Judge: Frank M. Tavelman, Case: 22BBCV00202, Date: 2023-09-01 Tentative Ruling

Case Number: 22BBCV00202    Hearing Date: March 8, 2024    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

PETITION TO REINSTATE LLC

NOTICE:

The Court is not requesting oral argument on this matter.  Pursuant to California Rules of Court, Rule 3.1308(a)(1) notice of intent to appear is required.  Unless the Court directs argument in the Tentative Ruling, no argument will be permitted unless a “party notifies all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no notice of intent to appear is received.”  

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

ALLEGATIONS:

Synan Johnson (Plaintiff), in pro per, brings this action against Diana Dolmayan (Defendant) and Ascentia Beauty Spa seeking seeks economic, non-economic, special past and future damages, general past and future damages, exemplary or punitive damages, and cost of suit. Plaintiff and Defendant were partners in a business venture known as DS Medi Spa in 2021, however their relationship soured, and the business ceased to exist soon after. Plaintiff alleges, among other things, that Defendant conspired to offer medical services without the proper licensing, interfered with Plaintiff’s business, and generally tarnished Plaintiff’s reputation.

Settlement was reached in a separate unlawful detainer matter which dismissed Detox Shop LLC, a business owned by Plaintiff, from this action. However, the claims of Plaintiff and DS Medi Spa remain.

Plaintiff now brings this petition to have DS Medi Spa’s status as an active business reinstated with the Secretary of State.

ANALYSIS:

I.            LEGAL STANDARD

The Secretary of State shall reinstate to active status on its records, a business entity for which a court finds any of the following: (1) The factual representations by a shareholder, member, partner, or other person that are contained in the termination document are materially false, or (2) the submission of the termination document to the Secretary of State for filing is fraudulent. (Gov. Code § 12261 (a).)

Termination Document means the certificate or other document required by the Corporations Code that is the last certificate or document filed with the Secretary of State to effect the final dissolution, surrender, or cancellation of the business entity. (Gov. Code § 12260.)

If a court of competent jurisdiction orders reinstatement of a business entity to active status on any of the grounds stated in paragraph (1) or (2) of subdivision (a), the order for reinstatement shall state all of the following: (1) The specific grounds for reinstatement., (2) that if there is a conflict with the entity name [and various code sections]…the reinstatement shall be conditioned upon the business entity concurrently submitting for filing an amendment to change its name to eliminate the conflict along with the certified copy of the order required by Section 12263, and (3) that the business entity shall be reinstated effective from the date of the filing of the court order with the Secretary of State. (Gov. Code § 12261(b).)

The court order for reinstatement may be obtained by submitting a petition to the superior court containing the legal and factual basis for reinstatement or as part of a civil action for damages or equitable relief. The Secretary of State shall not be made a party to the proceeding. (Gov. Code § 12261(c).)

II.            MERITS

Arguments

Plaintiff states that she voluntarily dissolved DS Medi Spa at some point after the Complaint was filed in this suit on March 29, 2022. (Johnson Decl. ¶¶ 2-3.) Plaintiff attaches email correspondence between herself and Defendant’s former counsel. In this correspondence it appears that Plaintiff consented to the dissolution of DS Medi Spa or, in the alternative, its continued operation under Defendant. (See Exh. B [“I am interested in dissolving and tying up loose ends when it comes to dissolving the llc. That is my sole interest… Either your client wants to dissolve the business or stay in business. I’ve actually agreed to both at this point.”].)

Plaintiff also attached the Certification of Cancellation (Certification) she received from the California Secretary of State. (See Exh. A.) This certificate contains statements which Plaintiff certified were true including that the LLC did not maintain assets and that the LLC did not conduct any business after filing its articles of incorporation. (See Id.) Plaintiff now asserts that these statements are false.

Defendant’s opposition rests primarily on the argument that Plaintiff should not be allowed to reinstate DS Medi Spa if she was the same party that made the materially false statements that resulted in cancellation. In support of this premise, Defendant cites California Civil Code § 3517 which states, “No one can take advantage of his own wrong.” This statute is frequently cited as the basis for arguments of estoppel, intended to preclude a party from taking advantage of a situation they ostensibly caused. Defendant argues that should DS Medi Spa be reinstated, Plaintiff would reap the benefit of being able to pursue claims on its behalf against Defendant.

