You can
search the entire site.
or go to the recent opinions, or the chronological or subject indices.
Gossman v. Greatland Directional Drilling, Inc. (2/5/99), 973 P 2d 93
Notice: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the attention of
the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone
(907) 264-0608, fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
TIMOTHY L. GOSSMAN, )
) Supreme Court No. S-8310
Appellant, )
) Superior Court No.
v. ) 3AN-96-2377 CI
)
GREATLAND DIRECTIONAL ) O P I N I O N
DRILLING, INC., an Alaskan )
Corporation, ) [No. 5076 - February 5, 1999]
)
Appellee. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
Karen L. Hunt, Judge.
Appearances: Steven D. Smith, Law Offices of
Steven D. Smith, P.C., Anchorage, for Appellant. James M. Seedorf
and Kimberly A. Colbo, Hughes, Thorsness, Powell, Huddleston &
Bauman, L.L.C., Anchorage, for Anadrill, a Division of Schlumberger
Technology Corporation, successor in interest by asset acquisition
to Appellee.
Before: Matthews, Chief Justice, Compton,
Eastaugh, Fabe, and Bryner, Justices.
FABE, Justice.
I. INTRODUCTION
In April 1995 Timothy Gossman was injured while working
at a storage facility formerly owned by Greatland Directional
Drilling, Inc. Gossman sued Greatland for negligence. Greatland,
however, had voluntarily dissolved as a corporation in 1993. The
superior court dismissed the action, ruling that AS 10.06.678 only
permitted a suit against a dissolved corporation when the liability
arose prior to dissolution. Because we conclude that AS 10.06.678
permits a suit against a dissolved corporation for an action that
accrues following dissolution, we reverse.
II. FACTS AND PROCEEDINGS
In August 1993 Anadrill, a division of Schlumberger
Technology Corporation, acquired almost all of Greatland's assets
and assumed Greatland Directional Drilling, Inc.'s corporate
interests and liabilities. Greatland then voluntarily dissolved as
a corporation and received a certificate of dissolution on October
19, 1993.
As part of its former operations, Greatland stored drill
bits in a company-owned facility. In 1984 one of Greatland's
employees modified the rack on which the drill bits were kept but
allegedly forgot to remount a device that was designed to prevent
the drill bits from rolling off the rack. Eleven years later,
Gossman, who worked for Anadrill, was injured at the facility when
an eight-hundred-pound drill bit fell from the shelf on which it
was stored and crushed Gossman's ankle and leg.
In July 1996 Gossman sued Greatland for negligence.
Anadrill moved to dismiss on the ground that AS 10.06.678 does not
provide for such a suit against a dissolved corporation. The
superior court heard oral argument in April 1997 and dismissed the
case. Interpreting AS 10.06.678, which sets forth the limited
circumstances in which a corporation may exist after dissolution,
the superior court found:
Permitting suit on liability which did not
exist prior to or at the time of the dissolution is contrary to an
orderly cessation of a corporate entity. Consequently . . . [the
statute] permits suit against a dissolved corporation only where
the liability was incurred prior to dissolution.
The court then denied Gossman's motion for reconsideration.
Gossman appeals.
III. DISCUSSION
A. Standard of Review
This appeal concerns the proper interpretation of
Alaska's corporate survival statute. The interpretation of a
statute presents a question of law, which we review de novo. [Fn.
1] We will "adopt the rule of law that is most persuasive in
light of precedent, reason, and policy."[Fn. 2]
B. AS 10.06.678 Permits Gossman to Sue Greatland.
At common law, corporate dissolution abated all
litigation to which the corporation was a party. [Fn. 3] But a
survival statute may extend the life of a corporation for
litigation purposes. [Fn. 4]
The Alaska Legislature expressly provided such a survival
statute but has amended it substantially since its original
enactment. The original survival statute, AS 10.05.594, permitted
claims brought within two years after dissolution:
The dissolution of a corporation . . .
does not take away or impair a remedy available to or against the
corporation, its directors, officers, or shareholders, for a right
or claim existing, or a liability incurred, prior to dissolution if
an action or other proceeding is commenced within two years after
the date of dissolution. The action or proceeding by or against
the corporation may be prosecuted or defend[ed] by the corporation
in its corporate name.[ [Fn. 5]]
In 1988 the legislature replaced AS 10.05.594 with AS 10.06.678:
[Fn. 6]
Continued existence of dissolved corporations;
purposes; abatement of actions; distribution of omitted assets.
