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Cauderlier & Associates, Inc. v. Zambrana

December 28, 2007


The opinion of the court was delivered by: John M. Facciola United States Magistrate Judge


Currently pending before me is Motion of Cauderlier & Associates, Inc. for Summary Judgment ("Motion"). For the reasons stated herein, the Motion will be granted in part and denied in part.


Plaintiff Cauderlier & Associates, Inc. ("CAI") asks this court to rule, as a matter of law, that: (1) Sergio Zambrana's counterclaims have been extinguished by the statute of limitations; (2) Zambrana has no ownership interest in CAI; and (3) Zambrana has no right to an accounting or a monetary judgment from CAI.


1. CAI was incorporated on August 19, 1999, with the Board of Directors consisting of Jean Claude Cauderlier, Zambrana, and James Powers.

2. On that day, the Directors of CAI issued a Unanimous Written Consent in Lieu of the Organizational Meeting of the Board of Directors of Cauderlier & Associates, Inc. ("1999 CAI Written Consent"), attached as Exh. D to Exh. 1 of the Motion.

3. The 1999 CAI Written Consent was signed by Cauderlier, Zambrana, and Powers. Id. at 9.

4. Pursuant to the 1999 CAI Written Consent, Cauderlier was elected President/Treasurer, Powers was elected Secretary, and Zambrana was elected Vice President/Assistant Secretary. Id. at 2.

5. CAI was authorized to issue 500 shares of common stock to Cauderlier in exchange for $60,000. Id. at 2. No other shares were authorized to be issued. Id.

6. Cauderlier was authorized to purchase 1035-1039 31st Street, N.W, in Washington, D.C. (the "Property") for $1,100,001. Id. at 3.

7. On August 20, 1999, Cauderlier obtained a promissory note from La Ruche, Inc. ("La Ruche") for $60,000. Jean-Claude Cauderlier Promissory Note, attached as Exh. C to Exh. 1 of the Motion. This was used by Cauderlier to purchase 500 common shares of CAI, pursuant to the 1999 CAI Written Consent. Cauderlier Decl. ¶¶ 5-6, attached as Exh. 1 to the Motion.

8. On November 19, 1999, CAI provided a deposit of $55,000 to Yes, Inc. ("Yes!"), the owner of the Property, for the purchase of the Property. See Official Check, attached as Exh. G to Exh. 1 of the Motion; Cauderlier Decl. ¶ 8.

9. On January 20, 2000, Zambrana gave a check to Cauderlier, payable to La Ruche, for $25,000, dated January 21, 2000 (the "Check"). Cauderlier Decl. ¶ 13; Zambrana Dep. at 33, attached as Exh. 2 to the Motion; Zambrana Aff. ¶ 2, attached as Exh. A to defendant's Opposition to Motion for Summary Judgment of Cauderlier & Associates, Inc. ("Opposition").

10. CAI closed the purchase of the Property on January 21, 2000. Cauderlier Decl. ¶ 10. The purchase price was $1,020,000. Powers Letter to Naithani dated Dec. 28, 1999, attached as Exh. I to Exh. 1 of the Motion. Present at the closing were Cauderlier, Zambrana, and Powers. Cauderlier Decl. ¶ 12; Naithani Aff. ¶ 8, attached as Exh. B to the Opposition.

11. Part of the price was paid with a loan of $965,000 secured from the Small Business Administration ("SBA"), via the Money Store Investment Corp., with CAI and La Ruche as co-borrowers. Application for Business Loan, attached as Exh. H to Exh. 1 of the Motion; Unconditional Guarantee, attached as Exh. J to Exh. 1 of the Motion.

12. On August 24, 2000, in a Written Consent in Lieu of an Annual Meeting of the Shareholders of Cauderlier & Associates, Inc., Cauderlier was elected Director of the Corporation; that same day, in a Written Consent in Lieu of an Annual Meeting of the Board of Directors of Cauderlier & Associates, Inc. (together, the "2000 CAI Written Consents"), Cauderlier was elected President/Treasurer, Secretary, and Vice President of CAI. 2000 CAI Written Consents, attached as Exh. E to Exh. 1 of the Motion.

13. The 2000 CAI Written Consents were signed only by Cauderlier. Id.

14. On June 23, 2004, La Ruche issued Certificate No. 10 to Zambrana for 10 shares in La Ruche. Pursuant to a Consent to Action in Lieu of a Special Meeting of the Shareholders of La Ruche, Inc., signed by Cauderlier and Zambrana, Certificate No. 10 was a replacement of Certificate No. 9, issued in January 2000, which "was never received by Mr. Zambrana and is lost." Exh. K to Exh. 1 of the Motion. Zambrana now argues that Certificate No. 9 was issued long before January 2000. Opposition at 13-14; Zambrana Dep. at 79-81.

I. Statute of Limitations

On October 24, 2005, Zambrana filed his Answer and Counterclaim ("Answer"), which included counterclaims for: (1) an accounting of the assets owned by CAI; (2) a declaratory judgment determining "his ownership share in the assets of CAI and/or in the Building"; and (3) under a theory of unjust enrichment, "a monetary judgment equal to the value of his share in the assets of CAI and/or in the Building." Answer at 6-12. CAI argues in its Motion that these counterclaims have been extinguished by the District of Columbia's three-year statute of limitations.*fn1 Motion at 6-8.

