Ironwood Homes, Inc. et al v. Bowen et al, No. 3:2008cv00098 - Document 263 (D. Or. 2010)

Court Description: OPINION AND ORDER: The Court DENIES as moot Plaintiffs' Motion 200 for Default Judgment against Linke and DENIES Linke's Motion 222 to Dismiss. Signed on 6/14/10 by Judge Anna J. Brown. (ljl)

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON PORTLAND DIVISION IRONWOOD HOMES, INC., an Oregon corporation; PATRICK D. HUSKE; and TAMARA L. HUSKE, 08-CV-0098-BR OPINION AND ORDER Plaintiffs, v. CRAIG E. BOWEN; PAMELA A. BOWEN, MICHAEL C. GIBBONS; WELLS FARGO BANK, N.A.; JAMES M. WILSON; DONALD W. NELSON; LINKE ENTERPRISES; INC. (aka FRONTIER LEATHER COMPANY); STERLING SAVINGS BANK; and ACTION MORTGAGE COMPANY, Defendants. THOMAS R. BENKE The Environmental Compliance Organization, LLC 7845 S.W. Capitol Hwy, Ste. 8 Portland, OR 97219 (503) 246-1514 Attorneys for Plaintiffs Ironwood Homes, Inc. (hereinafter referred to as Ironwood) and Patrick D. Huske and Tamara L. Huske (hereinafter referred to collectively as the Huskes) 1 - OPINION AND ORDER DANIEL R. SCHANZ TOM C. SPOONER Spooner Much & Amman, P.C. 530 Center St., Ste. 722 Salem, OR 97301 (503) 588-5899 Attorneys for Defendants Craig E. Bowen and Pamela A. Bowen (hereinafter referred to collectively as the Bowens) GEORGE WAYNE MCKALLIP, JR. PATRICK G. ROWE Sussman Shank, LLP. 1000 S.W. Broadway, Ste. 1400 Portland, OR 97205 (503) 227-1111 Attorneys for Defendant Michael C. Gibbons LEE C. NUSICH MICHAEL A. NESTEROFF Lane Powell, PC 601 S.W. Second Ave., Ste. 2100 Portland, OR 97204 (503) 778-2119 Attorneys for Defendants Wells Fargo Bank, N.A., and James M. Wilson (Wells Fargo/Wilson when referred to collectively) BRIAN D. CHENOWETH BROOKS MACINNES FOSTER Chenoweth Law Group, PC 510 S.W. Fifth Ave., Fifth Floor Portland, OR 97204 (503) 221-7958 Attorneys for Defendant Donald W. Nelson 2 - OPINION AND ORDER DAVID C. WEBER LOREN R. DUNN Riddell Williams 1001 Fourth Ave., Ste. 4500 Seattle, WA 98154 (206) 624-3600 Attorneys for Defendant Linke Enterprises of Oregon, Inc., aka Frontier Leather Co. (hereinafter referred to as Linke) GEANNA N. VAN DESSEL LESLIE R. WEATHERHEAD Witherspoon, Kelley, Davenport & Toole 422 West Riverside Ave., Ste. 1100 Spokane, WA 99201 (509) 624-5265 Attorneys for Sterling Savings Bank and Action Mortgage Co. BROWN, Judge. This matter comes before the Court on Plaintiffs Motion (#200) for Default Judgment against Defendant Linke Enterprises of Oregon, Inc. (Linke) and Linke s Motion (#222) to Dismiss.1 For the following reasons, the Court DENIES as moot Plaintiffs Motion for Default Judgment against Linke and DENIES Linke s Motion to Dismiss. 1 The complex factual and legal background of this case, and Linke s activities giving rise to the allegations made by Plaintiffs in this case is more fully described in the Court s Opinion and Order (#262) issued on June 14, 2010. 3 - OPINION AND ORDER PLAINTIFFS MOTION FOR DEFAULT JUDGMENT AGAINST LINKE On October 21, 2009, Plaintiffs filed a Motion seeking default judgment against Linke effective October 30, 2009 (the deadline for Linke to make its first appearance in this matter) on the ground that if the court does not otherwise appoint a receiver who can act as client representative [by that date], then there will be no answer filed by Linke. On October 28, 2009, the Court entered an Order relieving Linke of its obligation to file an answer until after its Motion for Appointment of a Client Representative is resolved by the Court. 2 The parties are cooperating in seeking an appropriate client representative for Linke. Accordingly, the Court DENIES as moot Plaintiffs Motion for Default Judgment against Linke. LINKE S MOTION (#222) TO DISMISS FOR FAILURE TO STATE A CLAIM Linke moves to dismiss Plaintiffs claims against Linke and each of the Crossclaims asserted against it by Wells Fargo/ 2 At oral argument on April 14, 2010, the Court directed the parties to confer and to submit a status report by April 28, 2010, on their progress in finding an acceptable client representative for Linke. On April 28, 2010, the parties reported to the Court that they were cooperating in that search. The Court will hold a further hearing to address issues relating to that representation after an acceptable representative has been found. 