Court Opinion

ID: 3146086
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:13:01.570033+00
Date Added: 2024-06-11T11:55:10.814742
License: Public Domain

FOURTH DIVISION
                                                   September 29, 2006

No. 1-05-0367

PHILIP PULEO, MALEX CORPORATION,        )     Appeal from the
AMY DERKSEN, CHANI DERUS, ROBERT        )     Circuit Court of
FILICZKOWSKI, d/b/a Robert              )     Cook County,
Filiczkowski Design Services,           )
YSPEX, INC., JACOB LESGOLD,             )
VAN RATSAVONGSAY, AND BRYAN WEISS       )
d/b/a Gearhouse Studios,                )
                                        )
     Plaintiffs-Appellants,             )
                                        )
               v.                       )
                                        )
MICHAEL TOPEL, Individually and         )
d/b/a Thinktank, LLC, and               )
THINKTANK, LLC, an Illinois             )
Limited Liability Company in            )
Dissolution,                            )     Honorable
                                        )     Ronald F. Bartkowicz
     Defendants-Appellees.              )     Judge Presiding.

     PRESIDING JUSTICE QUINN delivered the opinion of the court:

     Plaintiffs Philip Puleo, Malex Corporation, Amy Derksen,

Chani Derus, Robert Filiczkowski, YSPEX, Inc., Jacob Lesgold, Van

Ratsavongsay, and Bryan Weiss appeal the order of the circuit

court dismissing their claims against defendant Michael Topel
           1
(Topel).       On appeal, plaintiffs contend that the circuit court

erred by finding that Topel could not be held personally liable

     1
      The record shows that plaintiff Jacob Lesgold pursued a

separate summary judgment action against Topel.
No. 1-05-0367

for obligations incurred on behalf of defendant Thinktank, LLC

(Thinktank), after the company was involuntary dissolved.

     The record shows that effective May 30, 2002, Thinktank, a

limited liability company (LLC) primarily involved in web design

and web marketing, was involuntarily dissolved by the Illinois

Secretary of State.   The dissolution was due to Thinktank's

failure to file its 2001 annual report as required by the

Illinois Limited Liability Company Act (the Act) (805 ILCS

180/35-25(1) (West 2004)).

     Thereafter, on December 2, 2002, plaintiffs, independent

contractors hired by Topel, filed a complaint against Topel and

Thinktank in which they alleged breach of contract, unjust

enrichment, and claims under the account stated theory.   Those

claims stemmed from plaintiffs' contention that Topel, who

plaintiffs alleged was the sole manager and owner of Thinktank,

knew or should have known of Thinktank's involuntary dissolution,

but nonetheless continued to conduct business as Thinktank from

May 30, 2002, through the end of August 2002.   They further

contended that on or about August 30, 2002, Topel informed

Thinktank employees and independent contractors, including

plaintiffs, that the company was ceasing operations and that

their services were no longer needed.    Thinktank then failed to

pay plaintiffs for work they had performed.

     On or about April 4, 2003, Thinktank and Topel served their

answer to the complaint on plaintiffs.   In response, plaintiffs

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No. 1-05-0367

filed a motion for summary judgment on April 25, 2003.      In that

motion, plaintiffs argued that the only allegations that

Thinktank and Topel denied in their answer pertained to Lesgold.

 As such, plaintiffs contended that there was no genuine issue of

material fact and, thus, they were entitled to judgment as a

matter of law.   Subsequently, on June 6, 2003, plaintiffs filed a

request to admit.

     Although neither Thinktank nor Topel filed a response to

plaintiffs' motion for summary judgment, they filed a response to

plaintiffs' request to admit.      Therein, defendants denied that

Topel, as sole manager and owner of Thinktank, was in a position

to know that Thinktank had been involuntarily dissolved by the

Illinois Secretary of State or that the company was operating

while dissolved during the period beginning on May 30, 2002.

     On September 2, 2003, the circuit granted plaintiffs' motion

for judgment on the pleadings against Thinktank.      Thereafter, on

October 16, 2003, plaintiffs filed a separate motion for summary
                          2
judgment against Topel.       Relying on Gonnella Banking Co. v.

