Title: Rowell v. Union Bank

State: vermont

Issuer: Vermont Supreme Court

Document:

Rowell v. Union Bank  (94-112); 164 Vt 634; 674 A.2d 1256

[Filed 11-Jan-1996]


                               ENTRY ORDER

                      SUPREME COURT DOCKET NO. 94-112

                            NOVEMBER TERM, 1995


Morris, Hollis, Marvin & Wilbur      }     APPEALED FROM:
Rowell & Rowell Bros., Inc.          }
                                     }
     v.                              }     Orleans Superior Court
                                     }
Union Bank                           }
                                     }    DOCKET NO. S143-90OsC


       In the above-entitled cause, the Clerk will enter:


       Rowell Bros., Inc. appeals the Orleans Superior Court's grant of
  summary judgment in favor of Union Bank, holding that 11 V.S.A. § 2075
  (repealed 1993) bars this conversion action. The issue on appeal is whether
  the limitations period of 11 V.S.A. § 2075 was triggered when notice of
  termination was issued for failure to file an annual report.  Rowell Bros.
  argues that (1) in cases of involuntary dissolution, the limitations period
  commenced when notice of revocation was issued, and (2) because Rowell
  Bros. began a voluntary dissolution procedure, it was not obligated to
  submit an annual report.  We conclude Rowell Bros. ceased to exist as a
  corporation when notice of termination was sent, January 10, 1986, and that
  the statute of limitations had run when the suit was brought.  We affirm.

       On September 18, 1984, Union Bank auctioned off real and personal
  property belonging to Rowell Bros.  On September 17, 1990, Rowell Bros.
  filed this conversion action.  Generally, the statute of limitations for
  conversion is six years.  12 V.S.A. § 511.  However, 11 V.S.A. § 2075
  required a dissolving corporation to bring an action within three years of
  the date it ceased to exist.

       In F.W. Webb Co. v. Martell, we found that dissolution for failure to
  file an annual report is effective once notice of termination is sent by
  the Secretary of State.  149 Vt. 254, 255, 542 A.2d 286, 287 (1988). 
  Accordingly, dissolution for purposes of § 2075 related back to the date
  notice of termination was issued.  Rowell Bros. argues that dissolution is
  not effective until the Secretary of State issues a notice of revocation. 
  The notice of revocation, however, merely affirms the termination and
  triggers 11 V.S.A. § 2056 (repealed 1993), which provides a lawful means of
  dissolving the corporation.  Id. at 256, 542 A.2d  at 287-88.  It is not a
  prerequisite to dissolution.  In the usual case, the corporation ceases to
  exist after some act or omission. Dissolution triggers the process of
  winding up corporate affairs.  Under Rowell Bros.' theory, the corporation
  would legally exist until all its affairs were wound up.  If this were
  true, § 2075 might extend the statute of limitations beyond the general
  six-year limit indefinitely.  We decline to construe 11 V.S.A. § 2075 such
  that it would have produced an unreasonable result.

       Furthermore, under 11 V.S.A. § 2063 (repealed 1993), a corporation
  could be "reinstated" if the corporation paid a fee and submitted an annual
  report within nine months. 11 V.S.A. § 2063.  To be "reinstated," the
  corporation must have changed its status when notice of termination was
  issued, i.e., it must have ceased to exist.

 

       Rowell Bros. also argues that it was absolved from filing an annual
  report because it lost all its property and initiated voluntary dissolution
  procedures.  A corporation is required to file an annual report, however,
  even if it has ceased to do business and is winding up its affairs. 5A
  Fletcher Cyclopedia of the Law of Private Corporations § 2301 at 615 (perm.
  ed. 1995). Corporations may not evade the law by filing articles of
  dissolution.   The obligation to file ends once a corporation winds up its
  affairs.  If Rowell Bros. had wound up its affairs before the annual report
  was due, this action would still be barred, because the statute of
  limitations in 11 V.S.A. § 2075 would necessarily have been tolled prior to
  January 10, 1986, and the six year limit exceeded.  The letter sent by the
  Tax Department informed Rowell Bros. that it was not dissolved as of
  December 5, 1985 and that the voluntary dissolution would not be complete
  until Rowell Bros. received tax clearance.  Therefore, Rowell Bros. should
  have known that the obligation to file an annual report still applied as of
  December 5, 1985.

       Finally, Rowell Bros. argues that if a corporation were dissolved by
  failing to file an annual report, it could shirk its tax obligations and
  not obtain a tax clearance.  This, defendant alleges, contradicts the
  legislature's intent.  However, this could be true whether a corporation
  dissolves voluntarily or involuntarily, and is why annual reports, which
  include the names and addresses of the officers and directors, must be
  filed until the corporation is wound up.

       Rowell Bros., Inc. ceased to exist as of January 10, 1986 because it
  failed to file an annual report; accordingly, 11 V.S.A. § 2075, the
  controlling law when the conduct giving rise to this action occurred, bars
  this claim.

       Affirmed.




     BY THE COURT:



     _______________________________________
     Frederic W. Allen, Chief Justice

     _______________________________________
     Ernest W. Gibson III, Associate Justice

     _______________________________________
Ú-¿  John A. Dooley, Associate Justice
À-Ù   Publish
     _______________________________________
Ú-¿  James L. Morse, Associate Justice
À-Ù   Do Not Publish
     _______________________________________
     Denise R. Johnson, Associate Justice