4 - OPINION AND ORDER Wilson and Nelson for failure to state claims on which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). Plaintiffs and Defendants Wells Fargo/Wilson and Nelson oppose the Motion. Linke asserts it is a dead and buried corporation under Oregon law with no undistributed assets and, therefore, may not be sued or held liable for environmental-response costs. The underlying issue is whether certain liability insurance policies, which may provide indemnity coverage to Linke (notwithstanding Linke s status as a dead and buried corporation) and are the apparent source of the funding of Linke s defense in this case, constitute undistributed assets of Linke that render it a live entity capable of being sued in this case. I. Federal Law. Federal Rule of Civil Procedure 17(b)(2) provides the capacity of a corporation to sue or to be sued is determined by the law under which it was organized. In an action in which the plaintiff seeks partial relief under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9601, et seq., the Ninth Circuit has held Rule 17(b)(2) requires the court to apply state law when deciding whether the dissolved corporation may be sued for damages. Levin Metals Corp. v. Parr-Richmond Terminal Co., 817 F.2d 1448, 1449 (9th Cir. 1987). 5 - OPINION AND ORDER The Court notes Levin has been criticized by other courts generally because the state law that would otherwise apply allowed the dissolved corporation to escape responsibility for its unlawful disposal of hazardous wastes. See, e.g., Columbia River Svc. Corp. v. Gilman, 751 F. Supp. 1448, 1453 (W.D. Wa. 1990); Canadyne-Georgia Corp. v. Cleveland, 72 F. Supp. 2d 1373, 1382 ((M.D. Ga. 1999)). case here. That is not the In any event, this Court is bound to follow the Ninth Circuit s decision. II. Oregon Law. Oregon Revised Statute § 60.637(2)(e) provides the dissolution of a corporation does not [p]revent commencement of a proceeding by or against a corporation in its corporate name. Oregon Revised Statute § 60.645 provides a claim against a dissolved corporation may be enforced to the extent of its undistributed assets (emphasis added) unless the dissolved corporation gives written notice of its pending dissolution to known claimants (see Oregon Revised Statute § 60.641) or publishes such notice to unknown claimants in a newspaper of general circulation (see Oregon Revised Statute § 60.644). Oregon Revised Statute § 60.001(7) defines distribution of a corporate asset as a direct or indirect transfer of money or other property. 6 - OPINION AND ORDER III. Analysis. The parties have not cited and the Court has not found any cases in Oregon that are helpful in addressing the issue as to whether a liability policy of the type that may be involved in this case is a corporate asset capable of being distributed when the corporation is dissolved. Other courts, however, have found liability policies should be listed as assets of a bankrupt estate. See, e.g., Matter of Shondel, 950 F.2d 1301, 1305 (7th Cir. 1991)(When a debtor schedules a liability claim and owns liability insurance to cover that claim, the liability insurance policy should be listed as an asset of the estate. ). Notwithstanding the paucity of case law on this subject, the Court notes it is reasonable to infer Linke s liability insurance polic[ies] are an asset of the company because an attorney paid by the insurance company is currently representing Linke s interests in this case. Nevertheless, Linke moves to dismiss Plaintiffs claims against it for failure to state a claim on the ground that Plaintiffs do not allege that Linke holds any undistributed assets, and, accordingly, Linke lacks the capacity to be sued. The lack of capacity to be sued, however, is a special matter that a plaintiff need not allege. Fed. R. Civ. P. 9(a)(1)(A). Thus, to state a claim against Linke, Plaintiffs need not allege Linke has undistributed assets to satisfy a judgment. 