*1 Illinois Official Reports
Appellate Court
Michigan Indiana Condominium Ass’n v. Michigan Place, LLC
Aрpellate Court MICHIGAN INDIANA CONDOMINIUM ASSOCIATION, an Illinois Not-for-Profit Corporation, and THE BOARD OF Caption
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). First District, Fourth Division
District & No.
Docket No. 1-12-3764 Filed April 24, 2014
Held Third-party plaintiff’s action against third-party defendants for breach of contract and breach of implied warranties based on masonry ( Note: This syllabus services they provided in connection with the construction of a constitutes no part of the opinion of the court but condominium complex was properly dismissed on the ground that the has been prepared by the action was filed more than five years after the corporations under Reporter of Decisions which third-party defendants did business were dissolved, and for the convenience of pursuant to section 12.80 of the Business Corporation Act, an action the reader. ) against a corporation must be commenced within five years of its
dissolution. *2 Decision Under Appeal from the Circuit Court of Cook County, No. 11-M1-157148; the Hon. Thomas R. Mulroy, Jr., Judge, presiding. Review Affirmed. Judgment
Counsel on Robert Marc Chemers, Matthew J. Egan, Scott L. Howie, Matthew J. Ligda, and Richard M. Burgland, all of Pretzel & Stouffer, Chtrd., of Appeal
Chicago, for appellant.
Cathleen M. Hobson and Patrick H. Norris, both of Law Offices of Meachum, Starck, Boyle & Trafman, оf Chicago, for appellees. JUSTICE EPSTEIN delivered the judgment of the court, with opinion. Panel
Presiding Justice Howse and Justice Fitzgerald Smith concurred in the judgment and opinion.
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. BACKGROUND 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. 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 allegеd that the Complex was *3 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 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 (2005).
De novo
review is also
appropriate where the outcome of a case turns on the construction of provisions of the Act, a
mаtter that presents a question of law.
Pielet v. Pielet
, 2012 IL 112064, ¶ 30. 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. “[I]f that language is clear and unambiguous, we are not at
liberty to depart from its plain meaning.”
Moore v. Chicago Park District
,
created.”
Blankenship v. Demmler Manufacturing Co.
,
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,
,
People v. Parker
, 30 Ill. 2d 486, 489 (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 (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 а
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.
,
“In our judgment the language of [the corporate survival statute] is сlear 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
*5
provision of [the statute].”
O’Neill v. Continental Illinois Co.
,
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
,
“exception” to, the statutory corporate survival period. Instead, the Parker court determined that a director’s liability did not abate upon dissolution of the corporation. Id . at 490. There, the State of Illinois had filed suit, and obtained a judgment, for unpaid taxes against a former director of a dissolved corporation who had fаiled to notify known creditors of the intent to dissolve, as required by then-section 42(f) of the Act. Id . at 488. The director appealed and the Illinois Supreme Court affirmed. As the court noted, the defendant was a former director, not a dissolved corporation. The Parker court held that the corporate survival statute had “no application to the directors’ liability imposed by section 42(f).” (Emphasis added.) Id . at 490-91. In Pehr v. Metz, Train & Youngren, Inc. , 274 IlI. App. 3d 218 (1995), also cited by
Optima, the plaintiff filed a personal injury suit against the dissolved corporation within the five-year survival period but later voluntarily dismissed the suit. The plaintiff then refiled the suit pursuant to section 13-217 of the Code of Civil Procedure (735 ILCS 5/13-217 (West 1992)), which provided that a voluntarily dismissed action could be refiled within the greater
of one year or the expiration of the limitations period if the original suit was filed within the
original limitations period.
Pehr
,
which a minor, through her parents, filed suit against a corpоration for injuries sustained on
its premises. The trial court dismissed the action with prejudice pursuant to the corporate
survival statute. On appeal, plaintiff argued that the exception for minors in the Limitations
Act (formerly Ill. Rev. Stat. 1981, ch. 110, ¶ 13-112) overrode the corporate survival statute.
Moore
, 121 Ill. App. 3d at 925. The appellate court agreed, noting that Illinois courts had
long recognized that a minor should not be precluded from enforcing his rights unless clearly
debarred from so doing by some statute or constitutional provision.
Id
. at 925-26 (citing
Wilbon v. D.F. Bast Co.
