FOR PUBLICATION
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEES:
JAMES E. AYERS PETER J. RUSTHOVEN
Wernle, Ristine & Ayers HOWARD E. KOCHELL
Crawfordsville, Indiana E. SEAN GRIGGS
Barnes & Thornburg
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
THE LOVOLD COMPANY, )
)
Appellant-Plaintiff )
)
vs. ) No. 32A04-0105-CV-226
)
GALYAN’S BROWNSBURG, INC., )
GALYAN’S FAMILY MARKET, INC., and )
P & P BROWNSBURG REALTY, INC., )
)
Appellees-Defendants. )
APPEAL FROM THE HENDRICKS SUPERIOR COURT
The Honorable David H. Coleman, Special Judge
Cause No. 32D01-9603-CP-062
March 5, 2002
OPINION- FOR PUBLICATION
BAKER, Judge
Once again, we are called upon to examine a party’s potential
liability for remedial “clean-up” costs under the Indiana Underground
Storage Tank Act[1] (the Act). In this instance, the Lovold Company
(Lovold) appeals the trial court’s grant of summary judgment in favor of
Galyan’s Brownsburg, Inc., (GBI), Galyan’s Family Market, Inc. (Family
Market) (collectively, Galyan’s) and P & P Realty, Inc. (P & P).
Specifically, Lovold contends it was error to determine as a matter of law
that the defendant corporations that had been voluntarily dissolved by the
Indiana Secretary of State (Secretary of State), could not be held liable
for clean-up costs pursuant to the Act. In essence, Lovold urges that the
two-year statute of limitations should not preclude the claims brought
against Galyan’s because those claims were not known and could not have
reasonably been discovered within the limitations period.
FACTS[2]
In 1963, GBI acquired a certain tract of real estate located at
800 East Main Street in Brownsburg (the site). From the mid 1950s to the
early 1980s, the site housed a gasoline station. GBI had leased the
premises to the Almond Oil Company (Almond), which was an independent
distributor of petroleum products produced by Shell Oil. Almond had
installed Shell-brand signs and gasoline dispensing pumps, which were
connected to a number of Underground Storage Tanks (USTs). During a ten-
year lease, either Almond or an independent sublessee operated a filling
station at the site that included the use and operation of USTs.
When Almond ceased filling station operations at the site in 1980, it
pumped out nearly all of the gasoline that remained in the USTs and removed
the dispensing pumps that had been installed. The nature of the property
was changed and the building on the site was used for other purposes
including a film developing shop.
In 1983, GBI was liquidated and voluntarily dissolved. GBI published
a “Notice of Voluntary Dissolution” in the newspaper and the Secretary of
State ultimately issued a “Certificate of Dissolution” on November 2, 1983.
As part of the liquidation, GBI sold and conveyed the site by a general
warranty deed to Family Market in return for $397,060. The Notice of
Dissolution stated that the business then conducted by GBI would continue
unchanged under the name of “Galyan’s Family Market, Inc.” Appellant’s
App. at 182.
In 1984, Family Market experienced substantial financial loss, ceased
business and was liquidated. The liquidation proceeds were placed in trust
for the benefit of Family Market’s creditors. Those funds were eventually
exhausted, resulting in no undistributed assets of Family Market after the
creditors were paid. Moreover, there were no liquidating dividends or
other distributions to Family Market shareholders. During the course of
the liquidation, Family Market sold and conveyed the site in November 1984
by general warranty deed to P & P, a corporation formed that year, in
return for P & P’s notes payable to Family Market creditors. P & P never
operated a gasoline station on the site. A year later, P & P sold the site
to Lovold and then ceased doing business. No undistributed assets remained
after paying its creditors, and no liquidating dividends or other
distributions were made to its shareholders. Proceeds of the 1985 sale to
Lovold were used to pay the P & P notes previously issued to Family Market
creditors. In 1987, Family Market and P & P were administratively
dissolved by the Secretary of State.
