Theta Properties v. Ronci Realty Co., Inc.

• Decision Date: 30 January 2003
• Docket Number: No. 2001-359-Appeal.,2001-359-Appeal.
• Citation: Theta Properties v. Ronci Realty Co., Inc., 814 A.2d 907 (R.I. 2003)
• Parties: THETA PROPERTIES et al. v. RONCI REALTY CO., INC.
• Court: Rhode Island Supreme Court

814 A.2d 907

THETA PROPERTIES et al. v. RONCI REALTY CO., INC.

No. 2001-359-Appeal.

Supreme Court of Rhode Island.

January 30, 2003.

Present: WILLIAMS, C.J., LEDERBERG, FLANDERS, and GOLDBERG, JJ.

Guido R. Salvadore, Providence, for Plaintiff.

Matthew T. Oliverio, Dante J. Giammarco, Providence, for Defendant.

OPINION

FLANDERS, Justice.

Raising the dead to sue them can prove as difficult with dissolved corporations as with other quondam life forms. An attorney for the defendant, Ronci Realty Company, Inc. (Ronci), a dissolved corporation, filed a notice of appeal from a Superior Court order denying a motion to vacate the default judgment against Ronci and from the entry of a default judgment in favor of the plaintiffs: Theta Properties, a Rhode Island partnership, its general partners Robert P. Terino and Joseph A. Santoro, Theta Properties, Inc., and Robert P. Terino. Ronci's attorney also moved this Court to stay enforcement of the order granting the plaintiffs a default judgment, and a duty justice granted this relief. Because a dissolved corporation — whose statutory wind-up period has expired — is legally dead and cannot thereafter be sued, the motion justice erred in denying the motion to vacate the judgment against Ronci, which was void ab initio. Therefore, we reverse, vacate the judgment, and remand for entry of an amended judgment dismissing the complaint.

Facts and Travel

On April 3, 1986, plaintiff Robert Terino (Terino), a partner of plaintiff Theta Properties (Theta), a Rhode Island general partnership, entered into a purchase and sale agreement (agreement) on behalf of Theta with Ronci. In the agreement, Ronci agreed to sell and Terino agreed to buy a certain parcel of real estate at 184 Woonasquatucket Avenue, North Providence. The property bordered the Woonasquatucket River at a point where a dam connected it with another property that Ronci owned. The dam straddled the North Providence and Johnston town lines. The agreement included a provision giving the buyer an option to purchase the dam, along with certain riparian rights. The agreement also provided that the option would expire if it were not exercised by April 30, 1989. On June 26, 1986, the parties closed on the sale and Ronci delivered a deed to the property to Theta, as Terino's nominee. The plaintiffs assert, and Ronci concedes, that Theta never exercised the option to purchase this property, but that the deed from Ronci to Theta erroneously included a description of the dam and the riparian rights that were described in the purchase and sale agreement. A year after the sale, on July 1, 1987, without noticing the mistake, Theta delivered a quitclaim deed to plaintiff Theta Properties, Inc. that contained the same description of the property in question.

Some time after the original transfer, Ronci Enterprises, Inc., a Rhode Island corporation, acquired both Ronci and its parent corporation, F. Ronci Company, Inc. On December 30, 1996, Ronci voluntarily dissolved itself by filing articles of dissolution with the secretary of state. As of that time, neither Ronci nor anyone else had paid any taxes on the property since June 26, 1986.

In 2001, approximately fourteen years after the transfer of the property to Theta, and almost five years after Ronci had dissolved, plaintiffs filed suit against Ronci seeking to reform the deed and to re-convey the dam back to Ronci.¹ But the time for Ronci to sue or be sued had expired in 1998 — two years after it dissolved in 1996. See G.L.1956 § 7-1.1-98 (allowing two years for dissolved corporations to sue or be sued).

Nevertheless, plaintiffs caused the summons and complaint to be served on Ronci's former officer and on its former agent for service of process. Unsurprisingly, Ronci filed no response to plaintiffs' complaint within twenty days of this service, as it otherwise would have been required to do by Rule 12(a)(1)(A) of the Superior Court Rules of Civil Procedure. Receiving no response from Ronci, plaintiffs filed an affidavit in support of their motion to default Ronci, pursuant to Rule 55(a) and (b)(3) of the Superior Court Rules of Civil Procedure. The clerk, however, apparently failed to enter a default against Ronci at that time. Undeterred, plaintiffs filed a motion for the entry of a default judgment. Before the hearing on that motion, an attorney for Ronci moved to dismiss the complaint under Rule 12(b), and also objected to plaintiffs' motion for a default judgment. Ronci's attorney asserted that because the secretary of state had dissolved Ronci as a corporation on December 30, 1996, it no longer existed as a legal entity, and, therefore, it could not be sued or properly served with process. Still undeterred, plaintiffs then filed a motion for the entry of a default nunc pro tunc. On August 6, 2001, the court not only entered a default against Ronci nunc pro tunc, but also a judgment of default.