(a) A corporation that is dissolved voluntarily or involuntarily
continues to exist for the purpose of winding up its affairs,
defending actions against it, and enabling it to collect and
discharge obligations, dispose of and convey its property, and
collect and divide its assets. A dissolved corporation does not
continue to exist for the purpose of continuing business except so
far as necessary for winding up the business.
(b) An action or proceeding to which the
corporation is a party does not abate by the dissolution of the
corporation or by reason of proceedings for winding up and
dissolution of the corporation. A corporation that is dissolved
voluntarily or involuntarily may not commence a court action,
except [to recover improper distributions made to shareholders
during the wind-up process].
(Emphases added.)
We have not had an occasion to interpret AS 10.06.678.
Because of the pronounced change in the language of the 1988
survival statute, however, two important questions of
interpretation arise in this case: (1) whether a claim must have
existed prior to dissolution, and (2) whether a time limit exists
for commencing an action.
1. AS 10.06.678 permits actions arising after a
corporation has dissolved.
We must decide whether the legislature intended AS
10.06.678 to allow suits against dissolved corporations for actions
accruing after dissolution. Although we have never had the
opportunity to interpret Alaska's original survival statute on this
point, the commonly held view was that such statutes only permitted
pre-dissolution tort suits. [Fn. 7] But the 1988 amendments to
Alaska's survival statute eliminated the specific language that a
claim must exist prior to dissolution. AS 10.06.678 simply states:
"A corporation that is dissolved . . . continues to exist for the
purpose of . . . defending actions against it. . . ."[Fn. 8]
While we no longer apply a rigid plain meaning rule of statutory
construction, "[w]here a statute's meaning appears clear and
unambiguous . . . the party asserting a different meaning bears a
correspondingly heavy burden of demonstrating contrary legislative
intent."[Fn. 9]
Greatland contends that the legislature's removal of the
limiting language signified a return to the common law rule, under
which neither pending nor future actions could be maintained or
brought against a dissolved corporation. Gossman argues that
because AS 10.06.678 no longer contains such language, a plaintiff
can sue a dissolved corporation at any time, regardless of when the
action accrued. We address each argument in turn.
Greatland first contends that the legislature intended to
eliminate completely the ability to sue a dissolved corporation.
The plain text of the statute contradicts this interpretation.
Alaska Statute 10.06.678(a) expressly permits a corporation to
defend actions against it. Subsection (b) also provides that "[a]n
action or proceeding to which a corporation is a party does not
abate by dissolution of the corporation." Thus, the legislature
apparently did not intend to revert back to the common law bar to
all actions against a dissolved corporation.
Greatland alternatively argues that AS 10.06.678 limits
actions against dissolved corporations to those that have accrued
prior to dissolution. Although the legislative history of AS
10.06.678 is somewhat scarce, the House and Senate Judiciary
Committees did discuss the development of Alaska's survival statute
and the considerations that influenced the 1988 amendments. [Fn.
10]
The legislature enacted the Alaska Corporations Code in
1957 and modeled it after the Oregon Code, which the Oregon
legislature took verbatim from the Model Business Corporation Act
of 1950 (MBCA). [Fn. 11] Both the Oregon and Alaska legislatures
thus based their survival statutes on MBCA sec. 98 (1951), later
renumbered as MBCA sec. 105 (1969). [Fn. 12] Until 1984, courts
typically interpreted MBCA sec. 105 as only allowing suits against
corporations for actions arising prior to dissolution. [Fn. 13]
But in 1984 the MBCA was revised. When revamping sec. 105, the
revisors remarked that "[e]arlier versions of the Model Act did not
recognize the serious problem created by possible claims that might
arise long after the dissolution process was completed . . . ."
[Fn. 14] As a result, revised MBCA sec. 14.05, replacing sec.
