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University of Alaska v. Thomas Architectural Products, Inc. (12/1/95), 907 P 2d 448
Notice: This opinion is subject to formal 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, telephone (907) 264-0606; fax (907) 276-
THE SUPREME COURT OF THE STATE OF ALASKA
UNIVERSITY OF ALASKA, )
) Supreme Court No. S-5803
) Superior Court No.
) 4FA-91-1864 Civil
) O P I N I O N
THOMAS ARCHITECTURAL )
PRODUCTS, INC., ) [No. 4288 - December 1, 1995]
Appeal from the Superior Court of the State
of Alaska, Fourth Judicial District,
Richard D. Savell, Judge.
Appearances: Gerard R. LaParle, Guess &
Rudd, Fairbanks, for Appellant. Andrew
Guidi, Delaney, Wiles, Hayes, Reitman &
Brubaker, Inc., Anchorage, for Appellee.
Before: Moore, Chief Justice, Rabinowitz,
Matthews and Compton, Justices. [Eastaugh,
Justice, not participating].
MOORE, Chief Justice.
The University of Alaska (the University) brought suit
against Thomas Architectural Products, Inc. (TAP), a dissolved
Washington corporation. TAP successfully moved for a Civil Rule
12(b)(6) dismissal in superior court, citing a Washington statute
which requires that actions against dissolved corporations be
initiated within two years of the date of dissolution. The
University appeals. We reverse.
II. FACTS AND PROCEEDINGS
The relevant facts of this case are not in dispute.
The University entered into a contract to have its Statewide
Office Building constructed. TAP, a subcontractor on the
project, supplied the general contractor with building panels
made by a third-party manufacturer. On August 25, 1988,
Washington's Secretary of State administratively dissolved TAP
for failure to file the required annual report and license
The University claims that in May 1990, it became aware
that the panels were defective.1 In October 1991, the University
filed suit against TAP and other parties to the contract,
alleging breach of implied warranty and strict liability for the
defective building panels. TAP moved to dismiss the University's
complaint, basing its motion on Washington Revised Code
23B.14.340, which contains a two-year abatement of claims
provision in favor of dissolved corporations. The court granted
TAP's motion to dismiss.
The University filed a Civil Rule 60(b)(1) motion to
reinstate TAP as a defendant. The University argued that the
court's dismissal of TAP had been based on a statutory scheme
that went into effect after the delivery of the panels and TAP's
dissolution. The University also claimed that under the older
statute, Washington Revised Code 23A.28.250, repealed by 1989
Wash. Laws, ch. 165, ' 204, an administratively dissolved
corporation such as TAP could not seek protection under the two-
year abatement of claims provision. TAP responded that the
dismissal was correct under either version of the statute. The
court denied the University's motion to reinstate, and granted
TAP's motion for entry of Civil Rule 54(b) judgment dismissing it
from the case. This appeal followed.
A.Whether the University May Bring Suit Against TAP Is
a Question of Washington Law
The University asks this court to apply Alaska law in
determining whether a suit against TAP could properly be filed in
October 1991. TAP responds that the application of Washington
law is compelled by Alaska Civil Rule 17(b), which provides that
"[t]he capacity of a corporation to sue or be sued shall be
determined by the law under which it was organized."2
Although not an Alaska case, Johnson v. Helicopter &
Airplane Servs Corp., 404 F. Supp. 726 (D. Md. 1975),
demonstrates that Washington law governs the question of whether
TAP was amenable to suit at the time the University filed its
complaint. Pursuant to Federal Civil Rule 17(b),3 Johnson
applied Delaware law to the question of whether a dissolved
Delaware corporation that had done business in New York had the
capacity to be sued in New York. As the court explained, Rule
17(b) is meant to create uniformity across jurisdictions; its
intended result is that "once a corporation is determined to have
capacity to be sued in its original place of business, it may be
sued in any . . . court." 404 F. Supp. at 729. The court
[i]f under the law of Delaware a corporation
is organized and under the law of its
domicile, Delaware, it has the capacity to
sue or be sued, then it can be sued or sue
anywhere, and if it has not any capacity to
sue or be sued under the law of its domicile,
it cannot sue or be sued anywhere.
Id. at 730 n.2 (quoting Hearings Before House Comm. on the
Judiciary, 75th Cong., 3d Sess., ser. 17, at 20 (1938))
Rule 17(b) therefore requires us to look to Washington
law to determine whether TAP had the capacity to be sued when the
University filed its complaint. See also United States v.