Clara's Pasta Di Casa, Ltd., 337 Ill. App. 3d 385 (2003),

plaintiffs contended that Topel, as a principal of Thinktank, an

LLC, had a legal status similar to a shareholder or director of a

corporation, who courts have found liable for a dissolved

     2
      Plaintiff Jacob Lesgold filed a separate motion for summary

judgment against Thinktank on October 16, 2003.

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No. 1-05-0367

corporation's debts.    Thus, plaintiffs argued that Topel was

personally liable for Thinktank's debts.    Topel did not file a

response, and plaintiffs subsequently argued that Topel's failure

to respond should be treated as a failure to contest their motion

and that judgment should be entered for them.

     On March 25, 2004, the circuit court denied plaintiffs'

motion for summary judgment against Topel.    Subsequently,

plaintiffs filed a motion to reconsider on July 1, 2004, which

the circuit court denied on August 23, 2004.

     Plaintiffs then filed a motion for clarification on

September 13, 2004, in order to obtain the circuit court's basis

for denying their motion to reconsider.    On October 12, 2004, the

circuit court granted plaintiffs' motion for clarification.      In

doing so, the circuit court acknowledged that Topel continued to

do business as Thinktank after its dissolution and that the

contractual obligations at issue were incurred after the

dissolution.    However, the court then stated:

          "This court bases its decision on its reading

          of the Illinois Limited Liability Company

          Act.    Specifically, this court reads 805 ILCS

          180/10-10 in concert with 805 ILCS 180/35-7

          as well as the legislative notes to 805 ILCS

          180/10-10 to determine that the Illinois

          Legislature did not intend to hold a member

          of a Limited Liability Company liable for

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No. 1-05-0367

           debts incurred after the Limited Liability

           Company had been involuntarily dissolved."

Finally, on January 6, 2005, the circuit court entered a final

order dismissing all of plaintiffs' claims against Topel with

prejudice.   The court stated in pertinent part:

           "Based upon the Court's prior finding that

           the Illinois Legislature did not intend to

           hold a member of a Limited Liability Company

           liable for debts incurred after the Limited

           Liability Company had been involuntarily

           dissolved, the Court finds that all of

           Plaintiffs' claims against Defendant Topel

           within the Complaint fail as a matter of law,

           as they are premised upon Defendant Topel's

           alleged personal liability for obligations

           incurred in the name of Thinktank LLC after

           it had been involuntarily dissolved by the

           Illinois Secretary of State."

Plaintiffs now appeal that order.

     We initially note that Topel has not filed a brief.

Nonetheless, we may proceed under the principles set forth in

First Capitol Mortgage Corp. v. Talandis Construction Corp., 63
Ill. 2d 128, 133 (1976).

     Our review of a dismissal of a complaint on its pleadings is

de novo.   Keck & Associates, P.C. v. Vasey, 359 Ill. App. 3d 566,

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No. 1-05-0367

568 (2005).     In doing so, we accept all well-pleaded allegations

in the complaint as true.    Board of Managers of the Village

Centre Condominium Ass'n, Inc. v. Wilmette Partners, 198 Ill. 2d
132, 134 (2001).

     In this court, plaintiffs contend that the circuit court

erred in dismissing their claims against Topel.     In making that

argument, plaintiffs acknowledge that the issue as to whether a

member or manager of an LLC may be held personally liable for

obligations incurred by an involuntarily dissolved LLC appears to

be one of first impression under the Act.     That said, plaintiffs

assert that it has long been the law in Illinois that an officer

or director of a dissolved corporation has no authority to

exercise corporate powers and, thus is personally liable for any

debts he incurs on behalf of the corporation after its

dissolution.    Gonnella Baking Co., 337 Ill. App. 3d at 386;
Cardem, Inc. v. Marketron International, Ltd., 322 Ill. App. 3d
131 (2001); Chicago Title & Trust Co. v. Brooklyn Bagel Boys,
Inc., 222 Ill. App. 3d 413 (1991).      Plaintiffs reason that Topel,

as managing member of Thinktank, similarly should be held liable

for debts the company incurred after its dissolution.

