Canadian Ace Brewing Co., v. Joseph Schlitz Brewing Co., ANHEUSER-BUSC

• Decision Date: 22 May 1980
• Docket Number: Nos. 79-2046,79-2237 and 79-2275,ANHEUSER-BUSC,INC,s. 79-2046
• Citation: 629 F.2d 1183
• Parties: CANADIAN ACE BREWING CO. et al., Plaintiffs-Appellants, v. JOSEPH SCHLITZ BREWING CO., Defendant-Appellee. Ida G. SCHULTZ, Marcelle G. Keeshin, and Allen H. Schultz, in their individual capacities, Plaintiffs-Appellants, Cross-Appellees, v., Defendant-Appellee, Cross-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1183

629 F.2d 1183

CANADIAN ACE BREWING CO. et al., Plaintiffs-Appellants, v. JOSEPH SCHLITZ BREWING CO., Defendant-Appellee.

Ida G. SCHULTZ, Marcelle G. Keeshin, and Allen H. Schultz, in their individual capacities, Plaintiffs-Appellants, Cross-Appellees, v. ANHEUSER-BUSCH, INC., Defendant-Appellee, Cross-Appellant.

Nos. 79-2046, 79-2237 and 79-2275.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 22, 1980.

Decided May 21, 1980.

As Amended May 22, 1980.

Allen H. Schultz, Chicago, Ill., for plaintiffs-appellants.

Paul H. LaRue, Chicago, Ill., Scott E. Flick, Washington, D. C., for defendant-appellee.

Before FAIRCHILD, Chief Judge, and SWYGERT and BAUER, Circuit Judges.

FAIRCHILD, Chief Judge.

These two appeals from judgments in favor of defendants raise the question whether actions under the antitrust laws by former stockholders for injuries to their dissolved corporation are barred by the Illinois Business Corporation Act, Ill.Rev.Stat. ch. 32 § 157.94, which limits the time period for a dissolved corporation to sue (or be sued) to within two years from the date of its dissolution.

Canadian Ace Brewing Co. was issued a certificate of dissolution on December 6, 1972, by the Secretary of State of Illinois. The complaints involved in these appeals were filed at separate times thereafter. On November 10, 1977, the individual former stockholders of Canadian Ace filed a complaint against Anheuser-Busch, Inc., a Missouri corporation. On November 13, 1978, Canadian Ace and the individual former stockholders, together, filed a three count complaint against Jos. Schlitz Brewing Co., a Wisconsin corporation.

The allegations in both complaints are substantially similar. In essence, plaintiffs claim that the defendants, Anheuser-Busch, and Jos. Schlitz Brewing Co. (respectively as the first and third largest producers of malt beverages) have monopolized, attempted or combined and conspired to monopolize the malt beverage trade, have entered into contracts, combinations and conspiracies to fix the prices of their malt beverages, and have discriminated in price among different wholesale purchasers of their malt beverages. As a result of these violations it is claimed that Canadian Ace was forced out of business. Additionally, it is alleged that defendants fraudulently concealed the illegal acts from plaintiffs by failing to maintain true and accurate records of the financial transactions which took place, by making fraudulent, false and misleading entries in their books and records and by preparing and filing false and misleading financial statements. The alleged wrongs, it is claimed, proximately and directly caused Canadian Ace to dissolve and the concealment caused more than two years to elapse prior to the discovery of the grounds for these actions.

In an earlier action brought by Canadian Ace against one of the same defendants, Anheuser-Busch, on allegations the same as those claimed here, the district court (Judge Will) refused to invoke its equitable powers to apply the principle of fraudulent concealment so as to toll the two year survival period and allow the corporation to bring the action five years after the corporation was dissolved. Judge Will noted that the plaintiffs, by invoking the principle of fraudulent concealment, attempted to apply to § 94 the tolling principle applied to a statute of limitation. Section 94, according to the court, was not a statute of limitation but a corporate survival statute, enacted both to aid in the winding up process of a corporation following the dissolution and also to prevent the abuse whereby a corporation would dissolve in order to escape creditors. Having found that the principle of fraudulent concealment had no application here, the court granted Anheuser-Busch's motion to dismiss. Canadian Ace Brewing Co. v. Anheuser-Busch, Inc., 448 F.Supp. 769, 771-72 (N.D.Ill.1978), aff'd 601 F.2d 593 (7th Cir.), cert. denied, 444 U.S. 884, 100 S.Ct. 175, 62 L.Ed.2d 113 (1979).

