May 31, 2001

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JUSTICE O'MALLEY delivered the opinion of the court:

Defendant, Theodore A. Koyzis (Koyzis), appeals from a summaryjudgment order that held that he was personally liable for apromissory note because the corporation on whose behalf hepurportedly signed the note was dissolved at the time he signed it. Koyzis contends there are two reasons why he is not personallyliable for the note: (1) the conduct that gave rise to the noteoccurred prior to the dissolution of the corporation; and (2) thereinstatement of the corporation ratified the debt as a corporateobligation. We affirm.

Plaintiff, Cardem, Inc. (Cardem), filed a multi-countcomplaint against various defendants. This appeal is limited tothe first count of the complaint which was a claim against Koyzisand Marketron International, Ltd. (Marketron), alleging thatMarketron, through Koyzis its president, had signed a promissorynote on April 25, 1997 (the April 25 note), agreeing to repayCardem the sum of $465,600 plus interest on October 1, 1997; thaton May 1, 1997, Marketron paid Cardem $40,000; and that Marketronfailed to pay the balance of the note on the due date. The debtarose prior to Marketron's dissolution and was based on $465,000paid by Cardem to Marketron in 1992 to purchase cigarettes. Marketron never delivered the cigarettes and in 1993, Koyzis, aspresident of Marketron, signed a note agreeing to repay Cardem$465,000.

In its motion for summary judgment, Cardem contended thatKoyzis was personally liable for the April 25 note because Koyzissigned the note knowing that Marketron had been dissolved. Thedocuments attached to Cardem's motion included a letter from theIllinois Secretary of State to John Stock III, (Stock), who wasMarketron's registered agent and Koyzis's attorney at the time,showing that Marketron was dissolved effective March 1, 1994, forfailure to file an annual report and failure to pay a franchisetax. Another attached document from the Secretary of State showedthat Marketron was reinstated effective July 16, 1997.

Excerpts of depositions of Koyzis and Stock were also attachedto Cardem's motion. Koyzis' deposition showed that Koyzis was theonly active officer and shareholder of Marketron; Koyzis signed theApril 25 note as president of Marketron in the offices of hisattorney, Stock; the April 25 note replaced a prior note that wasexecuted in 1993; and Stock had informed Koyzis sometime in the1990s that Marketron had been dissolved due to the failure to fileannual reports.

Stock's deposition showed that Stock was the registered agentfor Marketron; on March 25, 1994, Stock's office received a letterfrom the Secretary of State advising that Marketron had beendissolved on March 1, 1994; Stock sent a letter dated March 28,1994, to Koyzis regarding the dissolution which stated, in part:

" 'This means you cannot transact business in that capacity. I would, therefore, strongly suggest that if you intend tokeep this corporation viable, that you forward to theSecretary of State the annual report and the franchise taxASAP.' "

Stock's deposition further showed that in June 1997 Stock submittedto the Secretary of State an application for reinstatement seekingMarketron's reinstatement; the Secretary of State responded thatannual reports for 1993, 1994, 1995, and 1996 would be required forreinstatement; on June 30, 1997, Stock completed the annual reportsfor those four years and resubmitted the application forreinstatement; Marketron was reinstated on July 16, 1997; as far asStock knew, Marketron remained dissolved from 1994 until itsreinstatement on July 16, 1997; the purpose of the meeting inStock's office on April 25, 1997, when Koyzis signed the note, wasto threaten Koyzis with legal action unless he paid money toCardem.

In Koyzis' response to Cardem's motion for summary judgmentKoyzis asserted, in relevant part, that he was not personallyliable for the April 25 note because under the Business CorporationAct of 1983 (805 ILCS 5/1.01 et seq. (West 1998)) and applicablecase law, Marketron's reinstatement ratified the note as acorporate obligation. In his deposition, Koyzis had been askedwhether when he signed the April 25 note he felt that he would bepersonally liable for the note. Koyzis responded "No. I signed iton behalf of the corporation, but that didn't make any difference. They were after me, not the corporation, because they knew thecorporation had no assets."

On appeal, Koyzis contends that the trial court erred ingranting summary judgment in favor of Cardem. As in all casesinvolving summary judgment, our standard of review is de novo. Busch v. Graphic Color Corp., 169 Ill. 2d 325, 333 (1996).