, 73 Ill. 2d 58, 73 (1978), and
Walgreen Co. v. Industrial Comm’n
323 Ill. 194 (1926)). The
Moore
court also explained that this policy had “been adhered to
consistently in decisions with refеrence to the limitations provisions contained in other
statutes and their applicability to minors and incompetents.”
Id
. at 926. As the court further
explained: “We believe that where, as here, there is no language in the statute involved, or in
any constitutional provision, which distinctly restricts the right of a minor or incompetent to
file an action against a corporation more than two years after dissolution relating to liability
incurred prior to dissolution, that such an action may be brought within two years of the
minor’s reaching majority.”
Id
. at 926-27. The court held that “under the circumstances here,
the statutory exception аs to minors overrides the corporation dissolution statute and
preserves the court’s jurisdiction over the cause.”
Id
. at 925. In sum, the
Moore
court decided
that the policy of protecting the rights of minors prevailed over the policy established by the
corporate survival statute. See
Vance v. North American Asbestos Corp
.,
latter of which had been dissolved more than two years prior to the suit.
Id
. at 50-51. After
the trial court dismissed the plaintiffs’ complaints, plaintiffs appealed.
Id
. at 51. Noting that
the plaintiffs had alleged that the parent corporation had induced them to delay filing their
claims against the subsidiary during the two-year period within which suits could be
maintained against the dissolved corporation, the appellate court remanded and allowed suit
to proceed against the parent corporation.
Id
. at 55. In so doing, the court relied on the well
established rule in Illinois that “it is sufficient in order to trеat one corporation as the alter
ego of another where there is such a unity of interest and ownership that the individuality of
one corporation has ceased, and where the observance of the fiction of separate existence
would under the circumstances sanction a fraud by promoting injustice.” (Internal quotation
marks omitted.)
Id
. at 52. In reversing the dismissal of the complaint against the parent
corporation, the court explained that “if the plaintiffs can produce evidence that there was a
unity of interest and ownership between the [parent corporаtion] and the [subsidiary] and that
the recognition of the [subsidiary’s] separate identity would ‘present an obstacle to the due
protection or enforcement of public or private rights’ or would ‘promote injustice,’ then
liability could properly be predicated against the [parent corporation].”
Id
. at 52-53. We do
not read
Edwards
to stand for the broad proposition stated by the
North American Asbestos
court that “the two-year limitation on corporate survival is not absolute.”
North American
Asbestos Corp.
,
have recognized that equitable considerations sometimes counsel against rote application of the [corporate] Survival Statute.” Hamilton v. Conley , 356 Ill. App. 3d 1048, 1059 (2005). The Hamilton court decided that the case there presented such a situation. Id . In Hamilton the trial court had dismissed a shareholder action against a dissolved corporation for misappropriation of the corporate assets. Id . The Hamilton court held that, in light of the plaintiff’s allegations that the corporation waited until shortly before the end of the five-year period to engage in the misconduct, equitable considerations warranted an extension. . As the court explained:
“If we were to conclude that the Survival Statute bars plaintiff’s claims, then officers and directors could, by waiting to do their misdeeds near the end of the winding-up period, avoid liability altogether. That is to say, shareholders could succeed to ownership of the corporation’s cause of action on the same day it became time-barred under the Survival Statute. We decline to find that the [corporate] Survival Statute requires such a result. “ . We believe that Hamilton is distinguishable. As Loucon and Jenni note, Hamilton
involved a derivative action asserting an interest
of
the corporation. More importantly, the
case involved misconduct, which is not alleged here. See
Pielet v. Pielet
, 2012 IL 112064,
¶ 47 (explaining that the
Hamilton
court had applied “equitable considerations and the
principle that statutes should be construed to avoid results that are absurd, inconvenient or
unjust, the court concluded that the fraud alleged by plaintiff justified permitting him to press
his claim notwithstanding the fact that it would otherwise be time-barred”). We also note that
the Illinois Supreme Court has stated that even a statute of repose, which normally
extinguishes an action, nonetheless may be tolled in the case of fraudulent concealment. See
DeLuna v. Burciaga
,
because the claims were filed more than five years after the corporations were dissolved. At the time the third-party complaint was filed both corporations had ceased to exist. Since Optima did not file its third-party action within the five-year statutory time period, there is no longer an entity that can sue or be sued. It follows that seсtion 5.25 of the Act did not authorize the Secretary of State to serve as Jenni’s or Loucon’s agent for service of process. The trial court correctly dismissed Optima’s third-party complaint with prejudice pursuant to section 2-619. We recognize that dismissal of Optima’s third-party action means that Optima’s right to
sue Jenni and Loucon expired before Optima discovered that it had a cause of action against them. However, this harsh result does not allow us to disregard the plain language of the statute. Moreover, as this court has explained:
“When [the predecessor statute] was enacted, the two-year grace period must have been deemed by the legislature to be the appropriate time span to allow suit against the dissolved corporation thus balancing the need to protect injured parties against the need to give finality to a corporate dissolution. In our present industrial economy, a long period of time may elapse between conduct by industrial corporations which injures people and the discovery of those injuries by the injured parties.