In 1995, the Brownsburg Fire Department discovered that petroleum was
leaking from the USTs at the site and submitted a report to the Indiana
Department of Environmental Management. Within a few months Lovold, the
current property owner, removed the tanks and contaminated soil and
performed other cleanup work on the property at a cost of $150,000. There
is no evidence demonstrating that GBI knew of any UST leakage when it owned
the site, either before or after UST use and operation ceased and the pumps
were removed. Similarly, neither Family Market nor P & P were aware of any
leakage.
On December 20, 1995, Lovold filed a complaint against Galyans
pursuant to the Act, seeking to recover its cleanup cost from Shell and
other defendants. Lovold demanded contribution from those defendants as a
result of the leakage on the site.
GBI filed a motion for summary judgment disclaiming any liability for
remedial costs because it had been granted a certificate of voluntary
dissolution by the Secretary of State in 1983. Thus, GBI urged that
Lovold’s action against it could not proceed because it failed to institute
that cause of action within two years after the dissolution had occurred.
P & P, along with Family Market, alleged entitlement to summary judgment
because they were not statutory “owners” or “operators” of the UST’s at
the time of the release.
In February 2001, Family Market and P & P filed a second motion for
summary judgment. They asserted that no genuine issue of material fact
existed in light of the administrative dissolutions that were entered by
the Secretary of State. Both Family Market and P & P argued that the
dissolution of the corporations in 1987, occurring while the corporations
were insolvent, and allegedly without any final distribution of assets to
their shareholders, established a defense to Lovold’s claims for
contribution.
On May 8, 2001, the trial court granted the motions for summary
judgment and entered final judgment for Galyan’s and P & P. Lovold now
appeals.
DISCUSSION AND DECISION
I. Standard of Review
On appeal the standard of review of a summary judgment motion is the
same standard used in the trial court: summary judgment is appropriate
only where the evidence shows that there is no genuine issue of material
fact and the moving party is entitled to a judgment as a matter of law.
Shell Oil Co. v. The Lovold Co., 705 N.E.2d 981, 983-84 (Ind. 1998). All
facts and reasonable inferences drawn from those facts are construed in
favor of the non-moving party. Colonial Penn. Ins. Co. v. Guzorek, 690
N.E.2d 664, 667 (Ind. 1997). The moving party bears the burden of proving
the absence of a genuine issue of material fact. Shell Oil Co., 705 N.E.2d
at 984. If the movant sustains this burden, the opponent must set forth
specific facts showing that there is a genuine issue of material fact. Id.
II. Lovold’s Claims
A. Cause of Action Against GBI
Lovold argues that the trial court erred in granting GBI’s motion for
summary judgment because the voluntary corporate dissolution of GBI does
not, as a matter of law, operate to bar potential liability for
environmental contamination that had not been discovered within two years
after the dissolution. In essence, Lovold urges that a voluntarily
dissolved corporation still may face environmental liability even though
the action against it was not brought within two years following the
dissolution.
In addressing this issue, we note the relevant provisions of our
corporation dissolution statute, I.C. § 23-1-45-7[3]:
(c) If the dissolved corporation publishes a newspaper notice in
accordance with subsection (b),[[4]] the claim of each of the
following claimants is barred unless the claimant commences a
proceeding to enforce the claim within two (2) years after the
publication date of the newspaper notice. . . .
(d) A claim may be enforced under this section:
(1) against the dissolved corporation, to the extent of its
undistributed assets; or
(2) if the assets have been distributed in liquidation, against a
shareholder of the dissolved corporation to the extent of the
shareholder’s pro rata share of the claim or the corporate assets
distributed to the shareholder in liquidation, whichever is less, but
a shareholder’s total liability for all claims under this section may
not exceed the total amount of assets distributed to the shareholder.
(Emphasis supplied).
In determining whether Lovold’s action against GBI is time-barred, we
note in Indiana Nat’l Bank v. Churchman, 564 N.E.2d 340 (Ind. Ct. App.
