Case Title: CATAMOUNT CONSTRUCTION, a Wyoming corporation v. TIMMIS ENTERPRISES, a Wyoming corporation and CRAYTON MASONARY, INC., a Wyoming corporation

Citation: 

Docket Number: S-08-0023

State: wyoming

Court: Wyoming Supreme Court

Date: 2008-10-09T00:00:00Z

Document:
CATAMOUNT CONSTRUCTION, a Wyoming corporation v. TIMMIS ENTERPRISES, a Wyoming corporation and CRAYTON MASONARY, INC., a Wyoming corporation2008 WY 122193 P.3d 1153Case Number: No. S-08-0023Decided: 10/09/2008
OCTOBER 
TERM, A.D. 2008

 
 

CATAMOUNT 
CONSTRUCTION, a Wyoming 
corporation,Appellant(Plaintiff),v.TIMMIS 
ENTERPRISES, a Wyoming corporation and CRAYTON 
MASONRY, INC., a Wyoming 
corporation,Appellees(Defendants).

 
 

Appeal 
from the DistrictCourtofLaramieCounty

The 
Honorable Edward L. Grant, Judge

 
 
Representing 
Appellant:

Raymond 
W. Martin of Sundahl, Powers, Kapp & Martin, Cheyenne, Wyoming.

 
 
Representing 
Appellee Crayton Masonry:

Julie 
Nye Tiedeken of McKellar, Tiedeken & Scoggin, LLC, Cheyenne, Wyoming.

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.

 
 
KITE, 
Justice.

 
 
[¶1]      General 
contractor Catamount Construction (Catamount) filed suit against several of its 
subcontractors, alleging defective work on a house in Cheyenne.  The subcontractors filed motions to 
dismiss, asserting that Catamount had no standing to maintain its suit because 
it was defunct as the result of bankruptcy.  The district court granted the 
subcontractors' motions.  On appeal, 
we conclude that corporate existence is a matter of state law and, under 
Wyoming law, a 
dissolved corporation may sue and be sued.  
Catamount, therefore, has standing to maintain this 
action.

 
 
[¶2]      We reverse and 
remand.  

 
 
ISSUES

 
 
[¶3]      Catamount 
presents the following issue on appeal:

 
 
Did 
the District Court err in dismissing Catamount Construction's lawsuit against 
the Appellees on the basis that, due to Catamount Construction's Chapter 7 
bankruptcy, Catamount is a defunct corporation and therefore has no standing or 
capability to pursue a cause of action?

 
 
The 
only appellee appearing on appeal is Crayton Masonry, Inc. (Crayton).1   Crayton states an additional 
issue:

 
 
Was 
the Complaint properly dismissed because it failed to allege a justiciable 
controversy?

 
 
FACTS

 
 
[¶4]      In 2002, Paul 
and Diane Steele contracted with Catamount to act as general contractor on a 
house in Cheyenne.  
In the process of building the home, Catamount engaged subcontractors to 
accomplish various aspects of the construction.  Crayton was one of the 
subcontractors.    

 
 
[¶5]      On June 10, 2005, 
Catamount filed a voluntary petition for bankruptcy under Chapter 7 of the 
Bankruptcy Code.  The petition 
listed the Steeles and Crayton as creditors.  The bankruptcy trustee reported the 
corporation had no assets to administer and the case was designated as fully 
administered and closed on November 7, 2005.  At some point, Catamount was 
administratively dissolved by the Wyoming Secretary of State.       

  

[¶6]      The Steeles 
asserted that portions of the construction were defective, including some of the 
work performed by Crayton.  They 
alleged that, as general contractor, Catamount was responsible for the work of 
its subcontractors.  In anticipation 
of the Steeles' claims, Catamount initiated suit against several subcontractors, 
including Crayton, on August 2, 2007.  
Shortly thereafter, the Steeles filed an action against Catamount and its 
insurer.      

 
 
[¶7]      Crayton filed a 
motion to dismiss the complaint, asserting that Catamount did not have standing 
to sue, as it was a defunct corporation after its bankruptcy.  Crayton further argued that Catamount's 
claims were not ripe because they depended on the Steeles having a valid claim 
against Catamount, which assertion was purely speculative.  The district court dismissed Catamount's 
suit on the basis that it was a defunct corporation as a result of its 
bankruptcy and, therefore, did not have standing to sue.  Catamount appealed.      

