Appeal from the Circuit Court of Lake County. No. 94-L-1796. Honorable Bernard E. Drew, Jr., Judge, Presiding.
Released for Publication May 30, 1996.
The Honorable Justice Inglis delivered the opinion of the court: Bowman and Thomas, JJ., concur.
The opinion of the court was delivered by: Inglis
The Honorable Justice INGLIS delivered the opinion of the court:
Defendants, Miriam Kozin, Steven Kozin, Mark Kozin, Robert Kozin, Jeffrey Kozin, and SMRJ, Inc., appeal the order of the circuit court of Lake County which granted summary judgment in favor of plaintiff, Gerald E. Kennedy. We affirm in part and reverse in part.
Prior to August 30, 1990, plaintiff had been employed by Four Boys Labor Service, Inc. (Four Boys), as a sales manager. Plaintiff was subsequently dismissed and he filed a complaint against Four Boys in the circuit court of Cook County. The complaint alleged that Four Boys had breached an employment contract and that Four Boys had wrongfully discharged plaintiff. On July 20, 1993, the trial court entered a judgment in favor of plaintiff and against Four Boys in the amount of $68,348.98.
Shortly after plaintiff filed his original complaint, Erwin Kozin passed away. Miriam, as the sole director of Four Boys, executed an agreement which transferred the corporation's assets to Erwin's probate estate. Although the exact manner of the transfer is unclear, the corporation's assets were transferred from the probate estate to Miriam. On December 11, 1991, Miriam executed a contract of sale which sold all of Four Boys' assets to Steven Kozin, Mark Kozin, Robert Kozin, and Jeffrey Kozin (Kozin brothers). Miriam sold the assets in exchange for the sum of $10,000 plus a note payable in monthly installments of $2,500. The Kozin brothers then transferred Four Boys' assets to SMRJ, Inc. (SMRJ). The Kozin brothers are the sole shareholders of SMRJ. On December 1, 1992, Four Boys was involuntarily dissolved by the Secretary of State for failure to pay franchise taxes and failure to file an annual report. SMRJ continues to do business utilizing the trade name "Four Boys Labor Service."
On March 29, 1995, plaintiff filed a supplementary proceeding pursuant to section 2--1402(c)(6) of the Illinois Code of Civil Procedure (735 ILCS Ann. 5c/2--1402(c)(6) (Smith-Hurd Supp. 1996)) seeking the recovery of certain assets of Four Boys in order to satisfy plaintiff's judgment. The supplementary proceeding was directed against Miriam Kozin, Steven Kozin, Mark Kozin, Robert Kozin, Jeffrey Kozin, and SMRJ as a result of the events which occurred following the death of Erwin Kozin.
Plaintiff's supplementary complaint alleged seven counts. Count I was brought derivatively on behalf of Four Boys and alleged that, by selling the corporation's assets to the Kozin brothers, Miriam had rendered the corporation insolvent and unable to pay its debts. Count II was directed against Miriam and alleged that Miriam's failure to mail notice of Four Boys' dissolution to plaintiff rendered her personally liable to plaintiff for the amount of plaintiff's judgment. Count III sought the turnover of corporate assets held by Miriam. Count IV was directed against the Kozin brothers and alleged that the Kozin brothers purchased Four Boys' assets subject to all the liabilities of the corporation, which liabilities included plaintiff's judgment. Count V was directed against SMRJ and alleged that SMRJ was the successor of Four Boys and, thus, subject to the liabilities of the former corporation. Counts VI and VII were directed against Miriam and the Kozin brothers and alleged that the transaction entered into between Miriam and the Kozin brothers represented a fraudulent conveyance.
Both parties filed motions for summary judgment, and on August 1, 1995, the trial court granted plaintiff's motion as to counts II, III, IV, V, and VII. The trial court ordered Miriam to turn over the proceeds she had received from the sale of Four Boys to the Kozin brothers. The order further required SMRJ to pay plaintiff the monthly installments which it had previously been paying Miriam until such time as plaintiff's judgment was satisfied.
On August 7, 1995, plaintiff filed a motion for the issuance of a rule to show cause for Miriam's failure to turn over the proceeds she had received from the sale of Four Boys. On August 23, 1995, defendants filed a motion to vacate the judgment which was denied. On August 23, 1995, the trial court, pursuant to Supreme Court Rule 277(h) (134 Ill. 2d R. 277(h)), entered a money judgment against Miriam in the amount of $82,023.58. This timely appeal followed.
On appeal, defendants argue that the trial court erred in entering summary judgment against defendants because plaintiff failed to show that defendants possessed any asset of the judgment debtor (Four Boys). Summary judgment is proper where there are no disputed questions of fact, and the moving party is entitled to judgment as a matter of law. See Signal Capital Corp. v. Lake Shore National Bank, 273 Ill. App. 3d 761, 767, 652 N.E.2d 1364, 210 Ill. Dec. 590 (1995). We review the trial court's grant of summary judgment de novo. Signal Capital, 273 Ill. App. 3d at 768. Because there are no disputed issues of fact, we need only determine whether the trial court properly determined, as a matter of law, that plaintiff was entitled to summary judgment as to counts II, III, IV, V, and VII.
Supplementary proceedings may only be initiated after a judgment has been entered and are designed to assist a judgment creditor to discover assets of the judgment debtor in order to satisfy that judgment. 735 ILCS Ann. 5/2--1402 (Smith-Hurd Supp. 1996); Pyshos v. Heart-Land Development Co., 258 Ill. App. 3d 618, 622-23, 196 Ill. Dec. 889, 630 N.E.2d 1054 (1994). Once a judgment creditor discovers assets of the judgment debtor in the hands of a third party, the trial court may order the third party to deliver up those assets to satisfy the judgment. Pyshos, 258 Ill. App. 3d at 623. Section 2--1402(c)(6) of the Code of Civil Procedure further provides that when assets of the judgment debtor are discovered, the court may "authorize the judgment creditor to maintain an action against any person or corporation that, it appears upon proof satisfactory to the court, is indebted to the judgment debtor, for the recovery of the debt ***." 735 ILCS Ann. 5/2--1402(c)(6) (Smith-Hurd Supp. 1996).
In analyzing defendants' argument, we will consider the trial court's grant of summary judgment as to each individual count. The trial court granted summary judgment in favor of plaintiff on count II. Count II alleged that Miriam violated sections 8.65(a)(2) and 12.75 of the Business Corporation Act of 1983 (Business Corporation Act) (805 ILCS 5/8.65(a)(2), 12.75 (West 1994)). These sections impose individual liability on the director of a corporation who causes the corporation to be dissolved without providing proper notice to known creditors of the corporation. See 805 ILCS 5/8.65(a)(2), 12.75 (West 1994). It is undisputed that Miriam failed to give notice to plaintiff that the corporation was being dissolved. Further, it would appear that plaintiff was a known creditor of the corporation because, while plaintiff's claim had not yet been reduced to judgment, plaintiff's complaint was filed prior to the dissolution of the corporation.
However, an action to impose liability pursuant to the Business Corporation Act is an attempt to hold a corporate director personally liable for damages sustained by a creditor and is not concerned with the actual assets of the judgment debtor. See 805 ILCS 5/8.65(a)(2), 12.75 (West 1994). Such an action does not require allegations that assets of the judgment debtor are in the hands of a third party or that the third party is indebted to the judgment debtor. Thus, because such an action imposes personal liability independent of the debtor's assets, such an action constitutes a separate action not ...