A cause of action does not accrue "until the [claimant] knows or by the exercise of reasonable diligence should know of the injury, its cause in fact and some evidence of wrongdoing." Brown v. District of Columbia, 853 A.2d 733, 737 n.4 (D.C. 2004) (internal quotation and citation omitted).*fn2 Zambrana's counterclaims are based, generally, on two allegations: (1) he obtained "an ownership interest in CAI and/or the Building (to be) owned by CAI" in return for the Check; and (2) La Ruche was used by Cauderlier as the "alter ego" of CAI for purposes of purchasing the Property. Answer at 7-10

a. Zambrana's Ownership in CAI and/or the Property

In regard to Zambrana's allegation that he bought an ownership interest in CAI and/or the Property in exchange for the Check, CAI asserts that Zambrana's counterclaims accrued at a meeting in either February or March 2000 (the "Meeting"), at which time his "demands for CAI shares were rebuffed." Motion at 7-8. According to Cauderlier, Zambrana "refused [at the Meeting] to accept my offer of the 10 percent of La Ruche in exchange for $25,000 [and instead] asked for interest in CAI or the land. I told him no." Cauderlier Decl. ¶ 17. Cauderlier also asserts that Zambrana was advised at the Meeting to retain his own attorney. Id. at 14, Powers Dep. at 42, attached as Exh. 3 to the Motion.

Powers also recalls that Cauderlier refused to issue Zambrana an interest in CAI at the Meeting. Powers Dep. at 66. According to Powers, however, this refusal was the starting point of a negotiation that culminated in an understanding that Zambrana would receive an interest in both La Ruche and CAI. Id. at 68-69. Despite this broad understanding, however, Powers recalls that there was not a comprehensive agreement concerning the "quantification of stock to be granted." Id. at 70.

Zambrana, for his part, does not recall the Meeting. Zambrana Dep. at 63. He does deny, however, that Cauderlier refused a demand that Zambrana be given shares in CAI. Id. at 63. He instead asserts that he was unaware until 2004 that his ownership interest in CAI was in dispute. According to Zambrana, he was promised an ownership interest in CAI by Cauderlier at the time he submitted the $25,000 check. Zambrana Aff. ¶ 10. Cauderlier "stated in the presence of [third parties] before and after settlement that [Zambrana was] an owner of CAI." Id. at ¶ 14. Cauderlier "initially and consistently" stated that the Property was being purchased by both him and Zambrana. Naithani Aff. ¶ 21. Zambrana, "in [his] capacity as an owner of CAI[,] received many telephone calls" regarding payments from CAI. Zambrana Aff. ¶¶ 16-17. He asserts that it was not until February 17, 2004, that he became aware that his ownership interest in CAI was disputed by Cauderlier. Opp. at 17; Zambrana Dep. at 57-58. On that day, Cauderlier asserted in a letter that he was "the sole shareholder" of CAI. Id.

Determining when Zambrana's counterclaims concerning his ownership in CAI accrued requires the untangling of a web of competing recollections. If Cauderlier is correct that he flatly refused to extend ownership of CAI to Zambrana at the Meeting, it seems clear that the counterclaims would have accrued at that time and would now be barred. On the other hand, if Zambrana is to be believed that there was an agreement to grant him ownership in CAI and that he was not aware until 2004 that this was disputed by Cauderlier, the counterclaims would not be barred by the three-year limitation period. Finally, Powers' description of events -- that there was agreement at the Meeting that Zambrana would become an owner of CAI, but not over the specific details -- supports Zambrana's assertions, yet raises the question of whether, for purposes of triggering the three-year limitation period, Zambrana should have been on notice at the Meeting that his ownership of CAI was in dispute.

Such a factual dispute is to be resolved by the finder of fact. "Although what constitutes the accrual of a cause of action is a question of law, the specific moment when accrual occurs is usually a jury question." Smith v. Brown & Williamson Tobacco Corp., 3 F. Supp. 2d 1473, 1475 (D.D.C. 1998) (citing Diamond v. Davis, 680 A.2d 364, 370 (D.C.1996)). A court may dismiss a claim on statute of limitations grounds only if "no reasonable person could disagree on the date" on which the cause of action accrued. Kuwait Airways Corp. v. American Security Bank, N.A., 890 F.2d 456, 463 n.11 (D.C. Cir. 1989. A reasonable person could, after weighing the competing testimony presented by the parties, disagree on the date on which Zambrana's counterclaims accrued. See Lively v. Flexible Packaging Ass'n, 830 A.2d 874, 892 n.29 (D.C. 2003) (en banc) ("Unless the evidence regarding the commencement of the running of the statute of limitations is so clear that the court can rule on the issue as a matter of law, the jury should decide the issue on appropriate instructions.").

b. La Ruche as Alter Ego of CAI

To the extent that Zambrana's counterclaims are based on the alleged misuse of La Ruche by Cauderlier for the benefit of CAI's purchase of the Property, the accrual point would have been when Zambrana was made aware, or should have become aware, of such misuse. Nowhere in Zambrana's Answer or Opposition does he state when this discovery occurred, but there are clues to be found in the record.