 
 
STANDARD 
OF REVIEW

 
 
[¶8]      Although styled 
as a dismissal, the district court's ruling is properly reviewed as a summary 
judgment order because the court considered information outside of the 
pleadings.  Mathisen v. Thunder Basin Coal Co., LLC, 
2007 WY 161, ¶ 8, 169 P.3d 61, 63 
(Wyo. 2007).   Summary judgments are governed by 
W.R.C.P. 56(c):

 
 
The 
judgment sought shall be rendered forthwith if the pleadings, depositions, 
answers to interrogatories, and admissions on file, together with the 
affidavits, if any, show that there is no genuine issue as to any material fact 
and that the moving party is entitled to a judgment as a matter of 
law.

 
 
[¶9]      A district 
court's summary judgment ruling is reviewed de novo, using the same materials and 
following the same standards as the district court.  The evidence is considered from the 
vantage point most favorable to the party opposing the motion, and we give that 
party the benefit of all favorable inferences that may fairly be drawn from the 
record.  Metz v. Laramie County School Dist. No. 1, 
2007 WY 166, ¶ 17, 173 P.3d 334, 
339 (Wyo. 2007); Cook v. Shoshone First 
Bank, 2006 WY 13, ¶ 11, 126 P.3d 886, 889 (Wyo. 2006).

 
 
DISCUSSION

 
 

1.                  
Standing

 
 
[¶10]   The district court dismissed 
Catamount's complaint ruling that, as a result of its bankruptcy, it was a 
defunct corporation and did not have standing to pursue its action.  Catamount argues on appeal that the 
district court's decision was erroneous as a matter of 
law.

 
 
[¶11]   One of the primary cases supporting 
the district court's decision is Liberty 
Trust Co. Employees Profit Sharing Trust v. Holt (In the Matter of Liberty Trust 
Co.), 130 B.R. 467 (W.D. Tex. 1991).  
In Liberty Trust, the federal 
district court considered the issue of "whether a Chapter 7 corporate debtor has 
an existence or life outside of the bankruptcy estate."  Id. at 470.   It ruled:

 
 
[t]his 
Court believes the Bankruptcy Court was correct in concluding that the Debtor in 
this instance could have no further existence.   Title 11, United States 
Code, Section 727(a)2 provides that a corporation or 
partnership is not entitled to discharge under Chapter 7. Only individuals are 
eligible for discharge.  Congress' purpose in denying discharge to 
corporations and partnerships was to "avoid the trafficking in corporate shells 
and in bankruptcy partnerships."  The consequence of denying discharge to 
corporations and partnerships in a Chapter 7 proceeding is to render such 
entities "defunct."  The Court 
assumes that "defunct" depicts a status akin to that of a dissolved corporation 
or partnership, and so interprets the term in this case.

 
 

Id. 
at 471 (footnote added).  

 
 
[¶12]   Recognizing that corporations are 
creations of state law, the Liberty Trust 
court concluded that "under Texas law the [c]orporation is civilly 
dead'" and described the 
corporation's legal status as "a state of limbo," in which it could not assert 
rights to any causes of action.  
Id. at 472.  
The court declared the corporation "de facto" dissolved.  Id.  
Other cases have followed the Liberty Trust ruling.  See, e.g., Thornton v. Mankovitch, 626 S.E.2d 189 
(Ga. Ct. App. 2006); U.S. Dismantlement 
Corp. v. Brown Assoc., Inc., 2000 WL 433971, No. Civ. A. 97-1309 (E.D. 
Pa. April 13, 
2000).       

 
 
[¶13]   There are, however, cases that have 
reached the opposite conclusion.  In 
NLRB v. Better Building Supply Corp., 837 F.2d 377 (9th Cir. 1988), the 
United States Court of Appeals for the Ninth Circuit noted that, pursuant to 11 
U.S.C. § 727, a corporation is not entitled to discharge its debt in a 
liquidation proceeding under Chapter 7 of the Bankruptcy Code.  Id. at 378-79, citing 6 Lawrence P. King, Collier on Bankruptcy ¶ 727-7 through 
727-9 (15th ed. 2001).  
Thus, the NLRB debt survived the corporation's bankruptcy.  Id.  