105, states that corporate dissolution does not "prevent
commencement of
a proceeding by or against the corporation in its corporate name"
or "abate or suspend a proceeding pending by or against the
corporation . . . ."[Fn. 15]
The Alaska Legislature expressly considered these
revisions to the MBCA when amending Alaska's survival statute. For
instance, in a letter to Senator Bettye Fahrenkamp, the drafting
committee stated that "[t]he initial and final drafts of the
[revised MBCA] were carefully reviewed, as well as comments of its
reporter"and that HB 322 "continued the strong influence of the
original Model Act . . . but is now heavily augmented by the work
product of the drafters of the [revised MBCA]."[Fn. 16]
Additionally, both the House and Senate Judiciary Committee Files
contain working papers that provide a section-by-section analysis
of HB 322 and a comparison between the house bill, the old Alaska
Business Code, the MBCA, the revised MBCA, as well as similar
statutes in Oregon, California, Delaware, New York, and Washington.
[Fn. 17] The official commentary to the proposed 1988 amendment of
AS 10.06.678 also noted that "RMBCA 14.05(b) contains similar
provisions continuing corporate existence."[Fn. 18] Thus, the
legislative history supports an interpretation of AS 10.06.678 that
permits actions arising after dissolution to be brought against the
dissolved corporation.
Next, we look to similar statutes of other jurisdictions,
as well as the cases analyzing and applying them, in our process of
statutory interpretation. [Fn. 19] Several states, like Alaska, do
not specify when an action against a dissolved corporation must
arise or be brought. [Fn. 20] Only California, however, uses
language identical to Alaska's. California's survival statute
states that a dissolved corporation exists "for the purpose of . .
. prosecuting and defending actions by or against it."[Fn. 21]
Therefore, we look to California's interpretation of its statute
for guidance.
In Pe¤asquitos v. Superior Court (Barbee), [Fn. 22] the
California Supreme Court answered the question that is now before
us. Pe¤asquitos involved homeowners who sued a dissolved
corporation that had improperly graded their housing lots. [Fn. 23]
As in the present appeal, the plaintiffs did not discover the basis
for their cause of action until after the corporation had
dissolved. [Fn. 24] Based on the reasoning of the revisors of the
MBCA, [Fn. 25] and a number of older cases interpreting other
jurisdictions' survival statutes, [Fn. 26] the court held that its
statute permitted claims accruing after dissolution against a
dissolved corporation. [Fn. 27] The court explained:
We perceive nothing unreasonable or improbable
in a construction that permits enforcement of postdissolution
claims against dissolved corporations but not against their
shareholders. Deciding what actions may be asserted against
dissolved corporations requires a balancing of the interest in
compensating just claims against the interest in finality and
repose for dissolved corporations. But the interest in repose
consists largely, if not entirely, in the shareholders' interest in
the prompt distribution and secure possession of the corporation's
remaining assets. Once that interest has been protected, it is
difficult to discern any other interest of sufficient weight to
justify barring a potentially meritorious cause of action asserted
within the relevant limitations period.[ [Fn. 28]]
After consideration of the legislative history and the
persuasive reasoning of the Pe¤asquitos court, we conclude that AS
10.06.678 allows a plaintiff to sue a dissolved corporation on a
cause of action that arises after dissolution. This interpretation
also addresses any policy concern that a corporation could avoid
known potential liability by arranging for its convenient death.
With the enactment of AS 10.06.678, the Alaska Legislature
eliminated any incentive for corporations to attempt such
manipulations.
2. AS 10.06.678 Does Not Provide a Statute of
Limitations.
The second issue that we must address is whether AS
10.06.678 provides any limitations period within which claims
against a dissolved corporation must be brought. The 1988
amendments to AS 10.06.678 explicitly deleted the two-year
limitations period that existed under AS 10.06.594. The official
comment on AS 10.06.678 also expresses the legislature's intent
that a dissolved corporation continue to exist "[f]or an indefinite
period of time"in which to wind up and defend actions against it.
