According to the Illinois Appellate Court, a corporate condominium association that was dissolved is in a legal standing the same as that of a dead natural person such as found in the case of Markus v. Chicago Title & Trust, 373 Ill.557 (1940).
Under Illinois §12.80 of the Business Corporation Act of 1983, a five-year window is open for suing a corporation on any claim that existed or liability that was incurred before the dissolution of the company.
In this particular case, the issue was whether (a) two subcontractors who are dissolved and allegedly botched work on a condominium project and (b) the general contractor who wasn’t sued by the condominium association until more than five years after the subcontractors closed shop. Does §12.80 block the general contractor from filing an indemnification, contribution claim against the defunct contractors, or do “equitable considerations” extend the deadline?
In this case, the third-party claims made by Optima Inc. against Jenni Inc. and Loucon Inc., two masonry contractors on the condominium project where Optima was general contractor, were dismissed at the trial level. The job was finished in 2002. Jenni was dissolved in 2006. Loucon went out of business in 2003 and the Michigan Indiana Condominium Association sued Optima for alleged “latent defects” in 2010.
Optima did not file a third-party complaint against the subcontractors until May 2, 2012, “six years and three months after Jenni’s dissolution.” In addition, it was eight years and eight months after Loucon’s dissolution.
Summonses were served on the defunct corporations through the Illinois Secretary of State under §5.25 of the Business Corporation Act, in which it is allowed that the Secretary of State is “irrevocably appointed” as agent of a dissolved domestic-corporation if the defunct company is sued within five years of the dissolution.
The appellate court affirmed the dismissal of the third-party action against Jenni and Loucon because “the plain language of Section 12.80 prohibits Optima’s claims against Jenni and Loucon because the claim was filed more than five years after the corporations were dissolved.
Because Optima did not file its third-party action within the five-year statutory time, there was no longer an entity that could sue or be sued. The Illinois Supreme Court has noted that the “five-year extension to a corporation’s life granted by Section 12.80 establishes a fixed endpoint beyond which a corporation ceases to exist.” Pielet v. Pielet, 2012 IL 112064. The ability to sue a defunct and dissolved Illinois corporation is controlled by statute.
Optima argued that “the definite point is not absolute, and may be extended under certain circumstances.” Its argument was made on equitable principles. Optima noted that it could not have instituted its third-party suit against Jenni and Loucon within the statutory five-year period because the original lawsuit against Optima was not filed until after the period had passed.
But that logic did not help Optima overturn the dismissal. The simple fact was that by the time the third-party complaint was filed, both corporations Jenni and Loucon had ceased to exist.
The Illinois appellate court also stated that the survival statute’s endpoint is stronger in that the corporations ceased to exist altogether during the grace period of five years. Since there is no exception provided by the legislature, there is no exception to protect the rights of parties seeking indemnification or contribution even where it had no knowledge of a claim against it before the expiration of the five-year term.
Michigan Indiana Condominium Association v. Michigan Place, LLC, 2014 IL App (1st) 123764 (April 24, 2014).
Kreisman Law Offices has been handling commercial litigation, lawsuits on behalf of businesses, partnerships and sole proprietorships and litigation for individuals and families for more than 38 years in and around Chicago, Cook County and its surrounding areas, including Bridgeview, Elmwood Park, Melrose Park, Cicero, Calumet City, Grayslake, Crystal Lake, Morton Grove, Des Plaines, Rolling Meadows, Schiller Park, Highland Park and Joliet, Ill.
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