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Podvin v. Jamar Co.

January 14, 2003

JOSEPH PODVIN, ET AL., RESPONDENTS,
v.
THE JAMAR COMPANY, ET AL., APPELLANTS, A.H. BENNETT COMPANY, ET AL., DEFENDANTS.



Hennepin County District Court File No. PI021486

Considered and decided by Shumaker, Presiding Judge, Lansing, Judge, and Minge, Judge.

SYLLABUS BY THE COURT

Tort and contract claims asserted against a corporation sixteen years after the corporation had voluntarily dissolved under the Minnesota Business Corporations Act are barred by the act and do not come within its exception for liabilities incurred during corporate dissolution proceedings.

The opinion of the court was delivered by: Lansing, Judge

Reversed; motion denied

OPINION

This appeal involves personal-injury litigation against two related corporations that voluntarily dissolved in 1985. The corporations moved to dismiss for insufficiency of process, arguing that service of process under Minn. Stat. § 5.25, subd. 5 (2000), could not be accomplished because the claims against the dissolved corporations were barred by Minn. Stat. §§ 302A.729,.781 (1984). The district court denied the motion to dismiss, holding that the personal-injury claims came within the exception created by Minn. Stat. § 302A.781 for liabilities incurred during dissolution proceedings. Because we conclude that the plain meaning of "liabilities incurred during dissolution proceedings" constrains its application to debts or obligations that a corporation is legally obligated to pay at the time of the dissolution proceedings, rather than unmatured tort or contract claims, we reverse.

FACTS

Walker Jamar Company (Walker Jamar), a closely held Minnesota corporation established in 1913, sold and installed ventilation systems, industrial roofing, and insulation. Some of these products contained asbestos. Joseph Podvin and the other respondents whose cases are consolidated in this appeal (collectively referred to as Podvin) are individuals who were exposed to asbestos in their work at refineries, power plants, processing plants, and other facilities that used asbestos-containing products. They have contracted asbestos-related diseases and have sued, among others, Walker Jamar and the Jamar Company (the companies) for installing or distributing asbestos-containing products at their worksites.

Walker Jamar reorganized in 1981 following a favorable letter ruling from the Internal Revenue Service on the tax consequences of its proposed restructuring. Although the record is not fully developed on this point, the companies maintain that the purpose for the reorganization was to insulate the construction activities of the company from potential liabilities stemming from the distribution of Walker Pug Mill, a product unrelated to this litigation. The restructuring included the formation of a different company, the Jamar Company (Jamar I), to take over most of the business of Walker Jamar and a holding company, Norwalk, Inc., to hold the stock of both Walker Jamar and Jamar I.

Jamar I and Norwalk, Inc., filed their articles of incorporation with the Minnesota Secretary of State in February 1982. In May 1982, Jamar I assumed all assets and liabilities of Walker Jamar except those associated with the Walker Pug Mill product. Jamar I continued all other aspects of the original business, including ventilation, air conditioning, and insulation work.

In 1983, the president and chairman of the board of Jamar I decided to sell the companies and retire. Initially he was unable to negotiate a successful sale and decided to dissolve the companies at the end of the fiscal year on January 31, 1985. But shortly before the proposed dissolution date, Jamar I instead sold its assets, including its name, to API, Inc., an existing Minnesota company specializing in industrial insulation, piping, sheet metal work, and energy conservation construction and materials distribution. As part of the asset purchase agreement, Jamar I agreed to indemnify and hold harmless API against any known or unknown liability of Jamar I not specifically assumed by API in the asset purchase agreement. Although API purchased the right to use the name "The Jamar Company," the cash-for-assets transaction involved no sale of stock.

When API purchased the assets of Jamar I, Jamar I merged into the parent company, Norwalk. A few months later, Norwalk merged into Walker Jamar. Walker Jamar's only remaining operation, the production and marketing of the Walker Pug Mill, had been discontinued for economic reasons in 1983. On July 17, 1985, Walker Jamar filed its notice of intent to dissolve. On August 12, 1985, Walker Jamar filed its articles of dissolution in accordance with Minn. Stat. § 302A.733 (1984); the same day, the secretary of state issued Walker Jamar's certificate of dissolution. After this date only the new Jamar (Jamar II), operated by API, remained a going concern.

In December 2001, Podvin filed a complaint for negligence, products liability, and breach of warranty against Jamar II and Walker Jamar. The companies moved to dismiss the lawsuit for insufficiency of process, claiming that, as dissolved corporations, they could no longer be served. The trial judge appointed by the ...


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