SW Legal studies in Business

Bankrupt, Dissolved Corporation Can Participate in Liability Litigation
Description

Wyoming high court held that a bankrupt builder had standing to sue subcontractors alleged to have performed defective work during construction. Despite the dissolution of the corporation in bankruptcy, there was a controversy involving the company that could be heard in court.

Topic Business Organization
Key Words

Corporation; Existence; Bankruptcy; Standing; Defects; Construction

C A S E   S U M M A R Y
Facts

Catamount Construction was a general contractor hired by the Steeles to build their house. Catamount hired subcontractors for parts of the work. A couple years after the house was built, Catamount filed for Chapter 7 bankruptcy. The Steeles contended that some of the work on the house was not done properly and sued Catamount after it filed for bankruptcy. Catamount in turn sued Crayton and other subcontractors for the work they performed, contending they should be responsible to the Steeles for their defective work. Crayton filed a motion to dismiss, asserting that Catamount did not have standing to sue as it was a defunct corporation that has been dissolved by the Secretary of State. The district court agreed and dismissed the suit. Catamount appealed.

Decision

Reversed and remanded. Corporate existence is a matter of state law. Bankruptcy does nothing to change the existence of a corporation. Catamount has standing to sue the subcontractors alleging defective work on the Steeles’ house despite the bankruptcy and the administrative dissolution of the corporation. There was a genuine controversy as to who was responsible for defective work. Catamount, although bankrupt, can participate in such litigation to resolve the issue.

Citation Catamount Construction v. Timmis Enterprises, 193 P.3d 1153 (Sup. Ct., Wyo., 2008)

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