Moore v. Occupational Safety & Health Review Commission
Moore v. Occupational Safety & Health Review Commission
Opinion of the Court
The petitioners/appellants seek review of a decision of the Occupational Safety and Health Review Commission. This decision upheld a finding by the administrative law judge of two Citations for Serious Violations and two Citations for Wilful Violations of the Occupational Safety and Health Act
There is no dispute about the facts which gave rise to this controversy. Life Science was a Virginia corporation operating a manufacturing plant at Hopewell, Virginia, producing a dangerous pesticide known as Kepone. It is conceded that, in operating the plant, Life Science was engaged in commerce within the jurisdictional test fixed by the Act. At all times the directors and the managing officers of Life Science having “direct responsibility for working conditions affecting the safety and health” of the employees of the plant were the appellants Moore and Hundtofte. On June 1,1975, the corporation Life Science was dissolved by operation of law under the terms of § 13.1-91, Code of Virginia, 1950, as amended, for failure to file the annual report and to pay certain franchise taxes and penalty required by law. The State Corporation Commission duly notified the registered agent of Life Science on June 3, 1975, of such dissolution by letter, in which Life Science and its directors were advised:
“1. The corporation must cease to do business and the directors must liquidate it.
“2. Any person who seeks to transact business in the name of the above-named corporation is guilty of a misdemeanor.
“3. Any person who does transact business in the name of the corporation may find himself personally liable on the contracts he purports to make in its name.”
Despite such dissolution and notification, the appellants, as the responsible officers and directors of Life Science, continued the normal operations of the plant including the manufacture of the pesticide Kepone. On August 13, 1975, following the application for reinstatement by Life Science on August 11, 1975, the corporation was reinstated as provided by § 13.1-92, Code of Virginia, 1950.
In the meantime, an inspection of the plant of Life Science was conducted under the provision of the Act by compliance officers of the Department of Labor from August 11, 1975, to August 18, 1975. As a result of that inspection, the four Citations in question — two for Serious Violations and two for Wilful Violations of the Act — along with notification of a proposed total penalty
Life Science and the appellants appeared and answered the Secretary’s complaint, conceding that Life Science “was an employer engaged in a business affecting commerce and * * * subject to the requirements of the Act” but denying that the individual respondents, the appellants here, were “employers” subject to the Act. Specifically, they alleged in their answer that the dissolution of the corporation by operation of law was the result of a “clerical oversight” without the knowledge of either individual appellant and that in any event, because of the later reinstatement of the corporation’s charter, Life Science was “deemed to have continued (as a valid corporation) from the date of dissolution.” Accordingly, the appellants argued that any liability for the violations under the Act was solely that of Life Science and not that of themselves.
At the hearing before the administrative law judge, to whom the proceedings were referred, the appellants conceded the liability of Life Science, and contested only whether the individual appellants could be considered “employers” under the Act, liable for any violations of the Act between June 1, 1975 and August 13, 1975, the period during which Life Science’s charter was under dissolution by operation of law.
As indicated, the sole question presented by the appeal relates to the liability of the appellants as managing officers and directors of Life Science for the violations of the Act arising out of the operations of the Kepone plant in the interim between the dissolution of Life Science’s charter on June 1,1975, and its reinstatement on August 13, 1975. The resolution of this issue, the parties agree, turns on the construction of the two Virginia statutes governing corporate dissolution by operation of law and the reinstatement of a corporate charter so dissolved.
Section 13.1-91, Virginia Code, 1950, provides that any corporation of that State, which fails “on two successive annual dates
These statutes, the interpretation of which is admittedly controlling on the issue in this case, have been given no authoritative construction by the Virginia courts on the matter of the liability of the corporate directors for debts or torts arising out of the continuance of the corporate business after dissolution by operation of law.