Northeastern Pharmaceutical & Chem. Co., 810 F.2d 726, 746 (8th
Cir. 1986), cert. denied 484 U.S. 848 (1987) (applying law of
domicile, per Rule 17(b), to determine dissolved corporation's
capacity to be sued); Johnson v. RAC Corp., 491 F.2d 510, 512 n.3
(4th Cir. 1974) (noting that Rule 17(b) is restatement of "firmly
established" principle that law of state of incorporation governs
dissolved corporation's ability to sue or be sued); Showers v.
Cassiar Asbestos Corp., 574 F. Supp. 322, 323 (E.D. Pa. 1983);
Newmark v. Abeel, 102 F. Supp. 993, 993 n.1 (S.D.N.Y. 1952);
Casselman v. Denver Tramway Corp., 577 P.2d 293, 295 (Colo.
B. TAP's Failure to Comply with Wind-up Requirements
Made It Susceptible to Suit by Known Creditors Who Did
Not Receive Notice of Dissolution
At common law, the dissolution of a corporation was its
civil death; dissolution immediately abated all actions by and
against a corporation, and ended its capacity to sue or be sued.
Johnson, 404 F. Supp at 730 (citing Melrose Distillers, Inc. v.
United States, 359 U.S. 271, 272 (1959)). This common law regime
has been supplanted in Washington, as in other states, by a
statute which prolongs the life of a corporation in order to
allow it to settle its affairs, and to allow its creditors to
recover what is owed to them.
The version of Washington's survival statute applicable
here provided, in relevant part:
The dissolution of a corporation either: (1)
By the issuance of a certificate of
dissolution by the secretary of state, or (2)
by a decree of court, or (3) by expiration of
its period of duration shall not take away or
impair any remedy available to or against
such corporation, its directors, officers 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.
Wash. Rev. Code 23A.28.250, repealed by 1989 Wash. Laws, ch. 165,
TAP's dissolution was achieved by a means not mentioned
in the survival statute -- a "certificate of administrative
dissolution" (CAD). CADs effectuate involuntary dissolutions,
which are initiated by the secretary of state against
corporations guilty of such infractions as failing to file an
annual report or pay taxes. Wash. Rev. Code 23A.28.125. Since
.250 does not explicitly state that a two-year survival period
begins to run when a CAD is issued, the University argues that
TAP's CAD "[did] not trigger the abatement of claims provision
contained in [Washington Revised Code] 23A.28.250."
1. An administratively dissolved
corporation's capacity to be sued is governed by
the survival statute
Washington case law indicates that a corporation is
effectively dissolved immediately upon the issuance of a CAD.
For example, Zimmerman v. Kyte, 765 P.2d 905 (Wash. App. 1988),
states that "[w]hen a corporation is dissolved administratively,
it ceases to exist." Id. at 909 (citing Wash. Rev. Code
23A.28.125(3)). In Zimmerman, the Plaza Drug Corp. (Plaza) and
the Zimmermans, two shareholders, brought a tort suit against
Kyte. During the proceedings the Zimmermans substituted
themselves as the sole plaintiffs in the case. A month later,
Plaza was administratively dissolved by the secretary of state.
Kyte later attempted to dismiss the Zimmermans from the case,
arguing that only Plaza possessed the cause of action against
her. One of the court's reasons for allowing the Zimmermans to
proceed was that when Plaza was administratively dissolved by the
secretary of state, the corporation immediately ceased to exist,
and all its assets flowed automatically to the Zimmermans as
shareholders. 765 P.2d at 909.
The University contends that "the rationale of
Zimmerman was refuted only a year later in Inducon Corp. v.
Crowley Maritime Corp., 771 P.2d 356 (Wash. App. 1989), review
denied, 777 P.2d 1050 (Wash. 1989)." We disagree.
Inducon Corp. was administratively dissolved for
failure to pay license fees. The following year, it initiated a
lawsuit. The defendants moved for summary judgment under
23A.44.120, which provided that a corporation that had any
overdue state fees could not commence or maintain a lawsuit.
Inducon contended that 23A.28.125(5) allowed it to file suit
despite its delinquent status. The latter statute provided:
Prior to such [administrative] dissolution
the corporation's existence will not be
affected nor will any of its rights, duties
and obligations be impaired, except as
otherwise provided in RCW 23A.44.120.
Wash. Rev. Code 23A.28.125(5). The court noted the obvious:
Inducon could not rely on 23A.28.125(5) to gain relief from
23A.44.120, because .125(5) explicitly provided that .120
remained applicable to corporations undergoing administrative
dissolution. 771 P.2d at 357. Thus, Inducon's holding is simply
not relevant to the task before us. The Inducon court ruled on
the inter-relation of 23A.44.120 and 23A.28.125(5), and we are
called upon to construe 23A.28.250, which was directly construed
by the Zimmerman court.
