THIRD DIVISION DECEMBER 26, 2007 1-06-3000 FL OYD D ISMUK

E, ) Appeal from the ) Cir cu it Co ur t o f Plai ntif f-A ppelle e, ) Co o k C o un t y. ) v. ) No. 05 CH 16842 ) RAND CO OK A

UTO SALES, INC., and RICHAR D D. ) GROSSMAN, ) Ho no r ab le ) Doro thy K

in nai rd, De f en da n t-A pp el l an t. ) Judge Presidin g. JU STI CECU

NNIN GH AM del i v ered th e op i n i on of th e c our t: The plai ntif f , Fl oyd Di sm uke, f i l ed a l awsui t in the c i rcui t court of Coo k C oun

ty aga inst t he def endants, Rand Co ok Aut o S ales, Inc . ( Rand Co ok ), and R ichard D. Gr os sman (G ro ssman) , a n at t or ney. T he pla

in tif f f il ed su it fo rde cla r at o ry jud gme nt an d s pe cific pe r fo rman ce t o t r an sfe rt it le to pla in tif f f or a moto r vehi

cl e purchased f

rom Ran d Cook. The plai

ntif f al so sued f or bre ach o f
co nt ra ct and s ou ght t o p ierce t he cor porate vei l of Rand Cook to hold Grossm an personal

ly li abl e. Grossman sub seq uen tly moved the c ourt to dism

iss th e acti on ag ai n st h i m i n h i s i n di v i du al ca paci ty pur sua nt to section 2-619 of the C ode of Ci vi l Procedure (735 ILCS 5/2-619 (West 200 4) ) (the Code). He also mo ved t o impo se sa nct io ns o n t he p laint iff pu rsua n t to Supreme C ourt Rul e 137 (155 I ll. 2d R . 13 7) f

or f i l i ng sui t to hol d h i m pers ona l l y li ab l e f orth e deb ts and obl iga tions of R and Cook. The court dism

is sed t he laws uit aga inst G ro ssman, but denied his mot ion fo r sa nct ions a gainst t he pla int iff. Grossman appeals f rom the o rder o f the ci

rcuit cou rt d eny

in g hi s mo t ion t o s anct ion t he plai ntif f . We af f i rm the orde r of th e ci rcui t court of C ook County

f or the re asons tha

t fol l ow.1-06-3000

2 BACK GROUND In Septembe

r 2004, t he plaint iff

pur chas ed a vehicle fro m RandCook. The plai ntif f al le ges that the veh

ic le ’s title was nev er proper ly transferred to hi

m f rom Ran d Cook. Rand Cook was invo lun t ar ily

dis solv ed i n A pril 2005. On

October 3, 2005, t he pl

ai ntif f f il ed a law su it in t he cir cu it courtof Co ok Co unt y. The pla int iff alleged t hat Rand Co ok failed t o p ro per ly tra nsfer t itle and requestedt hat t he co ur t ent er an o rd er of sp ecific per for mance t o r equ ire Ra nd Co ok t o t ra nsfer t he vehicle’stitle. The pl

ai ntif f al so all eged t hat Gr os sman wa s t he alt er eg o o f Ra nd Co o k a nd sho uld be ordered to arrange the tran sf

er of titl e an d pay the p l ai ntif f ’sresu l tin g dam ages . Grossman su bs eq uentl y f i l ed a m oti on to d i sm i ss pursuan t to se cti on 2-619 of the Code and also so ught sa nct io ns a ga inst t he p laint iff pursuant to S upreme C ourt Rul e 137 (155 Ill . 2d R. 137) ( Ru le 137 ). Gr os sman ar gue d t hat Illinois law d oe s no t sup po rt t he plain tiff ’s cla ims a ga inst him in his i nd i vi dua l ca paci ty asthe i nc orporator

o f Ra nd Co o k. Gr o ss man alle ge d t ha t his so le involvement wi th Rand Cook was asthe incorpor ato r of the busines s. Apart from thi s role, Grossm

an av erred that he h ad n o other i n v ol v em en t i n th e dev el opm en t, m an ag em en t, or b us i n es s transa ct ions o f the
co rp or at ion. Grossman

contended

th at n o Il li n oi s l aw su pp ortsa l aw su i t ag ai n st a n i n cor porator wi th
no ot her i nvol vem ent in the corpor ation. He al