It seems manifest that § 13.1-91, the Virginia corporate dissolution statute, by its terms, requires a finding of personal responsibility on the part of the corporate directors for any liability created by any normal continuance of the corporate business after dissolution. This conclusion follows from the effect of dissolution under the statute, on the corporate existence. A corporate dissolution by operation of law, under the “unique” Virginia statute, “has”, as one commentator has phrased it, “the legal effect of causing a de jure dissolution [of the corporation] as opposed to a de facto dissolution”
The logic of this statement seems inescapable, unless the subsequent reinstatement of the corporate charter under the provisions of section 13.1-92 can be said to have the effect of eliminating any previous personal liability on the part of the officers or directors. Such an application of the reinstatement statute, however, would be contrary to the rule adopted by the majority of courts in construing their respective state reinstatement statutes.
There can be no question, however, that the Virginia reinstatement statute does not relieve the directors, who have continued the corporate business, of individual liability for actions in the interim period between dissolution and reinstatement. Unlike the Delaware statute involved in Krapf, the Virginia reinstatement statute includes no language expressly relieving the directors individually of liability assumed or incurred between dissolution and reinstatement. Its language is quite clear to the point that reinstatement has “no effect on any question of personal liability of the directors.” What the Virginia statute manifestly does is to make the revived corporation liable for any liabilities incurred in this interim period but it declares at the same time in unmistakable terms that reinstatement will not relieve the directors of the personal liability they have already incurred by continuing the normal operations of the corporation during dissolution.
It follows that, under our construction of the Virginia statutes, the appellants did incur personal liability as “employers” under the Act for the violations between June 1, 1975, and August 13, 1975, and for the penalty assessed because of such violations, and the subsequent reinstatement of the corporate charter did not relieve them of such liability. Since we find that the Commission did not err in grounding the liability of the appellants on a construction of the Virginia statutes, it is unnecessary for us to consider the alternative ground stated in the report of the administrative law judge for finding the appellants individually liable.
The decision of the Commission is accordingly affirmed and the petition for review is dismissed.
. Occupational Safety and Health Act of 1970, 29 U.S.C. 651, et seq.
. For a statement of the procedure to be followed in the enforcement of the Act, see Atlas Roofing Co. v. Occupational Safety & Health Comm’n (1977) 430 U.S. 442 at 444-447, 97 S.Ct. 1261, 51 L.Ed.2d 464.
. The Act defines an “employer” as “a person engaged in a business affecting commerce who has employees” and the term includes, among others, “individual[s].” 29 U.S.C. § 652(4) and (5).
. Defense Corp. v. Lawrence Co. (1949) 336 U.S. 631, 634-5, 69 S.Ct. 762, 93 L.Ed. 931; Oklahoma Gas Co. v. Oklahoma (1927) 273 U.S. 257, 259, 47 S.Ct. 391, 71 L.Ed. 634; United States v. Polizzi (9th Cir. 1974) 500 F.2d 856, 908, cert. denied 419 U.S. 1120, 95 S.Ct. 802, 42 L.Ed.2d 820.
. In re Booth’s Drug Store (W.D.Va. 1937) 19 F.Supp. 95, has been construed as holding, by implication at least, that under an earlier version of § 13.1-91 (former section 3810), the directors would be personally liable under these circumstances. See, Gusky, Dissolution, Forfeiture, and Liquidation of Virginia Corporations, 12 U.Rich.L.Rev. 333 at 345, n. 45.
A distinction must be made between the temporary continuance of the corporate business as an incident to its efficient and economical liquidation and an indefinite continuance without any thought of liquidation. In the former case, the directors are acting in accordance with the mandate of the dissolution statute and incur no personal liability; in the latter case, they are acting in derogation of the dissolution statute and they do incur personal liability. See, Todd Shipyards Corp. v. Lomm (La.App. 1966) 190 So.2d 125, 129, writ refused 192 So.2d 370; United States v. Glen Upton, Inc. (W.D.Mo. 1974) 378 F.Supp. 1028, 1033 (“ * * * the business may have to be carried on for some time in order to protect corporate assets”); Eaton, Yale & Towne, Inc. v. Sherman Industrial Equip. Co. (E.D.Mo. 1970) 316 F.Supp. 435, 443. There is no contention that the appellants continued the corporate business after dissolution as an incident to dissolution or for the purpose of protecting corporate assets. Thus, the appellants can secure no comfort from the cases which recognize a right in the directors to continue temporarily the corporate business incidental to dissolution without incurring on that account personal liability.
