Court Opinion

ID: 3146085
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:12:59.812812+00
Date Added: 2024-06-11T15:07:14.570723
License: Public Domain

SIXTH DIVISION
                                                    October 6, 2006

No. 1-05-1536

MARSHA FORSYTHE-FOURNIER,                 )    Appeal from the
                                          )    Circuit Court of
          Plaintiff-Appellee,             )    Cook County
                                          )
     v.                                   )
                                   )
JERRY ISAACSON, MICHELLE ISAACSON, MARK   )
T. GOLAN ARCHITECT, LTD., PROTEMP         )
MECHANICAL INC., a Dissolved Illinois     )
Corporation,                              )
                                          )
          Defendants                      )
                                          )
(Barry Isaacson and Leslie Isaacson,      )    Honorable
                                          )    Paddy H. McNamara,
          Defendants-Appellees).          )    Judge Presiding

     JUSTICE McNULTY delivered the opinion of the court:

     What can the officers of a dissolved corporation do without

incurring personal liability?   In this case a corporation had

contracted to install an air-conditioning system in a new house,

but the corporation dissolved before completing the installation.

 The corporation's officers continued the installation despite

the dissolution of the corporation.    The plaintiff bought the

house and found the air-conditioning system defective.    She sued

the corporation's officers, arguing that they were individually

liable for the installation because they continued to act as the

corporation after the dissolution.    Following a bench trial, the

court found the officers individually liable for the costs of

repairing the air-conditioning system.

     We hold that, as part of winding up the affairs of the
1-05-1536

corporation, the officers of the dissolved corporation could

attempt to complete work on the contract the corporation entered.

 Because the plaintiff did not present any evidence that the

officers entered any new contracts following the dissolution, and

they did not otherwise exceed their duty to wind up corporate

business, the court should not hold the officers personally

liable on the corporation's contracts.      We reverse the judgment

the trial court entered against the corporate officers.

                               BACKGROUND

     In 1994 Jerold and Michelle Isaacson hired Marc T. Golan

Architect, Ltd., to design a house for Jerold and Michelle to

build.      Jerold and Michelle hired ProTemp Mechanical, Inc., an

Illinois corporation, to serve as general contractor for the

project.     Jerold's brother, Barry Isaacson, and Barry's wife,

Leslie Isaacson, owned ProTemp and served as its officers.

     ProTemp designed the heating, ventilating and air

conditioning system (HVAC) for the house.     It had already begun

its work on the house before August 1995.     The Illinois Secretary

of State dissolved ProTemp on August 1, 1995.      ProTemp continued

to do business after August 1, as it continued its work on Jerold

and Michelle's house.     It completed its design and installation

of the HVAC system after August 1, 1995.     In December 1995

ProTemp obtained a temporary certificate for occupancy of the

house.

     Jerold and Michelle moved into the house and lived there for

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several years.   In May 2001 Jerold and Michelle sold the house to

Marsha Forsythe-Fournier.    In June 2003 Forsythe-Fournier sued

Marc T. Golan Architect, ProTemp, and Jerold, Michelle, Barry and

Leslie Isaacson.   Forsythe-Fournier alleged that when she bought

the house she relied on Jerold's statement that the HVAC system

had no material defects.    In 2002 she discovered major flaws in

the HVAC system.

     The trial court granted summary judgment in favor of Golan

based on uncontradicted evidence that Golan had no role in

designing or installing the HVAC system.    Jerold declared

bankruptcy in 2003.   Due to the dissolution of ProTemp, Forsythe-

Fournier never served process on the corporation.    The trial

court dismissed all claims against Jerold, Michelle and ProTemp

before trial.    The case proceeded to trial only on the claim

against Barry and Leslie for breach of warranty of habitability.

     Forsythe-Fournier presented evidence of the defects in the

HVAC system and the measures Jerold and Barry took to conceal

those defects.   An expert testified that repairs to the system

would cost more than $120,000.    Ancillary work necessary for the

HVAC repairs would push costs even higher.

     Barry admitted that ProTemp continued its work on the house

after the corporate dissolution in August 1995, but he swore that

ProTemp did not enter into any new contracts after August 1,

1995.   He never attempted to have ProTemp reinstated as a

corporation.

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     Barry and Leslie argued that they acted solely as ProTemp's

officers winding up the business following the dissolution.    The

court said:

     "[T]he corporation was operating after dissolution, not

     just winding down, but doing the type of work that they

     had done before.