le ged that t he pla int iff pu r su ed t he law su it ag ain st him because Ra

nd Cook wa s i nv ol un tari l y di ss ol ve d a nd prob ab l y doe s n ot ha ve an y co llec t ible assets. Grossman argued that Rule 137 sa

nctions were warranted

beca use t he plaint iff

op t ed t o p ur sue t he law su it agains

t him after receivi

ng a ful l un dersta ndi ng of the facts thro ugh the discovery process. He cl ai med th at h i s af f i da v i t, inter ro gat or y answer s, a nd t he bus iness r eco rd s o f Rand Co ok yield no evi dence of his i nvol vem ent in Rand Cook ot her

than as i nc orporator. The re for e, Rule 1 37 s anct ions1-06-3000

3

were appropri ate. The t r ial c o ur t gr an t ed Gr o ss man ’s mo t io n t o dis miss bu t did not impose Rule 1 37 s anct ions aga ins t the plaint iff

. T he co ur t examined G ro ssman’s a ffi davit , int er ro gat or y answer s and Rand Coo k’s busi

ness records file d

wit h t he st at e, including t he ar t icles o f incor po ra t ion. At t he hear ing
onthem oti onto dis

mi ss, the plai

ntif f argued that sev

eral c ases i

n Il li nois , in cl udin g Bigelo w v. Gregory , 73 Ill . 197 (1874), and Robbi ns v . Butler , 24 Ill . 387 (1860 ), allow a n incor po ra t or t o be held r esp ons ible for t he act ions o f the corpo ration. The trial court hel d that under Ill

in ois cas el aw, an incor po ra t or wit h no o t her inter est or po sitio n in the corp orationcanno t be held liable for t he act ions of the corp orati on. The c ourt h

el d that i t woul d n ot levy sanct ions aga inst t he plaint iff . T he courtex pl ai ne d that the dec i si

on t o levy sa nct ions wa s a “c lo se ca ll” bu t ga ve t he pla int iff t he “be ne fit of the doubt”on havi

ng m is in terpret ed the l aw.

AN AL YSIS Ju ri sd i cti on is proper pursuant t o Supreme Court Rule 301 (155 Ill. 2d R. 301). Gro ssm

an argues that t he court abused i ts discretion by

not im posin g Rul e 137 sanctions on the pl ai nti f f f or at t empt ing t o p ierce t he corp orate ve i l of Rand Cook and hold h

im personally

li able for its actions. He c ont ends t hat unde r I lli nois law , a n incor po ra t or wit hou t any o t he rinvo lve men t in

the busin ess is n ot th e alt er ego of t he co rp or at ion and , t her efo re , c anno t be held liable for t he ac t ions o f the
co rp or at ion. Impo rt Sales , I nc. v. Contin ental Beari ngs Corp. , 217 Ill . App. 3d 893, 904, 577 N.E. 2d 1205, 1212 (19 91) . Grossman cl ai m s th at a reason ab l e i nq ui ry i nto th e c orporaterec ords

of Rand C ook dem onstrates t hat he was m

erely the in corpo rato r of the compan y a nd that he had no ot he r in terest in t he co r

po r at io n. T he r efo r e, Gr o ss man ar gu es t ha t un de rRu le 137, t he plaint iff sho uld be1-06-3000

4

san cti oned f or bri ngi ng v ex ati ous an

d ha rass i ng l i tig ati on. Su pr em e C our t Ru l e 1 37 sta tes i n perti n en t pa rt: “The signature of an attorney or party consti tut es a c er

ti f i ca te by him that he h as read t he pleading, m

ot ion or ot her paper; that to the best of his k no wle dg e, info rmat io n, an d b elie f fo rmed aft er r ea so nable inq uir y it is we l l

grou nd ed i n f ac t an d i s w arran

ted by ex i sti ng l aw or a go od -fait h ar gument for t he ext ensio n, modifi cation, or reversal

of exist ing la

w , and that it i s not in

terpo sed f

or any i mproper purpose, such as to ha ras s or to ca us e u nn ec es sa ry de l ay orneedles s in

crease in the cost of l

itigation. *** I f a p lea din g, mo t io n, o ro t he r pa pe ris signed in vio lat io n o f t his ru l e, th e c our t, upon motion or upon i