[Fn. 29]
Moreover, as discussed above, the legislature considered
the provisions of the RMBCA, noting that AS 10.06.678 is similar to
RMBCA 14.05(b). [Fn. 30] Section 14.05, alone, leaves open the
possibility that a corporation might be sued for an indefinite
period of time after dissolution. To address such concerns, the
revisors of RMBCA created sec.sec. 14.06 and 14.07. [Fn. 31] These
sections establish an elective procedure whereby corporations may
provide notice to potential claimants that dissolution is to occur
and that known and unknown claims must be brought within a certain
number of years, usually five. [Fn. 32] Approximately thirty
states adopted some version of RMBCA sec.sec. 14.05-14.07 -- many
of them
incorporating these sections verbatim. [Fn. 33] But the drafters
of AS 10.06.678 chose not to include the limiting sections of the
RMBCA. This omission and the legislative comment imply that the
Alaska Legislature intended to allow suits against dissolved
corporations for an indefinite time. [Fn. 34]
Greatland argues that such an interpretation will
"eviscerate the dissolution procedures"by making it impossible for
a corporation to plan for "such a vague and amorphous possibility."
But we observe, as did the court in Pe¤asquitos, [Fn. 35] that the
interest in "finality and repose for a dissolved corporation"
consists primarily in the shareholders' interest in the prompt
distribution and secure possession of the corporation's remaining
assets. [Fn. 36] Allowing post-dissolution claims will not affect
the shareholders' interest because distribution occurs before
dissolution. [Fn. 37] In fact, to facilitate this distribution,
Alaska law requires a corporation to provide for its known
liability before voluntary dissolution, either by purchasing
liability insurance, setting aside assets, or having a successor
assume its liabilities, [Fn. 38] as Greatland did here. Moreover,
if the corporation has set aside assets and too much time has
lapsed, bringing suit against a dissolved corporation in most cases
will often be a pointless exercise, because the corporation will
have no assets with which to satisfy a judgment against it.
Most importantly, our legislature has made a policy
choice to permit a dissolved corporation to exist for an indefinite
period of time in which it may be sued for actions, regardless of
when such actions arise. We defer to its judgment.
IV. CONCLUSION
We conclude that AS 10.06.678 permits a suit against a
dissolved corporation even when the action accrues after
dissolution. We further hold that sec. 678 does not impose a
statute
of limitations on such actions. We therefore REVERSE the superior
court's dismissal and REMAND for further proceedings.
FOOTNOTES
Footnote 1:
See Aetna Cas. & Sur. Co. v. Marion Equip. Co., 894 P.2d 664,
666 (Alaska 1995) (citation omitted).
Footnote 2:
Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
Footnote 3:
See Pe¤asquitos, Inc. v. Superior Court (Barbee), 812 P.2d
154, 156 (Cal. 1991) (cumulating authority).
Footnote 4:
See, e.g., Hood Bros. Partners, L.P. v. USCO Distrib. Servs.,
Inc., 140 F.3d 1386, 1387-88 (11th Cir. 1998).
Footnote 5:
Former AS 10.05.594 (emphases added).
Footnote 6:
See ch. 166, sec. 6, SLA 1988.
Footnote 7:
See Chadwick v. Air Reduction Co., 239 F. Supp. 247, 250 (E.D.
La. 1965); Green v. Oilwell, Div. of U.S. Steel Corp., 767 P.2d
1348, 1350-51 n.1 (Okla. 1989); 3 Model Bus. Corp. Act Annotated
[hereinafter MBCA Annotated] sec. 14.07 annot. at 14-66, 67 (3d ed.
Supp. 1996).
Footnote 8:
AS 10.06.678(a).
Footnote 9:
University of Alaska v. Tumeo, 933 P.2d 1147, 1152 (Alaska
1997) (citations omitted).
Footnote 10:
Legislative committee reports are useful in interpreting
statutes. See Wien Air Alaska v. Arant, 592 P.2d 352, 360 n.32
(Alaska 1979), disapproved of on other grounds in Fairbanks North
Star Borough Sch. Dist. v. Crider, 736 P.2d 770 (Alaska 1987).
Footnote 11:
See Bill on the Alaska Corporations Code, House and Senate
Joint Journal Supp. No. 9 at 1 (1987).
Footnote 12:
See MBCA Annotated sec. 98 (1960).