Thereafter, an attorney for Ronci filed a notice of appeal on its behalf, moved to stay the judgment, and moved to vacate the default judgment, but the court denied these motions. Ronci's attorney then appealed from the denial of the motion to vacate the default judgment and also filed a motion in this Court to stay the enforcement of the default judgment. A duty justice of this Court granted that request to stay, which has remained in effect throughout this appeal.

Analysis

Ronci's lawyers suggest on appeal that the trial justice erred by defaulting Ronci and then by entering a default judgment against a corporation that had ceased to exist. They argue that, because Ronci had dissolved itself in 1996, plaintiffs could not sue it or properly serve it with process.

Pursuant to Rule 4(e)(3) of the Superior Court Rules of Civil Procedure, service of process on a corporation may be accomplished by:

"delivering a copy of the summons and complaint to an officer, a managing or general agent, or by leaving a copy of the summons and complaint at an office of the corporation with a person employed therein, or by delivering a copy of the summons and complaint to an agent authorized by appointment or by law to receive service of process * * *."

In this case, the record indicates that plaintiffs' counsel caused Ronci's former attorney to be served with the complaint because, when Ronci was still extant, that attorney had served as Ronci's agent for service of process. Ronci's former president, Frank Ronci, also received a copy of the summons and complaint via certified mail addressed to him at his residence (his wife, Nancy, signed for the letter that accompanied the summons and complaint). Ronci's attorneys contend, however, that both attempts at service were improper because the corporation did not exist when plaintiffs purportedly effected service, and, thus, it no longer could be sued by serving either a former officer or its former agent for service of process.

In Halliwell Associates, Inc. v. C.E. Maguire Services, Inc., 586 A.2d 530, 532 (R.I. 1991), this Court observed that "[a]t common law the legal dissolution of a corporation marked the death of its corporate existence and, in the absence of statutory provisions to the contrary, terminated that existence for all purposes whatsoever." Consequently, a "corporation's capacity to sue or be sued was completely destroyed upon dissolution." Id. at 533. Statutes have modified this common-law rule by providing for a post-dissolution period in which a corporation remains extant beyond its dissolution date for the limited purposes of winding up the business and of defending lawsuits or filing any claims related to the business. Id. We have held, however, that the shareholders of a dissolved corporation may not bring a claim in the name of the corporation unless they assert it before the expiration of the statutory wind-up period. Id. We reasoned that "allowing such suits to proceed after the expiration of the wind-up period would render the limitation contained in the [state] survival statute a nullity, barring nothing." Id. at 535.

Although this case involves a Rhode Island dissolution statute and a claim against a dissolved Rhode Island corporation — rather than, as in Halliwell, a dissolved Massachusetts corporation — our analysis in Halliwell is still applicable. Indeed, it would be anomalous for the General Assembly to allow a dissolved corporation to be sued indefinitely, while prohibiting it from asserting its own rights against others. We are of the opinion that any claim asserted against a dissolved corporation must be brought within the statutory post-dissolution period for doing so; namely, within two years of the dissolution. See § 7-1.1-98 (providing two years for a dissolved corporation to sue or be sued). Our decision is in accord with other jurisdictions that have addressed the issue. See State of Missouri ex rel. National Super Markets, Inc. v. Dowd, 1 S.W.3d 595, 598 (Mo.Ct.App.1999); Van Pelt v. Greathouse, 219 Neb. 478, 364 N.W.2d 14, 20 (1985); M.S. v. Dinkytown Day Care Center, Inc., 485 N.W.2d 587, 590 (S.D.1992); Kradel v. Piper Industries, Inc., 60 S.W.3d 744, 751 (Tenn.2001); Martin v. Texas Woman's Hospital, Inc., 930 S.W.2d 717, 721 (Tex.App.1996).

Theta argues that an objection to personal jurisdiction or service of process is deemed to be waived under Rule 12(h) if it was not timely raised in an answer or motion. Although service may be waived by the entry of a general appearance, see Mack Construction Co. v. Quonset Real Estate Corp., 84 R.I. 190, 194, 122 A.2d 163, 164 (1956) ("[i]nasmuch as it is well settled that by a general appearance a defendant submits himself to the jurisdiction of the court, any failure to serve him with process becomes immaterial"); 1 Kent, R.I. Civ. Prac. § 12.2 at 109 (1969) ("a defendant who simply answers to the merits of a claim thereby consents to the jurisdiction of the court"), "jurisdiction of the court over the person of a defendant is dependent upon proper...