7 - OPINION AND ORDER On this record, the Court concludes Plaintiffs have satisfied the requirements of Federal Rule of Civil Procedure 12(b)(6) and have adequately stated claims against Linke for indemnity and contribution under both federal and state law. Accordingly, the Court DENIES Linke s Motion to Dismiss. CONCLUSION For these reasons, the Court DENIES as moot Plaintiffs Motion (#200) for Default Judgment against Linke and DENIES Linke s Motion (#222) to Dismiss. IT IS SO ORDERED. DATED this 14th day of June, 2010. /s/ Anna J. Brown ____________________________ ANNA J. BROWN United States District Judge 8 - OPINION AND ORDER IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON PORTLAND DIVISION IRONWOOD HOMES, INC., an Oregon corporation; PATRICK D. HUSKE; and TAMARA L. HUSKE, 08-CV-0098-BR OPINION AND ORDER Plaintiffs, v. CRAIG E. BOWEN; PAMELA A. BOWEN, MICHAEL C. GIBBONS; WELLS FARGO BANK, N.A.; JAMES M. WILSON; DONALD W. NELSON; LINKE ENTERPRISES; INC. (aka FRONTIER LEATHER COMPANY); STERLING SAVINGS BANK; and ACTION MORTGAGE COMPANY, Defendants. THOMAS R. BENKE The Environmental Compliance Organization, LLC 7845 S.W. Capitol Hwy, Ste. 8 Portland, OR 97219 (503) 246-1514 Attorneys for Plaintiffs Ironwood Homes, Inc. (hereinafter referred to as Ironwood) and Patrick D. Huske and Tamara L. Huske (hereinafter referred to collectively as the Huskes) 1 - OPINION AND ORDER DANIEL R. SCHANZ TOM C. SPOONER Spooner Much & Amman, P.C. 530 Center St., Ste. 722 Salem, OR 97301 (503) 588-5899 Attorneys for Defendants Craig E. Bowen and Pamela A. Bowen (hereinafter referred to collectively as the Bowens) GEORGE WAYNE MCKALLIP, JR. PATRICK G. ROWE Sussman Shank, LLP. 1000 S.W. Broadway, Ste. 1400 Portland, OR 97205 (503) 227-1111 Attorneys for Defendant Michael C. Gibbons LEE C. NUSICH MICHAEL A. NESTEROFF Lane Powell, PC 601 S.W. Second Ave., Ste. 2100 Portland, OR 97204 (503) 778-2119 Attorneys for Defendants Wells Fargo Bank, N.A., and James M. Wilson (Wells Fargo/Wilson when referred to collectively) BRIAN D. CHENOWETH BROOKS MACINNES FOSTER Chenoweth Law Group, PC 510 S.W. Fifth Ave., Fifth Floor Portland, OR 97204 (503) 221-7958 Attorneys for Defendant Donald W. Nelson 2 - OPINION AND ORDER DAVID C. WEBER LOREN R. DUNN Riddell Williams 1001 Fourth Ave., Ste. 4500 Seattle, WA 98154 (206) 624-3600 Attorneys for Defendant Linke Enterprises of Oregon, Inc., aka Frontier Leather Co. (hereinafter referred to as Linke) GEANNA N. VAN DESSEL LESLIE R. WEATHERHEAD Witherspoon, Kelley, Davenport & Toole 422 West Riverside Ave., Ste. 1100 Spokane, WA 99201 (509) 624-5265 Attorneys for Sterling Savings Bank and Action Mortgage Co. BROWN, Judge. This matter comes before the Court on Plaintiffs Motion (#200) for Default Judgment against Defendant Linke Enterprises of Oregon, Inc. (Linke) and Linke s Motion (#222) to Dismiss.1 For the following reasons, the Court DENIES as moot Plaintiffs Motion for Default Judgment against Linke and DENIES Linke s Motion to Dismiss. 1 The complex factual and legal background of this case, and Linke s activities giving rise to the allegations made by Plaintiffs in this case is more fully described in the Court s Opinion and Order (#262) issued on June 14, 2010. 3 - OPINION AND ORDER PLAINTIFFS MOTION FOR DEFAULT JUDGMENT AGAINST LINKE On October 21, 2009, Plaintiffs filed a Motion seeking default judgment against Linke effective October 30, 2009 (the deadline for Linke to make its first appearance in this matter) on the ground that if the court does not otherwise appoint a receiver who can act as client representative [by that date], then there will be no answer filed by Linke. On October 28, 2009, the Court entered an Order relieving Linke of its obligation to file an answer until after its Motion for Appointment of a Client Representative is resolved by the Court. 2 The parties are cooperating in seeking an appropriate client representative for Linke. Accordingly, the Court DENIES as moot Plaintiffs Motion for Default Judgment against Linke. LINKE S MOTION (#222) TO DISMISS FOR FAILURE TO STATE A CLAIM Linke moves to dismiss Plaintiffs claims against Linke and each of the Crossclaims asserted against it by Wells Fargo/ 2 At oral argument on April 14, 2010, the Court directed the parties to confer and to submit a status report by April 28, 2010, on their progress in finding an acceptable client representative for Linke. On April 28, 2010, the parties reported to the Court that they were cooperating in that search. The Court will hold a further hearing to address issues relating to that representation after an acceptable representative has been found. 