 
 
[¶14]   The court also ruled that Chapter 7 
proceedings do not dissolve a corporation.  
Dissolution of a corporation can only be accomplished under state 
law.  Id. at 379.  NLRB stated that "[t]he drafters chose 
not to make corporate debt dischargeable so that corporations continuing to 
operate could not avoid previously incurred debt. . . . In adopting section 
727(a)(1), Congress intended that corporate debt would survive Chapter 7 
proceedings and be charged against the corporation when it resumed 
operations."  Id.  
 Thus, under the 
teachings of NLRB, a corporation 
continues to exist after Chapter 7 bankruptcy proceedings and, consequently, 
would retain standing to sue.  See also, Contreras v. Corinthian Vigor Ins. 
Brokerage, Inc., 103 F. Supp. 2d 1180, 1183-84 (N.D. Cal. 2000).    

 
 
[¶15]   A Texas bankruptcy court expressly 
rejected the Liberty Trust reasoning 
in In re CVA General Contractors, Inc., 
267 B.R. 773, 782 n. 10 (Bkrtcy., W.D. Tex. 2001).  The bankruptcy court agreed with NLRB 
that a bankruptcy liquidation does not effect a dissolution of the 
corporation.  Moreover, CVA indicated that Liberty Trust did not correctly 
interpret Texas corporation law.  CVA stated that Texas law provides that 
"a dissolved corporation continues its corporate existence for a period of three 
years from the date of dissolution, among other reasons, to prosecute or defend 
in its corporate name any action or proceeding by or against the dissolved 
corporation' and to permit the survival of any existing claim by or against the 
dissolved corporation.'" Id., quoting TEX.BUS.CORP.ACT, Art. 
7.12A(1)-(2) (West Supp. 2001).  Thus, according to CVA, a Texas corporation continues to exist for a 
time after dissolution for limited purposes, including to pursue legal actions, 
an important detail overlooked by Liberty Trust.  Id.  

 
 
[¶16]   In F.P. Woll & Co. v. Fifth and Mitchell Street Corp., 2001 WL 
34355652, No. Civ.A. 96-CV-5973 (E.D. Pa. Dec. 
13, 2001), the United 
States district court concluded that the NLRB line of cases was correct.  

 
 
When 
a corporation files for bankruptcy under Chapter 7 of the Bankruptcy Code, a 
trustee is appointed who arranges for the orderly distribution of the 
corporation's assets amongst its creditors. See 11 U.S.C. § 704 (2001). 
The corporation is thereby liquidated. Eaton argues that judgment should not be 
entered against it in this case because a corporation which has been liquidated 
under Chapter 7 is de facto dissolved, and therefore lacks the capacity to sue 
and be sued.

 
 
The 
question of Eaton's capacity to sue and be sued after liquidation is decided 
under Pennsylvania law. See FED. R. CIV . P. 
17(b) (providing that "[t]he capacity of a corporation to sue or be sued shall 
be determined by the law under which it was organized."); 6 Lawrence P. King, 
Collier On Bankruptcy  ¶ 727 .01[3] (15th Ed.2001) ("After 
liquidation, any dissolution of the corporation ... must be effectuated under 
state law, since the Code does not provide for dissolution of corporations[.]") 
Pennsylvania 
has a "detailed statutory scheme for voluntary corporate dissolution. In 
particular, Articles of Dissolution must be filed with the Department of State." 
Atlantic Richfield Co. v. Blosenski, 847 F. Supp. 1261, 1282 (E.D.Pa.1994) 
(citations omitted). A corporation is not protected from suit until two years 
after the date of its dissolution. See 15 Pa.C.S.A. § 1979(a)(2) (2001). 
Because Eaton has not dissolved itself under Pennsylvania law, it retains the capacity to 
sue and be sued.