In this case, the facts are not in dispute. Koyzis contendsthat the trial court erred in granting summary judgment in favor ofCardem because the court erred in finding that Koyzis waspersonally liable on the April 25 note. In support of thiscontention, Koyzis cites section 12.45(d) of the BusinessCorporation Act of 1983 (Act) (805 ILCS 5/12.45(d) (West 1998)). Koyzis correctly asserts that section 12.45(d) "codifies thecommon-law doctrine of 'relation back,' which permits a reinstatedcorporation to ratify actions taken on its behalf while it wasdissolved, giving the actions legal effect from the time they weretaken." Chicago Title & Trust Co. v. Brooklyn Bagel Boys Inc., 222Ill. App. 3d 413, 420 (1991). Koyzis argues that, under section12.45(d), Marketron's reinstatement ratified his signing of theApril 25 note and confirmed the note as a corporate obligation.

Koyzis acknowledges that section 12.45(d) does not expresslyaddress the effect of a corporation's reinstatement on personalliability that might have arisen from a corporate officer's actswhile the corporation was dissolved. Therefore, in support of hisargument that he was not personally liable on the April 25 note,Koyzis cites Mid-American Elevator Co. v. Norcon, Inc., 287 Ill.App. 3d 582 (1996) which did not involve the application of section12.45(d).

In Norcon, Norcon was a closely held corporation engaged inthe construction business. Douglas and Patricia Kaulas wereNorcon's president and secretary and primary shareholders. In1991, while Norcon was incorporated, Norcon subcontracted with Mid-American for work on a construction project. In the same year,Mid-American sued Norcon for breach of the contract. In 1994,while the suit was pending, the Secretary of State involuntarilydissolved Norcon for failing to pay franchise taxes. Norcon wasnever reinstated. In 1995, the court in the contract suit entereda judgment of $75,930 in Mid-American's favor. When the judgmentwas not paid, Mid-American served the Kaulases with a citationpetition that contained provisions prohibiting transfers ordispositions of Norcon's property pending the resolution of thecitation proceedings. Norcon, 287 Ill. App. 3d at 585.

During the citation proceedings it was established that theKaulases continued to conduct business as Norcon's officers fromthe date that Norcon was dissolved through the time of theproceedings. These activities included beginning at least two newprojects. In addition, after receipt of the citation, checks madepayable to Norcon were deposited into a separate account designated"Norenco." Funds from the Norenco account were disbursed to payNorcon's suppliers, contractors, creditors, and employees and tocover personal expenses of the Kaulases. The trial court grantedMid-American's motion seeking the turnover of funds in the Norencoaccount and another account and extended a restraining orderagainst the Kaulases. During further proceedings, Douglas Kaulasaverred that he had received notice of Norcon's dissolution but hadnot understood its significance. The trial court subsequentlyentered judgment against Douglas and Patricia Kaulas, jointly andseverally, for the outstanding balance of the judgment againstNorcon. Norcon, 287 Ill. App. 3d at 585-87.

The Kaulases appealed contending that the trial court erred inholding them personally liable for the balance of the judgmentagainst Norcon. The appellate court considered sections 3.20 and8.65(a)(3) of the Act (805 ILCS 5/3.20, 8.65(a)(3) (West 1998)) andconcluded that these sections did not require that the Kaulases beheld personally liable. The court noted that the conduct givingrise to the judgment at issue occurred long before Norcon'sdissolution and that a corporation's officers generally are notliable for corporate debts or liabilities.

In this case, Koyzis asserts that the trial court erred inholding him personally liable for the April 25 note because theApril 25 note merely replaced the note that he signed in 1993 priorto Marketron's dissolution. Koyzis argues that, just as with thedefendants in Norcon, he should not be held liable for a debt thatwas incurred while the corporation was in good standing.

Cardem responds by citing cases in which the courts construedsection 12.45(d) (805 ILCS 5/12.45(d) (West 1998)) and othersections of the Act and held that, even though a corporation wasreinstated pursuant to section 12.45(d), officers who conductedpurported corporate business while the corporation was dissolvedwere not relieved of personal liability for debts incurred by thebusiness during the period of the dissolution. See Chicago Title& Trust, 222 Ill. App. 3d at 420; Department of Revenue v. Semenek,194 Ill. App. 3d 616, 618-19 (1990). Cardem also cites cases that,without construing section 12.45(d), held that officers of acorporation could be held personally liable for debts incurred bythe business during a period of corporate dissolution. See Steve'sEquipment Service, Inc. v. Riebrandt, 121 Ill. App. 3d 66, 70(1984); In re Estate of Plepel, 115 Ill. App. 3d 803, 807 (1983).

