APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, INDUSTRIAL COMMISSION DIVISION
525 N.E.2d 1005, 171 Ill. App. 3d 838, 121 Ill. Dec. 698 1988.IL.895
Appeal from the Circuit Court of Cook County; the Hon. Mary M. Conrad, Judge, presiding.
JUSTICE McCULLOUGH delivered the opinion of the court. BARRY, P.J., and McNAMARA, WOODWARD, and CALVO, JJ., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MCCULLOUGH
Claimant appeals from an order of the Industrial Commission (Commission) denying benefits on the basis claimant was not an employee of respondent on the date of the accident. At the time of the injury, the respondent corporation, of which claimant was an officer, had been involuntarily dissolved by the Secretary of State for the failure to pay franchise taxes. On appeal, claimant maintains reinstatement of corporate status retroactively establishes an employer-employee relationship covering the date of the injury. Alternatively, claimant maintains that despite involuntary dissolution, respondent was operating as a de facto corporation for the purpose of establishing that relationship. Claimant also contends the Commission improperly considered matters not in evidence and Aetna Insurance Company (Aetna) should be estopped to deny coverage because of the acceptance of premiums for compensation insurance.
Claimant began doing business in 1963, ostensibly as a sole proprietorship, selling and repairing trucks. On September 8, 1976, the business was incorporated as "King Truck Sales, Inc." In May 1977 claimant completed an assigned risk application in the name of "Joseph Romondo d/b/a King Truck Sales, Inc." On December 1, 1977, the corporate entity, "King Truck Sales, Inc.," was dissolved by the Secretary of State for failure to pay its franchise tax and file the annual report.
On August 17, 1978, while the corporation remained dissolved, claimant was severely injured when a truck tailgate fell on him. At the time, claimant's duties included general mechanical work on trucks, painting, and sales. A claim was made to Aetna, which began paying benefits. In 1980, Aetna notified claimant it had discovered his corporation had been dissolved and benefits would be discontinued because claimant was not an "employee" of an entity which had no corporate existence. It is undisputed claimant continued to pay, and Aetna accepted, insurance premiums at all relevant times.
At the hearing before the arbitrator on October 20, 1982, claimant presented a certificate from the Secretary of State which indicated that as of September 27, 1982, "King Truck Sales, Inc." was a corporation in good standing in the State of Illinois. An application for reinstatement of the corporation dated September 30, 1980, was also presented. Claimant further testified he was totally unaware his corporation had been dissolved until Aetna informed him of this fact in 1980.
Claimant is a corporate officer of this family business. Although he maintained there was a corporate board of directors meeting in 1978, he could not remember the date, did not take any minutes, and did not know if the corporate secretary, his wife, kept any minutes. He did not sign any corporate records during that year. Approximately five other employees work for the business.
Concluding claimant had abandoned the corporate form of business as early as May 1977 when claimant applied for the assigned risk application in the name of "Joseph Romondo d/b/a King Truck Sales," the arbitrator determined the subsequent reinstatement of corporate status did not relate back in time to the date of injury. Therefore, the arbitrator found claimant was operating as an employer, not an employee, on the date of the accident and was not entitled to benefits. On review, the Commission affirmed the arbitrator, finding, in part, "where a sole proprietorship existed, as the Commission finds to have been the fact in the instant case, the proprietor himself was not, and could not have elected to be treated as, an employee as defined in the Act as in effect on August 17, 1978." The circuit court affirmed the Commission's decision and claimant appeals.
Claimant initially argues reinstatement of a corporation which is dissolved by the Secretary of State for delinquency in payment of franchise taxes relates back in time and reestablishes, after the fact, claimant was an employee of the corporation on the date of the accident entitling him to benefits for his injuries.
For injuries to be compensable under the Act the claimant must demonstrate, among other things, "the existence of an employer-employee relationship on the date of the injury." (Master Leakfinding Co. v. Industrial Comm'n (1977), 67 Ill. 2d 517, 524, 367 N.E.2d 1308, 1311.) Under the Business Corporation Act of 1933 (Ill. Rev. Stat. 1983, ch. 32, par. 157.92), in effect at the time of the injury, a corporation which was dissolved for not filing reports or paying fees "shall cease to exist." Former section 82a of the Act (Ill. Rev. Stat. 1983, ch. 32, par. 157.82a), governing reinstatement, did not indicate that reinstatement retroactively validated corporate actions undertaken during the period of dissolution. Neither did it prohibit reinstatement from having such an effect. The provision of the former Act was simply silent on that question. Regal Package Liquor, Inc. v. J.R.D., Inc. (1984), 125 Ill. App. 3d 689, 466 N.E.2d 409.
The parties have cited a variety of decisions discussing whether reinstatement of corporate status should be allowed to retroactively validate corporate activity occurring during the time of dissolution. (Compare In re Estate of Plepel (1983), 115 Ill. App. 3d 803, 450 N.E.2d 1244 (and cases cited therein), with Regal, 125 Ill. App. 3d 689, 466 N.E.2d 409.) While none is sufficiently analogous to be considered controlling in the situation here, we glean from these cases the general principle that reinstatement of a dissolved corporation will have retroactive effect, ...