter 14A of Title
40" –- is not relevant to this discussion. Effective January
1, 2011, that door-closing statute was once again amended and
renumbered as § 10A-2-15.02 by Ala. Acts 2009, Act No. 2009-
513. Act No. 2009-513 only slightly modified the substance of
the statute by changing the reference to obtaining "a
certificate of authority" to "registering"; § 10A-2-15.02(a)
provided:

         "(a) A foreign corporation transacting business
    in this state without registering as required under
    Section 10A-1-7.01 or without complying with Chapter
    14A of Title 40 may not maintain a proceeding in
    this state without so registering and complying. All
    contracts or agreements made or entered into in this
    state by foreign corporations prior to registering
    to transact business in this state shall be held
    void at the action of the foreign corporation or by
    any person claiming through or under the foreign
    corporation by virtue of the contract or agreement;
    but nothing in this section shall abrogate the
    equitable rule that he or she who seeks equity must
    do equity."

     Act No. 2009-513 amended the first sentence of former §
10A-2-15.02(a) to reflect the substantive language of former
§ 10-12-52(a), Ala. Code 1975, which provided: "A foreign
limited liability company transacting business in this state
may not maintain any action, suit, or proceeding in any court
of this state until it has registered in this state."
However, Act No. 2009-513 also renumbered § 10-12-52 as § 10A-
1-7.21 and amended it to make it applicable to all foreign
entities –- not just foreign limited-liability companies.

     We note that in TradeWinds Environmental Restoration,
Inc. v. Brown Bros. Construction, L.L.C., 999 So. 2d 875 (Ala.
                              8
1130659

circuit court denied CAG's Rule 59 motion on February 6, 2014.

CAG appeals.

                          Discussion

         "We have set forth the standard of review that
    must be applied in reviewing a dismissal pursuant to
    Rule 12(b)(6), Ala. R. Civ. P.:

               "'On appeal, a dismissal is not
          entitled to a presumption of correctness.
          The appropriate standard of review under
          Rule   12(b)(6)   is  whether,   when   the
          allegations of the complaint are viewed
          most strongly in the pleader's favor, it
          appears that the pleader could prove any
          set of circumstances that would entitle her
          to relief. In making this determination,
          this Court does not consider whether the
          plaintiff will ultimately prevail, but only
          whether she may possibly prevail. We note
          that a Rule 12(b)(6) dismissal is proper
          only when it appears beyond doubt that the

2008), this Court relied on Freeman Webb in dismissing a
foreign corporation's ex contractu claim under former § 10-2B-
15.02(a), which included the additional sentence, the
substance of which is present in § 10A-1-7.21.        However,
because an ex delicto claim was not brought in Tradewinds,
this Court did not include a discussion about what effect, if
any, the additional sentence in former § 10-2B-15.02(a) had on
ex delicto claims.

     The legislative history of § 10A-1-7.21, therefore,
indicates that the language that was construed in Freeman Webb
to prohibit only ex contractu –- and not ex delicto –- claims
was never included in the language of the statutes that have
been applicable to limited-liability companies. Accordingly,
Freeman Webb's differentiation between ex contractu and ex
delicto claims is not relevant to an interpretation of § 10A-
1-7.21.
                              9
1130659

          plaintiff can prove no set of facts in
          support of the claim that would entitle the
          plaintiff to relief.'

    "Nance v. Matthews, 622 So. 2d 297, 299 (Ala. 1993)
    (citations omitted)."

Lloyd Noland Found., Inc. v. HealthSouth Corp., 979 So. 2d

784, 791 (Ala. 2007).7

    As set forth above, the circuit court dismissed CAG's

case upon application of Alabama's door-closing statute, §

10A-1-7.21, Ala. Code 1975, which provides, in pertinent part:

"A foreign entity transacting business in this state, except

a corporation or other organization formed under federal law,

may not maintain any action, suit, or proceeding in any court

of this state until it has registered in this state."     Such

registration is required by § 10A-1-7.01, which provides:

         "(a) To transact business in this state, a
    foreign entity must register under this chapter if
    the entity:

    7
     Smelley supplemented the motion to dismiss with exhibits.
That submission would normally convert a motion to dismiss to
a summary-judgment motion. See Rule 12(b), Ala. R. Civ. P.;
Ex parte Hodge, [Ms. 1121194, February 7, 2014] ___ So. 3d
___, ___ (Ala. 2014).    However, because the circuit court
struck the exhibits Smelley attached to the motion to dismiss,
the exhibits did not affect the nature of the motion.
                              10
1130659

                "(1)   is   a  foreign   entity,   the
           formation of which, if formed in this
           state, would require the filing under
           Article 3 of a certificate of formation; or

                "(2) affords limited liability under
           the law of its jurisdiction of formation
           for any owner or member.

         "(b) A foreign entity described by subsection
    (a) must maintain the entity's registration while
    transacting business in this state."

