No. 2--01--0609

_________________________________________________________________

	IN THE

	APPELLATE COURT OF ILLINOIS

	SECOND DISTRICT	

_________________________________________________________________

JOHNNIE PEETOOM and				) Appeal from the Circuit

GREG PEETOOM,					) Court of Winnebago County.

							)

	Plaintiff-Appellants,		)

							) No. 2000--L--321

v.							) No. 2000--L--321

				 			)

RICHARD A. SWANSON,				)

							)

	Defendant,					)

							)

(DD. MMIiCcHhAaEeLl GGIiBbSsOoNn, JJOoHhNn PP.		)  Honorable					

PPOoWwEeRrSs, ANDand HHUuGgHh k. KK. FFUuNnDdEeRrBbUuRrGg,					) Honorable Ronald L. Pirrello,

dEFENDANTS-aPPELLEES).Defendants-Appellees).							) Ronald L. Pirrello, Judge, Presiding.

							) Judge, Presiding.

_________________________________________________________________

	PRESIDING JUSTICE HUTCHINSON delivered the opinion of the court:PRESIDING JUSTICE HUTCHINSON delivered the opinion of the 

the court:	

	Plaintiffs, Johnnie and Greg Peetoom, appeal from the trial court's order dismissing their complaint against defendants, D.

Michael Gibson, John Powers, and Hugh Funderburg.  The trial court

found that plaintiffs' complaint was barred by the two-year statute

of limitations period for personal injury actions (735 ILCS  5/13--

202 (West 1992)).  We reverse and remand the cause for further

proceedings.

	On January 20, 1993, plaintiff Johnnie Peetoom fell while

walking on a parking lot owned by The Swanson Group, Inc.

(Swanson).  On January 11, 1995, she filed a negligence action

against Swanson seeking to recover damages for the injuries she

allegedly suffered as a result of the fall (the underlying litigation).  Her husband, Greg Peetoom, also sought damages for

loss of consortium.  On May 16, 1997, the trial court in the

underlying litigation entered a default judgment against Swanson. 

On June 1, 1998, the Illinois Secretary of State involuntarily

dissolved Swanson for its failure to file a report and pay its

taxes.  On September 30, 1998, the trial court in the underlying

litigation conducted a prove-up to determine plaintiffs' damages. 

On November 2, 1998, the trial court entered a judgment awarding

Johnnie Peetoom $1 million in damages and Greg Peetoom $100,000 in

damages.  Plaintiffs initiated citation proceedings against

Swanson, but they were unsuccessful in their efforts to collect the

judgment because Swanson was insolvent.

	On September 28, 2000, plaintiffs filed the present action

against defendants in their individual capacity.  Plaintiffs

alleged that defendants were each shareholders and directors of

Swanson.  Plaintiffs alleged that defendants disregarded the

corporate entity and that Swanson was a "mere facade for the

operation of its shareholders."  Plaintiffs sought to pierce

Swanson's corporate veil and to collect their judgment in the

underlying litigation from defendants personally.

	Defendants subsequently moved to dismiss plaintiffs' complaint

pursuant to section 2--619(a)(5) of the Code of Civil Procedure

(the Code) (735 ILCS 5/2--619(a)(5) (West 2000)).  Defendants

argued that plaintiffs' action was barred by the two-year

limitations period applicable to personal injury actions (735 ILCS 

5/13--202 (West 1992)).  Defendants argued that, because plaintiffs

failed to name them in the underlying litigation, they were now time-barred from bringing a negligence action against them.  On May

31, 2001, the trial court granted the motion and dismissed

plaintiffs' complaint with prejudice.  Plaintiffs timely appealed.

	On appeal, plaintiffs contend that the trial court erred when

it applied section 13--202 of the Code to dismiss their complaint. 

Plaintiffs argue that their complaint to pierce the corporate veil

was not predicated upon a theory of negligence but was instead an

attempt to collect from Swanson's shareholders the judgment entered

against Swanson in the underlying litigation from Swanson's shareholders.  Plaintiffs contend

that section 12.80 of the Business Corporation Act of 1983 (the

Act) (805 ILCS 5/12.80 (West 1998)), which imposes a five-year

limitation on all actions against dissolved corporations and their

shareholders, is the limitations period applicable to this case. 

