Case Title: MS v. Dinkytown Day Care Center, Inc.

Citation: 485 N.W.2d 587

Docket Number: 

State: south-dakota

Court: South Dakota Supreme Court

Date: 1992-05-06T00:00:00Z

Document:
485 N.W.2d 587 (1992) M.S. and C.S. as Guardians ad Litem for L.R.S., a Minor, and C.L.P. as Guardian ad Litem for K.S.D., a Minor, Plaintiffs and Appellants, v. DINKYTOWN DAY CARE CENTER, INC., a South Dakota Corporation, Defendant and Appellee. No. 17556. Supreme Court of South Dakota. Considered on Briefs December 5, 1991. Decided May 6, 1992. Rick Johnson of Johnson, Eklund & Abourezk, Gregory, for plaintiffs and appellants. Charles M. Thompson of May, Adam, Gerdes & Thompson, Pierre, for defendant and appellee. PER CURIAM. M.S. and C.S., guardians ad litem for minor L.R.S., and C.L.P., guardian ad litem for minor K.S.D. (collectively referred to as parents) appeal a judgment on the pleadings in favor of Dinkytown Day Care Center, Inc. (Dinkytown) in their civil action for the alleged sexual abuse of the minor children while in Dinkytown's care. We affirm. On October 9, 1990, parents filed a summons and complaint against Dinkytown for injuries to the minor children resulting from their alleged sexual abuse while in Dinkytown's care. Causes of action were raised on behalf of both parents and the children for breach of contract/warranty; negligence; intentional and negligent infliction of emotional distress; and, medical costs. The summons and complaint were served on October 11, 1990. Dinkytown answered and moved to dismiss on the following basis: Dinkytown subsequently filed a motion for judgment on the pleadings with a supporting affidavit verifying it was dissolved with the Secretary of State's issuance of a certificate of dissolution on June 3, 1988. On April 12, 1991, the trial court issued its memorandum decision finding parents' action was commenced more than two years after Dinkytown's dissolution and that it was, therefore, time barred. The trial court directed judgment on the pleadings be entered in favor of Dinkytown and judgment was so entered on April 18, 1991. Parents appeal. "Judgment on the pleadings provides an expeditious remedy to test the legal sufficiency, substance, and form of the pleadings. However, it is only an appropriate remedy to resolve issues of law when there are no remaining issues of fact." Korstad-Tebben v. Pope Architects, 459 N.W.2d 565, 567 (S.D.1990) (citations omitted). In this instance, there is no dispute on the relevant facts.[*] The arguments relate solely to whether the trial court erred in finding parents' action time barred under the pertinent statutes. Legal issues involving the interpretation of statutes are subject to de novo review by this court. See, Bryant v. Butte County, 457 N.W.2d 467 (S.D.1990). SDCL 47-26-39 provides in pertinent part: The trial court held because Dinkytown was dissolved on June 3, 1988, and parents did not commence their action until October 9, 1990, more than two years passed after the date of dissolution and, accordingly, parents' action was time barred by SDCL 47-26-39. Parents argue this two year period for bringing claims against a dissolved corporation should have been tolled as to the children's claims by SDCL 15-2-22(1) which provides: The trial court held SDCL 47-26-39 is not a statute of limitations subject to tolling by this provision but a survival statute unaffected by the tolling requirement. We agree. At the outset, we observe that absent the two year period for bringing claims against a dissolved corporation allowed by SDCL 47-26-39, the children's right to bring an action against Dinkytown would have abated with its dissolution. As observed by the U.S. Supreme Court in Oklahoma Natural *589 Gas Co. v. Oklahoma, 273 U.S. 257, 47 S. Ct. 391, 71 L. Ed. 634 (1927): Oklahoma Natural Gas Co., 273 U.S. at 259-60, 47 S. Ct. at 392, 71 L. Ed. at 635-36 (citations omitted). Accord, Floerchinger v. Sioux Falls Gas Co., 68 S.D. 543, 5 N.W.2d 55 (1942). It follows that: Christensen v. Boss, 179 Neb. 429, 138 N.W.2d 716, 720 (1965). Statutes such as SDCL 47-26-39 which continue the existence of dissolved corporations for a fixed time for purposes of defending and prosecuting suits are generally viewed as survival statutes and not statutes of limitation. See, e.g., Licht v. Association Services, Inc., 236 Neb. 616, 463 N.W.2d 566 (1990); Van Pelt v. Greathouse, 219 Neb. 478, 364 N.W.2d 14 (1985); Bazan v. Kux Machine Company, 52 Wis.2d 325, 190 N.W.2d 521 (1971). Thus, in Davis v. St. Paul Fire & Marine Ins. Co., 727 F. Supp. 549 (D.S.D.1989), the District Court viewed SDCL 47-7-50 as a survival statute rather than a statute of limitations. SDCL 47-7-50, like SDCL 47-26-39, extends the life of corporations for two years after dissolution for purposes of suing and being sued. SDCL 47-7-50 merely applies to business corporations while SDCL 47-26-39 applies to nonprofit corporations. Thus, there is substantial support for the trial court's determination that SDCL 47-26-39 is a survival statute and not a statute of limitations. The distinction between a survival statute and a statute of limitations, Davis, 727 F. Supp. at 551 (citations omitted) (emphasis added). The fact a survival statute essentially creates a right or claim that would not exist but for the statute is key to this court's determination of whether the minority tolling provision in SDCL 15-2-22(1) is applicable to the corporate survival period established by SDCL 47-26-39. In Matter of Estate of Erdmann, 447 N.W.2d 356 (S.D.1989), this court was confronted with the issue of whether SDCL 15-2-22(1) tolled a statutory three year time limit for applying for a refund of overpaid inheritance taxes. Holding the