     We first look to the provisions of the Act as they provided

the trial court its basis for its ruling.     Katris v. Carroll, 362
Ill. App. 3d 1140, 1144 (2005) (in reviewing a circuit court's

summary judgment, this court looked to the applicable provisions

of the Act to determine the fiduciary duties owed by managers and

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No. 1-05-0367

members of an LLC).    When reviewing a statute, the cardinal rule

is to ascertain and give effect to the intent of the legislature.

 Carroll, 362 Ill. App. 3d at 1145.    The plain meaning of the

language in the statute provides the best indication of

legislative intent.    Carroll, 362 Ill. App. 3d at 1145.    Where

the statutory language is clear, the court must give it effect

without resorting to other aids for construction.    Solich v.

George & Anna Portes Cancer Prevention Center of Chicago, Inc.,

158 Ill. 2d 76, 81 (1994).    Further, when a statute is amended,

it is presumed that the legislature meant to change the law as it

formerly existed.    Department of Transportation v. Drury
Displays, Inc., 327 Ill App. 3d 881, 888 (2002), citing Scribner

v. Sachs, 18 Ill. 2d 400, 411 (1960).

     As stated, the circuit court relied on sections 10-10 and

35-7 of the Act in making its ruling.    Section 10-10 provides:

                "(a) Except as otherwise provided in

          subsection (d) of this Section, the debts,

          obligations, and liabilities of a limited

          liability company, whether arising in

          contract, tort, or otherwise, are solely the

          debts, obligations, and liabilities of the

          company.    A member or manager is not

          personally liable for a debt, obligation, or

          liability of the company solely by reason of

          being or acting as a member or manager.

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No. 1-05-0367

                (b) (Blank)

                (c) The failure of a limited liability

          company to observe the usual company

          formalities or requirements relating to the

          exercise of its company powers or management

          of its business is not a ground for imposing

          personal liability on the members or managers

          for liabilities of the company.

                (d) All or specified members of a

          limited liability company are liable in their

          capacity as members for all or specified

          debts, obligations, or liabilities of the

          company if:

                      (1) a provision to that effect is

                contained in the articles of organization;

                and

                      (2) a member so liable has

                consented in writing to the adoption of

                the provision or to be bound by the

     provision."               805 ILCS 180/10-10 (West

     2004).

Section 35-7 provides:

                "(a) A limited liability company is

          bound by a member or manager's act after

          dissolution that:

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No. 1-05-0367

                       (1) is appropriate for winding up

                  the company's business; or

                       (2) would have bound the company

                  under Section 13-5 before dissolution, if

                  the other party to the transaction did not

                  have notice of the dissolution.

                  (b) A member or manager who, with

          knowledge of the dissolution, subjects a

          limited liability company to liability by an

          act that is not appropriate for winding up

          the company's business is liable to the

          company for any damage caused to the company

          arising from the liability."    805 ILCS

          180/35-7 (West 2004).

     Section 10-10 clearly indicates that a member or manager of

an LLC is not personally liable for debts the company incurs

unless each of the provisions in subsection (d) is met.       In this

case, plaintiffs cannot establish either of the provisions in

subsection (d).    They have not provided this court with

Thinktank's articles of organization, much less a provision

establishing Topel's personal liability, nor have they provided

this court with Topel's written adoption of such a provision.      As

such, under the express language of the Act, plaintiffs cannot

establish Topel's personal liability for debts that Thinktank

incurred after its dissolution.

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No. 1-05-0367

     As plaintiffs contend, similar to the Business Corporation

Act (BCA) (see 805 ILCS 5/12.30 (West 2004)), the Act explicitly

provides that an LLC continues after dissolution only for the

purpose of winding up its business (805 ILCS 180/35-3 (West

2004)).   However, as plaintiffs concede in their brief, the Act

does not contain a provision similar to section 3.20 of the

Business Corporation Act, which provides:

           "All persons who assume to exercise corporate

           powers without authority so to do shall be

           jointly and severally liable for all debts

           and liabilities incurred or arising as a

           result thereof."   805 ILCS 5/3.20 (West

           2004).

     Moreover, we observe that section 35-7 of the Act explicitly

provides that a member or manager of an LLC who, with knowledge

of the dissolution, exceeds the scope of his authority during the

wrapping up of a company's business is liable to the company for

any damages arising from the liability.    805 ILCS 180/35-7(b)

(West 2004).    The Act, however, contains no language concerning a

member or manager's liability to a third party.    That silence

speaks volumes when viewed in conjunction with the legislature's

amendment of the former version of section 10-10.