Plaintiffs argue that their action was filed within five years from

the date that the Secretary of State dissolved Swanson.

	Section 2--619(a)(5) of the Code (735 ILCS 5/2--619(a)(5)

(West 2000)) allows for thre dismissal of a cause of action if "the

action was not commenced within the time limited by law."  A motion

to dismiss pursuant to section 2--619 of the Code admits all well-

pleaded facts and reasonable inferences drawn therefrom.  Becker v. Zellner, 292 Ill. App. 3d 116, 122 (1997).  Additionally, a section 2--619 motion admits the legal sufficiency of the complaint but

asserts affirmative matter to avoid or defeat the claim.  Gragg v. Calandra, 297 Ill. App. 3d 639, 643 (1998).  We review the trial court's ruling on a section 2--619 motion de novo.  Gragg, 297 Ill. App. 3d at 643.

	The parties' arguments focus upon three statutory limitations

periods, sections 13--202 and 12--108 of the Code, and section

12.80 of the Act.  Section 13--202 of the Code requires that

"[a]ctions for damages for an injury to the person *** be commenced

within 2 years next after the cause of action accrued."  735 ILCS

5/13--202 (West  1992).  Section 12--108 of the Code provides that

"no judgment shall be enforced after the expiration of 7 years from

the time the same is rendered."  735 ILCS 5/12--108 (West 1998). 

Section 12.80 of the Act provides as follows:

	"The dissolution of a corporation either (1) by the

issuance of a certificate of dissolution by the Secretary of

State, or (2) by a judgment of dissolution by a circuit court

of this State, or (3) by expiration of its period of duration,

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.  Any such action or proceeding by or against the

corporation may be prosecuted or defended by the corporation

in theits corporate name."  805 ILCS 5/12.80 (West 1998).

	To determine which of these statutory limitations governs this

case, we must first consider the basic tenets of corporation law

and the nature of an action to pierce the corporate veil.  A

corporation is a legal entity whichthat6 exists separately and distinctly

from its shareholders, officers, and directors, who are not

generally liable for the corporation's debts.  In re Estate of Wallen, 262 Ill. App. 3d 61, 68 (1994).  One of the primary purposes of doing business as a corporation is to insulate

stockholders from unlimited liability for corporate activity. 

Wallen, 262 Ill. App. 3d at 68.  Limited liability will ordinarily exist even though the corporation is closely held or has a single

shareholder.  Wallen, 262 Ill. App. 3d at 68.

	However, a court may disregard a corporate entity and pierce

the veil of limited liability where the corporation is merely the

alter ego or business conduit of another person or entity.  In re Rehabilitation of Centaur Insurance Co., 238 Ill. App. 3d 292, 299 (1992), aff'd, 158 Ill. 2d 166 (1994).  This doctrine fastens liability on the individual or entity that uses a corporation

merely as an instrumentality to conduct that person's or entity's

business.  Centaur, 238 Ill. App. 3d at 300.  Such liability arises from fraud or injustice perpetrated not on the corporation but on

third persons dealing with the corporation.  Centaur, 238 Ill. App. 3d at 300.  The doctrine of piercing the corporate veil is an

equitable remedy; it is not itself a cause of action but rather is

a means of imposing liability on an underlying cause of action,

such as a tort or breach of contract.  Centaur, 238 Ill. App. 3d at 300.

	Because a complaint seeking to pierce the corporate veil is

not itself a cause of action, the limitations period applicable to

such a complaint is governed by the nature of the underlying cause

of action alleged in the complaint.  Here, plaintiffs assert that

the cause of action alleged in their complaint is an action to

collect the judgment for damages awarded in the underlying litigation.  As such, the seven-year limitations period for

enforcing judgments contained in section 12--108 of the Code would

ordinarily apply to their complaint.  However, because Swanson is

a dissolved corporation, plaintiffs argue that the five-year

limitations period for commencing actions against dissolved

corporations and their shareholders contained in section 12.80 of

the Act governs this case.

