A Cuyahoga County, Ohio trial court did not abuse its discretion when it appointed a receiver for a “defunct” foreign corporation that the trial court found “persists for the purpose of winding up its affairs in Ohio.” In re: All Cases against Sager Corporation (2010), 188 Ohio App 3d 796, appeal accepted for review (2011), 127 Ohio St. 3d 1503. The Court of Appeals found it undisputed that corporate assets existed after the foreign corporation had been dissolved, “and that these assets may afford insurance coverage to Ohioans injured by exposure to Sager’s products”. Thus, despite the foreign corporation’s argument that the appointment violated due process and was erroneous, the Court of Appeals found no abuse of the court’s sound discretion.
The Court of Appeals quoted State ex rel. Celebrezze, 60 Ohio St.3d at 73, 573 N.E.2d 62, fn. 3, quoting 65 American Jurisprudence 2d (1972) 873, 874, Receivers, Sections 19, 20 for the proposition that:
‘A court in exercising its discretion to appoint or refuse to appoint a receiver must take into account all the circumstances and facts of the case, the presence of conditions and grounds justifying the relief, the ends of justice, the rights of all the parties interested in the controversy and subject matter, and the adequacy and effectiveness of other remedies.’
Sager had made certain products with asbestos materials, which it sold in Ohio. Court claims were made against it by Ohio citizens in Cuyahoga County for injuries related to asbestos. The claimants asserted that insurance was available that might afford coverage for their claims, even though Sager had been dissolved in its state of incorporation, Illinois.
The Court of Appeals first found that Ohio law controls the appointment of a receiver over assets of a defunct foreign corporation that allegedly caused tortious injury in Ohio, citing Ohayon v. Safeco Ins. Co. (2001), 91 Ohio St.3d 474, 747 N.E.2d 206. The internal-affairs doctrine, providing that the law of the state of incorporation determines internal issues of the corporation, was not applicable to tort actions pertaining to the rights of third parties.
Moreover, the Court of Appeals reasoned that, “These third parties have a potential interest in Sager’s remaining insurance assets should they obtain a judgment.” Thus, despite Sager’s argument as to its non-existence under Illinois law, the court found that the issue was whether corporate assets remained which the receiver properly might distribute to Ohio citizens as a result of torts committed in Ohio prior to the corporate dissolution. The Ohio Supreme Court accepted the appeal for review in January, 2011.