82 A.3d 696
Del.2013Background
- Krafft-Murphy Co., a Delaware corporation that dissolved in 1999, faced hundreds of asbestos suits and retained liability insurance whose coverage remained unexhausted.
- The corporation did not use DGCL procedures (§§ 280–281) to notify creditors or set aside assets for future claimants; its only asserted assets are the unexhausted insurance policies.
- Petitioners (asbestos claimants with suits pending in other jurisdictions) sought appointment of a receiver under 8 Del. C. § 279 to enable litigation and recovery against the dissolved corporation.
- The Court of Chancery granted summary judgment for the corporation, accepting insurers’ representations that they would defend claims filed within ten years of dissolution and holding that claims filed after ten years were time-barred, so no receiver was warranted.
- The Supreme Court reviewed statutory interpretation questions about whether contingent contractual rights (insurance policies) are “property” under § 279, whether the dissolution scheme imposes a general time bar on third‑party claims, and whether a dissolved corporation may litigate after § 278’s three‑year winding‑up period without a receiver.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contingent contractual rights (unexhausted insurance) are “property” under § 279 | Contingent rights qualify as property; insurance policies are assets that can vest if liability attaches | Policies aren’t property unless a final judgment exists or claims are timely; court need not appoint receiver | Contingent contractual rights are “property” under § 279 if they are capable of vesting; insurance policies here can be property because claims are not statutorily extinguished |
| Whether DGCL dissolution provisions create a general statute of limitations extinguishing third‑party claims after prescribed periods | §§ 280–282 do not extinguish corporate liability generally; they provide planning procedures and limited bars tied to specific notice/rejection rules | The planning periods (5/10 years) imply an outer limit; after 10 years liability is extinguished so policies lack value | §§ 278–282 do not operate as a general time bar on third‑party claims; the statute’s text and history show the planning periods protect directors/shareholders, not abolish corporate liability |
| Whether a dissolved corporation may defend suits commenced after § 278’s three‑year wind‑up without a court appointee | A receiver must be appointed because the corporation loses power to act after three years; insurers’ unilateral defense cannot restore corporate authority | Insurers’ representations that they will defend make petition non‑justiciable; no receiver needed for claims within ten years | After § 278’s three‑year period, the corporation lacks authority to act except for suits commenced before that period; for suits commenced after three years, the corporation may act only through a court‑appointed receiver/trustee under § 279 |
| Whether Court of Chancery properly denied receivership based on insurers’ assurances | Petitioners argued assurances don’t cure the statutory lack of corporate authority; receivership was ripe | Court accepted insurers’ assurances and held petition hypothetical for <=10‑year claims | Court erred: insurers’ assurances do not substitute for statutory authority; petition for receiver was justiciable and must be decided on merits |
Key Cases Cited
- Addy v. Short, 89 A.2d 136 (Del. 1952) (contingent rights of a dissolved corporation can be property)
- In re Citadel Indus., Inc., 423 A.2d 500 (Del. Ch. 1980) (statutory dissolution scheme prolongs corporate existence for winding up; § 279 relief depends on undistributed assets)
- In re Texas E. Overseas, Inc., 998 A.2d 852 (Del. 2010) (unexhausted insurance policies can be property permitting receivership under § 279)
- In re RegO Co., 623 A.2d 92 (Del. Ch. 1992) (§§ 280–281 recognize rights of future claimants and provide safe harbors for directors/shareholders)
- City Investing Co. Liquidating Trust v. Continental Cas. Co., 624 A.2d 1191 (Del. 1993) (reaffirming that contingent property interests can have value post‑dissolution)