When the Business Corporation Act of 1983 (1983 Act) [citation] was enacted,
[the predecessor statute] was reрlaced by section 12.80 of the 1983 Act [citation],
which contained the same wording, except that the
grace period
was extended from
two years to five years. We are unaware of any official explanation for that change,
but, logically, the General Assembly must have made the change as its response to the
problem arising
because of the increasing time span between injuries and the
discovery of those injuries by injured persons
. We deem this to be the new balance
given by the legislature to the conflicting interests we have described. Otherwise,
we
detect no legislative intent to upset the previous decisiоns giving a strict interpretation
to the stated grace period for suits against dissolved corporations
.” (Emphases added.)
Vance v. North American Asbestos Corp.
,
of its cause of action against Jenni and Loucon, that is the effect of the statute’s definitive five-year limit. Our supreme court has acknowledged that such harsh results may occur in other statutory schemes, such as with a four-year repose period for medical malpractice actions and a six-year repose period for legal malpractice actions. See, , Orlak v. Loyola University Health System , 228 Ill. 2d 1, 7-8 (2007) (“The statute of repose sometimes bars actions even before the plaintiff has discovered the injury.”); Cunningham v. Huffman , 154
Ill. 2d 398, 406 (1993) (same); Mega v. Holy Cross Hospital , 111 Ill. 2d 416, 424 (1986) (“That the repose provision may, in a particular instance, bar an action before it is discovered is an accidental rather than necessary consequence.”); Snyder v. Heidelberger , 2011 IL 111052, ¶ 10 (“The purpose of a statute of repose *** operates to curtail the ‘long tail’ of liability that may result from the discovery rule [of the statute of limitations.] *** Thus, a statute of repose is not tied to the existence of any injury, but rather it extinguishes liability after a fixed period of time.”). As the Illinois Supreme Court has explained:
“Where the words employed in a legislative enactment are free from ambiguity or
doubt, they must be given effect by the courts even though the consequences may be
harsh, unjust, absurd or unwise. [Citations.]
Such consequences can be avoided only
by a change of the law, not by judicial construction
. [Citation.].” (Emphasis added and
internal quotation marks omitted.)
Perlstein v. Wolk
,
five-year “outer limit” for filing suit against a dissolved corporаtion as a statute of repose.
See, ,
Sharif v. International Development Group Co.
,
Procedure (735 ILCS 5/13-214(b) (West 2010)), referred to as the construction statute of repose, controls over sections 5.25 and 12.80 of the Businеss Corporation Act of 1983. Section 13-214(b) provides:
“(b) No action based upon tort, contract or otherwise may be brought against any
person for an act or omission of such person in the design, planning, supervision,
observation or management of construction, or construction of an improvement to
real property after 10 years have elapsed from the time of such act or omission.
However,
any person who discovers such act or omission prior to expiration of 10
years from the time of such act or omission shall in no event have less than 4 years to
bring an action
as provided in subsection (a) of this Section.” (Emphasis added.) .
The construction statute of repose “insulat[es] all participants in the construction process
from the onerous task of defending against stale claims.”
MBA Enterprises, Inc. v. Northern
Illinois Gas Co
.,
“Statutes of repose stem from a basic equity concept that a time should arrive, at
some point, that a party is no longer responsible for a past act. [Citations.] The
construction statute of repose thus represents a legislative balancing act between the
rights of persons harmed by allegedly faulty construction and the rights of those
*11
responsible for such construction; after the stаtutory period has passed, the right to be
free of stale claims *** comes to prevail over the right to prosecute them. [Citations.]
