Corp. v. Krafft-Murphy Co. (In re Krafft-Murphy Co.)

Decision Date26 November 2013
Docket Number2013.,No. 85,85
Citation82 A.3d 696
PartiesIn the Matter of KRAFFT–MURPHY COMPANY, INC., A Dissolved Delaware Corporation Robert F. Anderson, et al., Petitioners/Intervenors Below, Appellants, v. Krafft–Murphy Company, Inc., Respondent Below, Appellee.
CourtUnited States State Supreme Court of Delaware

OPINION TEXT STARTS HERE

Court Below: Court of Chancery of the State of Delaware, C.A. No. 6049.

Upon appeal from the Court of Chancery. REVERSED and REMANDED.

Raeann Warner and Jordan J. Perry, Esquires, Jacobs & Crumplar, P.A., Wilmington, Delaware; Jeffrey P. Wasserman, Esquire, Ciconte, Wasserman & Scerba, LLC, Wilmington, Delaware; Of Counsel: Jennifer L. Lilly, Esquire (argued), The Law Offices of Peter G. Angelos, P.C., Baltimore, Maryland; Daniel A. Brown and Eileen M. O'Brien, Esquires, Brown & Gould, LLP, Bethesda, Maryland, for Appellants.

Francis J. Murphy, Esquire, Murphy & Landon, Wilmington, Delaware; Of Counsel: Joseph L. Ruby, Esquire (argued), Lewis Baach PLLC, Washington, DC, for Appellee.

Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS, and, RIDGELY, Justices, constituting the Court en Banc.

JACOBS, Justice:

I. INTRODUCTION

This is an appeal from a judgment of the Court of Chancery in an action to appoint a receiver for Krafft–Murphy Company, Inc. (the Corporation), a dissolved Delaware corporation, under 8 Del. C. § 279. The Petitioners–Below/Appellants, who are tort claimants in lawsuits pending against the Corporation in other jurisdictions, seek the appointment of a receiver to enable them lawfully to pursue those claims against the Corporation in those other courts. The Corporation (as Respondent–Below/Appellee) argues that because it holds no assets other than unexhausted liability insurance policies, Delaware law does not authorize the appointment of a receiver and that, in any event, it is not necessary to appoint one. The Court of Chancery granted summary judgment in favor of the Corporation. The Petitioners timely appealed.

The case raises two interrelated questions of first impression in this Court, plus a third question directly addressed by settled Delaware law. First, does a contingent contractual right, such as an insurance policy, constitute “property” within the meaning of 8 Del. C. § 279? Second, does Delaware's statutory corporate dissolution scheme (8 Del. C. §§ 278–282) contain a generally applicable statute of limitations that time-bars claims against a dissolved corporation by third parties after the limitations period expires? Third, after 8 Del. C. § 278's three year winding-up period expires, does a dissolved corporation have the power to act absent a court-appointed receiver or trustee?

We conclude that under 8 Del. C. § 279, contingent contractual rights, such as unexhausted insurance policies, constitute “property” of a dissolved corporation, so long as those rights are capable of vesting. We further hold that Delaware's dissolution statutes impose no generally applicable statute of limitations that would time-bar claims against a dissolved corporation by third parties. Finally, we hold that the existence of the “body corporate” continues beyond the expiration of the statutory winding-up period of 8 Del. C. § 278 for purposes of conducting litigation commenced before the expiration of that period. But, for litigation commenced after the expiration of that statutory period, a dissolved corporation may act only through a receiver or trustee appointed under 8 Del. C. § 279.

Because the judgment of the Court of Chancery rests on legal determinations inconsistent with these holdings, we reverse the judgment and remand the case for further proceedings in accordance with this Opinion.

II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. The Parties

The Corporation is a dissolved Delaware corporation that, before its dissolution in 1999, engaged in the plastering business in the Washington, D.C. metropolitan area. Beginning in 1989, the Corporation was named as a defendant in hundreds of asbestos-related personal injury lawsuits. The Corporation's defense both in this Delaware proceeding, and in the personal injury lawsuits in other jurisdictions, is being funded and directed by the Corporation's liability insurers in accordance with the applicable insurance policies.

The original Petitioners–Below, who are asbestos claimants represented by a Baltimore, Maryland law firm, have asbestos-related personal injury claims pending against the Corporation in other jurisdictions. During the Court of Chancery proceedings in this case, other tort claimants, represented by a different law firm, were permitted to intervene. The original Petitioners–Below and the Intervenors–Below are referred to collectively as Petitioners.”

