Court Opinion

ID: 8967828
Source: CourtListenerOpinion
Date Created: 2022-11-27 10:17:58.468921+00
Date Added: 2024-06-11T17:10:22.420989
License: Public Domain

VINSON, District Judge,
dissenting:
I agree with the majority’s analysis and conclusion regarding Foresco’s corporate claims being extinguished by Section 10-2A-203, Alabama Code (1975), but I respectfully dissent with respect to Hutson’s individual claims.
As the majority acknowledges, the issue in this case is whether Foresco’s contractual right to receive payments from Fulg-ham’s future use of the designs and drawings for the two models of log cranes constituted a property right to which Hutson, as a former Foresco shareholder, became legally entitled upon Foresco’s dissolution. In my opinion, it did. Therefore, I reach a conclusion contrary to the majority’s.
(1) What was the nature of Foresco’s contractual interest? The record is undisputed that, pursuant to the contracts in question, Foresco completed the design of both the 80 and 120 foot cranes in 1979, and provided design drawings for each model to Fulgham. Fulgham then proceeded to make the required payments to Fores-co through October 1983 for three of the 80 foot cranes, and for eleven of the 120 foot cranes. Under the agreements, it appears that additional cranes manufactured and sold by Fulgham pursuant to the agreements would trigger required payments of $8,000 for each of the next two 80 foot cranes or 5% of the sales price for each additional 120 foot crane and each 80 foot crane in excess of two (within 5 years after the sale of the sixth crane of each type). On its face, therefore, Foresco’s contractual interest seems to be a right to receive payments, measured by the use of the designs in each crane manufactured and sold. The sole determinant of payment would be Fulgham’s sale of either model of crane. This seems to be squarely within the general definition of “royalty:”
*1465A payment which is made to an author or composer by an assignee or licensee in respect of each copy of his work which is sold, or to an inventor in respect of each article sold under the patent.
Black’s Law Dictionary (Rev. 4th ed. 1968)
Fulgham maintains that because Foresco may have additional obligations under the contracts, the contracts have not been fully performed by Foresco. Fulgham also asserts that the contracts are not assignable because they require personal services. Therefore, Fulgham’s position is that the contracts are not property rights capable of assignment or succession to Foresco’s stockholders upon its dissolution. Unlike the majority, I cannot agree. It is of importance that Fulgham’s argument regarding additional services required of Foresco was not asserted in its answer or in any pleadings before the trial court, and the trial court’s “memorandum of decision” conspicuously omits reference to such an assertion. The argument seems to have been raised for the first time on appeal. At most, Fulgham’s argument raises an issue of material fact, precluding summary judgment and necessitating reversal. Similarly, although the majority finds it unnecessary to address, further personal services are not required, and the royalty right under the contract is freely assignable, if the only determinant of payment is the use of the designs by Fulgham in manufacturing and selling additional cranes.
In short, my analysis of the evidence in the record leads me to conclude either that Foresco had completed essentially all of its obligations under the agreement, so that all that remained was for Fulgham to pay the production payments called for if any additional cranes were manufactured and sold, or that there is a genuine issue of material fact regarding whether Foresco had done so. In either event, Hutson’s claim should not have been barred by summary judgment if he is a proper owner of the right to receive payment under the executed agreements. United States Fidelity & Guaranty Co. v. R.S. Armstrong & Brothers, 225 Ala. 276, 142 So. 576, 577 (1932).
I can find no basis to distinguish the right to receive future production payments as contemplated by the agreements in this case from the right to receive future royalties or payments from other forms of intellectual property, such as under a copyright, trademark, patent, or licensing agreement.
