The opinion of the court was delivered by: FOREMAN
Before the Court is a Motion for Summary Judgment on the "Capacity to Sue Issue" (Document No. 77) by defendant Lumbermens Mutual Casualty Company ("LMC"), in which defendants Bituminous Fire & Marine Insurance Company ("Bituminous") (Document No. 80) and Fireman's Fund Insurance Company ("FFI") (Document No. 81) have joined. In addition, plaintiff Citizens Electric Corporation ("Citizens") has objected (Document No. 95) to LMC's reply brief (Document No. 94) to Citizens' memorandum in opposition to LMC's motion.
On July 3, 1987, Giles Armature & Electric Works, Inc. ("Giles") was notified by the United States Environmental Protection Agency that it was a potentially responsible party under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") concerning the investigation and remediation of hazardous materials at the Missouri Electric Works ("MEW") site in Cape Girardeau, Missouri. Previously, Giles had been voluntarily dissolved by the Illinois Secretary of State on April 1, 1986. The United States filed suit against Giles on April 1, 1991, seeking recovery of past and future response costs and fees.
On March 28, 1991, Citizens, as class representative, sued Giles seeking a declaration that Giles and its shareholders were jointly and severally liable for past and future response costs at the MEW site. Giles and Citizens entered into a settlement agreement on June 2, 1993 (Document No. 31, Attachment), and a consent judgment concerning liability for contamination at the MEW site was entered on July 27, 1993. (Document No. 38). The settlement agreement provided that collection on the judgment against Giles, its former officers, directors, and shareholders would be limited to any applicable insurance coverage. Document 30, Attachment at P 2.
On or about August 5, 1991, Bituminous received notice of Citizens' claims against Giles. FFI received similar notice on or about October 1, 1991; LMC was notified on or about April 29, 1993. Citizens served garnishment summons and interrogatories on Bituminous on or about October 5, 1993; LMC and FFI received their summonses and interrogatories approximately five days later.
LMC denies it provided Giles with insurance coverage and asserts that Citizens failed to provide any evidence of such coverage. (Document No. 53, Document No. 78 at 3, Document No. 94 at 9-11). FFI concedes that it issued two policies to Giles effective from July 15, 1970, to July 15, 1976, but contends that has not been able to locate any policies, or evidence of any policies, for the period from 1964 to 1970. (Document No. 76 at 2, Document No. 82 at 2). Bituminous issued several policies to Giles, but disputes whether those policies provide coverage under the facts of this case. (Documents Nos. 62 & 63, Document No. 80 at 2).
Summary judgment shall be granted if on the record "there is no genuine issue as to any material fact and  the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). When determining whether there is a genuine issue of material fact, all facts must be construed in the light most favorable to the non moving party and the court must draw all inferences in favor of that party. Smart v. State Farm Ins. Co., 868 F.2d 929, 931 (7th Cir. 1989). "The party moving for summary judgment must affirmatively demonstrate the absence of a genuine issue of material fact." Shintom America, Inc. v. Car Telephones, Inc., 45 F.3d 1107, 1995 WL 21904, at *1 (7th Cir. 1995). The non-moving party "may not rest upon the mere allegations or denials of his pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986) (alteration in original) (citation omitted). Furthermore, the mere existence of some evidence in support of the nonmoving party is not sufficient to deny a motion for summary judgment -- there must be "sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id.
The central claim of the defendants' motion is that Citizens is barred from pursuing the garnishment action because that action was brought more than five years after the corporate dissolution of Giles. The Illinois Business Corporation Act's corporate survival statute, 805 ILCS 5/12.80, provides that a civil proceeding may be brought on behalf of or against a corporation within five years of dissolution of the corporation. In response, Citizens argues that (1) the former officers, directors, and shareholders of Giles are subject to personal liability under CERCLA, therefore, Giles's dissolution is irrelevant to liability of these individuals; (2) a garnishment action is not an independent proceeding, but is ancillary to the main action, which was filed within the five-year period following Giles's dissolution; and, (3) CERCLA's liability scheme supersedes the Illinois corporate dissolution statute. (Document No. 91).
The Capacity of Dissolved Corporations to Sue or Be Sued
Under Federal Rule of Civil Procedure 17(b), "the capacity of a corporation to sue or be sued shall be determined by the law under which it was organized." Therefore, the Court will look to Illinois law to determine the capacity of Giles to sue or be sued.
The Illinois corporate survival statute prohibits a corporation from suing or from being sued more than five years after dissolution.
Canadian Ace Brewing Co. v. Joseph Schlitz Brewing Co., 629 F.2d 1183 (7th Cir. 1980); T-K City Disposal, Inc. v. Commercial Union Ins. Co., 761 F. Supp. 552 (N.D. Ill. 1991). "Where a statute continues the existence of a corporation for a certain period, it is generally held that the corporation becomes defunct upon the expiration of such period, at least in the absence of a provision to the contrary, so that no action can afterwards be brought by or against it and must be dismissed." Canadian Ace Brewing Co., 629 F.2d at 1185 (citing 16A William M. Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 8144 (rev. vol., Richard E. Eickhoffed.)). "The language of [§ 12.80] is clear and unambiguous. Under that section any right of claim existing on behalf of a corporation or any liability incurred by a corporation prior to its dissolution may be enforced if the action is commenced within [five] years after the date of such dissolution." O'Neill v. Continental Illinois Co., 341 Ill. App. 119, 93 N.E.2d 160, 168 (Ill. App. Ct. 1950). The purpose of the survival statute is "to continue the life of a corporation for [five] years for the purpose of settling its affairs and that actions to collect claims due the corporation may be begun at any time within [five] years after dissolution of the corporation." Canadian Ace Brewing Co., 629 F.2d at 1185.