tolling provision inapplicable, we observed *590 that where the legislature creates a right, "[I]t has `the power to impose any restrictions it sees fit,' and the conditions imposed `qualify the right and are an integral part thereof; they are conditions precedent which must be fully complied with, or the right does not exist.'" Erdmann, 447 N.W.2d at 358 (emphasis added) (quoting Acton Const. Co. v. Commissioner of Revenue, 391 N.W.2d 828, 835 (Minn.1986)). From this foundation, we concluded: Erdmann, 447 N.W.2d at 359 (emphasis original) (citations and footnote omitted). As in Erdmann, the right at issue in this case, i.e., the children's right to recover from Dinkytown, was purely statutory. As previously discussed, absent the corporate survival period in SDCL 47-26-39, the children's right to recover would have been extinguished with Dinkytown's dissolution. It was only because of SDCL 47-26-39 that the children's right to recover was extended after the date of dissolution. Despite this extension, the children's right to recover after dissolution never arose. The right was subject to a condition, i.e., commencement of an action within two years of the date of dissolution. This the children and parents did not do and, therefore, a condition precedent to the children's right to recover never occurred. It follows that, as in Erdmann, the minority tolling provision of SDCL 15-2-22(1) does not apply in this case. The two year period for bringing claims provided for in SDCL 47-26-39 is not a statute of limitations subject to tolling by SDCL 15-2-22(1) but a condition precedent to the right to recover damages from a dissolved corporation. This analysis is consistent with that relied upon in a variety of other cases holding minority tolling provisions like SDCL 15-2-22(1) inapplicable to statutory rights of recovery predicted on meeting certain time limits. See, e.g., Boatman v. Dawkins, 294 Ark. 421, 743 S.W.2d 800 (1988) (minority tolling provision inapplicable to statute requiring illegitimate child to file claim for share of father's estate within 180 days of death of putative father); Whittington v. State, 72 Haw. 77, 806 P.2d 957 (1991) (minority tolling provision inapplicable to two year limitation period for filing actions against state); Demchuk v. Duplancich, 92 Ill. 2d 1, 64 Ill.Dec. 560, 440 N.E.2d 112 (1982) (minority tolling provision inapplicable to one year limitation in Dramshop Act); Harden v. State, 434 N.W.2d 881 (Ia.1989) (minority tolling provision inapplicable to statute of limitations for actions against state). A result contrary to the above was reached by the appellate court of Illinois in Moore v. Nick's Finer Foods, Inc., 121 Ill.App.3d 923, 77 Ill.Dec. 364, 460 N.E.2d 420 (Ill.App.Ct.1984). In Moore it was held that a minor could bring a common law cause of action against a dissolved corporation more than two years after its dissolution if the action was brought within two years of the minor's reaching the age of majority. The trial court had dismissed Moore's action against a dissolved corporation under a two year survival statute similar to SDCL 47-26-39. On appeal, it was argued the two year survival statute should have been tolled under a minority tolling provision similar to SDCL 15-2-22(1). Citing a series of cases in which Illinois courts had recognized a minor should not be precluded from enforcing its rights unless clearly debarred from doing so, the Illinois Court reversed the dismissal of the action. Despite the fact Moore is highly analogous to the present case, its result is clearly at odds with this court's analysis in *591 Erdmann, supra, and the series of cases cited above. Moore also appears to conflict with the decision of the Illinois Supreme Court in Demchuk, supra, which held a one year time limit for dramshop actions untolled by the Illinois minority tolling provision. Although the Moore court distinguished Demchuk on the basis that a common law cause of action was involved in Moore, it failed to reconcile that reasoning with the rule that, at common law, the power of a corporation to sue and be sued is extinguished with its dissolution, a rule clearly recognized by the Illinois courts. See, e.g., Vance v. North American Asbestos Corp., 203 Ill.App.3d 565, 149 Ill.Dec. 1, 561 N.E.2d 279 (Ill.App.Ct.1990). Moreover, the Illinois Appellate Court has subsequently identified the distinguishing feature of Moore as the existence of liability insurance to cover the claim of the minor and thereby avoid a suit's disruption of corporation dissolution proceedings. Id. However, even the Illinois Court has refused to recognize a rule that the time limits of a corporate survival statute should be disregarded in all cases where unexhausted liability policies covering the dissolved corporation are still in existence. Id. Based upon the above review, we find the holding of Moore anomalous and that application of this court's analysis in Erdmann represents a sounder and more consistent legal path. Relying on Erdmann, we hold there was no error by the trial court in failing to apply SDCL 15-2-22(1) in this case and in granting Dinkytown judgment on the pleadings. Parents also raise a vague argument that application of the corporate survival provision in SDCL 47-26-39 in this case violates the children's rights to equal protection of the law. However, in Sharp v. Sharp, 422 N.W.2d 443, 445 (S.D.1988) we stated: Given the similar status of the record in the instant case, we likewise decline consideration of the constitutional question at this time. Affirmed. MILLER, C.J., and WUEST, HENDERSON, SABERS and AMUNDSON, JJ., participating. [*] We note the allegations of sexual abuse are not at issue in this appeal.