Footnote 13:
See Green v. Oilwell, Div. of U.S. Steel Corp., 767 P.2d 1348,
1350-51 n.1 (Okla. 1989); 3 MBCA Annotated sec. 14.07 annot. at 14-
67
(3d ed. 1996 Supp.).
Footnote 14:
Model Bus. Corp. Act sec. 14.07 off. cmt. (rev. ed. 1994).
Footnote 15:
Id. at 14.05(b)(5), (6).
Footnote 16:
Bill on the Alaska Corporations Code, House and Senate Joint
Journal Supp. No. 9 at 9 (1987).
Footnote 17:
See The Origins of the Alaska Corporations Code, House
Judiciary Committee File, microfiche 4704-4708, HB 322 (1988)
[hereinafter House Report]; Revision of the Proposed Alaska
Corporations Code, Senate Judiciary Committee file, microfiche
5339-5344, HB 322 (1988) [hereinafter Senate Report]; see also
House Report at preface.
Footnote 18:
Alaska Code Revision Comm'n, A Section by Section Comparison
of the Alaska Corporations Code with the Final Draft of the Revised
Model Business Corporations Act 93 (1984).
Footnote 19:
See 2B Sutherland Stat. Const. sec. 52.01 (5th ed. 1992).
Footnote 20:
See, e.g., Ga. Code Ann. sec. 14-4-161 (1998) (dissolution
shall
not "operate to extinguish any demand or cause of action against it
in favor of any person whomsoever, whether arising from contract or
tort; nor shall such dissolution work the abatement of any action
pending against it"); N.J. Stat. Ann. sec. 14A:12-9 (West 1997)
("[T]he [dissolved] corporation may sue and be sued in its
corporate name and process may issue by and against the corporation
in the same manner as if dissolution had not occurred."); N.Y. Bus.
Corp. Law sec. 1006(a)(4), (b) (McKinney 1986) ("The dissolution of
a
corporation shall not affect any remedy available to or against
such corporation"; "the corporation may sue or be sued in all
courts . . ."); Ohio Rev. Code Ann. sec. 1701.88 (Banks-Baldwin
1998)
("Any claim existing or action or proceeding pending by or against
the corporation or which would have accrued against it may be
prosecuted to judgment . . . .").
Footnote 21:
Cal. Corp. Code sec. 2010(a) (West 1998).
Footnote 22:
812 P.2d 154 (Cal. 1991).
Footnote 23:
See id. at 155.
Footnote 24:
See id.
Footnote 25:
See id. at 160.
Footnote 26:
See, e.g., id. at 159 (quoting Oliver v. American Motors
Corp., 616 F. Supp. 714, 717 (D. Va. 1985) (holding that under
Virginia's survival statute, if corporations could be sued for
actions arising during the wind-up period, "it seems logical . . .
that a corporation should be liable for acts occurring prior to
dissolution which cause injury subsequent to dissolution")); id. at
160 (quoting Naugher v. Fox River Tractor Co., 446 F. Supp. 1281,
1283 (N.D. Miss. 1977) (holding that remedial statutes should be
interpreted liberally, and that under Ohio's survival statute,
corporate liability is established "at the time the machine was
manufactured and placed on the market")).
Footnote 27:
See Pe¤asquitos, 812 P.2d at 162.
Footnote 28:
Id. at 160 (citation omitted).
Footnote 29:
Sectional Analysis of HB 322, House and Senate Joint Journal
Supp. No. 9 at 171 (1987).
Footnote 30:
See Alaska Code Revision Comm'n, A Section by Section
Comparison of the Alaska Corporations Code with the Final Draft of
the Revised Model Business Corporations Act 93 (1984).
Footnote 31:
See Model Bus. Corp. Act sec. 14.07 off. cmt. (rev. ed. 1994).
Footnote 32:
See id. at sec.sec. 14.06, 14.07. The annotation to the
revised
MBCA makes clear that the change from sec. 105 resulted primarily
from
the development of product liability doctrine and "other claims
that may arise years after the original transaction,"which
"created a new set of problems that were not satisfactorily
addressed by earlier versions of the Model Act." MBCA Annotatedsec.
