Judge: Michael E. Whitaker, Case: 22SMCV01045, Date: 2023-10-10 Tentative Ruling

Case Number: 22SMCV01045    Hearing Date: October 10, 2023    Dept: 207

TENTATIVE RULING

MOTIONS

Defendant and Cross-Defendant Suzanne Wilde-Anderson, Trustee of the Suzanne Wilde-Anderson 1993 Trust (“Defendant”), Demurs to the complaint of Plaintiffs Michael Florman; Dunia Gailani; Michael Florman, D.D.S., Inc.; Gailani Dental Group, LLC; and Lewel, LLC (“Plaintiffs”) and to the cross-complaint of Defendants and Cross-Complainants Golden Glo Cleaners, John Ji Young You, Nancy You, and Golden Glo Quality Cleaner (Doe 1) (“Cross-complainants”) 

Plaintiffs and Cross-complainants have filed separate oppositions to the demurrers, and Defendant has filed a combined Reply.

REQUEST FOR JUDICIAL NOTICE

            Defendant requests the Court to take judicial notice of the following:

·         Exhibit A – Plaintiff Lewel, LLC’s Secretary of State profile, accessed from the California Secretary of State website

·         Exhibit B – The Entity Status Letter for Lewel, LLC, generated from the California Franchise Tax Board website.

Official notices, statements, and certificates made by the Secretary of State and by the Franchise Tax Board are properly the subject of judicial notice as documents reflecting official acts of the executive department of the State of California, pursuant to Evidence Code, section 452, subdivision (c).  (Friends of Shingle Springs Interchange, Inc. v. County of El Dorado (2011) 200 Cal.App.4th 1470, 1483–1484.)    

Therefore, the Court grants Defendant’s request and takes judicial notice of Exhibits A and B.

ANALYSIS

“It is black letter law that a demurrer tests the legal sufficiency of the allegations in a complaint.”  (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  In ruling on a demurrer, the court must “liberally construe[]” the allegations of the complaint.  (Code Civ. Proc., § 452.)  “This rule of liberal construction means that the reviewing court draws inferences favorable to the plaintiff, not the defendant.”  (Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228, 1238.) 

Defendant demurs generally and specially to both the complaint and cross-complaint, and each cause of action asserted therein, pursuant to Code of Civil Procedure section 430.10, subdivisions (b) and (e), on the basis that Plaintiff Lewel, LLC (“Lewel”) is a suspended business entity and therefore “lacks the legal capacity to sue and prosecute” the causes of action alleged in the complaint, and as such, the complaint fails to state a cause of action, and also cross-complainants’ causes of action for indemnity, etc., stemming from the complaint’s causes of action fail to state a cause of action.

“A corporation that has had its powers suspended lacks the legal capacity to prosecute or defend a civil action during its suspension.”  (City of San Diego v. San Diegans for Open Government (2016) 3 Cal.App.5th 568, 577.)  “Nor, during the period of suspension, may the corporation prosecute or defend an action, seek a writ of mandate, appeal from an adverse judgment, or renew a judgment obtained before suspension.”  (Ibid.)

“However, a plea of lack of capacity of a corporation to maintain an action by reason of a suspension of corporate powers for nonpayment of its taxes is a plea in abatement which is not favored in law, is to be strictly construed and must be supported by facts warranting the abatement’ at the time of the plea.”  (Traub Co. v. Coffee Break Service, Inc. (1967) 66 Cal.2d 368, 370.)  If an entity files an action while in a state of suspension, or its status subsequently becomes suspended for some portion of time during the pendency of the action, the entity can cure the deficiency by reviving its status prior to trial to maintain the action.  (Ibid.)  Thus, because the defect is curable, the suspension of a business entity’s status due to nonpayment of taxes is not a valid grounds for dismissal. (Maryland Casualty Co. v. Superior Court in and for City and County of San Francisco (1928) 91 Cal.App. 356, 363.)

When a business entity’s suspended status comes to light during litigation, “the normal practice is for the trial court to permit a short continuance to enable the suspended corporation to effect reinstatement (by paying back taxes, interest, and penalties)[.]”  (Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361, 1362.)  In Timberline, the Court simply continued the hearing on the suspended entity’s motion to renew the judgment to allow it to revive its status so the motion could be properly heard.

Plaintiffs and cross-complainants do not dispute that Lewel is currently suspended.  Rather, they argue that the defect is curable, and urge the Court to allow the action to continue to move forward at least as to the other Plaintiffs and Cross-complainants.  Plaintiffs point out that they are differently situated from Lewel, as Lewel was the title owner of the property, and seeks damages pertaining to the decreased sale value and costs of remediation.  Whereas the other Plaintiffs were tenants, who seek personal injury damages, and losses related to having to move out of the premises.  Similarly, Cross-complainants urge the Court not to stay or dismiss their cross-claims on the basis of Plaintiff Lewel’s suspended status.  In the alternative, Plaintiffs and Cross-complainants request a continuance of the hearing on the demurrer for three months so that Lewel can revive its status. 

Defendant argues in reply that while the parties have argued that Lewel should be permitted to pay its back taxes and revive its status, they have not produced any admissible evidence that Lewel is able or willing to do so.  As an alternative to dismissal, Defendant requests that the Court stay the entire action, or at least stay the action as to Lewel, though that may pose practical and administrative problems. 

Because dismissal based on this curable defect is improper, the Court finds that Lewel’s suspended status is not a valid ground to sustain the demurrers.  (Maryland Casualty Co., supra, 91 Cal.App. at 363.)  As such, there is no need to continue the hearing on the demurrer.

With no other motions currently pending, there is no need for the Court to continue any other hearing, nor does the Court see a basis to stay the case, in whole or in part, at this time.   

Plaintiff Lewel must revive its status before it can bring or defend against any motion in this case, or obtain a judgment in its favor in connection with the actions brought in this case.  Should a continuance become necessary in connection with any such motion, the parties may request one at that time upon a showing of good cause.

CONCLUSION AND ORDER

For the reasons stated, the Court overrules Defendant’s Demurrers to the Complaint and Cross-Complaint, and each cause of action alleged therein, in their entirety. 

The Court denies as moot the parties’ request for a continuance, stay, or partial stay of the case at this time.

The Court further orders that Defendant file and serve answers to the complaint and cross-complaint on or before October 31, 2023. 

The Court further orders Plaintiff Lewel to cure its suspended status before it can bring or defend against any motion in this case or obtain a judgment in its favor in connection with the actions brought herein. 

Defendant shall provide notice of the Court’s ruling and file a proof of service regarding the same. 

DATED:  October 10, 2023                                        ___________________________

                                                                                          Michael E. Whitaker

                                                                                          Judge of the Superior Court