1990), the bank brought an action against the sole shareholder of a
corporation that had been dissolved over two years earlier in an effort to
collect the balance due on an unpaid promissory note. On appeal, the bank
argued that the trial court’s entry of summary judgment against it was
improper because the circumstances dictated that the theory of equitable
estoppel tolled the two-year statute of limitations or “survival” period
embodied in the statute. Id. at 342. We rejected this argument and
observed that:
The question of whether the theory of equitable estoppel operates to
toll I.C. 23-1-7-1(e) has not been addressed by an Indiana court.
However, we have the benefit of numerous decisions from other
jurisdictions. Without fail, these decisions treat statutes
identical, or similar, to I.C. 23-1-7-1 as “survival” statutes, rather
than as statutes of limitation. That is, the statute gives life to a
right otherwise destroyed.
At common law, the corporate capacity to sue or be sued terminated
when the corporation dissolved. [Citation omitted]. Similarly,
dissolution destroyed the capacity of former shareholders to sue or be
sued with respect to rights entirely dependent upon and existing
solely as an outgrowth of shareholder status. Thus a survival statute
operates to give life to a claim that would otherwise be extinguished
by virtue of a corporate dissolution.
We see no reason for rejecting the view taken by these cases. It is
“[a] firmly established premise that a dissolved corporation may
thereafter be proceeded against either criminally or civilly only if
authorized by the laws of the state of its incorporation.” Therefore,
suit is barred if filed, as here, over two years from the date of
dissolution.
Id. at 342-43 (alteration in original and citation omitted) (quoting U.S.
v. P.F. Collier & Son Corp. (7th Cir. 1954) 208 F.2d 936, 937. We further
commented that:
Enactment of a survival statute indicates a legislative policy to
place a definite termination upon corporate existence with respect to
dissolution, as well as to protect shareholders, officers, and
directors of dissolved corporations from prolonged and uncertain
liability. The relief corridor afforded to claimants for a limited
period thereafter is narrow indeed and should not be liberally
extended or enlarged. Courts interpreting such enactments give
deference to this policy and have refused to apply equitable remedies
to defeat survival statutes.
Id. at 344 (emphasis supplied). Here, the application of the rationale
espoused in Churchman works as an absolute bar to Lovold’s 1995 action that
was filed over twelve years following GBI’s voluntary dissolution.[5]
Nonetheless, Lovold urges that liability should not be avoided merely
because a corporation is formally dissolved in light of the “overriding
public policies of encouraging and requiring environmental clean-up.”
Appellant’s brief at 10. Again, we point out that our legislature has
seen fit to carve out a window of vulnerability for two years in the event
that a corporation is dissolved. Such a rule is in line with the policy to
place a definite termination upon a corporation’s existence in order to
shield officers and owners of the corporation from uncertain or unlimited
liability. See id.
Moreover, while not controlling here, we deem it appropriate to
discuss the Seventh Circuit Court of Appeals decision in Citizens Elec.
Corp. v. Bituminous Fire & Marine Ins. Co., 68 F.3d 1016 (7th Cir. 1996).
In Citizens Electric, an action was brought against a dissolved corporation
for cleanup costs in an area that had become contaminated with PCBs. The
action was commenced in accordance with the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA).[6] The provisions
contained in our Underground Storage Tank legislation follow the same
remedial principles established in CERCLA. W. Ohio Pizza v. Clark Oil &
Ref., 704 N.E.2d 1086, 1090 (Ind. Ct. App. 1999). The Citizens Electric
court determined, in essence, that a CERCLA action may not be brought
against a dissolved corporation after the expiration of the state survival
period. Id. at 1020. Nothing embodied in CERCLA served to “override” this
rule and the Citizens Electric court further observed that if the state
survival statute were ignored, the common law rule is that “all litigation
by or against a dissolved corporation must be dismissed.” Id. at 1019.