14.07 at 14-67 (3d ed. 1996 Supp.). The official comment to the
revised MBCA noted the tension inherent in the older version of the
Act:
The problems raised by this type of litigation
are intractable: on the one hand, the application of a mechanical
two-year limitation period to a claim for injury that occurs after
the period has expired involves obvious injustice to the plaintiff.
On the other hand, to permit these suits generally makes it
impossible ever to complete the winding up of the corporation, make
suitable provision for creditors, and distribute the balance of the
corporate assets to shareholders.
Model Bus. Corp. Act sec. 14.07 off. cmt.; accord MBCA Annotated,
sec.
14.07 at 14-65. Section 14.07 was thought "to be a reasonable
compromise between the competing considerations of providing a
remedy to injured plaintiffs and providing a period of repose after
which resolved corporations may distribute remaining assets free of
all claims." Model Bus. Corp. Act sec. 14.07 off. cmt.
Footnote 33:
See Ala. Code sec.sec. 10-2B-14.05-.07 (1994) (allowing two
years
following dissolution in which to bring claims that accrue after
dissolution if corporation uses public notice procedure); Ariz.
Rev. Stat. Ann. sec.sec. 10-1405 to 1407 (West 1996) (5 years);
Ark. Code
Ann. sec.sec. 4-27-1405 to 1407 (Michie 1996) (5 years); Colo. Rev.
Stat.
Ann. sec.sec. 7-114-105 to 108 (West Supp. 1997) (5 years); Conn.
Gen.
Stat. Ann sec.sec. 33-884, -886, -887 (West 1997) (3 years); Fla.
Stat.
Ann. sec.sec. 607.1405-.1406 (West 1993 & Supp. 1998); Ind. Code.
Ann. sec.sec.
23-1-45-5 to 23-1-4-7 (Michie 1997) (2 years); Iowa Code Ann.
sec.sec.
490.1405-.1407 (West 1991) (5 years); Ky. Rev. Stat. Ann. sec.sec.
271B.14-050 to -070 (Michie 1996) (2 years); Miss. Code Ann.
sec.sec. 29-4-14.05 to 14.07 (1996) (5 years); Mo. Ann. Stat. sec.
351.482 (West
1991 & Supp. 1998) (2 years); Mont. Code Ann. sec.sec. 35-1-935 to
-937
(1997); Neb. Rev. Stat. sec.sec. 21-20,155 to -20,157 (1997) (5
years);
N.H. Rev. Stat. Ann. sec.sec. 293A:14.05-14.07 (Michie Supp. 1997)
(5
years); N.C. Gen. Stat. sec.sec. 55-14-05 to -07 (1990) (5 years);
Or.
Rev. Stat. sec.sec. 60.637, .641, .644 (1997) (5 years); S.C. Code
Ann.
sec.sec. 33-14-105 to -107 (Law. Co-op. 1990) (5 years); S.D.
Codified
Laws sec.sec. 47-7-6.1 & -7.1 (Michie 1991) (no limit); Tenn. Code
Ann.
sec.sec. 48-24-105 to -107 (1995) (2 years); Utah Code Ann.
sec.sec. 16-102-1405 to 1407 (1995) (5 years); Vt. Stat. Ann. tit.
11A sec.sec. 14.05-.07
(1997) (5 years); Va. Code Ann. sec.sec. 13.1-745, 746 (Michie
1993)
(unspecified); Wash. Rev. Code. Ann. sec.sec. 23B.14.050, .060
(West
1994) (unspecified); Wis. Stat. Ann. sec.sec. 180.1405 -.1407
(1992) (2
years); Wyo. Stat. Ann. sec.sec. 17-16-1405 to -1407 (Michie 1997)
(4
years).
Footnote 34:
Although we conclude that AS 10.06.678 does not provide a
limitations period within which claims against a dissolved
corporation must be brought, any post-dissolution claim must still
satisfy the applicable statute of limitations in AS 09.10.
Footnote 35:
See Pe¤asquitos v. Superior Court (Barbee), [Fn. 39] 812 P.2d
154, 160-61 (Cal. 1991).
Footnote 36:
Id. at 160.
Footnote 37:
See id. at 160-61.
Footnote 38:
See AS 10.06.620(2); AS 10.06.668(1).
Footnote 39:
812 P.2d 154 (Cal. 1991).
