Case Title: Patterson v. Missouri Valley Steel, Inc.

Citation: 229 Kan. 481, 625 P.2d 483

Docket Number: 52,055

State: kansas

Court: Kansas Supreme Court

Date: 1981-03-25T00:00:00Z

Document:
229 Kan. 481 (1981)
625 P.2d 483
MICHAEL J. PATTERSON, Appellant,
v.
MISSOURI VALLEY STEEL, INC., Appellee.
No. 52,055

Supreme Court of Kansas.
Opinion filed March 25, 1981.
Charles A. Briscoe, of Scott, Quinlan & Hecht, of Topeka, argued the cause, and Philip A. Harley, of the same firm, was on the brief for the appellant.
Richard F. Hayse, of Eidson, Lewis, Porter & Haynes, of Topeka, argued the cause and was on the brief for the appellee.
The opinion of the court was delivered by
MILLER, J.:
Plaintiff, Michael J. Patterson, appeals from an order of the Osage District Court sustaining a motion to dismiss filed by Missouri Valley Steel, Inc., a dissolved corporation, and dismissing that defendant from this lawsuit. The sole issue is whether this action was timely commenced against Missouri Valley Steel.
This is an action for damages for personal injuries and wrongful *482 death arising out of the capsizing of the Whippoorwill showboat on Lake Pomona on June 17, 1978. The action is brought by Patterson, a passenger who sustained personal injuries, and whose expectant wife was killed. He commenced the action on November 29, 1978, against Bruce L. Rogers and Veda Rogers, the operators of the showboat. Mr. and Mrs. Rogers were served with summons on the day the action was filed; they have answered, and the action remains pending and undetermined against them in the lower court; they do not appear in this appeal. Other defendants, added after the action was filed, also do not appear here. The only parties appearing are the plaintiff and defendant, Missouri Valley Steel, Inc.
On August 28, 1979, plaintiff filed a motion for leave to amend his petition, and to add additional parties defendant, including Missouri Valley Steel, Inc. The motion was granted and the amended petition was filed August 29, 1979. Personal service was made upon F.C. Bannon, described in the summons as resident agent of Missouri Valley Steel, Inc., on August 30, 1979. The amended petition alleges that the defendant:
Missouri Valley responded within the 20-day period by filing a motion to dismiss for various reasons. It alleged that Missouri Valley "was dissolved on August 13, 1976. By the terms of K.S.A. 17-6807, such a dissolved corporation would be continued for three years after its dissolution for the purpose of prosecuting and defending suits by or against it. Under K.S.A. 60-203 an action is deemed commenced upon the filing of the petition if service is made within 90 days thereafter. However ... this Court did not allow the filing of this petition until August 28, 1979, which was over two weeks past the three year limitation period mandated by K.S.A. 17-6807.... [T]his named defendant had no notification whatsoever that any action by this plaintiff was being brought against it until over three years after its dissolution."
The trial court heard arguments of counsel on various motions *483 in this and several related cases and-on January 2, 1980, sustained Missouri Valley's motion to dismiss. The trial court said:
The court concluded its order by saying in paragraph No. 15:
Next, on January 28th, the court heard a motion to modify its ruling in various respects. It modified paragraph No. 15 of its prior order (the last paragraph set forth above), so that it reads as follows:
K.S.A. 60-254(b) reads in pertinent part as follows:
The journal entry incorporating the trial court's ruling on the motion to modify was approved and filed March 24, 1980. Four days later, on March 28, plaintiff filed an application for interlocutory appeal pursuant to K.S.A. 60-2102(b). That statute, insofar as is material here, is as follows:
"60-2102. Invoking jurisdiction of court of appeals.
....
"(4) A final decision in any action....
On April 10, 1980, the court of appeals entered an order that plaintiff's application for an interlocutory appeal "is denied as moot as plaintiff may appeal as a matter of right per K.S.A. 60-2102(a)." Plaintiff promptly served a notice of appeal from the trial court's order of January 2, as modified March 24, on opposing counsel on April 15, filed it in the office of the clerk of the district court's on April 17, and in the office of the clerk of the appellate courts on April 21, 1980. We hold that when a trial court, in an action involving multiple parties, expressly determines that there is no reason for delay and directs the entry of a final judgment against one of the parties pursuant to K.S.A. 60-254(b), such a judgment may be appealed as a matter of right under K.S.A. 60-2102(a)(4).
