In re All Cases Against Sager Corp.

132 Ohio St.3d 5

967 N.E.2d 1203

2012 -Ohio- 1444

In re ALL CASES AGAINST SAGER CORP.

No. 2010–1705.

Supreme Court of Ohio.

Submitted Sept. 21, 2011.

Decided April 3, 2012.

Ulmer & Berne, L.L.P., Bruce P. Mandel, and Max Thomas, Cleveland; and Troutman Sanders, L.L.P., and Patrick F. Hofer, for appellant.

Bevan & Associates, L.P.A., Inc., Thomas W. Bevan, Patrick M. Walsh, and Joshua P. Grunda, Boston Heights, for appellees.

Shook, Hardy & Bacon, L.L.P., Victor E. Schwartz, Mark A. Behrens, and Cary Silverman, urging reversal for amici curiae the Ohio Insurance Institute, Coalition for Litigation Justice, Inc., Property Casualty Insurers Association of America, National Association of Mutual Insurance Companies, and American Insurance Association.

Weston Hurd, L.L.P., Daniel A. Richards, Shawn W. Maestle, and Melanie R. Shaerban, Cleveland, urging reversal for the Ohio Association of Civil Trial Attorneys.

O'DONNELL, J.

[Ohio St.3d 5]{¶ 1} The principal issue we confront in this appeal is whether the court of appeals correctly affirmed the decision of the trial court to appoint a receiver for [Ohio St.3d 6]Sager Corporation for the purpose of accepting service of process and marshaling assets consisting of unexhausted liability-insurance policies for asbestos-related claims filed against Sager. Sager was an Illinois corporation that filed for dissolution in 1998 and, pursuant to Illinois law, was no longer amenable to suit after 2003. In characterizing its own opinion, the appellate court plainly stated, “The appeal before us has the peculiar procedural posture of the receivership being the only issue.” 188 Ohio App.3d 796, 2010-Ohio-3872, 936 N.E.2d 1034, at ¶ 7.

{¶ 2} When the trial court appointed a receiver for the Sager Corporation, it concluded that Sager's conduct in Ohio vested the court with jurisdiction to wind up Sager's affairs in Ohio and found that pursuant to R.C. 1701.88(B), Sager had the capacity to be sued under Ohio law. In affirming the trial court, the appellate court found that R.C. 2735.01(E) provided authority for the trial court to appoint a receiver for a dissolved corporation.

{¶ 3} For the following reasons, the judgment of the appellate court is reversed. Fundamental to our analysis is the principle that we must afford full faith and credit to laws in our sister states and that a dissolved foreign corporation that is no longer amenable to suit in its state of incorporation is likewise not amenable to suit in Ohio. Thus, because these claims had not been commenced against Sager as of June 17, 2003, and no judgment had been entered against it, and because these claimants are now precluded from obtaining a judgment against Sager in this case, the appointment of a receiver to accept service of process and to marshal assets—including unexhausted liability-insurance policies—is barred. In conformity with constitutional requirements of due process and the Full Faith and Credit Clause, the law of the state of incorporation controls whether a corporation is amenable to suit. Here, we apply Illinois corporate law and conclude that claims filed against a dissolved Illinois corporation more than five years after dissolution are barred.

Facts and Procedural History

{¶ 4} The Sager Corporation, an Illinois corporation since 1921, manufactured protective clothing and other industrial products containing asbestos, such as gloves, aprons, leggings, jackets, and curtains, and sold some of these to United States Steel in Lorain, Ohio.

{¶ 5} On June 17, 1998, Sager ceased its operations and filed for dissolution in the state of Illinois, commencing a five-year postdissolution period during which Illinois law permitted claims to be asserted against it. That period ended on June 17, 2003.

{¶ 6} On September 4, 2007, Commodore Bowens, suffering from mesothelioma, and executors of the estates of two deceased victims of mesothelioma filed [Ohio St.3d 7]suit in Ohio against Sager and more than 200 other entities for personal injury, loss of consortium, and wrongful death, alleging that their injuries stemmed from exposure to asbestos products.

{¶ 7} On July 1, 2008, after having appeared and participated in discovery in the litigation, Sager moved for summary judgment, asserting that because it had been dissolved and because the five-year period for filing claims against it had expired, it was no longer amenable to suit. In response, the law firm of Bevan & Associates, on behalf of all clients with asbestos-related claims pending against Sager, sought the appointment of a receiver to wind up Sager's corporate affairs in Ohio, asserting that “Sager has insurance policies which have not been exhausted, and are assets of Sager.” Sager opposed the motion, urging that the trial court lacked jurisdiction to appoint a receiver for a foreign corporation and arguing that even if it had jurisdiction, it should apply Illinois law, which provides that Sager is no longer amenable to suit, and also arguing that the appointment violated the Due Process, Commerce, and Full Faith and Credit Clauses of the United States Constitution.