B. Facts

The material facts are not disputed. The Corporation was formed in Delaware in 1952. Although the Corporation was primarily a plastering company, it also supplied and installed Sprayed Limpet Asbestos, an asbestos-containing product. That activity exposed the Corporation to significant liability risk, and ultimately caused it to be named as a defendant in hundreds of asbestos-related lawsuits.

While it was fully operational, the Corporation obtained primary liability insurance from various insurance companies, including Travelers Casualty and Surety Company, CNA Insurance Company, and Great American Insurance Company (collectively, the “Insurers”). The applicable insurance policies obligate the Insurers to defend the Corporation in suits for damages covered by the policies, and also to indemnify the Corporation against covered third party claims. The coverage available under those insurance policies has not been exhausted.

The Corporation ceased operations in 1991, and in 1999 it formally dissolved, pursuant to 8 Del. C. § 275. The Corporation did not elect to notify creditors of its dissolution under the procedure set forth in 8 Del. C. § 280. Nor did the Corporation make any provisions for claims of future creditors and claimants, utilizing the procedure set forth in 8 Del. C. § 281(b). All parties agree that the Corporation's only assets are its unexhausted insurance policies.

C. The Asbestos Proceedings and the § 279 Petition

In 2010, the Corporation began filing motions in other courts to dismiss asbestos-related claims commenced more than ten years after its dissolution. 1 The underlying basis of those motions was that because the Corporation has been dissolved for more than three years, it is no longer amenable to suit as a matter of Delaware law.2

The Petitioners responded to those motions to dismiss by ( inter alia ) filing, in the Court of Chancery, a verified petition for the appointment of a receiver for a dissolved corporation under 8 Del. C. § 279. The Corporation moved to dismiss the Petition on grounds of insufficient service of process and failure to state a claim upon which relief can be granted. On November 9, 2011, the Court of Chancery granted the Petitioners' motion to perfect service of process and denied the Corporation's motion to dismiss.3

On August 1, 2012, the Corporation moved for summary judgment. In response, the Petitioners moved for judgment on the pleadings. By Opinion dated February 4, 2013, the Court of Chancery granted the Corporation's motion for summary judgment and denied the Petitioners' motion for judgment on the pleadings. 4

D. The Court of Chancery Opinion

During the Court of Chancery proceedings, the Insurers represented to the court that the Corporation would continue to litigate and defend against all third party claims filed less than ten years after its dissolution. 5 For that reason (the Corporation argued), it was unnecessary to appoint a receiver to facilitate the litigation of those claims. As for claims filed more than ten years after the Corporation dissolved—claims that the Corporation had moved in various courts to dismiss—the Corporation argued that it held no assets (“property”) that would justify the appointment of a receiver.6 Accepting the Insurers' argued-for distinction between those two sets of claims, the Court of Chancery held that claims filed more than ten years after the date of dissolution were time-barred and should be dismissed,7 and that claims filed less than ten years after the date of dissolution could proceed without a court-appointed receiver. 8

More specifically, the court accepted the Corporation's assurances (made by its Insurers) that it would continue to defend against all claims that were filed within ten years of the date of dissolution. On that basis, the court determined that with respect to those claims, the petition to appoint a receiver “depend[ed] upon ... a factual scenario that is hypothetical and speculative,” and, therefore, was not “justiciable.” 9

Regarding claims filed after the tenth anniversary of the dissolution, the Vice Chancellor noted that under 8 Del. C. § 279, a receiver may be appointed at any time if the dissolved corporation has “still existing property interests.” 10 The court concluded, however, that the Corporation held no existing property interests, reasoning as follows: 11 The Corporation's liability insurance policies would have value, and constitute “property” under § 279,12 only if the Corporation could be potentially held liable to third parties, which would trigger coverage under the policies.13 However, the court determined, Delaware's dissolution statutes ( 8 Del. C. §§ 278– 282) operate to extinguish a dissolved corporation's liability after ten years from the date of dissolution, because those provisions establish a ten year outer limit within which a dissolved corporation can potentially be held liable for third party claims.14 Therefore, the Corporation could not be “liable for tort suits ... brought after ten years,” and as a consequence, the liability insurance policies “are not as a matter of law undistributed assets in relation to claims commenced more than ten years after dissolution.” 15 Lastly, the court concluded,...

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