Both parties to this dispute cite a final Washington
case, Pacesetter Real Estate, Inc. v. Fasules, 767 P.2d 961
(Wash. App. 1989). In that case, Pacesetter defaulted on two
promissory notes, and then, in response to foreclosure,
successfully sued on the ground that the notes were usurious. On
appeal the note-holder challenged Pacesetter's standing to sue
because (1) the corporation was out of compliance with 23A.44.120
(requiring payment of all fees before a corporation may initiate
litigation) and (2) because it had been administratively
dissolved nearly four years earlier. The court found for the
note-holder on the first claim, making the rest of the opinion
dicta. Nevertheless, the opinion contains a substantial amount
of analysis cited by the parties.
The University points to the following statement by the
While the Legislature expressly provides for
administrative dissolution following a
corporation's failure to pay annual license
fees, and further provides for timely
reinstatement following such dissolution, it
fails to provide direction as to the status
of a corporation so dissolved. Early
Washington case law, however, holds a
corporation's failure to apply for
reinstatement within the time permitted
results in irrevocable dissolution.
767 P.2d at 964-65 (footnotes omitted). The University infers
from this that TAP should be considered truly dissolved, and the
two-year survival period should begin to run, only after the
point at which the corporation can no longer "cure" the reason
for its administrative dissolution and gain reinstatement. Under
23A.28.127, this occurs two years after the issuance of the CAD.
Thus, under the University's proposed interpretation, an
administratively dissolved corporation could be sued up to four
years after receiving a CAD -- a deadline that would allow the
University's suit in this case.
But the University's conclusions are belied by another
passage from the same opinion:
[F]rom December 30, 1983, Pacesetter or any
of its creditors had 2 years to initiate an
action arising from predissolution
transactions. Here, Pacesetter and
[shareholders] filed this action on September
25, 1987. . . . Since Pacesetter failed to
comply with the 2-year reinstatement period,
it lacks standing to bring this action.
767 P.2d at 964-65. This passage clearly refutes by implication
the University's argument that the survival statute does not
begin to run until the two-year reinstatement period for
administratively dissolved corporations has expired. If the
University were correct, then Pacesetter would have been able to
file suit. Instead, despite the fact that Pacesetter sued less
than four years from the date of its dissolution, it was deprived
of the benefits conferred by the survival statute.
2. An administratively dissolved
corporation is subject to wind-up requirements
The University also argues that TAP was subject to
provisions of the code requiring a dissolved corporation to wind
up its affairs. We agree.
Notably, the three Washington cases on which the
parties rely all deal with an administratively dissolved
corporation or its successor which sought to bring an action more
than two years after dissolution. While these cases conclusively
establish that the two-year survival statute is applicable to
administratively dissolved corporations, they do not address the
question of what wind-up provisions are applicable to such a
corporation, or whether failure to properly wind up the
corporation's affairs tolls this limitations period.
Washington's relevant statutory provisions set forth
the conditions upon which the secretary of state should
administratively dissolve a corporation, the notice requirements
to do so, and the means by which a corporation can seek
reinstatement. Wash. Rev. Code 23A.28.125-.127. However, the
statutes are silent as to what an administratively dissolved
corporation must do if it does not seek reinstatement. While
corporations undergoing voluntary dissolution must notify
creditors of the dissolution, discharge existing debts and
obligations, and distribute remaining corporate property, Wash.
Rev. Code 23A.28.060, there are no express requirements for
administratively dissolved corporations.
We can either view this incongruity as a deliberate
decision by the Washington legislature to treat the two types of
dissolution differently, or attribute it to legislative
oversight. We conclude that Washington courts would determine
that the latter is more plausible, and that the legislature
intended to subject administratively dissolved corporations to
We reach this conclusion primarily because Washington
law obligates us to "avoid a literal reading [of a statute]
resulting in unlikely, absurd or strained consequences. . . . A
statute should be construed in light of the legislative purposes
behind its enactment." State v. Day, 638 P.2d 546, 547 (Wash.
1981) (en banc). As one Washington court noted in a context
analogous to the one before us, "it would be absurd to conclude
that after being dissolved for nonpayment of fees, a corporation
would be rewarded." Inducon Corp., 771 P.2d at 358. TAP's
reading of the statute would result in just such an "absurd"
reward. Allowing a corporate board to walk away from an
administratively dissolved corporation would deliver all of the
benefits of the dissolution statute to a corporation without any
of the protections which the statute provides to creditors. It
would also create an incentive for corporations to avoid the
orderly procedures set forth in the voluntary dissolution
provisions in favor of a "quick exit" by administrative
dissolution. In other words, TAP's reading would undermine the
entire structure of Washington's corporate dissolution statutes.
