Judge: Joel L. Lofton, Case: 21AHCV00102, Date: 2023-01-05 Tentative Ruling

Case Number: 21AHCV00102    Hearing Date: January 5, 2023    Dept: X

   Tentative Ruling

Judge Joel L. Lofton, Department X

HEARING DATE:     January 5, 2023                                   TRIAL DATE: No date set.

CASE:                         LARRY FINCH, an individual, v. INTERNATIONAL MAC CONSTRUCTION, INC., a California corporation; MAC CONSTRUCTION BUILDERS, INC., JAE WOO CHUNG, and DOES 3 to 10

CASE NO.:                 21AHCV00102

DEMURRER

DEMURRING PARTY:      Defendants Mac Construction Builders, Inc. and Jae Woo Chung       

RESPONDING PARTY:      Plaintiff Larry Finch

SERVICE:                              Filed August 5, 2022

OPPOSITION:                       Filed December 21, 2022

REPLY:                                   Filed December 28, 2022

RELIEF REQUESTED

            Demurring Parties demurrer to Plaintiff’s complaint based on lack of capacity and for failure to state facts sufficient to state a claim.

BACKGROUND

             This case arises out of Plaintiff Larry Finch’s (“Plaintiff”) claim that Defendants International Mac, Construction, Inc., Mac Construction Builders, Inc, and Jae Woo Chung (“Defendants”) failed to pay under an agreement for a construction project. Plaintiff alleges he is the sole management member of The Bird and Bear LLC, dba LA Development Company (“LADC”). He alleges that LADC and Defendants entered into a contract on or around May 22, 2017, where LADC would provide construction services in exchange for $300,000 paid in $45,000 installments. Plaintiff alleges that LADC completed the work but only received $71,700. Plaintiff alleges that Defendants still owe approximately $288.300.

            Plaintiff filed this complaint on November 16, 2021, alleging two causes of action for (1) breach of contract and (2) breach of the covenant of good faith and fair dealing.

TENTATIVE RULING

            Demurring Parties’ demurrer is SUSTAINED with leave to amend.

REQUEST FOR JUDICIAL NOTICE

            Demurring Parties request judicial notice of The Bird and the Bear LLC’s certificate of status issued by the California Secretary of State’s showing that The Bird and the Bear LLC is a suspended entity. Although Plaintiff argues that this Court cannot and should not take judicial notice of the certificate, various courts have maintained judicial notice of a certificate of status issued by the Secretary of Status indicating an entity’s corporate powers are suspended is proper. (See Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470, 1483; Newport Harbor Ventures, LLC v. Morris Cerullo World Evangelism (2016) 6 Cal.App.5th 1207, 1215.)  

            Demurring Parties’ request for judicial notice, Exhibit A, is granted pursuant to Evidence Code section 452, subdivision (c).

LEGAL STANDARD

            A party may demurrer based on the grounds that “the person who filed the pleadings does not have the legal capacity to sue.” (Code Civ. Proc. section 430.10, subd. (b).)

A general demurrer may be taken to a complaint where “[t]he pleading does not state facts sufficient to constitute a cause of action.” (Code of Civ. Proc. § 430.10(e).) A demurrer for sufficiency tests whether the complaint states a cause of action.  (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.) In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.  (Code Civ. Proc. section 430.30(a).)  A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.)  The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.  (Hahn v. Mirda, supra, 147 Cal.App.4th 740, 747.)

DISCUSSION

            Whether the Demurrer is Untimely

            Plaintiff argues in opposition that the present demurrer is untimely.

            Code of Civil Procedure section 430.40, subdivision (a), provides that a person may demurrer to a pleading “within 30 days after service of the complaint or cross-complaints”.

            Plaintiff filed a proof of substituted service for service of the summons on Defendants on January 14, 2022. The present demurrer, however, was not filed until August 5, 2022, over five months after the demurrer was required to be filed. Demurring Party’s demurrer is clearly late.

