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AMERICAN OPTICAL CO. v. PHILADELPHIA ELEC. CO.

April 1, 1964

AMERICAN OPTICAL COMPANY
v.
PHILADELPHIA ELECTRIC COMPANY et al.



The opinion of the court was delivered by: GRIM

On December 28, 1956 a fire occurred in a building located at 801-809 Chestnut Street, Philadelphia. On September 2, 1960 a tenant in the damaged building sued among others, (1) Chestnut Corporation, the record owner of the building at the time of the fire, (2) the corporation's president and (3) the building rental agent, alleging their joint and several liability for the property damage sustained by the tenant in the fire. Diversity of citizenship is the basis of jurisdiction. Personal service of process was effected on the rental agent but not the corporation or its president. Pursuant to an order of court dated December 7, 1962 the complaint was amended to include as party defendants certain trustees to whom it was alleged the damaged premises had been conveyed on or about September 13, 1957. By authorization of this court, Chestnut Corporation, its president and the trustees, were served by mailing a copy of the complaint to the Secretary of the Commonwealth of Pennsylvania, and to the named defendants at their respective out of state residences. These three parties have now filed various motions challenging this court's jurisdiction over them.

Motion of Chestnut Corporation to Dismiss

 Chestnut Corporation in its motion to dismiss argues that at the time service was effected on it the corporation had ceased to exist and was not subject to suit.

 Capacity to sue or be sued in a federal court in the case of a corporation is determined by the law of the state under which it was organized. Fed.R.Civ.P. 17(b). Chestnut Corporation was organized under the laws of Pennsylvania which provide for the survival of remedies against a dissolved corporation as follows:

 '* * * The dissolution of a business corporation, either by the issuance of a certificate of dissolution by the Department of State, or by the decree of a court of common pleas * * * shall not take away or impair any remedy given against such corporation * * * for any liability incurred prior to such dissolution, if suit thereon is brought and service of process had before or within two years after the date of such dissolution. * * *' Act of May 5, 1933, P.L. 364, art. XI, § 1111 as amended, 15 P.S. § 2852 -1111(A).

 The fire in which plaintiff's alleged damages were sustained occurred on December 28, 1956. As a result of an application by the shareholders, a Certificate of Dissolution of Chestnut Corporation was issued by the Pennsylvania Department of State on September 28, 1959. Suit was started on September 2, 1960 and service of process on Chestnut Corporation was effected on December 20, 1962, which was more than three years after the corporation had been dissolved.

 Plaintiff contends that the Pennsylvania statute quoted above '* * * is an enabling act and not a restrictive act and * * * does not in terms prohibit suit after the two year period.' With this I disagree. The purpose of the statute is to set up an orderly procedure for the dissolution of a business corporation and at the same time to fix a time beyond which the shareholders need no longer concern themselves about the possibility that creditors might assert claims which could upset the dissolution and resurrect the corporation for the purpose of defending against the alleged claims. The statute clearly puts a two-year limitation on the period during which creditors can assert claims after dissolution of the corporation.

 Since the service of process on Chestnut Corporation in this suit was effected more than two years after the corporation had been dissolved, the motion to dismiss the action against it must be granted.

 Motion of William Kriger to Dismiss or Quash Service of Process

 Defendant Kriger, who was the last president of Chestnut Corporation, moves to dismiss or quash the service of process of the complaint against him alleging that the service of process on him was insufficient. Service was made by mailing a copy of the complaint and summons to the Secretary of the Commonwealth of Pennsylvania and to the defendant at his home in New York State.

 Such service is sufficient to confer federal jurisdiction over the person of this defendant if a Pennsylvania statute authorizes service in such a manner. Fed.R.Civ.P. 4(d)(7). Plaintiff argues that the Pennsylvania Non-Resident Owner of Real Estate Act is such a statute. *fn1" Defendant however contends that he is not and was not an 'owner, tenant or user' of the real estate involved here, but only the president of the corporation which owned the real estate at the time of the fire which is the basis of the litigation here. It is undisputed that at the time of the fire the record owner of the real estate was Chestnut Corporation and not defendant Kriger. Plaintiff argues however that the corporation was 'owned and controlled' by defendant Kriger and that Kriger 'controlled, maintained and used' the premises involved in the litigation and 'was the real owner thereof.'

 It is true that the fiction of the corporate entity cannot be used by the real owners of a property to escape liability for injuries caused by them, Rumig v. Ripley Mfg. Corp., 366 Pa. 343, 77 A.2d 360 (1951). Cf. Norris Tool & Machine Co. v. Rosenlund, 355 Pa. 560, 50 A.2d 273 (1947). However, the record before the court lacks sufficient facts for the court to make an intelligent determination of the issue at this time. The only evidence in the record bearing on this issue is the admission of defendant Kriger in his answer to the third-party complaint of Albert M. Greenfield & Co. and in his answers to plaintiff's supplementary interrogatories that he was the president of Chestnut Corporation at the time of the fire.

 Plaintiff attempted by interrogatories to discover the names of the shareholders of Chestnut Corporation and their respective interests, but Kriger objected to the interrogatories and refused the information asserting that it was irrelevant to the issues involved in the litigation. The problem of the correctness of defendant's ...


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