. See 16A, Fletcher Cyc. Corp. (Perm.Ed.) § 8132, pp. 293-294, 19 Am.Jur.2d § 1650, pp. 1000-1001; In re Hare (D.Md. 1962) 205 F.Supp. 881, 883; Norton v. Supreme Fuel Sales Co. (D.N.J. 1947) 72 F.Supp. 287, 288; Trower v. Stonebraker-Zea Live Stock Co. (N.D.Okl. 1937) 17 F.Supp. 687, 689; Smith v. Great Basin Grain Co. (1977) 98 Idaho 266, 561 P.2d 1299, 1313; Moore v. Rommel (1961) 233 Ark. 989, 350 S.W.2d 190, 193; Southeastern Construction Co. v. Robbins (1940) 248 Ala. 367, 27 So.2d 705, 707; Leibson v. Henry (1947) 356 Mo. 953, 204 S.W.2d 310, 316; Guilford Builders Supply Co. v. Reynolds (1959) 249 N.C. 612, 107 S.E.2d 80, 83; Riedell v. Stuart (1931) 151 Okla. 266, 2 P.2d 929, 76 A.L.R. 1469, 1476-1477, with annotation; Bulova Watch Co. v. Roberts Jewelers of Rock Hill (1962) 240 S.C. 280, 284, 125 S.E.2d 643; Ewald Iron Co. v. Commonwealth (1910) 140 Ky. 692, 131 S.W. 774, 776; Trubowitch v. Riverbank Canning Co. (1947) 30 Cal.2d 335, 182 P. 182, 188-189; Jones v. Young (1934) 115 W.Va. 225, 174 S.E. 885, 887.
. Johnson v. Helicopter & Airplane Service Corp. (D.Md. 1975) 404 F.Supp. 726, 730, remanded on other grounds 491 F.2d 510; In re Booth’s Drug Store, supra (19 F.Supp. at 96).
. Commercial Nat. Bank v. Gilinsky (1909) 142 Iowa 178, 120 N.W. 476, 478, 134 Am.St.Rep. 406; Edward Shoes, Inc. v. Orenstein (N.D.Ind. 1971) 333 F.Supp. 39, 42-43.
Of course, this exception, even if admissible under the Virginia statute, would not be relevant here, since the appellants concededly both knew of and participated in the continued operation of the Kepone plant after corporate dissolution.
. See, Frederick G. Krapf & Son, Inc. v. Gorson (Del. 1968) 243 A.2d 713, 715, discussed below.
. 19 Am.Jur.2d § 1652, pp. 1001-1002.
. 12 U.Rich.L.Rev., supra, at 343.
. 16A Fletcher Cyc. Corp. (Perm.Ed.) § 7997, at p. 57.
. 12 U.Rich.L.Rev., supra, at 346.
. See Accurate Const. Co. v. Washington (D.C.App. 1977) 378 A.2d 681, 684-685; Poritzky v. Wachtel (Sup.Ct. 1941), 176 Misc. 633, 27 N.Y.S.2d 316; Moore v. Rommel, supra, 350 S.W.2d at 193; Clark Estate Co. v. Gentry (1951), 362 Mo. 80, 240 S.W.2d 124, 128; Van Landingham v. United Tuna Packers (1922) 189 Cal. 353, 208 P. 973, 976-980; 1480 Popham Corporation v. Fordham Bus Corporation
. See 12 U.Rich.L.Rev., supra, at 348-349.
Reference
- Full Case Name
- W. P. MOORE, Virgil A. Hundtofte and Life Science Products Company, a corporation v. OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION and Ray Marshall, Secretary of Labor
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- 6 cases
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- Published