The policy underlying these decisions was set out in Plepelwhere the court decided, as an issue of first impression, that anofficer of a corporation that had been involuntarily dissolved andwas later reinstated was personally responsible for debts incurredby the business during the period of dissolution. The Plepel courtbased its decision on a survey of the opinions of otherjurisdictions that had addressed this question and agreed withthose that imposed personal liability on such an officer. Plepel,115 Ill. App. 3d at 806. In discussing one of these opinions, thePlepel court stated:

"[T]he court noted that if the reinstatement of thecorporation were held to 'relate back' so as to nullify thepersonal liability of the person who incurred the debts, aformer officer of a dissolved corporation could obtain credit,and subsequently shift his personal liability to thecorporation simply by paying the arrearage in franchise tax.[Citations.] We agree that such a result is against publicpolicy because it would create a mechanism by which just debtscould be easily evaded." Plepel, 115 Ill. App. 3d at 806-07.

Section 8.65(a)(3) of the Act provides:

"The directors of a corporation that carries on itsbusiness after the filing by the Secretary of State ofarticles of dissolution, otherwise than so far as may benecessary for the winding up thereof, shall be jointly andseverally liable to the creditors of such corporation for alldebts and liabilities of the corporation incurred in socarrying on its business." 805 ILCS 5/8.65(a)(3) (West 1998).

We believe that the court in Chicago Title & Trust correctlyread section 8.65(a)(3) in conjunction with section 12.45(d) andthe policy considerations set out in Plepel when it concluded thatan officer of a corporation that has been involuntarily dissolvedand is later reinstated is not relieved of personal liability fordebts incurred by the business during the dissolution. ChicagoTitle & Trust, 222 Ill. App. 3d at 420.

Applying these principles to this case, we conclude that thetrial court properly granted summary judgment in favor of Cardemafter finding that Koyzis was personally liable for the April 25note. It is undisputed that Koyzis was aware that Marketron hadbeen involuntarily dissolved effective March 1, 1994, and thatMarketron was not reinstated until July 16, 1997. In 1994, afterMarketron's dissolution, Koyzis's attorney advised Koyzis inwriting that, because of the dissolution, Koyzis could not transactbusiness in his capacity as a corporate officer of Marketron. Nonetheless, on April 25, 1997, during the period of Marketron'sdissolution, Koyzis signed a promissory note as president ofMarketron.

We find Norcon, the case relied on by Koyzis, inapplicable tothe facts of this case. Norcon involved the efforts of a judgmentcreditor to collect from the officers of the corporate judgmentdebtor on the basis that the corporation had been dissolved duringthe pendency of the underlying suit against the corporation. Theofficers had done nothing with regard to the corporate debt afterdissolution except possibly retain or dispose of corporate assetsimproperly. The court held that the officers would be responsiblefor a full accounting in that event, but would not otherwise beliable for the corporate debt. Moreover, although the courtconsidered other sections of the Act, it did not expressly base itsdecision to any extent on section 12.45(d) of the Act.

In this case, Koyzis, unlike the defendants in Norcon, tookthe affirmative step to sign, purportedly as president of acorporation which he owned and which had been dissolved nearlythree years earlier, a new note with different terms. He wasmotivated to do so, in part, because the creditor threatened to tryand hold him personally liable on the debt. Cardem had agreed toforego legal action against Koyzis in return for Koyzis's signingof the new note. Thus, by signing the April 25 note, Koyzisreceived the personal benefit of forestalling legal action againsthim. It is also undisputed that Koyzis was aware that Marketronhad no assets and that he should not transact business under theguise of conducting Marketron's business while Marketron wasdissolved.

Based on this record, we conclude that the trial courtcorrectly ruled that Koyzis was personally liable for the April 25note when he signed it and that the reinstatement of Marketron didnot relieve Koyzis of his personal liability for the note. Accordingly, the trial court did not err when it entered summaryjudgment against Koyzis.

The judgment of the circuit court of Du Page County isaffirmed.

Affirmed.

McLAREN and CALLUM, JJ., concur.