Mich. Ind. Condo. Ass'n, an Ill. Not-For-Profit Corp. v. Mich. Place, LLC

• Decision Date: 24 April 2014
• Docket Number: No. 1–12–3764.,1–12–3764.
• Citation: 2014 IL App (1st) 123764,8 N.E.3d 1246,380 Ill.Dec. 704
• Parties: MICHIGAN INDIANA CONDOMINIUM ASSOCIATION, an Illinois Not–for–Profit Corporation and The Board of Directors of the Michigan Indiana Condominium Association, Plaintiffs, v. MICHIGAN PLACE, LLC, an Illinois Limited Liability Company; Shorebank Development Corporation Chicago, a Delaware Corporation; Bank of America Community Development Corporation; Optima Inc., an Illinois Corporation; Helen Dunlap; Timothy Hansen; James Bell; and Susan McLann, Defendants (Optima, Inc., an Illinois Corporation, Third–Party Plaintiff–Appellant; Paul Holzman, d/b/a Jenni, Inc.; and Loucon, Inc., Third–Party Defendants–Appellees, and RSR Holding Corporation, f/k/a Republic Windows, Third–Party Defendant).
• Court: United States Appellate Court of Illinois

2014 IL App (1st) 123764

8 N.E.3d 1246

380 Ill.Dec. 704

MICHIGAN INDIANA CONDOMINIUM ASSOCIATION, an Illinois Not–for–Profit Corporation and The Board of Directors of the Michigan Indiana Condominium Association, Plaintiffs,

v.MICHIGAN PLACE, LLC, an Illinois Limited Liability Company; Shorebank Development Corporation Chicago, a Delaware Corporation; Bank of America Community Development Corporation; Optima Inc., an Illinois Corporation; Helen Dunlap; Timothy Hansen; James Bell; and Susan McLann, Defendants (Optima, Inc., an Illinois Corporation, Third–Party Plaintiff–Appellant; Paul Holzman, d/b/a Jenni, Inc.; and Loucon, Inc., Third–Party Defendants–Appellees, and RSR Holding Corporation, f/k/a Republic Windows, Third–Party Defendant).

No. 1–12–3764.

Appellate Court of Illinois,

First District, Fourth Division.

April 24, 2014.

Robert Marc Chemers, Matthew J. Egan, Scott L. Howie, Matthew J. Ligda, and Richard M. Burgland, all of Pretzel & Stouffer, Chtrd., of Chicago, for appellant.

Cathleen M. Hobson and Patrick H. Norris, both of Law Offices of Meachum, Starck, Boyle & Trafman, of Chicago, for appellees.

OPINION

Justice EPSTEIN delivered the judgment of the court, with opinion.

¶ 1 Third-party plaintiff, Optima, Inc. (Optima), appeals from the dismissal, pursuant to section 2–619 of the Code of Civil Procedure ( 735 ILCS 5/2–619 (West 2010)), of its third-party complaint against third-party defendants, Paul Holzman, d/b/a Jenni, Inc. (Jenni), and Loucon, Inc. (Loucon). We affirm the judgment of the circuit court of Cook County.

¶ 2 BACKGROUND

¶ 3 The underlying case arose out of the construction of a 119–unit residential condominium complex (the Complex). Optima was the general contractor and selected subcontractors to perform the construction work, including Jenni and Loucon, each of which provided masonry services. Construction was completed in June 2002. On September 2, 2003, Loucon was dissolved. Jenni was dissolved on January 1, 2006.

¶ 4 In the spring of 2010, plaintiffs, Michigan Indiana Condominium Association and the board of directors of the Michigan Indiana Condominium Association, allegedly discovered latent defects in the Complex. On August 29, 2011, plaintiffs filed a complaint for damages against Optima and other defendants. A first amended complaint was filed on or about March 12, 2012. Plaintiffs asserted four counts against Optima and alleged that the Complex was not constructed in a watertight manner, and without the necessary flashing, weather barriers, caulking, and other weatherproofing components. Plaintiffs sought damages under breach of the implied warranty of habitability and breach of the implied warranty of good workmanship.