     Prior to its amendment, section 10-10 provided:

                 "(a) A member of a limited liability

           company shall be personally liable for any

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No. 1-05-0367

          act, debt, obligation, or liability of the

          limited liability company or another member

          or manager to the extent that a shareholder

          of an Illinois business corporation is liable

          in analogous circumstances under Illinois

          law.

                 (b) A manager of a limited liability

          company shall be personally liable for any

          act, debt, obligation, or liability of the

          limited liability company or another manager

          or member to the extent that a director of an

          Illinois business corporation is liable in

          analogous circumstances under Illinois law."

           805 ILCS 180/10-10 (West 1996).

     In 1998, however, the legislature amended section 10-10 and

in doing so removed the above language which explicitly provided

that a member or manager of an LLC could be held personally

liable for his or her own actions or for the actions of the LLC

to the same extent as a shareholder or director of a corporation

could be held personally liable.   As we have not found any

legislative commentary regarding that amendment, we presume that

by removing the noted statutory language, the legislature meant

to shield a member or manager of an LLC from personal liability.

 Drury Displays, Inc., 327 Ill App. 3d at 888 ("When a statute is
amended, it is presumed that the legislature intended to change

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No. 1-05-0367

the law as it formerly existed").

     Nonetheless, plaintiffs ask this court to disregard the 1998

amendment and to imply a provision into the Act similar to

section 3.20 of the Business Corporation Act.    We cannot do so.

     This court recently rejected a similar request in In re

Application of County Collector, 356 Ill. App. 3d 668, 673-674

(2005).   There, petitioner Dream Sites, LLC, purchased property

at an annual tax sale as a result of respondent Grace Apostolic

Church's delinquent general real estate taxes.   Petitioner then

filed a petition for issuance of a tax deed and lodged a "Notice

of expiration of period of redemption" pursuant to section 22-10

of the Property Tax Code (Code) (35 ILCS 200/22-10 (West 2002))

which provided in pertinent part "[i]n counties with 3,000,000 or

more inhabitants, the notice shall also state the address, room

number, and time at which the hearing is set."   The petition,

however, omitted a street address and merely stated that the

hearing for issuance of the tax deed would be held in "Room 1704,

Richard J. Daley Center in Chicago, Illinois."   Respondent filed

an objection arguing that the notice was insufficient due to the

lack of a street address.   The circuit court denied the motion

and entered an order granting petitioner's petition.

     On appeal, respondent argued that the circuit court's ruling

was against the manifest weight of the evidence because it

ignored the plain language of section 22-10 of the Code.

Conversely, petitioner argued that despite the language of

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No. 1-05-0367

section 22-10, this court should find that "Daley Center,

Chicago, Illinois" was an adequate address for purposes of the

petition.   This court, however, concluded that by amending

section 22-10 to require that a notice provide an address and not

merely a building name, the legislature intended a notice to

include a street address to denote the physical location of a

building.   As such, this court reversed the circuit court's

ruling and remanded the cause for further proceedings.

     In the case at bar, we similarly decline plaintiffs' request

to ignore the statutory language.      When the legislature amended

section 10-10 (805 ILCS 180/10-10 (West 2004)), it clearly

removed the provision that allowed a member or manager of an LLC

to be held personally liable in the same manner as provided in

section 3.20 of the Business Corporation Act.     Thus, the Act

does not provide for a member or manager's personal liability to

a third party for an LLC's debts and liabilities, and no rule of

construction authorizes this court to declare that the

legislature did not mean what the plain language of the statute

imports.    Solich, 158 Ill. 2d at 83.
     We, therefore, find that the circuit court did not err in

concluding that the Act did not permit it to find Topel

personally liable to plaintiffs for Thinktank's debts and

liabilities.    We agree with plaintiff that the circuit court's

ruling does not provide an equitable result.     However, the

circuit court, like this court, was bound by the statutory

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No. 1-05-0367

language.

     Accordingly, we affirm the judgment of the circuit court of

Cook County.

     Affirmed.

     CAMPBELL and MURPHY, JJ., concur.

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