    A     foreign   entity's   failure   to   comply   with   the

registration requirements of a statute such as § 10A-1-7.01 is

a capacity defense, and it does not per se implicate standing

or subject-matter jurisdiction.      As this Court stated in

Penick v. Most Worshipful Prince Hall Grand Lodge F & A M of

Alabama, Inc., 46 So. 3d 416, 425-26 (Ala. 2010):

         "A foreign corporation's failure to obtain
    authorization to do business in Alabama is a
    capacity defense and does not per se implicate
    standing and subject-matter jurisdiction. Archer
    Western Contractors, Ltd. v. Benise–Dowling &
    Assocs., Inc., 33 So. 3d 1216, 1219 n. 4 (Ala. 2009)
    ('[Section 10A–2–15.02(a)], Ala. Code 1975, does not
    preclude the courts of this state from exercising
    jurisdiction over actions brought by unauthorized
    foreign entities transacting business in Alabama for
    the purpose of enforcing their contracts.'); Moseley
    v. Commercial State Bank, 457 So. 2d 967 (Ala. 1984)
    (holding that a foreign corporation's lack of
    authorization to do business in Alabama is a
    capacity defense that is waived unless timely
    asserted by specific negative averment); cf. [State
    v. Property at 2018] Rainbow Drive, 740 So. 2d
    [1025] at 1028 [(Ala. 1999)] ('"Standing represents

                               11
1130659

     a jurisdictional requirement which remains open to
     review at all stages of the litigation."' (quoting
     National Org. for Women, Inc. v. Scheidler, 510 U.S.
     249, 255, 114 S. Ct. 798, 127 L. Ed. 2d 99 (1994)));
     Ex parte Smith, 438 So. 2d 766, 768 (Ala. 1983)
     ('Lack of subject matter jurisdiction may not be
     waived   by    the   parties....');    and   Mobile,
     Alabama–Pensacola, Florida Bldg. & Constr. Trades
     Council v. Williams, 346 So. 2d 964, 966 (Ala. 1977)
     (Faulkner, J., dissenting) ('There is a difference
     between capacity to sue and standing to sue.')."

See also Wausau Dev. Corp. v. Natural Gas & Oil, Inc., [Ms.

1120614,     November     22,    2013]      ___    So.   3d   ___,    ___   (Ala.

2013)(quoting Penick).

     Lack of capacity is an affirmative defense.                     See Wausau,

___ So. 3d at ___ (quoting Rikard v. Lile, 622 So. 2d 413, 414

(Ala. Civ. App. 1993))("'The lack of capacity to sue is an

affirmative    defense     which      must    be    specifically      pled.'");

Alabama     Power   Co.   v.    White,      377    So.   2d   930,    935   (Ala.

1979)(quoting Chemacid, S.A. v. Ferrotar Corp., 3 F.R.D. 45,

46 (S.D.N.Y. 1942), in its interpretation of Rule 9(a), Fed.

R.   Civ.     P.)("'[L]ack       of      capacity        is   an     affirmative

defense.'"); see also           Pretl v. Ford, 723 So. 2d 1, 3 (Ala.

1998). The Court of Civil Appeals set forth the proper method

of raising an affirmative defense in Williams v. Nash, 428 So.

2d 96, 99-100 (Ala. Civ. App. 1983):

                                       12
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         "Having determined that Nash has attempted to
    raise an affirmative defense by the materials in his
    motion, we look to the Alabama Rules of Civil
    Procedure for the proper method of pleading such a
    defense. The language of rule 8(c), as quoted below,
    provides the answer:

               "'(c)   Affirmative     Defenses.   In
          pleading to a preceding pleading, a party
          shall set forth affirmatively accord and
          satisfaction,    arbitration   and   award,
          assumption     of    risk,     contributory
          negligence,   discharge    in   bankruptcy,
          duress, estoppel, failure of consideration,
          fraud,   illegality,   injury    to  fellow
          servant, laches, license, payment, release,
          res judicata, statute of frauds, statute of
          limitations, waiver, and any other matter
          constituting an avoidance or affirmative
          defense.' (Emphasis supplied.)

         "The matters raised in Nash's motion, since they
    were an affirmative defense, should have been raised
    by his answer to Williams's complaint. Our supreme
    court has taken the strict view that an affirmative
    defense can be raised by motion only where the face
    of the complaint shows that the defense is a bar to
    the action. In those instances in which the face of
    the complaint fails to show that the action is
    barred by the affirmative defense, it may not be
    raised by a rule 12(b), [Ala.] R. Civ. P., motion
    but must be raised by an answer under rule 8(c),
    [Ala.] R. Civ. P. In Sims v. Lewis, 374 So. 2d 298
    (Ala. 1979), the court said:

          "'The courts seem now to agree that
          limitations and laches may indeed be raised
          on a 12(b)(6) motion where the face of the
          complaint shows that the claim is barred by
          the statute of limitations, and/or laches,
          [5 C. Wright & A. Miller, Federal Practice
          & Procedure: Civil § 1277 (1969)]; see
          McGruder v. B. & L. Construction Company,

                              13
1130659

          Inc., 293 Ala. 354, 303 So. 2d 103 (1974).
          We hold that while the defenses of laches
          or limitations should be presented in a
          pleading to a preceding pleading, both may
          be properly raised via the 12(b)(6) motion
          where the face of the complaint shows that
          the claim is barred.'