The majority declines to recognize a “property interest” in an “unasserted corporate contract claim which involves evi-dentiary problems and factual disputes.” To me, it is of no consequence that the class of asset involved in this case is not real or tangible personal property, a fixed liability, or a liquidated debt. Foresco’s right to payment was simply a form of royalty asset, and it was just as well defined and assignable as a patent or copyright. If an interest in that royalty passed to Hutson upon Foresco’s dissolution, then Hutson is entitled to pursue his legal rights therein. For example, the purchaser or assignee of the copyright to a musical composition is entitled to pursue his legal right to payment for performance of the song, even from one who factually disputes that the performance is within the copyright or that the copyright was properly perfected. Thus, an underlying dispute between the parties as to whether the contracts have been fully performed, or whether the cranes were manufactured (or manufacturable) in accordance with the designs, does not render the asset into a corporate claim; instead, it merely places the assignee’s individual right to recover into question.
(2) Did Hutson succeed to an interest in Foresco’s contractual right to receive production payments? The answer to this question, of course, is dependent upon a determination of the nature of asset involved. As discussed above, I have reached a different conclusion from the majority regarding the class of asset. Consequently, I reach a different conclusion on Hutson’s succession. Nevertheless, the legal authorities cited by the majority make it very clear that shareholders have the right to share assets of a dissolved corporation, even in the absence of an expressed assignment. I need not, and will not, ad*1466dress that equitable principle further, except to note that it results in Hutson presently having an enforceable property right, assertable against Fulgham.
Both the trial court and the majority seem to find support for the conclusion they reach from the fact that the operation of Section 203 is not “unfair” to Hutson. This is apparently premised on the concept that if Hutson “suspected a breach by Fulgham he should have notified the receivers of the claim prior to the time dissolution was finalized.” [See “Memorandum of Decision,” p. 9] On the contrary, in my opinion inventorying assets in a corporate dissolution is usually very much like inventorying assets in a decedent’s estate. Quite often, an asset is overlooked or, as apparently occurred here, was deemed at the time to be of no further value. The asset does not disappear, however, nor is it ordinarily escheated. When it is later “discovered,” or found to be of value, it may be claimed by the rightful owner. Ideally, a prudent practitioner will remove any future uncertainty by insuring that an expressed assignment of all remaining non-specified assets is made. But Hutson’s failure to identify the right to future payments from Fulgham before the dissolution was finalized, or to have that right specifically assigned to him and Diaz, does not defeat his entitlement to the asset or constitute some form of “unclean hands.” I fail to see any way that it can, as a matter of law, bar Hutson’s claim.
In my view, the right to payment from Fulgham was a fully matured property right prior to dissolution. An interest in that right passed to Hutson at dissolution. Hutson’s standing and right to attempt to collect that royalty is unaffected by the corporate survival statute.
(3) Can Hutson assert a fraud claim against Fulgham? To the extent that Hutson, in a representative capacity, asserts fraud claims allegedly committed against Foresco, I agree with the majority that the survival statute bars them. But, as the majority’s footnote (18) addresses, Hutson also may have a personal cause of action for any fraud that Fulgham may have been committed with regard to his individual right to receive royalty payments. If, as I have attempted to set out above, Hutson did succeed to a property right to receive royalty payments under the agreement, then clearly he has the right to assert a claim that Fulgham committed fraud upon Hutson by slightly altering the design drawings to construct 78 foot and 125 foot cranes, instead of the 80 and 120 foot cranes contemplated under the agreement.
(4) Conclusion. In my opinion, Section 10-2A-203, Alabama Code (1975) has only limited application to this case: to the attempt by Hutson to bring claims in a representative capacity on behalf of Foresco, Inc., a dissolved Alabama corporation. It bars all claims on behalf of the corporation. But, on the other hand, the corporation’s right to receive future royalty payments was a matured asset or “property interest,” freely alienable, to which Hutson received an interest by operation of law upon the dissolution of the corporation. Therefore, Hutson, individually, is not prohibited by the corporate succession statute from asserting both his claim to a royalty payment and his claim for fraud in connection with the right to a royalty. To the extent that there may be some factual question raised about Foresco’s continuing obligation with respect to its designs, thereby affecting the legal characterization of the asset, that would be a genuine issue of material fact precluding summary judgment under Rule 56, Federal Rules of Civil Procedure. I would reverse and remand.