After this appeal was taken, the matter was transferred to the supreme court by order entered January 7, 1981, pursuant to K.S.A. 1980 Supp. 20-3018(c). Having determined that we have jurisdiction of the appeal, we now turn to the principal issue presented.
The trial court found, and the parties agree, that Missouri Valley Steel, Inc., was voluntarily dissolved on August 13, 1976. A certificate of dissolution was filed by the corporation in the office of the Secretary of State and in the office of the Register of Deeds of Leavenworth County, in which the registered office of the corporation was located, on that date. This action was not commenced against Missouri Valley until more than three years after August 13, 1976.
Article 68 of Chapter 17 of the Kansas Statutes Annotated is that part of the Kansas General Corporation Code which governs *485 the dissolution of corporations and the disposition of corporate assets upon dissolution. K.S.A. 17-6807 provides for the continuation of corporate existence, for limited purposes, following dissolution. It reads:
The Kansas comment to 17-6807 reads as follows:
K.S.A. 17-6808, providing for the appointment of trustees or receivers of dissolved corporations, reads:
*486 Section 278 of the Delaware corporation code, 8 Del. C. Ann. § 278, after which K.S.A. 17-6807 is patterned, reads:
Section 279 of the Delaware corporation code is virtually the same as K.S.A. 17-6808.
Plaintiff, although acknowledging that suit was filed against Missouri Valley more than three years after dissolution, contends that under K.S.A. 17-6807, the district court is authorized to extend the corporate life for the purpose of defending the action against it, and that corporate existence continues beyond the three-year period. Missouri Valley, on the other hand, contends that a district court may not extend the existence of the corporation by order entered after the expiration of the three-year period, when no application for an extension of continued corporate existence is made within the three-year period. In short, the corporation argues that its corporate existence or status terminated with the expiration of the three-year period after dissolution (except for the purpose of defending suits brought against it before the end of that period) and that thereafter the district court is given no power to revive the corporation; it can only extend corporate life if it makes such an order while the corporation still has life and is in existence  i.e., during the three-year period.
We have not had occasion to interpret this section, but there are a number of cases in other jurisdictions interpreting § 278 of the Delaware corporation code. Plaintiff relies upon three early cases in each of which the corporation had been involuntarily dissolved *487 for failure to pay franchise taxes. These are: Harned v. Beacon Hill Real Estate Co., 9 Del. Ch. 411, 84 A. 229 (1912); Wax v. Riverview Cemetery Co., 41 Del. (2 Terry) 424, 24 A.2d 431 (Super. Ct. for New Castle County, 1942); and Ross v. Venezuelan-American Independent Oil Pro. Ass'n, Inc., 230 F. Supp. 701 (D. Del. 1964).
The first two cases involve title to real estate. In Harned, the corporation held title to real estate and failed to dispose of it during the three-year wind-up period. Thereafter, former stockholders sought to have a receiver appointed to sell the land; the corporation was made a defendant, and its attorney appeared and filed an answer, signed by its president and two directors and attested by the secretary. The receiver sold the land under court order; the purchaser sought to overturn the sale of the land on the theory that the corporation did not have capacity to be named a defendant in the proceedings to appoint the receiver; i.e., could not be sued. The court held that it was necessary to name the corporation a defendant, in order to give it notice of the appointment of the receiver, and it affirmed the judgment appointing a receiver and ordering the land sold. In Wax, title to real estate was challenged on the basis that the corporate holding company which once held title to real estate, and gave a mortgage on it, and which company's charter had been revoked for failure to pay franchise taxes nine years before suit was commenced, was not an existing corporation against whom the foreclosure judgment could be taken. The court held that the forfeiture of the corporate charter for failure to pay taxes only forfeited the corporate right to do business; it did not extinguish the corporation as a repository of and thus the corporation could continue to serve as a repository of title, and as an obligor of a debt, and was subject to suit in the foreclosure action.
