Henderson v. Elias, — So.3d —-, 2011 WL 710190 (Fla. 4th DCA Mar 02, 2011)

4th DCA: “The fact that the corporation’s two shareholders would be subject to personal jurisdiction in Florida in their individual capacities does not create personal jurisdiction over the corporation.”

Most civil litigators (and judges) spend most of their professional lives involved in cases based on in personam jurisdiction. Probate is different. In probate it’s all about in rem jurisdiction. This fundamental distinction is often glossed over by practitioners and trial judges alike, leading to all sorts of unfortunate rulings. The linked-to opinion is an example of this fact of life.

The jurisdictional distinctions between probate and most other civil litigation come to a head whenever there’s a disagreement involving a probate court’s power over [a] someone’s personal assets (vs. their share of the estate, click here), or [b] over foreigners/non-residents, click here).

In the linked-to opinion above the question was whether a Florida probate judge had jurisdictional authority to enter a freeze order over the assets of a NY LLC based solely on the allegation that the NY LLC was owned 50% by a FL decedent. The answer, by the way, is NO.

Here’s the jurisdictional allegation made by the estate in support of its freeze-order petition. Note the emphasis on the court’s inherent authority over assets of the estate, which is an in rem argument:

The amended petition is devoid of allegations that Stardale [the NY LLC] committed any act or omission within or directed towards Florida. The sole jurisdictional allegations found in the petition state that Stardale “is a foreign limited liability corporation owned 50% percent by the [e]state and 50% by Henderson” and that the court “has jurisdiction over the parties … pursuant to its inherent jurisdiction to monitor the administration of the estate.”

The 4th DCA didn’t bite on the in rem reference, instead framing its analysis on the required two-part personal jurisdiction test I’ve written about before [click here]. This is an important point: framing the issue in terms of personal jurisdiction pre-determined the outcome of this appeal. Here’s why:

We hold that these allegations in the amended petition are insufficient to state a basis for personal jurisdiction over Stardale. The estate made no allegations of conduct by Stardale which would subject the corporation to the jurisdiction of a Florida court under section 48.193(1). The fact that the corporation’s two shareholders would be subject to personal jurisdiction in Florida in their individual capacities does not create personal jurisdiction over the corporation. Cf. Beasley v. Diamond R. Fertilizer, Co., 710 So.2d 1025, 1026 (Fla. 5th DCA 1998) (holding that the conduct of business in Florida by a corporation would not subject its shareholders to personal jurisdiction in Florida). The petition contains no allegations that Stardale is Henderson’s alter ego. See, e.g., Nichols v. Paulucci, 652 So.2d 389, 393 (Fla. 5th DCA 1995). Likewise, no allegations of a principal-agent relationship were found in the petition. See, e.g., TRW Vehicle Safety Sys. Inc. v. Santiso, 980 So.2d 1149, 1152-53 (Fla. 4th DCA 2008). As the estate failed to allege facts bringing Stardale within the reach of the long-arm statute, we need not address whether the allegations, if proven, would demonstrate sufficient minimum contacts with Florida.

Because the allegations in the petition are insufficient, the trial court should have dismissed the amended petition as to Stardale without prejudice. See World Class Yachts, Inc. v. Murphy, 731 So.2d 798, 800 (Fla. 4th DCA 1999) (holding that dismissal of a complaint for insufficient jurisdictional allegations should be without prejudice to amend). As such, we need not decide whether the evidence adduced at the hearing was sufficient to establish jurisdiction. See Hall, 980 So.2d at 1291. We reverse and remand for further proceedings.