The first moment when Zambrana could have become aware that Cauderlier was using La Ruche for the benefit of CAI's purchase of the Property was on January 20, 2000, when he made the Check payable to La Ruche. Answer at 9. Zambrana claims he "made [the Check] payable to La Ruche at the behest of J. Cauderlier, who told [him] at the time that [he] would become a shareholder in CAI." Zambrana Aff. at ¶ 10; Zambrana Dep. at 34, 57. At this moment Zambrana was reasonably put on notice that there may be "commingl[ing]" of assets between the two corporations. Answer at 9. Zambrana claims he was an owner of La Ruche before this occurred. Opposition at 14. As an owner of La Ruche, then, Zambrana could reasonably be expected to have inquired at that time about the use of La Ruche to fund CAI and/or the Property.

There is further evidence in the record that Zambrana was aware, or should have been aware, of the relationship between La Ruche and CAI around the time the Property was purchased in 2000. For example, in his Opposition, Zambrana cites testimony from Powers that there "was discussion between [Zambrana, Cauderlier around the time the Property was purchased] about the way they were putting together the financial packages, but Mr. Webb [CAI's accountant] was doing that, so when they went to the Money Store, when they presented everything, [Powers] believe[d] much of it was being driven through using La Ruche." Opp. at 1; Powers Dep. at 41. Moreover, the SBA Application, SBA Note, and the SBA Unconditional Guarantee list CAI and La Ruche as co-borrowers of the $965,000 used to purchase the Property. SBA Application, SBA Note, attached as Exh. H to Exh. 1 of the Motion; SBA Unconditional Guarantee, attached as Exh. J to Exh. 1 of the Motion. Zambrana was present at the closing and would have had access to these documents. Zambrana Dep. at 60.

Zambrana, then, either knew or should have known in 2000 of his allegation that La Ruche was being misused by Cauderlier to benefit CAI's purchase of the Property. Because his Answer was filed on October 24, 2005, any counterclaims based upon this allegation are time-barred by the three-year statute of limitations.

II. Zambrana's Ownership in CAI and/or the Property

CAI seeks an entry of summary judgment on its declaratory judgment claim that Cauderlier is the sole shareholder and has 100 percent ownership of CAI. Complaint at 5-6 (Count I). In support of its Motion, CAI asserts that: (1) no more than five hundred shares of common stock have been issued by CAI, all of which were purchased by Cauderlier for $60,000 on August 19, 1999; and (2) Zambrana has produced "no contract, diary entry, contemporaneous writing, or other written evidence suggesting that he either owns or was owed stock in CAI. Motion at 8-9. Zambrana, in response, argues that he purchased an ownership interest in CAI and/or the Property for $25,000.

a. The Record Construed In The Light Most Favorable To Zambrana

"[S]ummary judgment requires that the factual record be construed in the light most favorable to the non-moving party." Mahoney v. U.S. Marshals Service, 454 F. Supp. 2d 21, 26 (D.D.C. 2006). Moreover, it is appropriate for the court to go further and test the legal validity of Zambrana's claim by taking as true the allegations he makes in support of his claim, in order to ascertain whether he is entitled to judgment in his favor if the finder of fact were to accept the truth of his allegations. Fed. R. Civ. P. 12(b)(6) and 12(d).*fn3

1. Zambrana paid the Check to La Ruche. Zambrana Aff. ¶ 2.

2. "At all times, it was understood between" Cauderlier and Zambrana that the Check "was to be earmarked for the purchase by CAI of" the Property. Id. ¶ 4.

3. Zambrana made the Check out to La Ruche "at the behest of" Cauderlier, who told Zambrana at that time that he "would become a shareholder in CAI." Id. ¶ 10.

4. The Check was used by La Ruche and Cauderlier to pay for the Property. Zambrana Aff. ¶ 22; Powers Dep. at 41.

5. Zambrana was given part ownership in La Ruche "in recognition of [his] many years of excellent performance as an employee of La Ruche and as incentive to keep [him] in the employ of La Ruche." Id. ¶ 8; Powers Dep. at 25 (Zambrana "was promised ownership interest in La Ruche by Mr. Cauderlier . . . in '97 or '98"). His ownership in La Ruche, then, was not consideration for the Check. Id. ¶ 9.

6. Stock Certificate No. 9, granting 10 shares of La Ruche to Zambrana, was issued at the same time that Cauderlier received Stock Certificate No. 8, granting him 50 shares of La Ruche. Opp. at 13. In other words, Stock Certificate No. 9 (later replaced by Stock Certificate No. 10) was issued far in advance of, and not consideration for, Zambrana's $25,000 payment to La Ruche. Id.

7. Powers recalls that Zambrana "at times" referred to "the 25% promise" in regard to what percentage of La Ruche he was promised by Cauderlier. Powers Dep. at 54. There was discussion between the parties as to how this 25% interest ...

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