When interpreting a statute of repose, courts must construe it liberally to fulfill the
objectives it was designed for, yet they must not enlarge it beyond the legitimate
intent of the legislature. [Citation.]” (Internal quotation marks omitted.)
Ryan v.
Commonwealth Edison Co
.,
Compliance with an applicable statute of limitations is merely an additional requirement that must be met when bringing suit against a dissolved corporation within the time period contained in section 12.80. We fail to see how the repose period, or any limitations period, trumps or nullifies the statutory five-year period after which a corporation ceases to exist. The right of a corporation to exist beyond its date of dissolution is purely statutory and we are mindful that the result here is harsh with respect to Optima. Nevertheless, even assuming that this court has the authority to apply equitable tolling to the survival period, we believe that authority would be limited to circumstances involving fraud or misconduct. In the case at bar, there has been no allegation or claim whatsoever that either of the dissolved corporations engaged in any type of fraudulent aсtivity or concealment. Unless and until the legislature amends the corporate survival statute to permit an exception to protect the rights of parties seeking indemnification or contribution which had no knowledge of a claim before the expiration of the five-year term, we believe courts have no power to undo the harsh results of an action such as this. Jenni and Loucon have argued on appeal that Optima’s third-party complaint failed as a
matter of law for an additional reason: Optima’s claims for indemnification and contribution had not accrued prior to either Jenni’s or Loucon’s dissolution. In support of this argument, they note that our supreme court has held that “section 12.80 of the Business Corporation Act of 1983 may only be invoked in aid of a cause of action against a dissolved corporation where the cause of action accrued prior to the corporation’s dissolution.” Pielet , 2012 IL 112064, ¶ 49. In view of our determination that Optima’s third-party complaint was properly dismissed because it was not filed within the five-year grace period created by the corporate survival statute, we need not address Optima’s contention that its causes of action accrued prior to dissolution, i.e. , when the alleged faulty construction occurred. Moreover, although the issue in Pielet was whether the breach of contract there had occurred prior to, or after, the corporation’s dissolution, the Pielet court made an observation regarding the statutory “fixed endpoint” for suing a dissolved corporation. Id . ¶ 32 n.3. The court noted that “[h]ad [the plaintiff] waited more than five years after [the corporation]’s dissolution to file suit against it, any claim she had against it would clearly have been untimely whether the cause of action had accrued before or after the corporation’s dissolution.” (Emphasis added.) . Jenni and Loucon have also argued that it is not the construction statute of repose that
applies to Optima’s third-party complaint but, rather, the statute of limitations for indemnity and contribution provided in section 13-204 of the Code of Civil Procedure. 735 ILCS 5/13-204 (West 2010). Since Optima’s cause of action cannot stand as a matter of law under section 12.80, it does not matter which statute of limitations applies. *12 For the reasons stated, we affirm the order of the circuit court of Cook County dismissing
Optima’s third-party complaint against Jenni and Loucon pursuant to section 2-619 of the Code of Civil Procedure. 735 ILCS 5/2-619 (West 2010). Affirmed.
Notes
[1] In
Bellevillе Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc.
, 199 Ill. 2d 325, 338 (2002), the
Illinois Supreme Court discussed the principle that where a statute creates a substantive right unknown
to the common law and the statute contains a limitations period, time is made an inherent element of the
right and is a condition of the liability itself. The
Belleville
court stated that this proposition is now
confined to the area of administrative review. . Nonetheless, as we have noted, the court more
recently reaffirmed that the time limitation in the corporate survival statute creates a “fixed endpoint”
after which a dissolved corporation cannot sue оr be sued.
Pielet
,
[2] See also Official Comments of the Advisory Committee to the Secretary of State on the Illinois Business Corporation Act of 1983, Section 12.80 (“Under § 94 of the 1933 Act, remedies after dissolution survived for only two years. Under the 1983 Act remedies after dissolution survive for five years. The Advisory Committee believed that, as often occurs in product liability cases, injuries are often not known for a significant period of time, and trends towards both longer statutory remedy survival periods and judicial avoidance of short survival periods exist. The Advisory Committee balanced assured finality and a reasonable discovery period, determining that, in the present state of our legal structure, five years was appropriate.”). http://ilibl.files.wordpress.com/2013/03/official- comments-1983-ilbca.pdf.