                                * * *

            *** [I]f you carried on as a corporation at the

     point at which the corporate form no longer existed,

     you can assume the individual liability. ***

                                * * *

            *** I am not accepting that carrying on work as

     usual is wind-up."

The court entered judgment against Barry and Leslie for $150,000.

                              ANALYSIS

     This case turns on the application of common law principles

to facts proven at trial.    We accept the trial court's findings

of fact unless they are contrary to the manifest weight of the

evidence, but we review de novo the court's rulings of law.

Corral v. Mervis Industries, Inc., 217 Ill. 2d 144, 154-55
(2005).

     "[P]ersonal liability may be imposed on an officer of a

dissolved corporation who enters into contracts on behalf of the

corporation after dissolution."     In re Estate of Plepel, 115 Ill.

App. 3d 803, 806 (1983).    "[O]fficers of a corporation could be

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held personally liable for debts incurred by the business during

a period of corporate dissolution."    Cardem, Inc. v. Marketron
International, Ltd., 322 Ill. App. 3d 131, 136 (2001).    However,

the law permits officers to wind up corporate affairs without

incurring personal liability.    See 805 ILCS 5/8.65(a)(3) (West

1994).

     In Campisano v. Nardi, 212 Conn. 282, 562 A.2d 1, (1989),

the plaintiff signed a contract with a corporation for work on

the plaintiffs' house.    Three months later the secretary of state

dissolved the corporation.    Campisano, 212 Conn. at 283-84, 562
A.2d at 2.    The corporation continued to work on the house for

another year.    When the corporation failed to complete the work

satisfactorily, the plaintiffs sued the corporation and its

president.    The referee found that the president had only wound

up the affairs of the corporation, so the court found the

president not individually liable for the breach of contract.

The appellate court said:

            "The fact that the defendant sought to complete

     his existing contractual obligations *** is entirely

     consistent with an effort to wind up the corporation.

     Had he succeeded, he would have eliminated a claim

     against the corporation."    Campisano, 212 Conn. at 289,
       562 A.2d at 5.

     The court distinguished numerous authorities, like those

Forsythe-Fournier cites here, where a court held a corporate

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officer individually liable on a contract the officer signed on

behalf of a corporation after the corporation's dissolution.       See

Gonnella Baking Co. v. Clara's Pasta di Casa, Ltd., 337 Ill. App.
3d 385 (2003).    The court noted that Campisano's claim

"involve[d] a contractual obligation incurred prior to the

dissolution, and not in the period following dissolution."

Campisano, 212 Conn. at 289, 562 A.2d at 5.    The court affirmed

the judgment holding the corporation's president not personally

liable.

     The uncontested evidence here shows that ProTemp undertook

duties as general contractor, including designing and installing

the HVAC system, before its involuntary dissolution.    After the

dissolution the corporation remained responsible for fulfilling

its duties under the contract. See Mid-American Elevator Co. v.
Norcon, Inc., 287 Ill. App. 3d 582, 589 (1997) (corporation must

provide for rights of corporate creditors and third persons

during windup).     ProTemp entered no new contracts following the

dissolution.   Forsythe-Fournier presented no evidence that Barry

and Leslie acted in a manner inconsistent with their duty to wind

up the corporation's business.    Instead, she showed that Barry

and Leslie, like the defendant in Campisano, failed to fulfill
the corporation's contract.    The proof here, like that in

Campisano, shows the corporation's liability, but it provides no

grounds for holding the officers individually liable.      If we hold

the officers liable for breach of warranty here, we will

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discourage corporate officers from taking any steps to fulfill

corporate contractual duties while winding up corporate business.

     Forsythe-Fournier showed that Barry and Leslie continued to

work on the house after the dissolution of ProTemp.    She did not

show that Barry or Leslie undertook any new obligations on behalf

of ProTemp or that they exceeded their responsibilities as

officers of a dissolved corporation working on winding up its

affairs.    Thus, Forsythe-Fournier has not proven grounds for

holding Barry and Leslie individually liable for the

corporation's negligence in the design and installation of the

HVAC system.    Accordingly, we reverse the judgment entered

against Barry and Leslie Isaacson.

     Reversed.

     JOSEPH GORDON and O'MALLEY, JJ., concur.

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