    "Wright and Miller state that the rationale for this
    rule is found in the fact that the pleadings under
    federal rules practice are designed merely to
    provide notice of the claims and defenses which will
    later be involved in the trial. It is based on the
    view that the pleading stages of litigation should
    not be turned into 'little trials.' Motions under
    rule 12(b)(6) then should not deal with matters
    which are outside the complaint. 5 C. Wright & A.
    Miller, Federal Practice & Procedure: Civil § 1277
    (1969)."

    As noted above, the circuit court granted Smelley's

motion to dismiss without considering the exhibits attached

thereto -- having struck those exhibits pursuant to CAG's

motion.   Accordingly, Smelley's motion was not converted to a

motion for a summary judgment.8    See supra note 7.   Therefore,

    8
     In Ex parte Scannelly, 74 So. 3d 432, 438 (Ala. 2011),
this Court noted the distinction between a motion to dismiss
filed pursuant to Rule 12(b)(6), Ala. R. Civ. P., and a motion
for a summary judgment:

         "It is apparent that the portion of Toxey's
    motion relating to the affirmative defense of res
    judicata (paragraphs 6 and 7 of his 'Motion to
    Dismiss'), which portion Toxey insists constitutes
    a Rule 12(b)(6) challenge, was, instead, a motion
    for a summary judgment. There is a notable
    distinction between a motion to dismiss filed
                              14
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the circuit court's dismissal of CAG's complaint was proper

    pursuant to Rule 12(b)(6) and a motion for a summary
    judgment:

               "'The Rule 12(b)(6) motion ... must be
          distinguished from a motion for summary
          judgment under Rule 56, which goes to the
          merits of the claim –- indeed, to its very
          existence –- and is designed to test
          whether there is a genuine issue of
          material fact. The Rule 12(b)(6) motion ...
          only tests whether the claim has been
          adequately stated in the complaint. Thus,
          ... on a motion under Rule 12(b)(6), the
          [trial] court's inquiry essentially is
          limited to the content of the complaint; a
          motion for summary judgment, on the other
          hand, often involves the use of pleadings,
          depositions, answers to interrogatories,
          and affidavits.'

    "5B Charles Alan Wright & Arthur C. Miller, Federal
    Practice and Procedure § 1356, at 372–75 (3d ed.
    2004) (footnote omitted). See also Lloyd Noland
    Found., Inc. v. HealthSouth Corp., 979 So. 2d 784,
    791 (Ala. 2007) ('"Since the facts necessary to
    establish an affirmative defense generally must be
    shown by matters outside the complaint, the defense
    technically cannot be adjudicated on a motion under
    Rule 12[, Fed. R. Civ. P.]." 5 Charles Alan Wright
    and Arthur C. Miller, Federal Practice and Procedure
    § 1277 (3d ed. 2004).'), and 1 Moore's Federal Rules
    Pamphlet § 12.4[5][b], p. 186 (2010) ('When the
    plaintiff's own factual allegations affirmatively
    demonstrate that the plaintiff cannot recover,
    dismissal under Rule 12(b)(6) is appropriate....
    Similarly, a dismissal under Rule 12(b)(6) may be
    based on an affirmative defense when the defense is
    clear from the face of the pleadings.' (emphasis
    added))."
                              15
1130659

only if CAG's alleged lack of capacity is evident from the

face of CAG's complaint.     We hold that it is not.

    CAG's original and amended complaints do not indicate

that CAG is a foreign entity or that it is not registered to

transact   business   in   Alabama   pursuant   to    §   10A-1-7.01.9

Accordingly, CAG's alleged lack of capacity to sue Smelley is

not apparent from the face of its complaint.          Therefore, the

circuit's court's dismissal of the complaint pursuant to §

10A-1-7.21 is due to be reversed.       Ex parte Scannelly, 74 So.

3d 432, 438 (Ala. 2011).

                            Conclusion

    For    the   reasons   stated    above,   the    circuit   court's

dismissal of CAG's complaint was improper.             Therefore, we

reverse the circuit court's judgment and remand the case for

further proceedings.

    REVERSED AND REMANDED.

    Moore, C.J., and Stuart, Shaw, and Wise, JJ., concur.

    9
     Under Rule 9(a), Ala. R. Civ. P., CAG is not required to
aver its capacity to bring the lawsuit in its complaint.
                                16