Business Law Internet Research Project: Case of Flint Storage Company

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Table of Contents

State Legislation on Unclaimed Property
Capacity to Sue
State Legal Provisions concerning Dissolved Corporation
Amendment to Michigan Uniform Unclaimed Property Act
Legal Position about Reasonableness
Remedy for Claiming the Unclaimed Insurance Proceeds
Work Cited

State Legislation on Unclaimed Property

Michigan State has a Uniform Unclaimed Property Act which is intended to protect the interest of the rightful owners or their legal heirs in giving back the possession of the unclaimed property to them (Department of Treasury).

This piece of legislation takes care of restoring the assets of even a corporation that is no longer in business subject however to the provisions of the Business Corporation Act (BCA).

Capacity to Sue

One of the important cases which have cleared identical legal issues in the matter of unclaimed properties is Flint Cold Storage v Michigan Department of Treasury decided by the Court of Appeals in favor of the State on the basis that Flint Cold storage did not possess the capacity to sue, for the recovery of unclaimed property since the corporation cannot be said to be carrying out the winding-up proceedings for an unreasonable length of the period after the dissolution.

State Legal Provisions concerning Dissolved Corporation

Flint Cold Storage v Michigan Department of Treasury case has considered certain relevant provisions of Michigan Compiled Laws (MCL) which govern the position of a dissolved corporation concerning it’s carrying on of its business.

According to MCL 450.1833 “, a dissolved corporation shall continue its corporate existence but shall not carry on business except to wind up its affairs.” (Court of Appeal) Section 450.1834 enables the officer, directors, and shareholders to continue to function as if no dissolution has taken place. Subsection (e) of 450.1834 also allows the corporation to sue and be sued in its corporate name.

However, these allowances are subject to the provisions of section 450.1833. Provisions of Chapter 8 of BCA deal with the winding up of corporate affairs by stipulating that the winding-up proceedings have to be carried out ‘within a reasonable time’ of the dissolution of the company without specifying any definite time limit for completing such winding-up proceedings.

The question of whether a dissolved Michigan corporation can claim unclaimed property is well settled by the decision in the case of Flint Cold Storage v Michigan Department of Treasury.

A dissolved corporation in Michigan can be considered to be in business to wind up its affairs for a reasonable time after dissolution until the corporation winds up its affairs and within this reasonable period, the corporation can file a suit in its name for the recovery of unclaimed property entrusted to the Treasury.

Amendment to Michigan Uniform Unclaimed Property Act

Effective October 12, 2004, the provisions of Michigan Uniform Unclaimed Property Act have been amended by Michigan Senate Bill 1340 (SB 1340) reduced the period during which the unclaimed property would be deemed abandoned to three years from the earlier period of seven years.
In the instant case of Flint Storage Company it can be argued that although the company has been dissolved by the State in 2004 for not filing the returns for three years, it still can be considered as carrying on the business for winding up of the business of the company.
Therefore the company can sue for the reclamation of the unclaimed demutualized funds of $ 200,000 sent to the Unclaimed Property Division of the Michigan State.

Legal Position about Reasonableness

This claim may not be tenable; because of the fact, the court would accept a reasonable time limit for carrying out the liquidation of the company, even though Chapter 8 of the BCA has not specified any express time limit for the winding up the corporations. It is established in many court cases that the winding-up proceedings have to be carried out within a reasonable period [see for example Doting v Trunk 259 Mont 343, 352; 856 P2d 536 (1993)].

Whether the period of 5 years elapsed from the time of dissolution of the company by the State and the time of claiming the demutualized funds is reasonable for winding up the affairs of Flint Storage is questionable by the court [see S.C Gray Inc v Ford Motor Co 92 Mich App 789, 817; 286 NW2d 34 (1979)] and therefore the Widow’s claim as an officer of the company for the unclaimed property may not be acceptable. Since the very existence of the corporation is questionable there cannot be a claim by the officer of the corporation which does not possess the capacity to sue.

The decision of the court in determining the reasonableness of the period may also alter the position of the company to bring the suit as a corporation carrying out it’s winding up proceedings in that the company may not be considered as being in existence having the capacity to sue.

Remedy for Claiming the Unclaimed Insurance Proceeds

The court has also suggested a remedy for claiming the unclaimed property of the dissolved corporation. The court suggested that the historic shareholders or their estates may be provided with the right to bring an action in their names for making the claim (One Court of Justice).

According to this expression in the case of Flint Cold Storage, the widow of Joe Flint may file an action for the recovery of the unclaimed property as the estate of the deceased shareholder. The only lacuna here is the onus on her to prove that Joe Flint and the widow were the only historic shareholders of the corporation at the time of dissolution. Subject to the production of the documentary proof to the shareholding, the widow might be able to succeed in her claim for the demutualized funds paid into the Treasury.

Work Cited

CourtofAppeal. State of Michigan: Court of Appeals: Flint Cold Storage. 2009. Web.

DepartmentofTreasury. Frequently Asked Questions – Unclaimed Property. 2001. Web.

OneCourtofJustice. COA Opinion: Flint Cold Storage v Michigan Dep’t of Treasury. 2009. Web.

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