Such an observation is precisely in line with our decision in Churchman as
well as the purpose and effect of the survival statute.[7] Accordingly, we
see nothing in the Act that would counter the narrow limitations set forth
in the survival statute.
We also note that in an effort to avoid the dictates of Churchman to
the corporate dissolution provisions, Lovold likens the circumstances here
to those involving medical malpractice claims for latent injuries. It is
apparent that Lovold ignores that part of Churchman where we declared that
the “relief corridor” is narrow and will not be liberally extended or
enlarged. Additionally, unlike certain “latent” medical conditions, the
presence of USTs and possible leakage could have been ascertained had
Lovold made inquiry and performed some investigation.
In general, absent fiduciary disclosure duties, a buyer who complains
of matters that could have been discovered before purchase will not be
protected. Stucco Cotton Duster Co. v. Comet Elec. Co., 95 Ind. App. 672,
680, 180 N.E. 185, 187-88 (1932) (recognizing no liability when information
is as accessible to one party as to the other and the truth may be
ascertained by the exercise of reasonable diligence), trans. denied; see
also Choung v. Iemma, 708 N.E.2d 7, 14 (Ind. Ct. App. 1999) (holding no
liability for not disclosing that a house had been relocated and placed
upon a newly constructed foundation; advertisement stating that the house
was a “rebuilt walkout ranch” put the buyer on notice, requiring him to
make further inquiry of the seller or to obtain an inspection of the
premises).
Here, any prospective buyer was placed on notice of the likely
presence of USTs at the site. An examination of the chain of title records
would have disclosed a number of recorded leases made to various oil
companies. Lovold could have made such an inquiry and arranged an
inspection or investigation for possible leakage. The designated evidence
shows that it failed to do so and it did not obtain seller representations,
warranties or other assurances on that topic. Thus, Lovold’s inaction and
failure to take any steps in an effort to learn readily ascertainable
information about the site wholly undermines its analogy to latent injuries
or other medical malpractice limitations notions. Thus, the trial court
properly entered summary judgment in GBI’s favor.
B. Family Market and P & P
Lovold argues that the trial court erred in granting summary judgment
for Family Market and P & P. In essence, Lovold urges that the corporate
dissolution of Family Market and P & P and their liquidation of the assets
to creditors should not have affected their liability for remedial cleanup.
In resolving this contention, we first set forth some general
policies and protections afforded under the Act. The Act provides for the
regulation of USTs and the prevention and remediation of pollution from
tanks. Shell Oil Co., 705 N.E.2d at 967. Further, it gives IDEM the
authority to promulgate rules to enforce its provisions, including the
ability to require “owners and operators” of USTs to take corrective
action. I.C. § 13-23-1-2, -13-1. There is a provision for the recovery of
corrective action costs and attorneys fees by a private party who
successfully prosecutes a claim against an owner or operator of those
tanks. I.C. § 13-23-13-8. The Act anticipates payment of costs by owners
and operators before or after cleanup. Id. Specifically, I.C. § 13-23-13-
8(b) provides that:
A person who . . .
(2) undertakes corrective action resulting from a release from
an underground storage tank, regardless of whether the corrective
action is undertaken voluntarily or under an order issued under this
chapter,
is entitled to receive a contribution from a person who owned or
operated the underground storage tank at the time the release
occurred.
Turning to some definitional statutes, I.C. § 13-11-2-150(a) defines
“owner” as:
(a) “Owner” for purposes of Ind. Code 13-23, except as provided in
subsection (b),[8] means:
(2) for an underground storage tank that is:
(A) in use before November 8, 1984; but
(B) no longer in use on November 8, 1984;
a person who owned the tank immediately before the discontinuation of
the tank’s use.
To qualify as an “operator” of a UST, a person must be “in control of,
or hav[e the] responsibility for, the daily operation of an
underground storage tank.” I.C. § 13-11-2-148.