{¶ 8} The trial court, relying on R.C. 1701.88(B), appointed a receiver to accept claims and marshal corporate assets, including unexhausted insurance proceeds, and stated in its order, “The defunct corporation persists for the purpose of winding up its affairs in Ohio.”

{¶ 9} Sager appealed the appointment to the Eighth District Court of Appeals, which relied on R.C. 2735.01(E) and held that “there is no dispute that corporate assets exist notwithstanding Sager's dissolution and that these assets may afford insurance coverage to Ohioans injured by exposure to Sager's products,” so that “the trial court did not abuse its discretion by appointing a receiver in this matter.” 188 Ohio App.3d 796, 2010-Ohio-3872, 936 N.E.2d 1034, at ¶ 22. The appellate court also affirmed the trial court's application of Ohio law based on the occurrence of the injury in Ohio and further held that no due process violation had occurred because the appointment of a receiver “does not extend its corporate life; the receiver ‘will merely be a vehicle through which [the asbestos claimants] will seek recovery from the insurers.’” Id. at ¶ 21, quoting In re Texas E. Overseas, Inc., Del. Chancery, C.A. No. 4326–VCN, 2010 WL 318266 (Jan. 26, 2010).

{¶ 10} In its memorandum in support of jurisdiction, Sager posed the following proposition: “As a constitutional matter, and as a matter of Ohio statutes and precedent, whether a dissolved corporation is susceptible to suit must be determined by the law of its state of incorporation, not by the law of the forum state.” However, in its brief and during oral argument, Sager asserted that R.C. 2735.01 does not authorize an Ohio court to appoint a receiver to wind up the affairs of a foreign corporation or to accept service of process for it, a receiver may not [Ohio St.3d 8]resurrect a dissolved corporation when its only assets consist of liability-insurance policies, a court may not base jurisdiction for a tort claim on the interest of claimants in unexhausted insurance policies, and subjecting a foreign corporation to suit contrary to the law of its state of incorporation violates the Due Process, Commerce, and Full Faith and Credit Clauses of the United States Constitution.

{¶ 11} The claimants principally rely on Ohayon v. Safeco Ins. Co. of Illinois, 91 Ohio St.3d 474, 747 N.E.2d 206 (2001), and 2 Restatement of the Law 2d, Conflict of Laws, Section 146 (1971), urging that Ohio conflict-of-laws analysis requires application of Ohio law to determine whether their claims are barred, not the five-year corporate-survival period provided by Illinois law. They also assert that nothing in the Ohio receivership statute limits its application to domestic corporations, and they claim that if Sager negligently exposed them to asbestos while doing business in Ohio, then they have a right to recover against its remaining asset—unexhausted insurance coverage in Sager's liability policies—regardless of whether it still exists as a corporation. They further assert that Sager failed to argue to the trial court that the unexhausted insurance policies are not corporate assets and has therefore waived that argument, and they urge that Sager's appearance in this case demonstrates that such insurance proceeds do exist. Finally, they maintain that subjecting Sager to the same laws applicable to domestic corporations does not violate the Due Process, Commerce, and Full Faith and Credit Clauses, because Sager became subject to Ohio law by choosing to conduct business in this state.

{¶ 12} The single matter, however, raised by this appeal is whether the appellate court properly affirmed the decision to appoint a receiver to accept service of process and marshal assets consisting of unexhausted liability-insurance proceeds for a dissolved foreign corporation in this case. It did not.

Law and Analysis

Application of Law

{¶ 13} Although the trial court relied on R.C. 1701.88(B) as authority to appoint a receiver, we recognize that R.C. 1701.98 restricts the provisions of R.C. 1701.01 to 1701.98 to domestic corporations, except as otherwise provided, and we are unaware of any provision extending its authority to foreign corporations.

{¶ 14} The analysis of the court of appeals applying R.C. 2735.01(E) is more compelling because that section of the code authorizes a common pleas court to appoint a receiver when a corporation has been dissolved. However, as 2 Restatement of the Law 2d, Conflict of Laws, Section 300, explains, “A state, without terminating the existence of a foreign corporation, may wind up its business in the State, subject to constitutional limitations.” (Emphasis added.) Thus, while the appellate court correctly recognized that a trial court has the [Ohio St.3d 9]authority to appoint a receiver for a foreign corporation to wind up its affairs in Ohio, that authority is...