ts own i nit ia tive, ma

y i mpose upon the person wh o sign ed i t, a represented pa rt y, orboth, an appropriate sanction, whi ch m ay in cl ude an order to pay to the oth

er pa rty or p ar ti es th e a mo unt of reasonab le expenses in curredbeca use of t he fil

ing o f the pleadi

ng, m otion or other pa

per, in cl udin g a reasonabl

e atto rney fee.” 155 Il

l. 2d R. 137. The pu r po se o f Ru le 13 7 is to pr event par t ies fro m abusing t he judicial pr oc ess by impo sing
sa nc ti ons on lit iga nt s w ho file vexat iou s and har assing a ct ions ba sed upo n unsu ppo rt ed a llegat ions of fac t or la w. Burrows v. Pick , 306 Ill . App. 3d 1048, 1050, 715 N.E. 2d 792, 794 (1999) . Th e pa rty se ek i ng to ha ve sa nc ti ons i m pos ed by the cou rt m us t de mons

trate tha t the op po sing lit ig ant
ma de untrue and f

al se al le gations wi

thout reasonabl

e cause. Burrows , 306 Ill . App. 3d at 1050-51,1-06-3000

5

715 N. E
. 2d at 79 4. Ru le 1 37 will be st r ict ly co nst rue d b ec au se it is pe na l in na ture. Dowd & Dowd, Ltd. v. Gl ea son, 181 Ill . 2d 460, 487, 693 N.E.2d 358, 372 (1998). Usin g an objec t ive st anda rd , t he trial court mus

t deter mi ne wh ether a party m

ade a r ea so na ble in quiry in to the fac

ts and law sup po rt ingt he ir a lleg at io ns t o mee t t he bu r de n o f Ru le 137. Burrows , 306 Ill . App. 3d at 1051, 715 N.E.2d a t 794. On review, we mus

t decide wh

ether the t rial court ’s de cis io n w as “info rmed , ba se d o n va lid
r ea so ns, an d fo llo we d lo gic ally from the ci rcumstances of the case.” Burrows , 306 Ill . App. 3d at 1051, 715 N.E.2d at 79 4. A r ulin g o n Rule 13 7 s an ct io ns s ho uld not be overturned unless the trial court has ab

use d i ts di scre tion
. Dowd & Dowd , 181 Il l . 2d at 48 7, 693 N .E.2d at 37 2. In t his c as e, t he p laint iff attempted t o pie r ce t he co r po r at e v eil o f Ra nd Co o k t o ho ld Grossman l i ab l e i n h i s i nd i vi dua l ca paci ty f or th e al l eg ed

da m ag esres ul ti ng f rom a s al estran sacti on between the pla in tif f an d Rand Cook. Grossman

argues thatRul

e 137san cti ons a re pro per because he was o nly the in

corpo rato r of Rand C ook and under Ill in ois l aw, an i ncorporat or without i nv olv em en t in the c orporati on m

ay not be he l d li ab l e f

or the actions of

the c omp an

y . Grossman argues t hat an in

corp orat or, without any i

nterest or involvement in the corp orati on aft er its fo rmat ion, is not t he “alt er ego ” o f the co mpany andthe ref ore c an not b e h el d l i ab l e f ort he act ions of t he co rp or at ion. “Unde r I lli nois law , a co rp or at ion is a leg al ent ity t hat exist s sep ar at e and dis tinct fro m its sha re hold er s, o ffi cer s and di

rectors.” Mac aluso v. Je nkins , 95 Ill . App. 3d 461, 464, 420 N. E
. 2d 25 1, 25 4 ( 19 81 )
. Ge ne r ally, co r po r at e o ffice r s a nd dir ec t o r s a r e n o t ind ividua lly liable f ort he de bt s a nd o blig at io ns o f t he co mp an y. Macaluso , 95 Ill . App. 3d at 464, 420 N.E .2dat 254. Howev er, the of f i cers an d di rectors m ay be he l d l i ab l e f or th e debts of

th e c orp orati on “w hen t he1-06-3000

6

corp orati on is me rely the al ter ego o r b us ines s c o ndu it o f a governi ng or a dom i na tin g pers onal

