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Home My WebLink About2002-4610 Civil CARLISLE SYNTEC INCORPORATED, AS LIQUIDATING AGENT FOR CARLISLE ENGINEERED METALS, INC., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW vs. NO. 02-4610 CIVIL SEQUA CORPORATION d/b/a PRECOAT METALS, Defendant vs. PPG INDUSTRIES, INC., Additional Defendant IN RE: MOTIONS OF PPG INDUSTRIES, INC. AND SEQUA CORPORATION FOR SUMMARY JUDGMENT BEFORE HESS AND OLEK 1.1. OPINION AND ORDER CEM, the company at the heart of this litigation, was incorporated in Delaware in 1992 when Carlisle Corporation (Carlisle), SynTec's parent company, decided to enter the metal roofing industry. Carlisle purchased the assets of a bankrupt metal roofing company, which it then transferred to CEM. In 1996, Carlisle transferred its ownership interest in CEM to SynTec thereby making SynTec the sole stockholder. Although SynTec and CEM shared some of the same officers and directors, the two corporations were separate, legally distinct entities. This litigation stems from a September 1995 business agreement between CEM and defendant Sequa Corporation (Sequa) whereby Sequa agreed to coat steel roofing materials with paint supplied by defendant PPG Industries (PPG). CEM used the coated steel products in numerous projects throughout the country but was generally unsuccessful in its business NO. 02-4610 CIVIL ventures. CEM's operations were shut down in 1997, and the company was voluntarily dissolved two years later, on December 22, 1999. At the time the company was dissolved, SynTec, as the sole CEM stockholder, executed a series of resolutions that authorized SynTec to liquidate any remaining assets and effectuate CEM's dissolution. Under the resolutions, SynTec received any assets that remained after the payment of all outstanding debts, but did not assume any of CEM' s outstanding warranty obligations. After learning of coating defects in the products CEM had provided to various customers, SynTec commenced this action by filing a writ of summons against Sequa on September 25, 2002. SynTec later filed a complaint, alleging breach of contract (Count I), breach of implied warranties under the UCC (Counts II and III), and breach of express warranties under the UCC (Count IV). After more than three years of protracted legal wrangling, the defendants, Sequa and PPG, have moved for summary judgment. Their primary contention is that SynTec lacks standing to bring suit on behalf of CEM. We agree and will sustain the motions for summary judgment. Under Pa.R.Civ.P. 1035(b), a party may move for summary judgment when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter oflaw." When reviewing a motion for summary judgment, the court must "view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party." Ertel v. Patriot News Co., 674 A.2d 1038, 1041 (Pa. 1996). 2 NO. 02-4610 CIVIL Under Delaware lawl a dissolved corporation may only sue or be sued in the three years immediately following the date of dissolution. 8 Del. Code Ann. tit. 8, S 278 (2005). Alternatively, any individual may petition the Delaware Court of Chancery at any time to be appointed as a "trustee" of the dissolved corporation, with the "power to prosecute and defend, in the name of the corporation... all such suits as may be necessary or proper." 8 Del. Code Ann. tit. 8, S 279 (2005). Because SynTec was not appointed "trustee" of the now-dissolved CEM by the Delaware Court of Chancery, it lacks standing to prosecute this action. Here, the record reveals that SynTec, although acting as "liquidating agent" for CEM, was not acting pursuant to any "court order or statute." See Clifton Dep. at 65, 72. SynTec's general counsel acknowledged, at deposition, that SynTec never petitioned the Delaware Court of Chancery for authorization to act as CEM's trustee, with the power to prosecute and defend lawsuits. Id Although SynTec did receive CEM's assets under the resolutions that it adopted, those resolutions did not transfer any of CEM' s outstanding warranties or liabilities. Id at 61. Under Section 279, a corporate entity's lifespan can be extended indefinitely through the appointment of a trustee, in contrast to the Delaware common law rule that "a dissolved corporation [can] neither sue nor be sued." Int'l Pulp Equip. Co. v. St. Regis Kraft Co., 54 F.Supp. 745, 748 (D. Del. 1944); see also In re Citadel Indus., Inc., 423 A.2d 500 (Del Ch. 1980). The record, however, is devoid of any evidence that SynTec took the steps required by Delaware law to be appointed "trustee" of CEM. 1 CEM was incorporated within the state of Delaware; under Pennsylvania law, a corporate entity's standing to sue is determined by the law of the state of incorporation. See 15 Pa.C.S. ~ 4145; Wettengel v. Robinson, 136 A. 673, 676 (Pa. 1927). 