In addition to barring the commencement of legal action, the Illinois corporate survival statute prohibits the initiation of garnishment proceedings as well. "A long line of cases has consistently held that a claim asserted by a judgment creditor against a garnishee must be one which the judgment debtor himself could have maintained." Wolff v. Halloway, 116 Ill. App. 2d 270, 253 N.E.2d 596, 597 (Ill. App. Ct. 1969) (citations omitted); accord Reisman v. Delgado, 117 Ill. App. 3d 331, 453 N.E.2d 902, 904, 73 Ill. Dec. 77 (Ill. App. Ct. 1983); Zucker v. United States Computer Co., 85 Ill. App. 3d 759, 408 N.E.2d 41, 45, 41 Ill. Dec. 695 (Ill. App. Ct. 1980); Hunter Mfg., Inc. v. Hines, 76 Ill. App. 3d 664, 395 N.E.2d 186, 187, 32 Ill. Dec. 239 (Ill. App. Ct. 1979). "No cause of action which accrues after dissolution may be brought against a dissolved corporation. Thus, the existence of an insurance policy is irrelevant ." Blankenship v. Demmler Mfg. Co., 89 Ill. App. 3d 569, 411 N.E.2d 1153, 1157, 44 Ill. Dec. 787 (Ill. App. Ct. 1980); accord Vance v. North American Asbestos Corp., 203 Ill. App. 3d 565, 561 N.E.2d 279, 149 Ill. Dec. 1 (Ill. App. Ct. 1990). "When the judgment creditor of an insured seeks to garnish the proceeds of an insurance policy, the insurer can assert any defenses which it could have raised against the insured, "'absent some provision of the law which bars the insurer from raising those defenses.'" Reisman v. Delgado, 117 Ill. App. 3d 331, 453 N.E.2d 902, 73 Ill. Dec. 77 (Ill. App. Ct. 1983), (quoting Johnson v. R & D Enters., 106 Ill. App. 3d 496, 435 N.E.2d 1233, 62 Ill. Dec. 261 (Ill. App. Ct. 1982)). Because Citizens neither brought suit against the defendants nor initiated garnishment proceedings within five years of Giles's dissolution, the defendants argue that Giles (judgment debtor) could not have brought a claim against the defendants (garnishees), and therefore, Citizens (judgment creditor) is precluded from bringing the garnishment action.
The original action against Giles was filed within five years of Giles's dissolution. Citizens contends that a garnishment action is ancillary to the main action; thus, the garnishment action is not barred. In response, the defendants point to Chicago Riding Club v. Avery, 305 Ill. App. 419, 27 N.E.2d 636 (Ill. App. Ct. 1940), to support their contention that the garnishment action is prohibited regardless of the timing of the main action.
The plaintiff in Chicago Riding Club obtained a judgment against the Chicago Riding Club, a non-profit corporation, on April 29, 1938. On June 1, 1938, the riding club was dissolved. The plaintiff brought garnishment proceedings on September 1, 1938. The court upheld the dismissal of the garnishment action, noting that "the law is well settled in this state that in garnishment proceedings the creditor can only recover such indebtedness as can be recovered in an appropriate action in the name of the attachment or judgment debtor against the garnishee." Id. at 639 (quoting Supreme Sitting Order Iron Hall v. Grigsby, 178 Ill. 57, 52 N.E. 956, 957 (Ill. 1899)).
The timing of the original action was irrelevant in Chicago Riding Club -- the garnishment action was barred because it was filed after the statutory deadline for a dissolved corporation to bring an action. Id. at 631; see also Zucker v. United States Computer Corp., 85 Ill. App. 3d 759, 408 N.E.2d 41, 45, 41 Ill. Dec. 695 (Ill. App. Ct. 1980) ("In determining whether a garnishment action may lie against the garnishee the form of the action which the debtor could have maintained against the garnishee is irrelevant. What is highly relevant, however, is whether any action could be maintained."); Zimek v. Illinois Nat'l Casualty Co., 370 Ill. 572, 19 N.E.2d 620, 623 (Ill. 1939) (finding that garnishment action was proper because judgment debtor could have sued garnishee insurance company for the amount of his liability to the judgment creditor).
Although Citizens filed the original action against Giles three days before the five-year deadline, the subsequent garnishment actions were not brought against the defendants until more than five years following Giles's dissolution. Thus, under Illinois law, it is clear that the garnishment action against the defendants is barred by 810 ILCS 5/12.80 insofar as it is based upon the corporation's capacity to recover from the insurer. However, a ...