i ty.” Macaluso , 95 Il

l . Ap p. 3d a t 464, 420

N.E.2d a t 254. Up on examining

the record, we fi

nd that Gr os sman’s so le ro le in the c or po ra t ion wa s as t he i nc orporator. T he r e is no e vidence t hat he wa s involved in managing t he bus iness o r p os sess ed a ny in terest in Rand Cook after Decem

ber 16, 2003, when the b

usi ness was i ncorporat ed. However, we also find tha t t he plaint iff co uld have co nclude d t hat Gr os sman wa s su ffi cient ly i nvolved in the corp orati on so t hat including hi

m i n the l awsui t was not unreasonabl

e. Rand Cook had a conspi cuous la ck of r ec o r ds in

co mpliance wit h Illinois st at ut or y req uire ments and a n unfiled do cument pur po rt ing to assign al

l of G rossm an ’si ntere st i n R and Cook to one M ary

Hoef l er. As the i nc orporator of

Ra nd Cook , Grossman

ha d a n obli ga ti on under the Business Corp orati on Act of 1983 (805 ILCS 5/1.01 et seq. (Wes t 200 4) ) t o na me the initial direc t or s o f the corp orat ion. Section 2.20 o f the Busi ness Corpo ration Act st ates:

“ Org ani zati onof C orp orati on. (a ) If thereare n o pre i nc orporati

on sub scri bers an d if

init ial d ire ct o r s a r e n o t na med in t he articles of i

ncorporat ion, a m

eet in g o f the incor po ra t or s shall be he ld at the cal l o f

a m aj ori ty of the i nc orporators

f or th e purp ose

of
na m i ng th e i ni tia l di rectors.” 805 IL CS 5/2 .20(a) (We st 2004 ). G rossm an

adm its i n hi s i nterrogat ory ans

wers that he has

no defi ni te knowledge of

any in tended di rectors of the corporat ion. Thus , it appears that he f ai l ed to f ulf i l l a te ch ni cal obl i ga ti on unde r t he Busin ess Incorp orati

on A ct. N o rec ords

ha ve be en f i l ed wi th th e Sta te of Illi noi s naming any corpora te of fi cers, directors, or agents o f Ra nd Cook ot her than R

ic hard Grossm

an as the i

ni tial1-06-3000

7

registered agent and i

ncorporat or. Neithert he ar t icle s o f inc o r po r at io n no rt he co r

po r at io n file

“ de tai l rep ort” l i sts an othe r ag en t oroff i cer f or Ran d Cook. Itwa s th

ere f ore n ot un reason ab l e f or t he pla int iff

to bel ie ve that Gros sm an ha d a n i nte res t i n th e c orporati

on or man ag ed the corp orati on be caus e no other of

f i cers , di rectors, or ag en

ts were recorde d f

or the com

pan y . Nevertheless, t he fa ct s o f thi s c as e d o not sup po rt t he plaint iff ’s t heo ry o f pierc ing t he
cor porate veil of Rand Co ok and ho lding Gr os sman pe rso nally l iable for t he co mpany’s de bt s a nd obli gations. Pierci

ng the corporat e vei

l i s i ntended to allow a ggr ieved p laintiffs to re ach be hind t he faca de of th e c orp ora

ti on to atta ch l i ab i li ty to the pers on or per so ns who ar e r eally carr ying ou t t he
ma terial co r po r at e a ct ivit y. I n t his c as e, t he r ec o r d is cle ar t ha t wh ile Gr os sman wa s t he i nc orporator and la ter faile d to compl y w ith ce rtain techn

ic al requirem ents on beh

al f of the corpor ation, that does not make h i m i ts al ter ego. Ho weve r, in li

ght of t he f

ac ts surroun

di ng the i nc orporati

on, weca nn ot say that the trial

court abused

i ts d i scre ti on i n f i n di n g th at th e p l ai n ti f f made a re as on ab l e i

n qui ry i n to t he facts an

d a good faith argum

ent, not inter

pose d for an im

pro per purp ose, such as t o harass. Theref ore, we find t hat t he t rial co ur t did no t abus e its discr et ion by denying Gros sm an ’s m oti on to im pose Rul e 1 37 s an

cti ons on the pl ai nti f f f orfiling su it ag ain st Gr o ss man in h is in di vid ua l ca pa cit y. Ac cordi ngl y , we af f i rm the j udgm

en t of the ci rcui t court of C ook County
. Af fi rmed. QUINN , P.J., an

d THEIS, J ., conc

ur.