	Defendants respond that plaintiffs cannot collect the judgment

entered in the underlying litigation against them because they were

not named parties to that suit.  Defendants argue that, to collect

against them, plaintiffs are required to allege and prove their

allegations of negligence anew.  Accordingly, defendants conclude

that the cause of action underlying plaintiffs' complaint to pierce

the corporate veil must be predicated upon negligence and that such

an action is barred by the two-year limitations period contained in

section 13--202 of the Code.

	We agree with plaintiffs' position and find that the five-year

limitations period contained in section 12.80 of the Act governs

this case.  Plaintiffs' allegations of negligence against Swanson

have already been proved in the underlying litigation.  The trial

court in the underlying litigation found in plaintiffs' favor and

entered a judgment awarding damages.  This judgment became a new

and distinct obligation of Swanson whichthat was different from

plaintiffs' original negligence action.  Plaintiffs' complaint in

this case did not seek to recover damages from defendants on the

basis of Swanson's negligence, but instead sought to pierce

Swanson's corporate veil to enforce the judgment in the underlying litigation against defendants as corporate directors and

shareholders.  Therefore, the seven-year limitations period for

enforcing judgments contained in section 12--108 of the Code would

ordinarily govern actions of this type.  However, because Swanson

has been dissolved, section 12.80 of the Act reduces the

limitations period to five years.

	We find support for our conclusion that plaintiffs may seek to

pierce Swanson's corporate veil to enforce the judgment in the

underlying litigation against defendants in Pyshos v. Heart-Land Development Co., 258 Ill. App. 3d 618 (1994).  In Pyshos, the plaintiff secured a $20,000 judgment against a corporation. 

Pyshos, 258 Ill. App. 3d at 621.  The plaintiff subsequently initiated supplementary citation proceedings to discover the

corporation's assets.  As part of the citation proceedings, the

plaintiff filed a petition to pierce the corporate veil.  The trial

court subsequently granted the plaintiff's motion for summary

judgment on this petition.  Pyshos, 258 Ill. App. 3d at 621-22.  The reviewing court reversed, holding that it was improper to

pierce the corporate veil in supplementary proceedings because the

allegations necessary to support such an action do not fall within

the limited scope of what may be heard in supplementary

proceedings.  Pyshos, 258 Ill. App. 3d at 622.  The reviewing court further explained:

"[A] judgment creditor who has managed to secure a judgment

against a corporation and seeks to hold the individual

shareholders and directors of a judgment debtor corporation

liable for that judgment may consider alternative remedies.

	First, a judgment creditor may choose to initiate a

supplementary proceeding against the third-party shareholders

and directors.  The inquiry in such supplementary proceedings,

however, is limited to considering the allegation that the

shareholders and directors are holding assets of the judgment

debtor corporation.

	Alternatively, a judgment creditor may choose to file a

new action to pierce the corporate veil to hold individual

shareholders and directors liable for the judgment of the

corporation.  A new proceeding is proper because, where a

party obtains a judgment against another party, the underlying

claim merges with the judgment and the judgment becomes a new

and distinct obligation of the corporation which differs in

nature and essence forrom the original claim."  Pyshos, 258 Ill. App. 3d at 624.

Other Illinois courts have similarly noted that a judgment creditor

may initiate an action to pierce the corporate veil to enforce a

judgment against a corporation's shareholders.  See Jacobson v. Buffalo Rock Shooters Supply, Inc., 278 Ill. App. 3d 1084, 1087 (1996) (plaintiffs filed a complaint to pierce corporate veil to

collect workers' compensation judgment from corporation's

shareholders); Lange v. Misch, 232 Ill. App. 3d 1077, 1081 (1992) (reviewing court held that the plaintiff could not attempt to

pierce the corporate veil in supplementary proceedings and

admonished the plaintiff to file a separate action to pierce the

corporate veil to collect judgment against shareholder).  None of

these authorities supports defendants' assertion that, in an action to pierce the corporate veil to enforce a judgment against a

corporation's shareholders, a plaintiff must reallege and reprove

the underlying cause of action that formed the basis for the

judgment.