 
 
The 
legislative history of Section 727(a)(1) of the Bankruptcy Code-which provides 
that, unlike an individual, a corporation that files under Chapter 7 is not 
entitled to a discharge of its debts-supports the conclusion that a corporation 
which has been liquidated in a bankruptcy proceeding is not thereby dissolved. 
See 11 U.S.C. § 727(a)(1) (2001). Both the House and Senate Reports state 
that the denial of discharge is meant to "avoid trafficking in corporate shells, 
a form of bankruptcy fraud."  
H.R.Rep. No. 595, 95th Cong. 1st Sess.384 
(1977).  See also S.Rep. No. 
989, 95th Cong. 2nd Sess. 130 
(1978). This is because "a corporation with a substantial tax loss but with all 
of its debts discharged would be an attractive vehicle to shield profits." 
U.S. Dismantlement Corp. v. Jeffrey M. Brown Assoc., Inc., 97-CV-1309, 
2000 WL 433971, at 2 (E.D.Pa. Apr.13, 2000). There would be no traffic in 
corporate shells if those shells were de facto dissolved, and therefore lacked 
the capacity to act. The shell of a bankrupt corporation would only be 
attractive if it were still alive, and able to resume business free of its 
obligations. This is likely why Congress acted affirmatively, as part of the 
Bankruptcy Reform Act of 1978, to deny discharge to 
corporations.

 
 
The 
relevant case law also supports the conclusion that "defunct" corporations are 
not dissolved and therefore retain the capacity to sue and be sued. See Nat'l 
Labor Relations Bd. v. Better Bldg. Supply Corp., 837 F.2d 377, 379 (9th 
Cir.1988) (corporate debt could be charged against liquidated corporation when 
it resumed operations); Contreras v. Corinthian Vigor Ins. Brokerage, 
Inc., 103 F. Supp. 2d 1180, 1183-1184 (N.D.Cal.2000) (corporation's bankruptcy 
did not bar suit); DeLeon v. Beneficial Constr. Co., 55 F. Supp. 2d 819, 
824 (N.D.Ill.1999) (plaintiff could sue corporation as soon as its bankruptcy 
case was closed, despite fact that corporation was "insolvent and certainly 
judgment-proof"); In re CVA General Contractors, Inc., 267 B.R. 773, 782 
n. 10 (Bankr.W.D.Tx.2001) (liquidation did not effect dissolution).  But see, e.g., U.S. Dismantlement v. 
Jeffrey M. Brown Assoc., Inc., 97-CV-1309, 2000 WL 433971, at 4 (E.D.Pa. 
Apr.13, 2000). In Better Building Supply Corporation, the Ninth Circuit 
rejected the argument raised by Eaton in this case that Congress denied 
discharge to corporations because discharge would be pointless, since Chapter 7 
proceedings effect dissolution. See Better Bldg. Supply Corp., 837 F.2d  
at 379. Instead, that court found, corporations are denied discharge to prevent 
them from resuming business free of debt. Id. The debt survives bankruptcy, and 
the corporation survives too, because the debt cannot survive without a 
debtor. 

 
 

Id. 
at 
2-4.  

 
 
[¶17]   We agree with NLRB and Woll.  
Corporate existence is clearly a matter of state law.  Bankruptcy does nothing to change the 
existence of a corporation.  The 
fact that Congress has decided that a corporation does not obtain a discharge of 
its debts through a Chapter 7 bankruptcy supports the finding that the 
Bankruptcy Code does not affect a corporation's legal existence or capacity to 
sue or be sued.  If the corporation 
were "defunct" or de facto dissolved 
and incapable of maintaining or defending an action, as the Liberty Trust case concluded, it would 
be unnecessary to deny it a discharge of corporate debt.    

 
 
[¶18]   Furthermore, even if we followed 
the Liberty Trust analysis and 
declared that a corporation was de facto 
dissolved after Chapter 7 bankruptcy, Wyoming law would still allow the dissolved 
corporation to maintain a suit.  
Wyo. Stat. Ann. § 17-16-1405 (LexisNexis 2007) 
states:

 
 
   (a) A dissolved corporation 
continues its corporate existence but may not carry on any business except that 
appropriate to wind up and liquidate its business and affairs, 
including:

            
(i) Collecting its assets;

            
(ii) Disposing of its properties that will not be distributed in kind to 
its shareholders;

            
(iii) Discharging or making provision for discharging its 
liabilities;

            
(iv) Distributing its remaining property among its shareholders according 
to their interests; and

            
(v) Doing every other act necessary to wind up and liquidate its business 
and affairs.