We note that Lovold has not challenged the contention that
Family Market and P & P did not qualify as “operators” of the USTs.
Moreover, the undisputed facts show that that there had been no “daily
operation” of the USTs for years before either corporation came into
existence or owned the site. In Shell Oil Co. v. Meyer, our supreme
court determined that “daily operation” requires “continuous”
operation activity:
The definition of “operator” includes the phrase “daily operation of
the underground storage tank.” Although the Act does not require
interaction with the tank literally each day, “daily” implies at least
some continuous level of activity as opposed to installation, repair
or removal of a storage tank, or performance of some other irregular
or infrequent activity with respect to it. From the beginning of the
time span relevant to this case the “daily operations” i.e., the
activities routinely associated with the use of the tank, included
filling it, dispensing gasoline from it and measuring its contents. .
. . [M]easurement was accomplished by periodic “sticking” i.e.,
placing a dipstick like pole in the tank to determine the level of
fluid.
705 N.E.2d at 972-73.
No “daily operations” occurred after the site ceased operating as a gas
station in 1980.
Additionally, it is apparent under the Act that neither Family Market
nor P & P were ever “owners” for USTA purposes. Specifically, neither
corporation owned any of the USTs “immediately before the discontinuation
of the tank’s use” in accordance with I.C. § 13-11-2-150(a). Again, the
undisputed evidence reveals that discontinuation of use occurred in 1980,
before either of these corporations was formed or acquired the site.
Inasmuch as neither Family Market nor P & P qualified as “owners” or
“operators” of the USTs in accordance with the statutory definitions,
neither of them is subject to any contribution claim liability under the
Act. Thus, the trial court did not err in granting summary judgment in
their favor.
CONCLUSION
In light of the disposition of the issues set forth above, we
conclude that the trial court properly entered summary judgment for GBI
because Lovold’s cause of action against that corporation was precluded by
the two-year statute of limitations or “survival” provision set forth in
the corporate dissolution statute. We also note that the trial court
properly entered summary judgment for Family Market and P & P because
neither corporation qualified as an “owner” or “operator” within the
meaning of the Act.
Affirmed.
NAJAM, J., and MATTINGLY-MAY, J., concur.
-----------------------
[1] IND. CODE §§ 13-23-1-1 to –15. The Act was formerly codified at
IND. CODE §§ 13-7-20-12 to –42.
[2] Many of the facts set forth herein were originally reported in two
companion cases: Shell Oil Co. v. Meyer, 705 N.E.2d 962 (Ind. 1998) and
Shell Oil Co. v. The Lovold Co., 705 N.E.2d 981 (Ind. 1998).
[3] This statute was previously codified as I.C. § 23-1-7-1(e).
[4] Whether the corporation adequately complied with the requirements of
a newspaper notice is not at issue here.
[5] Although not at issue here because of our discussion of the
applicability of the “survival statute,” we note that our supreme court has
determined that a corporate officer may be held personally liable for
violating the Indiana Environmental Management Act (the Act), whether or
not the traditional doctrine of piercing the corporate veil would produce
such liability. IDEM v. RLG, Inc., 755 N.E.2d 556, 558 (Ind. 2001).
Specifically, the court in RLG observed that the sole corporate officer was
an active participant in various activities that amounted to a violation of
the Act. Id. at 563.
[6] 42 U.S.C. § 9607.
[7] The seventh circuit is not alone in rejecting CERCLA preemption of
state survival statutes. See Louisiana-Pacific Corp. v. ASARCO, Inc., 5
F.3d 431, 433-34 (9th Cir. 1993); cf. Aluminum Co. of Am. v. Beazer E.,
Inc., 124 F.3d 551, 567 (3d Cir. 1997). We have found no federal appellate
decision to the contrary and Lovold acknowledges that a “line of cases”
rejects its position. Appellant’s brief at 12.
[8] This subsection excepts from the “owner” definition security interest
holders who do not participate in managing a tank or produce, refine or
market regulated substances.