¶ 5 On May 2, 2012, Optima filed its third-party complaint against Jenni and Loucon, as well as third-party defendant, RSR Holding Corporation, f/k/a Republic Windows, which is not a party to this appeal. Optima alleged breach of contract and breach of implied warranties against both Jenni and Loucon. Optima sought both indemnification and contribution. Because both corporations had been dissolved, Optima served its notice upon the Secretary of State pursuant to section 5.25 of the Business Corporation Act of 1983 (805 ILCS 5/1.01 et seq. (West 2010)) (the Act).

¶ 6 Jenni and Loucon moved jointly to dismiss Optima's third-party complaint pursuant to sections 2–619(a)(5) and (a)(9) of the Code of Civil Procedure (735 ILCS 5/2–619(a)(5), (a)(9) (West 2010)). Jenni and Loucon argued that, since the action against them was instituted more than five years after their dissolution (six years and three months after Jenni's dissolution; eight years and eight months after Loucon's dissolution), the Secretary of State was not authorized to act as the dissolved corporations' agent under the Act, service was therefore improper, and the court lacked personal jurisdiction.

¶ 7 On November 29, 2012, the circuit court granted Jenni and Loucon's joint motion to dismiss and dismissed them with prejudice. The court also ordered that there was no just reason to delay enforcement or appeal pursuant to Supreme Court Rule 304(a). Ill. S.Ct. R. 304(a) (eff. Feb. 26, 2010). Optima now appeals.

¶ 8 STANDARD OF REVIEW

¶ 9 Our standard of review of the trial court's ruling on a section 2–619 motion to dismiss is de novo. Hamilton v. Conley, 356 Ill.App.3d 1048, 1053, 293 Ill.Dec. 68, 827 N.E.2d 949 (2005). De novo review is also appropriate where the outcome of a case turns on the construction of provisions of the Act, a matter that presents a question of law. Pielet v. Pielet, 2012 IL 112064, ¶ 30, 365 Ill.Dec. 497, 978 N.E.2d 1000. When construing a statute, our primary objective is to give effect to the legislature's intent, which is best indicated by the plain and ordinary language of the statute itself. Hartney Fuel Oil Co. v. Hamer, 2013 IL 115130, ¶ 25, 376 Ill.Dec. 294, 998 N.E.2d 1227. “[I]f that language is clear and unambiguous, we are not at liberty to depart from its plain meaning.” Moore v. Chicago Park District, 2012 IL 112788, ¶ 9, 365 Ill.Dec. 547, 978 N.E.2d 1050.

¶ 10 ANALYSIS

¶ 11 “A corporation can exist only under the express laws of the State by which it was created.” Blankenship v. Demmler Manufacturing Co., 89 Ill.App.3d 569, 573, 44 Ill.Dec. 787, 411 N.E.2d 1153 (1980) (citing Chicago Title & Trust Co. v. Forty–One Thirty–Six Wilcox Building Corp., 302 U.S. 120, 124–25, 58 S.Ct. 125, 82 L.Ed. 147 (1937)). “Accordingly, the right to sue a dissolved corporation is limited to the time established by the legislature.” Id. The dissolution of a corporation is, in legal effect, the same as the death of a natural person. Markus v. Chicago Title & Trust Co., 373 Ill. 557, 561, 27 N.E.2d 463 (1940), overruled on other grounds by ABN AMRO Mortgage Group, Inc. v. McGahan, 237 Ill.2d 526, 342 Ill.Dec. 7, 931 N.E.2d 1190 (2010). “Under common law, a dissolved corporation could not sue or be sued.” Henderson–Smith & Associates, Inc. v. Nahamani Family Service Center, Inc., 323 Ill.App.3d 15, 19–20, 256 Ill.Dec. 488, 752 N.E.2d 33 (2001). Even its pending legal proceedings would abate. Id. at 20, 256 Ill.Dec. 488, 752 N.E.2d 33; Blankenship, 89 Ill.App.3d at 572, 44 Ill.Dec. 787, 411 N.E.2d 1153. However, “this common law doctrine has been so modified that the property of a dissolved corporation is to be used for the benefit of the creditors and stockholders after dissolution, and generally, by a saving clause, stockholders or creditors may maintain an action for that purpose, and in order to maintain an action it must be filed within the time fixed for such purpose.” People v. Parker, 30 Ill.2d 486, 489, 197 N.E.2d 30 (1964). As the Chicago Title & Trust Court acknowledged, a state's power to end the corporate existence of a state-created corporation without limitation connotes the power to end its existence “with such limitations as the Legislature sees fit to annex.” Chicago Title & Trust Co., 302 U.S. at 128, 58 S.Ct. 125.