An examination of the historical development of
Washington's corporate dissolution scheme reinforces our
conclusion that administratively dissolved corporations are
subject to wind-up requirements. Before 1980, corporate
dissolution in Washington could be accomplished only by court
order. See Wash. Rev. Code 23A.28.130 (1969) (involuntary
dissolution); Wash. Rev. Code 23A.28.220 (1969) (decree of
involuntary dissolution). The superseded Washington code from
this era contains a form document to be employed by courts which
executed a decree of involuntary dissolution. This "Form of
Decree of Dissolution" indicates that before the court dissolved
a corporation it would satisfy itself that "all debts,
obligations, and liabilities of the . . . Corporation have been
paid and discharged." Wash. Rev. Code 23A.28.220 at 374 (1969).
Thus, under Washington's pre-1980 regime of involuntary
dissolution, a mechanism existed to ensure that such dissolved
corporations had wound up their affairs.5 There is no indication
in this history that the Washington legislature ever intended to
exempt involuntarily dissolved corporations from the wind-up
requirements to which they had traditionally been subject through
court supervision, and which voluntarily dissolved corporations
were explicitly required to undergo.
Having concluded that an administratively dissolved
corporation must wind-up its affairs in the same manner as a
voluntarily dissolved corporation, it is still necessary to
determine what effect TAP's failure to so would have on the two-
year survival of claims. Although there are no Washington cases
on point, other courts have held that the abatement of claims
provision is ineffective with regard to claims by creditors who
did not receive required notice. See Department of Social Servs.
v. Winyah Nursing Homes, Inc., 320 S.E.2d 464, 468 (S.C. App.
1984) ("Failure to strictly comply with the mandates of the
dissolution statutes effectively continues the corporation with
respect to creditors whose rights are prejudiced by the
noncompliance."); Alpine Property Owners Ass'n, Inc. v.
Mountaintop Dev. Co., 365 S.E.2d 57, 64-65 (W. Va. 1987); cf.
Licht v. Association Servs., Inc., 463 N.W.2d 566, 569-70 (Neb.
1990) (holding that where employee was aware of dissolution,
abatement of claims provision applied even in absence of written
notice because employee had actual notice).
Having reviewed the record, it is unclear whether the
University would have been entitled to notice. On the one hand,
a potential tort claimant is arguably not a known creditor.
Otherwise, a corporation would have to contact every person or
entity to whom it had sold a product, as each is a potential
product liability plaintiff. However, the record contains a
letter from the general contractor, KHO, providing "written
notice to Thomas Architectural that there were serious problems
with the building panels." In light of this letter, we conclude
that whether or not the University was a "known creditor" is an
Thus, we conclude that the abatement of claims
provision is generally applicable to bar claims against a
corporation brought more than two years after it is
administratively dissolved. However, if the University was a
known creditor and TAP failed to notify the University of its
dissolution, this provision would not bar a claim against TAP.
We therefore remand this case to the superior court for a
determination of whether the University was a known creditor.6
TAP's capacity to be sued is a question of Washington
law. TAP was subject to the wind-up requirements found in the
Washington corporations code. If the University was a known
creditor and TAP failed to notify the University of its
dissolution, then this suit is not barred by the abatement of
claims provision in Washington's survival statute. We REVERSE
and REMAND this case so that the trial court can determine
whether this was so.
1 There is some dispute about the time of the University's
discovery of the allegedly faulty panels, but this fact does not
affect the resolution of the case.
2 TAP also argues that the University has waived the
argument that Alaska law applies here. We do not reach TAP's
second argument since we conclude that Rule 17(b) requires the
application of Washington law.
3 The portion of Alaska's Rule 17(b) at issue here is
identical to the portion of the Federal Rule, which was applied
by the court in Johnson.
4 All cites hereafter to the Washington Code refer to
provisions in effect in 1988, at the time of TAP's dissolution.
5 We also note that the current Washington code contains a
wind-up procedure, established in 1989, that applies to
voluntarily and involuntarily dissolved corporations alike. See
1989 Wash. Laws ch. 165, ' 159 (codified at Wash. Rev. Code
6 TAP argues that even if it remains susceptible to suit,
the University's strict liability claims are barred under the
terms of the survival statute because they accrued after
dissolution occurred. We disagree with the premise of this
argument. The elements of a tort are complete when there has
been an invasion of a legally protected interest of the
plaintiff. Austin v. Fulton Ins. Co., 444 P.2d 536, 539 (Alaska
1968). In this case, the University allegedly suffered an
economic injury, which occurred and completed the elements of a
tort when the University purchased the defective building panels.
The date of this injury is not altered by the fact that the
University may not have discovered that the panels were defective
until 1991. As TAP concedes, delivery of the panels took place
before TAP's August 1988 dissolution. It follows that the
University's strict liability claims accrued before TAP's