	Additionally, we are unpersuaded by the authorities that

defendants cite in support of their position.  In In re Estate of Wallen, 262 Ill. App. 3d 61, 70 (1994), this court held that the plaintiff could not seek to pierce the corporate veil to collect a

foreign judgment from the sole corporate shareholder.  We held

that, under the full faith and credit doctrine, the plaintiff could

not seek to enforce a judgment in Illinois against an individual

who was not designated as a party in the foreign litigation. 

Wallen, 262 Ill. App. 3d at 70.  Our decision in Wallen was predicated upon the unique nature of foreign judgments; our holding

does not preclude a judgment creditor from filing an action to

pierce the corporate veil to enforce a judgment against a

corporation's shareholders.

	Defendants also rely on Matos v. Richard A. Nellis, Inc., 101 F.3d 1193, 1195 (7th Cir. 1996), a case in which the plaintiff

sought to pierce the veil of a dissolved corporation in a

supplemental proceeding to collect a judgment from the

corporation's shareholder.  After noting that Illinois's courts

would not allow an action to pierce the corporate veil in

supplemental proceedings (Matos, 101 F.3d at 1195, citing Pyshos, 258 Ill. App. 3d at 622), the reviewing court further commented

that it was impossible to pierce the corporate veil after a

corporation has been dissolved (Matos, 101 F.3d at 1195).  We reject this latter statement because it is contrary to the plain

language of section 12.80 of the Act.  As noted above, section

12.80 specifically provides that a corporation's dissolution does

"not take away nor impair any civil remedy available to or against

such corporation, its directors, or shareholders."  805 ILCS

5/12.80 (West 1998).  Therefore, despite Swanson's dissolution,

plaintiffs were entitled under section 12.80 to file suit against

Swanson and its shareholders within five years from the date of

dissolution.

	Defendants' discussion of Greenfield v. Ray Stamm, Inc., 242 Ill. App. 3d 320 (1993), and Johnson v. St. Therese Medical Center, 296 Ill. App. 3d 341 (1998), is also unpersuasive, as neither case

involved an action to pierce the corporate veil.  In Greenfield, the plaintiff sued the wrong party and sought to amend his

complaint to name a different party after the expiration of the

limitations period.  Greenfield, 242 Ill. App. 3d at 323-24.  In Johnson, the judgment debtor was a partnership, rather than a corporation.  Johnson, 296 Ill. App. 3d at 346.

	Having determined that the five-year limitations period of

section 12.80 of the Act governs this case, we briefly consider

whether plaintiffs filed their action within the limitations

period.  Section 12.80 requires that a plaintiff commence an action

"for any right or claim existing, or any liability incurred, prior

to [a corporation's] dissolution" within five years of the date of

dissolution.  805 ILCS 5/12.80 (West 1998).  Here, the Illinois

Secretary of State dissolved Swanson on June 1, 1998.  Plaintiffs filed their complaint on September 28, 2000.  Plaintiffs therefore

commenced their action within five years of Swanson's dissolution.

	Defendants argue that plaintiffs' collection action did not

exist prior to Swanson's dissolution as required by section 12.80

because the trial court in the underlying litigation did not enter

its damage award until after Swanson's dissolution.  Defendants

therefore contend that section 12.80 does not provide plaintiffs a

right to sue on the judgment.  Defendants' argument lacks merit. 

The trial court in the underlying litigation defaulted Swanson

prior to the date of Swanson's dissolution.  Therefore, prior to

its dissolution, the trial court in the underlying litigation

entered judgment against Swanson on plaintiffs' negligence action. 

Although the precise measure of plaintiffs' damages had yet to be

determined, Swanson's obligation on plaintiffs' complaint had been

established prior to the date of dissolution.  Accordingly, we

conclude that plaintiffs' right to collect on its complaint accrued

prior to Swanson's dissolution and that plaintiffs' complaint in

this case satisfied the limitations requirements of section 12.80

of the Act.  We therefore hold that the trial court erred in

dismissing plaintiffs' complaint as untimely.

	For the foregoing reasons, we reverse the judgment of the

circuit court of Winnebago County and remand the cause for further

proceedings.

	Reversed and remanded.

	GEIGER and BOWMAN, JJ., concur.