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 different question is presented as to insurance coverage for the corporate officers, directors, and shareholders.
Personal Liability of Former Officers, Directors, and Shareholders Under CERCLA
Citizens contends that the former officers, directors, and shareholders (collectively "officers") are personally liable for the cost of cleaning up the MEW site, and therefore, the Illinois corporate survival statute is not applicable to the liability of those individuals. Specifically, Citizens alleges that the
underlying judgment was obtained against Giles and its former officers, directors, and shareholders. The judgment was obtained pursuant to Section 107(a) of [CERCLA]. CERCLA § 107(a) imposes personal liability on officers, directors and shareholders of corporate polluters when those individuals have participated in or managed the wrongful waste disposal practices of the corporate polluter. Accordingly, Citizens' judgment against Giles and its officers, directors and shareholders of Giles imposes individual, joint and general6 liability on each of them. Pursuant to the express terms of the insurance contracts at issue in this case, these officers, directors and/or shareholders are separately insured against the aforesaid liability, and the dissolution of Giles does not affect that coverage.