Analysis

Plaintiff attests that she obtained the Certification by following an automated process on a service called IncFile. (Johnson Decl. ¶ 6.) Plaintiff appears to suggest that IncFile generated the statements which were materially false, stating that all she did was to fill in a few multiple-choice options provided to her. (Johnson Decl. ¶ 4.) Plaintiff’s declaration is silent as to what the IncFile dissolution process actually was. The Court finds these submissions do not clearly indicate whether the statements in the Certification were the subject of the multiple-choice options Plaintiff filled out. To the extent that Plaintiff suggests IncFile’s automated systems generated the false information, the Court does not find the evidence shows as much. It appears from the evidence that Plaintiff must have made the statements in the process of dissolving DS Medi Spa.

Further, Plaintiff attaches no evidence in support of her claim that DS Medi Spa conducted business pursuant to its articles of incorporation. Plaintiff only states that she and Defendant will under penalty of perjury testify that DS Media Spa conducted business. (See Mot. p. 5.) Plaintiff submitted a sworn declaration alongside this motion, but that declaration is silent as to the business activities of DS Medi Spa. Plaintiff also claims DS Medi Spa maintains assets which are stored at Defendant’s property. (See Id.) Plaintiff’s declaration is also silent as to these assets. None of the exhibits attached to Plaintiff’s moving papers attest to the business activities of DS Medi Spa or its assets. As it stands, Plaintiff has presented no evidence in connection with her petition that the information on the Certification was materially false.

Further, the Court finds Plaintiff’s motion is not in keeping with the purpose of Gov. Code § 12261.

While the nuance of a statue is often defined by case law, neither party cites to case law which is directly on point. This is for good reason, as the California Appellate Court has only addressed relief under Gov. Code § 12261 once since the statute was passed in 2006. In Holistic Supplements, LLC v. Stark (2021) 61 Cal.App.5th 530, the California Appellate Court addressed Gov. Code § 12261 only insofar as necessary to determine that a separate proceeding is not needed to reinstate a company. Holistic contains no discussion of the statute which speaks to the facts of this case.

To this end, the Court finds an analysis of legislative history to be useful. The legislative history of the statute provides: “[t]his bill would benefit the public by allowing a business entity to obtain a judicial determination, and if appropriate, a court order to reinstate the business, without suing the Secretary of State, thus streamlining the administrative process, removing the Secretary of State from the judicial process and reducing state costs.” (California Bill Analysis, Senate Floor, 2005-2006 Regular Session, Assembly Bill 2588, 8/10/2006.) “The Secretary of State reports that the situation arises where a business will claim that it has been terminated wrongfully; that is, the filer of the termination document was not acting on behalf of the business.” (California Bill Analysis, A.B. 2588 Assem., 4/26/2006 [emphasis added].)

It appears from the legislative history that the specific scenario Gov. Code § 12261 was designed to prevent was one in which the filer of the cancellation was acting contrary to the will of the business entity. This is not the scenario in this case where Plaintiff, by her own exhibits, is shown to have acted on behalf of the business. There was no disagreement about the dissolution of DS Medi Spa between its only two partners, Plaintiff and Defendant. In combination with the law’s general prohibition on profiting from one’s own wrong, the Court finds that Plaintiff could not in good faith seek to reinstate DS Medi Spa under Gov. Code § 12261.

Finally, the moving party should address the request first to the California Secretary of State and follow any administrative procedures if the Secretary of State denies the request.  The next court of action is to seek judicial relief if the Secretary of State denies the request.

Conclusion

The Court finds Plaintiff has not shown DS Medi Spa was cancelled by an instrument containing materially false information or an instrument which was falsely made. As such, Plaintiff is not entitled to relief under Gov. Code § 12261. Even had Plaintiff made such a showing, the Court finds she would likely be estopped from reinstating DS Medi Spa as the evidence indicates she was the party who would have made the false statements.

Accordingly, the petition is DENIED.

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RULING:

In the event the parties request a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER

Synan Johnson’s Petition to Reinstate came on regularly for hearing on March 8, 2024 with appearances/submissions as noted in the minute order for said hearing, and the Court, being fully advised in the premises, did then and there rule as follows: 

THE PETITION TO REINSTATE DS MEDI SPA LLC IS DENIED.