            “The court may, in furtherance of justice, and on any terms as may be proper, . . . enlarge the time for answer or demurrer.” (Code Civ. Proc. section 473, subd. (a)(1).) “ ‘ “There is no absolute right to have a pleading stricken for lack of timeliness in filing where no question of jurisdiction is involved, and where, as here, the late filing was a mere irregularity [citation]; the granting or denial of the motion is a matter which lies within the discretion of the court.” ’ ”

            Demurring Parties attempt to explain the delay by providing that they received notice later and were attempting to meet and confer the issues presented in the demurrer. Demurring Parties assert that they had been attempting to meet and confer since February 18, 2022. (Ryu Decl. ¶¶ 3-6.) However, the demurrer was filed over five months from that point. Nonetheless, the Court shall consider the Demurring Parties’ demurrer.

            Whether Plaintiff Has the Capacity to Sue

            Demurring Parties argue that Plaintiff lacks the capacity to bring this suit because the assignor of the rights that give rise to this claim is a suspended entity.

             “ ‘The assignee “stands in the shoes” of the assignor, taking his rights and remedies, subject to any defenses which the obligor has against the assignor prior to notice of the assignment.’ ” (Johnson v. County of Fresno (2003) 111 Cal.App.4th 1087, 1096.) Both parties provide that the original party to the contract which gives rise to this claim was The Bird and Bear LLC, a limited liability corporation managed by Plaintiff. Both parties agree that the LLC purported to assign the rights under the contract to Plaintiff.

            Demurring Parties, however, contend that the LLC is a suspended entity and thus cannot sue. Demurring Parties further argue that Plaintiff, as an assignee of a suspended entity, is subject to the same defense of lack of capacity to sue because of his assignor’s suspended status. In Exhibit A of Demurring Parties’ request for judicial notice, the California Secretary of State provides that The Bird and The Bear LLC’s “powers, rights, and privileges” were suspended as of November 1, 2018.

            “A suspended corporation loses all rights and privileges under the law, including the right to prosecute a lawsuit.” (Granny Purps, Inc. v. County of Santa Cruz (2020) 53 Cal.App.5th 1, 10.) “In the case of an assignment of a thing in action, the action by the assignee is without prejudice to any set-off, or other defense existing at the time of, or before, notice of the assignment”. (Code Civ. Proc. section 368.)

            In Cal-Western Businesses Services, Inc. v. Corning Capital Group (2013) 221 Cal.App.4th 304, 312 (“Cal-Western”), the appellate court upheld the trial court’s decision to strike the pleadings where the plaintiff was an assignee of a suspended corporation. The Court in Cal-Western stated that “ the time [the assignor] assigned the Judgment to [the assignee] by a private agreement between the parties, [the assignor’s] corporate powers and privileges had been suspended for failure to pay taxes, and it was thus barred from bringing an action”. (Ibid.)

            Similarly, here, Plaintiff was assigned the rights under the alleged contract from a suspended entity. Plaintiff provides that he was assigned the rights from LADC, as the dba of the assignor, on October 1, 2021. (Complaint ¶ 21.) However, Exhibit A demonstrates that at the time of the alleged assignment, The Bird and the Bear LLC was a suspended entity. Plaintiff argues he has standing to bring this suit because The Bird and the Bear LLC was in good standing at the time of the contract. However, Plaintiff does not address the issue of The Bird and the Bear LLC’s suspended status at the time of the assignment in its opposition. Plaintiff also does not provide that The Bird and the Bear LLC is no longer suspended.

            Thus, Plaintiff, as the assignee of a suspended entity lacks standing to bring this present case.

CONCLUSION

            Demurring Parties’ demurrer is SUSTAINED with 30 days leave to amend.

            Moving Parties to give notice.

Dated:   January 5, 2023                                 ___________________________________

                                                                                    Joel L. Lofton

                                                                                    Judge of the Superior Court