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
-2- 1-05-1536
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.
-3- 1-05-1536
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
-4- 1-05-1536
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
-5- 1-05-1536
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
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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
-2- 1-05-1536
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.
-3- 1-05-1536
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
-4- 1-05-1536
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
-5- 1-05-1536
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
-6- 1-05-1536
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.
-7-