(b) 
Dissolution of a corporation does not:

            
(i) Transfer title to the corporation's property;

            
(ii) Prevent transfer of its shares or securities, although the 
authorization to dissolve may provide for closing the corporation's share 
transfer records;

            
(iii) Subject its directors or officers to standards of conduct different 
from those prescribed in article 8;

            
(iv) Change quorum or voting requirements for its board of directors or 
shareholders; change provisions for selection, resignation, or removal of its 
directors or officers or both; or change provisions for amending its 
bylaws;

            
(v) Prevent commencement of a proceeding by or against the corporation in 
its corporate name;

            
(vi) Abate or suspend a proceeding pending by or against the corporation 
on the effective date of dissolution; or

            
(vii) Terminate the authority of the registered agent of the corporation. 

 
 
(emphasis 
added).  See also, Lusk Lumber Co. v. Indep. Producers Consol., 
43 Wyo. 191, 299 P. 1044, 1050 (Wyo. 1931) (holding that 
suit against a corporation may be maintained after the corporation is 
administratively dissolved).  Thus, 
even if the bankruptcy had triggered a de 
facto dissolution of the corporation and even though Catamount has been 
administratively dissolved by the Wyoming Secretary of State, it can still sue 
and be sued.   The district 
court's ruling that Catamount did not have standing to maintain its suit was 
erroneous.3  

 
 

2.                  
Justiciable 
Controversy

 
 
[¶19]   We only consider justiciable 
controversies.  "[A] justiciable 
controversy is defined as a controversy fit for judicial resolution."  Cox v. City of Cheyenne, 2003 WY 146, 
¶ 9, 79 P.3d 500, 505 (Wyo. 
2003).   Reiman Corp. v. City of Cheyenne, 838 P.2d 1182, 1186 (Wyo. 1992).  In other words, there must be a 
violation of a genuine, existing right; we will not issue advisory opinions 
addressing future speculative matters.  
Cox, ¶ 10, 79 P.3d  at 505; 
Cranston v. Thomson, 530 P.2d 726, 728-29 
(Wyo. 1975); Brimmer v. Thomson, 521 P.2d 574 
(Wyo. 
1974).  

 
 
[¶20]   Crayton contends that this case 
does not present a justiciable controversy because the complaint merely alleges 
claims that may or may not arise in the future.  Crayton points out that Catamount's 
complaint states that the Steeles have asserted claims which Catamount and 
Crayton both deny.  Crayton argues 
there is no guarantee that Catamount will be liable and suffer any damages 
enabling it to assert its claims against Crayton.

 
 
[¶21]   At the time Catamount filed suit 
against Crayton and the other subcontractors, the Steeles had not yet filed a 
complaint against Catamount.  
However, the record indicates that shortly thereafter, the Steeles did 
file suit against Catamount.  
Catamount claims that its subcontractors, including Crayton, are 
ultimately responsible for the Steeles' damages, if any are proven.  Although it may be appropriate to 
consolidate this case with the action between the Steeles and Catamount, there 
is clearly a justiciable controversy presented here. 

 
 
[¶22]   Reversed and remanded to the 
district court for further proceedings consistent with this opinion.   

 
 
FOOTNOTES

 
 

1Originally 
there were five appellees/defendants in this case.  Three of the five appellees, Markus 
Heating & Air Conditioning, LLC, Moore Foam, LLC, and The Plumbing Store, 
Inc., settled with Catamount and were dismissed.  Timmis Enterprises did not file a brief 
on appeal.   

 
 

2Section 
727(a) states in relevant part:

(a) 
The 
court shall grant the debtor a discharge, unless 

     (1) 
the debtor is not an individual[.]

 
 

3Our decision 
here is limited to the narrow question of whether Catamount has standing to 
maintain its suit.  We do not, and 
cannot, offer any opinion as to whether the specific claims at issue in this 
case were determined within the bankruptcy.