4 - OPINION AND ORDER Wilson and Nelson for failure to state claims on which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). Plaintiffs and Defendants Wells Fargo/Wilson and Nelson oppose the Motion. Linke asserts it is a dead and buried corporation under Oregon law with no undistributed assets and, therefore, may not be sued or held liable for environmental-response costs. The underlying issue is whether certain liability insurance policies, which may provide indemnity coverage to Linke (notwithstanding Linke s status as a dead and buried corporation) and are the apparent source of the funding of Linke s defense in this case, constitute undistributed assets of Linke that render it a live entity capable of being sued in this case. I. Federal Law. Federal Rule of Civil Procedure 17(b)(2) provides the capacity of a corporation to sue or to be sued is determined by the law under which it was organized. In an action in which the plaintiff seeks partial relief under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9601, et seq., the Ninth Circuit has held Rule 17(b)(2) requires the court to apply state law when deciding whether the dissolved corporation may be sued for damages. Levin Metals Corp. v. Parr-Richmond Terminal Co., 817 F.2d 1448, 1449 (9th Cir. 1987). 5 - OPINION AND ORDER The Court notes Levin has been criticized by other courts generally because the state law that would otherwise apply allowed the dissolved corporation to escape responsibility for its unlawful disposal of hazardous wastes. See, e.g., Columbia River Svc. Corp. v. Gilman, 751 F. Supp. 1448, 1453 (W.D. Wa. 1990); Canadyne-Georgia Corp. v. Cleveland, 72 F. Supp. 2d 1373, 1382 ((M.D. Ga. 1999)). case here. That is not the In any event, this Court is bound to follow the Ninth Circuit s decision. II. Oregon Law. Oregon Revised Statute § 60.637(2)(e) provides the dissolution of a corporation does not [p]revent commencement of a proceeding by or against a corporation in its corporate name. Oregon Revised Statute § 60.645 provides a claim against a dissolved corporation may be enforced to the extent of its undistributed assets (emphasis added) unless the dissolved corporation gives written notice of its pending dissolution to known claimants (see Oregon Revised Statute § 60.641) or publishes such notice to unknown claimants in a newspaper of general circulation (see Oregon Revised Statute § 60.644). Oregon Revised Statute § 60.001(7) defines distribution of a corporate asset as a direct or indirect transfer of money or other property. 6 - OPINION AND ORDER III. Analysis. The parties have not cited and the Court has not found any cases in Oregon that are helpful in addressing the issue as to whether a liability policy of the type that may be involved in this case is a corporate asset capable of being distributed when the corporation is dissolved. Other courts, however, have found liability policies should be listed as assets of a bankrupt estate. See, e.g., Matter of Shondel, 950 F.2d 1301, 1305 (7th Cir. 1991)(When a debtor schedules a liability claim and owns liability insurance to cover that claim, the liability insurance policy should be listed as an asset of the estate. ). Notwithstanding the paucity of case law on this subject, the Court notes it is reasonable to infer Linke s liability insurance polic[ies] are an asset of the company because an attorney paid by the insurance company is currently representing Linke s interests in this case. Nevertheless, Linke moves to dismiss Plaintiffs claims against it for failure to state a claim on the ground that Plaintiffs do not allege that Linke holds any undistributed assets, and, accordingly, Linke lacks the capacity to be sued. The lack of capacity to be sued, however, is a special matter that a plaintiff need not allege. Fed. R. Civ. P. 9(a)(1)(A). Thus, to state a claim against Linke, Plaintiffs need not allege Linke has undistributed assets to satisfy a judgment. 7 - OPINION AND ORDER On this record, the Court concludes Plaintiffs have satisfied the requirements of Federal Rule of Civil Procedure 12(b)(6) and have adequately stated claims against Linke for indemnity and contribution under both federal and state law. Accordingly, the Court DENIES Linke s Motion to Dismiss. CONCLUSION For these reasons, the Court DENIES as moot Plaintiffs Motion (#200) for Default Judgment against Linke and DENIES Linke s Motion (#222) to Dismiss. IT IS SO ORDERED. DATED this 14th day of June, 2010. /s/ Anna J. Brown ____________________________ ANNA J. BROWN United States District Judge 8 - OPINION AND ORDER

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