The two district court judges below, Judge Marshall and Judge Grady, adopted and incorporated by reference Judge Will's opinion as a bar not only to the action by Canadian Ace, but likewise, the action brought by the individual stockholders. Schultz v. Anheuser-Busch, Inc. (Memorandum Order, September 13, 1979); Canadian Ace v. Jos. Schlitz Brewing Co. (Memorandum Opinion, August 3, 1979). These appeals followed and were argued separately before this court but on the same day. Since the actions raise substantially the same question and can be decided upon the same grounds, these appeals are consolidated in this opinion. ¹ In both cases, plaintiffs would have us hold that § 94 does not apply to former shareholders suing in their individual capacities as successors to corporate property. In the event § 94 is held to apply, then they say the court should find the running of the statute suspended by the doctrine of equitable estoppel.

I. Applicability of § 94 to Shareholders' Action

At the outset we note that since we are required to determine plaintiffs' right to maintain these actions by construing § 94 of the Illinois statute, we are controlled by the decisions of the courts of Illinois. United States v. United States Vanadium Corporation, 230 F.2d 646 (10th Cir.), cert. denied, 351 U.S. 939, 76 S.Ct. 836, 100 L.Ed. 1466 (1956). ² Section 157.94 of the Business Corporation Act (Ill.Rev.Stat.1975, ch. 32 Sec. 157.94) (hereinafter Section 94) states:

The dissolution of a corporation . . . shall not take away or impair any remedy available to or against such corporation, its directors, or shareholders, for any right or claim existing, or any liability incurred, prior to such dissolution if action or other proceeding thereon is commenced within two years after the date of such dissolution. Any such action or proceeding by or against the corporation may be prosecuted or defended by the corporation in its corporate name.

Under the common law a corporation's capacity to sue or be sued terminated when the corporation was legally dissolved. 16A W. Fletcher, Cyclopedia of the Law of Private Corporations § 8142 (1979 Rev. Vol. Richard P. Eickhoff). Today, however, the harshness of the common law on creditors and shareholders has been replaced in every state by statutes which extend the corporate life for a definite time for the purpose of prosecuting and defending suits. However, where a statute continues the existence of a corporation for a certain period, it is generally held that the corporation becomes defunct upon the expiration of such period, at least in the absence of a provision to the contrary, so that no action can afterwards be brought by or against it and must be dismissed. 16A Fletcher, supra, § 8144.

The many appellate court decisions interpreting § 94 and its predecessors (§ 14 and § 79) show that its intended purpose is to continue the life of a corporation for two years for the purpose of settling its affairs and that actions to collect claims due the corporation may be begun at any time within two years after dissolution of the corporation. After this two-year period, the corporation can neither sue nor be sued. Central Stock & Grain Exch. v. Pine Tree Lumber Co., 140 Ill.App. 471 (1908); Ruthfield v. Louisville Fuel Co., 312 Ill.App. 415, 38 N.E.2d 832 (1942); Malicki v. Bulkley, 107 Ill.App. 595, aff'd 206 Ill. 249, 69 N.E. 87 (1903). Also, cases decided similarly by the Court of Claims include Charles A. Zahn Co. v. United States, 6 F.Supp. 317 (1934); A. J. Bates Co. v. United States, 3 F.Supp. 245 (1933).

A literal reading of the statute also shows that its provisions are applicable not only to a dissolved corporation but also to its directors and shareholders. Koepke v. First National Bank of DeKalb, 5 Ill.App.3d 799, 284 N.E.2d 671 (1972).

Plaintiffs' theory in their briefs, as we view it, is that Canadian Ace had a cause of action for injuries incurred by defendants' alleged antitrust violations and that this cause of action was an asset which passed to them, the former shareholders, by operation of law upon dissolution. As such, they argue that they are now, in their individual capacities, asserting this claim and do not come within the two year limitations of the statute. In support of this argument, plaintiffs rely principally upon Levy v. Liebling, 238 F.2d 505 (7th Cir. 1956), cert. denied, 353 U.S. 936, 77 S.Ct. 812, 1 L.Ed.2d 759 (1957). That case, decided by this court, raised the question as to the ability of former shareholders to bring an action on a judgment, entered in favor of their corporation before dissolution, thirteen years after the corporation was dissolved. Our decision in that case, which allowed the shareholders to maintain a cause of action on the judgment, recognized the rights of former shareholders to succeed, in their individual capacities, to rights owned by their corporation prior to its dissolution.

Although the Levy decision was decided under Kentucky law, the Kentucky statute involved is similar to the Illinois statute, so that the reasoning in that case would be persuasive if the underlying factual situations were the same. ³

Levy and the cases cited within Levy ⁴ are, however, distinguishable from the factual situation now before us. In Levy, the corporation prior to its dissolution (Imperial) not only commenced an action on a claim against Liebling, but such action was reduced to judgment in the Circuit Court in Cook County, Illinois. The judgment, thus, transformed the claim into a fixed debt. In contrast, the claim available to Canadian Ace against defendants, for the alleged antitrust violations, was never asserted by the corporation or its shareholders, either prior to its dissolution or within the two years thereafter.

The Illinois Business Corporation Act § 94 preserves claims existing prior to dissolution if action is commenced within two years after the date of dissolution. The statute does not require that...