The Wax and Harned cases were followed, without enthusiasms, by the United States District Court in Ross v. Venezuelan-American Independent Oil. The corporation's charter had been revoked for failure to pay Delaware franchise taxes. Two attorneys, employed by the corporation during the three-year wind-up period, sued after the period expired to recover fees for services rendered. The court interpreted §§ 278 and 279 of the Delaware corporation code to allow entry of judgment against a corporation after dissolution only if the action were begun before dissolution *488 or within three years thereafter or if a receiver were appointed under § 279. The court, however, felt that it was bound by the precedent established in Wax, "[d]espite what appears to be the questionable construction placed upon the dissolution law" therein, and allowed the attorneys' claims. 230 F. Supp.  at 704.
The gist of the Wax, Harned and Ross cases seems to be that a corporation dissolved involuntarily for failure to pay franchise taxes continues to exist as a legal entity since it may revive itself by paying its back taxes. We note that the Kansas version of the law, K.S.A. 17-6807, contains this wording describing "dissolved" not found in Delaware § 278:
This language was added to the Kansas act in 1972, some years after and apparently in response to the Wax, Harned and Ross decisions.
Smith-Johnson Steamship Corporation v. United States, 231 F. Supp. 184 (D. Del. 1964), was a libel action brought against the United States by the corporation during the three-year period immediately following its voluntary dissolution. After the three-year period had expired, the United States attempted to assert a cross-libel, arising from the same contract. The court held that this was an independent cause of action, and that it was barred by the three-year limitation set out in Delaware's § 278. The court said:
*489 The earlier cases cited above were all considered and the Delaware law was carefully analyzed by the United States District Court in the case of Johnson v. Helicopter & Airplane Services Corp., 404 F. Supp. 726 (D. Md. 1975), which involved a determination of the capacity of a dissolved corporation to be sued, in a products liability action, more than three years after its voluntary dissolution. The court said:
The court distinguished the earlier Delaware cases on the ground that they dealt with involuntary dissolution and were based on a fiction of corporate capacity intended to preserve the marketability of title to real property. It found the Smith-Johnson logic persuasive, noting that the opinion in that case
The court concluded that the corporate defendant had lost the capacity to sue and be sued, and sustained its motion to dismiss. Recent Illinois and Colorado cases follow the same rationale. See Canadian Ace Brewing Co. v. Anheuser-Busch, Inc., 448 F. Supp. 769 (N.D. Ill. 1978), and Casselman v. Denver Tramway Corp., 195 Colo. 241, 577 P.2d 293 (1978).
We have carefully considered the statute, K.S.A. 17-6807, the Delaware section upon which it is based, and the cited cases. We conclude that the rationale of the Johnson case should be followed in this state. We therefore hold that under K.S.A. 17-6807,
(1) A Kansas corporation may sue or be sued during the three-year wind-up period immediately following its dissolution, whether voluntary or involuntary.
(2) A district court may extend the wind-up period and thus extend the time during which a dissolved Kansas corporation *491 may sue or be sued only if application for such extension is made prior to the end of the three-year period.
(3) A dissolved Kansas corporation may sue or be sued during the period of time that a trustee or receiver for the corporation is appointed and acting pursuant to K.S.A. 17-6808.
(4) Absent a court-ordered extension or the appointment of a trustee or receiver, a Kansas corporation which has been dissolved, either voluntarily or involuntarily, may not sue or be sued after the three-year period has ended.
Missouri Valley Steel was not served with summons, and no action by Patterson was pending against it, until after the expiration of the three-year period following voluntary dissolution. No extension was granted by the district court during the three-year period, and no trustee or receiver was sought or appointed. We conclude that the district court was correct in holding, in effect, that Missouri Valley had lost the capacity to sue or be sued, and in sustaining the motion to dismiss.
The judgment is affirmed.