3 NO. 02-4610 CIVIL SynTec suggests that, despite the requirements of Section 279, it should be permitted to bring this suit under Section 278 as a successor in interest to CEM, because first, it has incurred substantial costs in paying for repairs to the projects CEM conducted, and will incur future costs to repair additional projects; and second, under Delaware law, Section 278 and Section 279 must be liberally construed to effect their remedial purpose. Int'l Pulp, 54 F.Supp. at 749. This argument fails on both points. First, the substantial costs that SynTec points to as "damages" were voluntary payments that SynTec made out of an interest in maintaining business relations. SynTec's general counsel testified at deposition that acting "as the liquidating agent for CEM, [and] without legal obligation to do so ... [SynTec] voluntarily funded... warranty repairs for customers ofCEM." Clifton Dep. at 58 (emphasis added). SynTec's general counsel explained that the company was motivated by a desire to salvage business relations, and save face. Id at 70-71. Similarly, any payments that SynTec may decide to make in the future will be completely voluntary, as it did not assume any of CEM' s liabilities when it dissolved in 1999. Id at 61? SynTec's second argument subverts the plain statutory language. Section 278 clearly permits only the dissolved corporation itself to prosecute or defend actions. Third parties may only sue on behalf of a dissolved corporation by petitioning the Chancery Court under Section 279. To permit SynTec to proceed with this lawsuit would effectively render Section 279 superfluous. 2 Because the three-year extension period by ~ 278 has also expired, CEM cannot be held liable for any future damages either. The only way that SynTec could be liable on the current and future projects would be if it was appointed CEM's "trustee" in accordance with ~ 279, which would coincidentally allow SynTec to prosecute this action. 4 NO. 02-4610 CIVIL Under Pennsylvania law, "when a statute creates a cause of action and designates who may sue, the issue of standing becomes interwoven with that of subject matter jurisdiction. Standing then becomes a jurisdictional prerequisite to an action." Gram v. Burgoon, 672 A.2d 823, 824-25 (Pa.Super. 1996). Because the necessary jurisdictional prerequisites have not been met in this case, summary judgment will be sustained. ORDER AND NOW, this day of January, 2006, the motions of the defendants for summary judgment are GRANTED. BY THE COURT, Kevin A. Hess, 1. Ronald L. Williams, Esquire F or the Plaintiff Thomas B. Schmidt, III, Esquire Alexandra Makosky, Esquire Murray S. Levin, Esquire For Defendant Sequa Corporation Richard F. Paciaroni, Esquire Marsha A. Sajer, Esquire For Additional Defendant PPG, Inc. :rlm 5 CARLISLE SYNTEC INCORPORATED, AS LIQUIDATING AGENT FOR CARLISLE ENGINEERED METALS, INC., IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA CIVIL ACTION - LAW vs. NO. 02-4610 CIVIL SEQUA CORPORATION d/b/a PRECOAT METALS, Defendant vs. PPG INDUSTRIES, INC., Additional Defendant IN RE: MOTIONS OF PPG INDUSTRIES, INC. AND SEQUA CORPORATION FOR SUMMARY JUDGMENT BEFORE HESS AND OLEK 1.1. ORDER AND NOW, this day of January, 2006, the motions of the defendants for summary judgment are GRANTED. BY THE COURT, Kevin A. Hess, 1. Ronald L. Williams, Esquire F or the Plaintiff Thomas B. Schmidt, III, Esquire Alexandra Makosky, Esquire Murray S. Levin, Esquire For Defendant Sequa Corporation Richard F. Paciaroni, Esquire Marsha A. Sajer, Esquire For Additional Defendant PPG, Inc. :rlm