¶ 12 In Illinois, section 12.80 of the Act governs the time period in which a corporation can be sue or be sued. 805 ILCS 5/12.80 (West 2010). Section 12.80 states, in relevant part:

“Survival of remedy after dissolution. The dissolution of a corporation * * * shall not take away nor impair any civil remedy available to or against such corporation, its directors, or shareholders, for any right or claim existing, or any liability incurred, prior to such dissolution if action or other proceeding thereon is commenced within five years after the date of such dissolution.” (Emphasis added.) 805 ILCS 5/12.80 (West 2010).

Section 12.80 is not a statute of limitations but, rather, a corporate “survival” statute. See, e.g., People v. Parker, 30 Ill.2d 486, 489, 197 N.E.2d 30 (1964) (interpreting predecessor statute). Thus, section 12.80 “extend[s] the life of a corporation” after its dissolution so that suits which normally would have abated may be brought by and against the corporation. (Emphasis added.) Blankenship, 89 Ill.App.3d at 574, 44 Ill.Dec. 787, 411 N.E.2d 1153 (interpreting predecessor statute that was identical to the current statute except that it required that the action be brought within two years); see also Forcite Powder Co. v. Herdien, 162 Ill.App. 425, 427 (1911) (“it is a necessary and wise public policy that continues the life of a corporation for the purpose of prosecuting and defending suits for the purpose of winding up its affairs”).

“Even when a statute continues the existence of a corporation for a certain period, however, it is generally held that the corporation becomes defunct upon the expiration of such period, and, in the absence of a provision to the contrary, no action can afterwards be brought by or against it and must be dismissed.” (Emphasis added.) Canadian Ace Brewing Co. v. Anheuser–Busch, Inc., 448 F.Supp. 769, 771 (N.D.Ill.1978), aff'd without op.,601 F.2d 593 (7th Cir.1979).

¶ 13 As this court has explained:

“In our judgment the language of [the corporate survival statute] is clear and unambiguous. Under that section any right [or] claim existing on behalf of a corporation or any liability incurred by a corporation prior to its dissolution may be enforced if the action is commenced ‘within two years after the date of such dissolution.’ We have neither the power nor desire to nullify the plain and wholesome provision of [the statute].” O'Neill v. Continental Illinois Co., 341 Ill.App. 119, 136, 93 N.E.2d 160 (1950) (interpreting the predecessor statute).

More recently, our supreme court has noted that “the five-year extension to a corporation's life granted by section 12.80 establishes a fixed endpoint beyond which a corporation ceases to exist.” (Emphasis added.) Pielet v. Pielet, 2012 IL 112064, ¶ 32 n. 3, 365 Ill.Dec. 497, 978 N.E.2d 1000; accord Blankenship, 89 Ill.App.3d at 574, 44 Ill.Dec. 787, 411 N.E.2d 1153 (“the survival statute reflects a legislative intent to establish a definite point in...