Opinion ID: 482542
Heading Depth: 1
Heading Rank: 6

Heading: capacity of nepacco to be sued

Text: 91 The capacity of a corporation to sue or be sued is determined by the law under which it is organized. Fed.R.Civ.P. 17(b). The district court held, under Delaware law, a corporation with a forfeited charter is not completely dead for all purposes, but merely in 'a state of coma,' during which it is still subject to suit, even if the suit is brought more than three years after the charter forfeiture. 579 F.Supp. at 827 n. 1, citing Ross v. Venezuelan-American Independent Oil Producers Ass'n, 230 F.Supp. 701 (D.Del.1964), and Wax v. Riverview Cemetery Co., 41 Del. (2 Terry) 424, 24 A.2d 431 (Super.Ct.1942). 92 Appellants argue the district court erred in holding that under Delaware law NEPACCO had the capacity to be sued. Appellants argue NEPACCO did not have the capacity to be sued because the government's action was not brought against NEPACCO until 1980, more than three years after NEPACCO had ceased to do business (1972), had liquidated its assets (1974), and had forfeited its charter for failure to nominate a successor registered agent (1976). See Del.Code Ann. tit. 8, Sec. 278. Appellants admit that NEPACCO has failed to file a certificate of voluntary dissolution with the Delaware Secretary of State, but they argue that NEPACCO simply no longer exists as a corporate entity. Appellants argue that under Delaware law the three-year period begins to run after either dissolution or forfeiture, citing Frederic G. Krapf & Son, Inc. v. Gorson, 243 A.2d 713, 715 (Del.Super.Ct.1968). 93 The government argues the district court correctly held that under Delaware law NEPACCO had the capacity to be sued. The government argues that forfeiture of the corporate charter and voluntary dissolution are not equivalent and that under Delaware law a corporation whose charter has been forfeited has not in fact been dissolved, but instead is merely in a suspended state from which it can be revived at any time. 94 Although the language in Frederic G. Krapf & Son, Inc. v. Gorson, id. at 714, suggest that forfeiture and dissolution may be comparable for purposes of Del. Code Ann. tit. 8, Sec. 278, we agree with the district court that forfeiture of the corporate charter and voluntary dissolution of the corporation are not legally equivalent. The cases distinguishing forfeiture from dissolution are preoccupied with preserving the marketability of titles; however, the case law does support the district court's analysis distinguishing forfeiture from voluntary dissolution. In the key case, Wax v. Riverview Cemetery Co., a holding company had mortgaged certain property it owned. The holding company then conveyed the property and mortgage to a third party. The holding company's charter was then revoked for nonpayment of taxes. Nine years later the mortgagee foreclosed on the property and bought it at a judicial sale. When the mortgagee later sold the property, the prospective buyer challenged the marketability of the mortgagee's title. The state court held that forfeiture of the holding company's charter for nonpayment of taxes does no more than forfeit the corporate right to do business, but does not extinguish the corporation as a legal entity, and, therefore, the holding company could still serve as [a] repository of title and as [an] obligor of a debt. 24 A.2d at 436. Accord Ross v. Venezuelan-American Independent Oil Producers Ass'n, 230 F.Supp. at 703-04 (federal district court for the District of Delaware interpreting Delaware law); see generally 16A W. Fletcher, Cyclopedia of the Law of Private Corporations ch. 65 (rev. perm. ed. 1979). But cf. Johnson v. Helicopter & Airplane Services Corp., 404 F.Supp. 726, 730-35 (D.Md.1975) (overview of Delaware and federal cases; holding that a corporation that had been dissolved, even though it was still conducting certain proceedings brought during its winding-up period, had lost its capacity to sue and be sued and thus could not be sued more than three years after dissolution). 95 Here, NEPACCO has lost its charter, but it has not been dissolved. We agree with the district court that, under these circumstances, NEPACCO's charter can be revived and that it has the capacity to be sued even though the government's initial complaint was not filed until more than three years after forfeiture.